Sunday, February 27, 2011

Wisconsin - Latest Front in the Public Worker Battle, A Budget Compromise of Sorts?, What Are Our Spending Values?

Of Public Pensions and Unions
This battle has been brewing for a long time. It started in Washington DC, where former School Superintendent Michelle Rhee battled the teacher's unions over merit pay and tenure. It moved to New Jersey, where rising star Governor Chris Christie demanded that public workers contribute to their benefits. It moved to San Diego, where the township abandoned traditional pensions in favor of 401K matches, And it spilled over into the streets in Wisconsin, where public worker angrily protested a plan by the Republican majority to force public unions to decertify, essentially stripping public workers of the ability to unionize.

The battles is over public unions and the cost of public benefits. First, let's examine a brief history lesson. The strength of the union movement in this country, which began in the manufacturing sector, reached its height in the 1950s and 1960s, as steel workers, auto workers and other manufacturing workers, who numbered in the millions, joined up to demand better pay and benefits, shorter work hours and improved safety. Since that time, unions in the private sector have been on a steady decline. Manufacturing jobs have left for overseas or been lost to automation. And what workers remain in manufacturing have abandoned unionization more and more as federal regulators have largely dealt with the extreme safety and environmental violations of years past and manufacturers have wised up and offered better pay and benefits to non-union employees to discourage organization. In fact, union membership in the US is at an all-time low, with a mere 8% of workers now members of a union local.

The last vestige of union power in this country is among public workers. Teachers, police officer, fire fighters, garbage collectors, you name it, most government employees are unionized. And those unions have been effective. While the private sector is almost completely through a 20 year migration away from defined benefit pensions, free health care and other plush benefits of years past, they are still in full force in the public sector. And state and local governments, while they have been quick to agree to generous pensions, have been very slow to fund them, with up to $15 trillion in unfunded pension liabilities saddled on the backs of state governments by some estimates.

Now, as the recession and the housing collapse have sapped state coffers, the battle over those generous benefits is in full force. And it is on display in Wisconsin, which has taken the most radical step to date, of moving to legally prohibit state workers from joining a union.

A few thoughts. First of all, I'm no great fan of modern unions, especially public employees unions. Opposing merit pay for teachers and opposing the dismissal of corrupt police officers and incompetent DMV employees isn't a great way to earn my love. Neither is failing to recognize the economic reality of the times or the obligations that public employees have to the taxpayers.

Having said that, I think the whole Wisconsin thing is an overreach. I have a radical idea. Rather than forcing the Wisconsin unions to decertify, couldn't the GOP just simply not agree to their demands? No pay or benefits package can or will exist that is not agreed to by the government. Unions or no unions, the government holds all the cards, they simply have to play them.

Full on display have been the worst of both parties. Union members comparing themselves to Egyptian protestors (as if!) and their democratically-elected Republican officials to Hitler (aren't we all a little tired of those intellect-insulting comparisons?). On display by the right? A naked attempt to sap the Democratic union power base and debasement of the protestors first amendment rights.

Can't we all grow up a little?

Boehner: No Shutdown Looming
John Boehner is no fool. Unlike Newt Gingrich, the Speaker of the House realizes the damage that was done to the GOP when it went toe-to-toe with then President Clinton over the budget in 1995, a battle that led to a government shutdown that helped to lead to a resounding re-election victory for Clinton in 1996. Boehner was explicit today that he would do everything possible to prevent a government shutdown, when the current continuing resolution expires next Friday and showed an openness to agree to a short-term measure to keep the government operating while Republicans negotiate a compromise with Senate Democrats and the President, although he was clear that any such measure would be at a reduced rate of spending.

Boehner is also now on record that the Republican budget proposal will address entitlement reform. This is progress. Entitlement reform (along with defense spending reform, which Boehner was notably silent on) will be the key to solving the deficit, not the nickels currently being argued over around discretionary spending. Let's just hope the GOP plan doesn't include a privatization of Social Security, an idea which makes the funding gap worse and subjects the federal safety net to the risks of the market. Stick to retirement age, tax ceilings and the tax rate, Mr. Boehner, and don't look to gamble with poor seniors primary source of income.

On the budget, I predict the GOP will get most of what it wants. President Obama has shown little backbone on economic issues, as evidenced by the "compromise" on the Bush (now Obama) tax cuts, where the President gave ground on essentially everything. Plus, the fact remains, the President can't get a budget that doesn't pass the GOP-controlled House, so they still hold all the cards.

What Spending Tells Us About Values
This past weekend, I was at my parent's house for lunch and dinner. My father, a retired defense contractor, is a committed economic conservative. He has voted Republican most of his life, hates high taxes and detests government spending on almost everything except the military. We agree on some things economic (farm subsidies drive both of us nuts!) and disagree on others (I would like a lot less military spending, he has long been a defense hawk.) But when we talked health care, he had a pleasantly pragmatic view.

You see, he had several back surgeries about a year ago. He noted that if he had paid for them himself, the total cost would likely have been close to a hundred thousand dollars. That's untenable for any private party to manage, he conceded - people have to have access to insurance. He also isn't a fan of single payer: "in the UK, they would just write me a prescription for some narcotics and send me on my way" he said, also a solution he didn't like. "So what do we do?", I asked. "I think," he said, pausing to consider the options, "that we are all going to have to get used to spending more on health care than we are used to."

And there you have the rub. You can't have world class care for everyone and not pay a premium for it. You can't continually reduce costs and improve care. We have to decide what kind of system we want. And that involves choices. Cost versus quality. Access versus innovation. How we balance these things reflect our values and determine our economy. The problem is, we are still having a sound-bite debate. This isn't about individual mandates or Medicare reimbursement rates. It is about how we design a system we can afford that contains choices that reflect our values. And that is no easy task. Obamacare doesn't solve it. But the GOP has offered no real alternative, other than the status quo, which is even more unsustainable.

Stay tuned. This issue isn't going away.

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