Unions, Union-Bashing, and All That:

Gov. Daniels (R-Indiana) is surely not the only politician who would have liked to have seen the fights over public sector unions, their pensions and their bargaining rights and all the rest, put off until another day. It puts President Obama and the other leaders of the Democratic Party in a tough bind. The arguments now raging around the issue(s) sound and feel, to me, a lot like the arguments over welfare policy in the mid-1990s. The Democrats had a big problem there, too – they had become associated, in much of the public mind, with the defense of the existing welfare system, and they didn’t have a very good answer to the question that Republicans (starting with Ronald Reagan) started asking: Why should hard-working taxpayers prop up this system, paying the “salaries” of those unwilling to work for themselves?

Only an act of political genius saved their bacon: President Clinton’s decision to jettison a portion of the existing Democratic coalition to lead the fight for a comprehensive welfare-reform package. Whether Obama and the other Democrats have it in them to do the same or not, I’m not sure – time will tell. They’re in the same tough spot; I suspect that accounts for their less-than-forthright support for the demonstrators in Wisoncin and elsewhere. It’s hard, once again, to come up with a good answer to the question: Why should the taxpayers of, say, New Haven Connecticut pay for policemen who can retire at an average age of 49 with an average pension of $74,400 (almost a full salary, for life, plus subsequent cost-of-living adjustments)? David Brooks in the NY Times had, I thought, the most insightful analysis of the problem a few days back; though friends of mine reflexively call it “union-bashing,” I think he struck just the right middle ground:

Let’s try to put aside the hyperventilation. Everybody now seems to agree that Governor Walker was right to ask state workers to pay more for their benefits. Even if he gets everything he asks for, Wisconsin state workers would still be contributing less to their benefits than the average state worker nationwide and would be contributing far, far less than private sector workers.

The more difficult question is whether Walker was right to try to water down Wisconsin’s collective bargaining agreements. Even if you acknowledge the importance of unions in representing middle-class interests, there are strong arguments on Walker’s side. In Wisconsin and elsewhere, state-union relations are structurally out of whack.

That’s because public sector unions and private sector unions are very different creatures. Private sector unions push against the interests of shareholders and management; public sector unions push against the interests of taxpayers. Private sector union members know that their employers could go out of business, so they have an incentive to mitigate their demands; public sector union members work for state monopolies and have no such interest. Private sector unions confront managers who have an incentive to push back against their demands. Public sector unions face managers who have an incentive to give into them for the sake of their own survival. Most important, public sector unions help choose those they negotiate with. Through gigantic campaign contributions and overall clout, they have enormous influence over who gets elected to bargain with them, especially in state and local races.

As a result of these imbalanced incentive structures, states with public sector unions tend to run into fiscal crises. They tend to have workplaces where personnel decisions are made on the basis of seniority, not merit. There is little relationship between excellence and reward, which leads to resentment among taxpayers who don’t have that luxury.

The politician, or the party, that can best sever the interests of the public sector unions from the private sector unions is going to prevail in this fight. Of course, that’s going to be difficult – perhaps impossible – for the Democrats to achieve; unlike welfare recipients and their advocates, public sector unions constitute part of the Democratic core (and a source for a gazillion dollars of funding for campaigns, overwhelmingly on the Democratic side). But I wouldn’t count them out quite yet; the Republicans are fully capable of squandering their natural advantage on this issue.