My U.S. News column this week is about one force that threatens to gobble up our otherwise thriving private sector economy: the greater-than-economic-growth increases in spending mandated by current entitlement programs like Social Security, Medicare, and Medicaid. But there's another force threatening the private sector economy: public-employee unions. In many but not all states, public-employee unions have been forcing greater-than-economic-growth spending increases on state and local governmentsspending that produces very little in the way of public benefit.
And the public-employee unions have been growing stronger. In California last year, they spent huge amounts of moneymoney that came, via members' dues, from the taxpayerson trashing Gov. Arnold Schwarzenegger's job rating and defeating his ballot measures. These leeches on the private sector economy are now in position to keep sucking more and more blood.
Another example of the power of public-employee unions, and the destruction they are wreaking on a once thriving private sector economy is in New Jersey. Steven Malanga of the Manhattan paints the picture in "The Mob That Whacked New Jersey." Here are his concluding paragraphs:
Aided by the courts and the vast expansion of budgets during the flush 1990s, New Jersey's tax eaters have little by little created a full-fledged example of the kind of regional government that the Left touts these daysa government that forces businesses and residents who have fled the dysfunction of the cities to pay the tab for those urban problems, whether they like it or not.
Further, Jersey is part of a cultural shift that is changing politics in many northeastern areas, as some high earners abandon traditional middle- and upper-class fiscally conservative values and vote liberal instead. In national elections, Jersey today is now reliably in the "blue" column. The trend is also showing up in local elections, where longtime Republican strongholds like Millburn, Summit, and Madison have elected Democratic city councils and mayors for the first time. Jersey may soon resemble its neighbor, New York City, as a place where the rich who tolerate high taxes or consider them a social obligation live side by side with the poor, but with a shrinking middle class.
In short, it may be that New Jersey, having for years enthusiastically welcomed New York's residents and jobs, is now watching the Empire State take a measure of revenge as its neighbor settles into a familiar high-tax, low-growth inertia. Jersey has caught a bad case of the blue-state blues.
A couple of comments. First, New Jersey is not quite as reliably blue as Malanga suggests. It voted 56-40 percent for Al Gore in 2000 but only 53-46 percent for John Kerry in 2004. That puts it within reach for a Republican presidential nominee like John McCain or Rudy Giuliani. And Democratic Gov. Jon Corzine, despite spending millions of his own money and despite his well-lubricated support from the big county Democratic machines, won by a similar 53-43 percent against a weak opponent in 2005.
Second, one of Malanga's most important points is that taxpayers aren't getting much value from the huge spending increases, and neither are the intended beneficiaries of the huge transfers from affluent suburbs to decaying central cities. Huge increases in spending on central city public schools have resulted in virtually no improvement in test scores. They have resulted instead in bloated salaries, benefits, and pensions for teachers and other public employees. And of course for public-sector union officials. And, through the unions, large flows of money have gone to the Democratic Party. All this is, evidently, gratifying to the upper-income liberals who vote Democratic in order to preserve the right to abort fetuses.
But it does nothing to help the kids who grow up in crime-ridden central cities with rotten schools. And by pillaging the private-sector economy, it strangles the goose that lays the golden eggs. Fortunately, not all state governments are run, as New Jersey's seems to be, by the public-sector unions, and the private sector can migrate elsewhere. Which of course is what is happening in New Jersey and has been happening in New York state for many years. The financial sector can continue to thrive, generating high incomes for people who don't mind paying high taxes, but less favored placesmost of upstate New York, lower-middle-class towns in New Jerseyare left with declining economies.
Third, many on the political left complain about the disappearance of the middle class, the alleged tendency of our economy to produce hefty income growth for those at the upper end of the economic scale and relatively little income growth for the large number at the lower end. Interestingly, this tendency toward income inequality is most pronounced in states that have been voting Democratic in presidential electionsespecially New York, New Jersey, Connecticut, and California. Income inequality tends to be much less in many states that vote heavily Republican. New York, New Jersey, Connecticut, and California have imported many high-income earners and low-income immigrants and have been exporting many more middle-income earners. This process is accelerated when, as in these four states, high-income earners have been eager to vote for Democrats backed by public-employee unions: The same people who have been complaining about this trend have been causing it.