It's hard to dodge downpours in a wet season, and it is proving remarkably wet for the Democrats and public sector unions. Since losing the big effort to recall the Republican governor of Wisconsin, they have been trying hard to explain away the 1,334,450 raindrops Wisconsin voters deposited on their pro-union campaigners. The rain on their parade, we are told, is not really a protest against the disproportionate political power accumulated by public sector unions. It's because voters dislike the idea of recalling someone they not so long ago voted into office. It's because the Democratic candidate, the worthy mayor of Milwaukee, wasn't as gifted an orator as the governor. It's because big corporate money poured in from out of state thanks to the Supreme Court ruling in the Citizens United case, which opened the floodgates for wealthy donors to exert undue sway. It's because….
Well, let's concede there's something in all these arguments, maybe adding up to as much as 46 percent of the vote against Gov. Scott Walker's 53 percent. But you'd have to be remarkably impervious to being soaked to say, as a White House spokesman did, that the massive defeat of the recall has no implications for anywhere outside of Wisconsin (which went for Barack Obama by 14 points in 2008).
The central issue was the political power of the public service unions, which translates into salaries, benefits, and pensions far above those received by the median wage earner in the state. Wisconsin taxpayers understood that the state's $3.6 billion deficit posed a mortal danger to continuing public services such as education and necessary infrastructure. So they said: Enough! They demanded that everybody contribute to putting the state back on track. In state after state, lavish, unaffordable over-promises have been made to public service employees; in fact, the cost of healthcare benefits and pensions is rising so fast that it is producing a fiscal crisis in virtually every state in the union.
How did the balance of power in the public sector become so out of whack? The public unions often elect the management that they negotiate with. They organize voting campaigns for politicians who, upon election, repay their benefactors by approving salaries and benefits for the public sector employees, irrespective of whether they are sustainable, and the unions don't worry about bankrupting those sitting opposite them at the table. The taxpayer-funded public service unions have essentially dictated the terms of their employment to the taxpayers they are supposed to serve.
Government employees are better off in almost every area than private sector employees, be it in paid benefits, time off, or job security. Pensions are particularly irritating, for many state workers can retire in their mid-50s at close to full pay and receive pensions for far more years than they have worked, even though they are young enough to take another job. If you take their pensions' present value in terms of the cash you would need to buy an annuity making payments equal to the pension, we have created a new class of millionaires.
Just think, in 2008, the average wage for the 1.9 million federal civilian workers was more than $79,000, compared to an average of slightly over $50,000 for the nation's 108 million private sector workers (measured in full-time equivalents), even though most federal workers cannot bargain over their pay and benefits. Ninety percent of government employees receive lifetime pension benefits versus 18 percent of private employees, not to mention annual salary increases and earlier retirement with instant, guaranteed benefits paid for with the taxes of the very same private sector workers. About 84 percent of state and local government employees have access to defined-benefit plans that are no longer widely available in the private sector.
The voters in Wisconsin supported Walker's insistence that public employees make substantial changes in the way they negotiate labor contracts. He has made it much more difficult for public unions to collect dues via automatic payroll deduction, which had its effect: It reduced membership in the American Federation of State, County and Municipal Employees by almost 50 percent. They simply did not feel that union membership was worth the cost of union dues when taken directly out of their own pockets.
The governor was able to point to examples from near-state rivals. In Indiana, the governor rescinded collective bargaining rights for public employees in 2005 and showed how reforms could work if they were allowed to take hold. This reaction was not limited to a blue state like Wisconsin. In San Diego, 66 percent of the voters approved imposing a six-year freeze on the pay levels used to determine pension benefits for city workers. In San Jose, 70 percent voted to require city workers to pay up to 16 percent of their salaries to retain their retirement plans or accept more modest benefits. In Iowa, the governor will propose requiring state workers, some of whom pay nothing toward their health insurance, to shoulder 20 percent of the premium.
The Wisconsin election has made officeholders and candidates realize that it is safer to take on liberal interest groups than conservative ones, safer to cut government than to increase taxes, and safer to face down irate public sector employees than irate taxpayers. Walker didn't just win, he won decisively enough to give heart to public officials across the nation to be firmer.
More and more people recognize that when it comes to state obligations for pensions and benefits, we are looking at a financial train wreck. If anything, the public wants more and not less of this policy of holding down taxes and cutting back on the scale of government expenses, so as to ensure funding for core government services such as libraries, parks, and healthcare. So much so that in Wisconsin some 38 percent of union households voted for Walker; he received over 200,000 more votes than he got just 18 months ago. The Wisconsin victory is a vivid illustration of the enthusiasm gap between Republicans and Democrats, reflected in the fact that Republicans out-raised and out-organized the mythically powerful labor unions in a large industrial state and even exceeded traditional union efforts to get out the vote. Thousands of Republican volunteers made more than 4 million voter contacts ahead of the recall election, and the party opened 26 offices, most of which will now become Romney campaign offices. All this was in the face of Big Labor, which went all-out in putting millions of dollars, months of organizing, and its reputation as a political superpower on the line to defeat Walker. It got trounced.
No other labor fight has captured the attention of Americans since President Ronald Reagan fired 11,000 air traffic controllers in 1981 for an illegal strike. (Franklin D. Roosevelt had called the idea of strikes by federal employees "unthinkable and intolerable.") Reagan's move encouraged businesses to take harder stands against unions and helped bring about a deep decline in union membership.
Quite simply, we no longer live in an age of surplus in which everyone can increase spending or cut taxes, be they Democrats or Republicans. We are in the midst of several years of minimal economic growth that forces tough choices on unsustainable public spending and future spending commitments. We are in a painful zero-sum era in which the politics of deciding who loses what, when, and how is upon us. Compromises will be increasingly difficult, for the public will not accept a labor movement that exploits its powerful advantage in contract negotiations based on political endorsements and votes for the very people who are theoretically on the other side of the negotiating table, in a culture of you-scratch-my-back, we'll-scratch-yours.
The voters are ahead of the politicians. The Wisconsin vote was not so much an anti-union vote as it was a vote against special interests that seek to preserve exorbitant benefits at the expense of the public. Governments today have no choice but to confront their unaffordable commitments, which were made when public employee unions, with their manpower, money, and clout, could get what they wanted or else would crush local politicians.
There is no quick fix to deal with the legacy of billions in unfunded liabilities. But there must be a fundamental rethinking of the public workforce and how we negotiate their contracts. One solution would be to take labor negotiations out of the hands of vulnerable legislators and assign them to independent commissions. Americans cannot maintain their essential faith in government if there are two Americas and the private sector subsidizes disproportionate benefits for a public sector elite.