"Public Unions - a Force for Destruction - Part 2"

Sydney M. Williams

Thought of the Day

“Public Unions – a Force for Destruction – Part 2”

March 11, 2010

March 11 is a special day for me. Today is my grandson Jack Featherston’s eighth birthday; and forty-eight years ago this day I asked my wife to marry me.

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An adage from my childhood was the promise, if food was scarce, of air pudding and wind sauce. I do not know the origin of the saying, but it may have emerged from the Depression when air pudding and wind sauce provided the only sustenance for too many people.

Those words have taken on new meaning, as demands from and assurances to public unions risk becoming empty promises. It is largely unions that risk bankrupting states such as California, New Jersey and New York, as well as countries like Greece. The Federal government can print its way toward honoring extravagant promises, but at the risk of paying off obligations with depreciated dollars.

As the Wall Street Journal editorialized yesterday, the California legislature, in 1999, enacted pension legislation that assumed, for actuarial purposes, investment returns of 8.25%. (As the Journal pointed out, had the DJIA compounded at 8.25% over the past ten years it would now be selling at 25,500; instead the Index is 10% below where it was ten years ago.) There are 15,000 retired California public employees on annual pensions in excess of $100,000, many of whom retire under the age of fifty – young enough so that they can take on another public job and collect a second pension in fifteen years. Needless to say, that promise is now negatively impacting California’s deficits, private sector job growth and tuition at California’s universities. It is likely to get far worse, as the money just isn’t there. No matter the promises of politicians, it is going to take the bitter pill of layoffs and reductions in pension benefits to return these profligate states to some sort of sanity.

State employees were the prime beneficiary of last year’s stimulus bill, as that money saved thousands of union jobs – a short term positive, but one that will have served to perpetuate a longer term problem for state legislatures already under enormous budget restraints if you believe, as I do, that unions are bleeding states dry.

The political web of entanglements is dense. Membership in unions for public employees now exceeds that in private industry. While corporate mismanagement led to the problems in the auto industry, union demands contributed to the problem. Unions are the single largest contributor to political campaigns, donating half a billion dollars in the 2008 elections – 90% to the Democratic Party.

Senator Jim Bunning (Republican from Kentucky and former major league pitcher) received nothing but derision when he attempted to hold up an extension of unemployment benefits. I don’t know the man, but I suspect he was attempting a symbolic gesture, pointing out that Congress cannot continue to spend money that does not exist, or, more accurately, Congress can spend it, but the inevitable result will be the depreciation of the currency. Should the economy continue to strengthen, as we all hope, the problem will be temporarily masked, but, with state legislatures increasingly dependent on the beneficence of public unions, the power those unions have over legislators will continue to expand. It becomes a self perpetuating cycle.