Democrats in deadly embrace of big labor

Economist:

ON FRIDAY the Wall Street Journal provided a wonderful bit of irony: despite the howls of indignation from the Democrats over private campaign spending, it turns out that the biggest sugar daddy is the American Federation of State, County and Municipal Employees (AFSCME), a public-sector labour union that spends almost all of its cash for the Democrats. AFSCME accounts for roughly 30% of spending from pro-Democratic groups. A piece from US News and World Report points out that, in total, "Big Labour" is spending more private cash than the Chamber of Commerce and American Crossroads (Karl Rove's outfit) combined.

Since the WSJ article most of the commentary has involved arguments over possible Democratic hypocrisy (pro, con), but that debate misses the point. The Democrats are electorally beholden to union support, and this often leads to bad policy.

In an essay in National Affairs previously flagged by Schumpeter, Daniel DiSalvo notes some of the negative consequences of this symbiotic relationship. He focuses on public-sector unions, which have grown while membership in their private-sector counterparts has flagged. Last year there were more public-sector employees (7.9m) than private-sector workers (7.4m) in unions—the first time this has happened. And public-sector unions have a distinct advantage over private ones. "Through their extensive political activity," says Mr DiSalvo, "these government-workers' unions help elect the very politicians who will act as 'management' in their contract negotiations—in effect handpicking those who will sit across the bargaining table from them, in a way that workers in a private corporation (like, say, American Airlines or the Washington Post Company) cannot." And the public-sector managers sitting across the table don't have the same worries as private-sector bosses, who must answer to profit-driven overlords. The lack of competition in government services produces little pressure on management or unions to come up with the most efficient work agreement. As a result, public-sector unions have become accustomed to getting what they want.

Mr DiSalvo offers up the California Correctional Peace Officers Association (CCPOA) as a case study in how public-sector unions make the system work for them, at the expense of good policy.

Throughout the 1980s and '90s, the CCPOA lobbied the state government to increase California's prison facilities—since more prisons would obviously mean more jobs for corrections officers. And between 1980 and 2000, the Golden State constructed 22 new prisons for adults (before 1980, California had only 12 such facilities). The CCPOA also pushed for the 1994 "three strikes" sentencing law, which imposed stiff penalties on repeat offenders. The prison population exploded—and, as intended, the new prisoners required more guards. The CCPOA has been no less successful in increasing members' compensation: In 2006, the average union member made $70,000 a year, and more than $100,000 with overtime. Corrections officers can also retire with 90% of their salaries as early as age 50. Today, an amazing 11% of the state budget—more than what is spent on higher education—goes to the penal system. Governor Arnold Schwarzenegger now proposes privatizing portions of the prison system to escape the unions' grip—though his proposal has so far met with predictable (union supported) political opposition.

Elsewhere the story is the same. Overgenerous contracts, promising lavish pensions, benefits and early retirement, have put states in dire fiscal straits. Mr DiSalvo cites Joshua Rauh, a professor at Northwestern University, who predicts that the pension funds of seven states—Connecticut, Indiana, New Jersey, Hawaii, Louisiana, Oklahoma and Illinois—will go broke by the end of fiscal year 2020.

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There is much more.

Public employee unions in some states are putting states in a bind that is threatening insolvency. California and New Jersey are already on the brink. Gov. Christi has had to cancel a tunnel because the state has to pay confiscatory pensions of public employees and teachers.

Until the problem caused by these labor agreements are faced head on the states will continue to see resources moving from investments in infrastructure to sink hole investment in pension funds.