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Wednesday, September 21, 2011

Crony Unionism: Government Sector

In my last column I illustrated how private-sector unions depend on government cronies to keep them afloat. In the government sector it is much, much worse. It is nothing less than a conspiracy between politicians, bureaucrats, and unions to create and sustain a fourth branch of government specifically designed to increase the cost, size, and power of government. Madison and Jefferson must weep.

Franklin Roosevelt, a dedicated crony of private-sector unionism (PSU), believed that government-sector unionism (GSU) was “unthinkable and intolerable.” In 1955 George Meany, the first president of the modern AFL-CIO, opined that “It is impossible to bargain collectively with the government.” This sentiment against GSU was almost universally shared, but it could not withstand the realities of electoral politics.

The first government-sector union was created in New York City in 1958 at the behest of Mayor Robert Wagner—son of Senator Robert Wagner, the principal author of the 1935 National Labor Relations Act (NLRA), which imposed PSU. Mayor Wagner and union boss Jerry Wurf agreed that as many city workers as possible should be assembled into unions and forced to pay union dues. Wagner saw that a well-organized and well-funded union could be a formidable force in future elections by providing him with disciplined boots on the ground as well as other in-kind and pecuniary support. Wurf saw that he would get a special place at the table around which public policy is formed. Their scheme bore fruit in Wagner’s 1961 reelection effort. (In 1959 Wisconsin became the first state to authorize GSU.)

President Kennedy noticed the role government-sector unions played in Wagner’s 1961 victory, Fred Siegel of the Manhattan Institute writes. In January 1962, with an eye to his expected 1964 reelection campaign, Kennedy signed Executive Order 10988, which imposed GSU on many groups of federal workers. Thereafter GSU spread to as many as 30 states.

A Fourth Branch of Government

All federal and state statutes that authorize GSU are patterned on the NLRA. A key section of the NLRA imposes on employers a duty to bargain in good faith with unions. Thus a union can force an employer to bargain with it over all questions involving wages and other terms and conditions of employment. In practice the “good faith” part of the duty to bargain means that the employer must be willing to compromise during the bargaining process.

In ordinary contract law each party must consent to bargain with each of the other parties. All parties are free simply to walk away at any time, and any contract that emerges from forced bargaining is null and void. Not so with unions. Every collective bargaining (CB) contract emerges from forced bargaining, yet every CB contract is considered legal and is enforceable in the courts.

Elected government office holders are routinely lobbied by organized interests such as the Sierra Club and the Chamber of Commerce. But neither they nor any other ordinary lobbyist can force any elected or appointed government official to bargain with them, much less compromise with them. In contrast union officials have the power to force government officials to bargain and compromise with them on what burdens will be placed on taxpayers. In effect government-employee unions (GEUs) are a fourth branch of government with which the legislative and executive branches must bargain and compromise on matters of public policy.

Wages and other terms and conditions of government employment are matters of public policy. They are paid for by taxpayers. Taxes are supposed to be determined in the open by elected legislatures together with elected presidents and governors. Moreover, taxpayers are supposed to have access to and a voice in the legislative process.

In contrast the CB process is carried out behind closed doors. Taxpayers employ government workers but have no seat at the table. Government officials at the table do not represent the interests of taxpayers; they seek to expand the scope of their power and influence. To them bigger budgets are always desirable. GEUs seek better wages, benefits, and conditions of employment for government employees so they can justify raising dues. GEU bosses seek more perks and power for themselves. The two sides of the government-sector CB table are cronies. They both seek to pick the pockets of taxpayers.

Concentrated Benefits and Diffused Costs

Other things equal, no one likes having to pay higher taxes. But when everyone pays higher taxes the extra tax receipts are disproportionately spent in ways that benefit government-sector workers. Their wages go up, or other terms of employment are improved, or the budgets of their agencies expand so their prominence and power increase—perhaps all of the above. Private-sector employees pay the higher tax and get little or nothing back, but since the costs are widely dispersed, the per-person burden is not high enough to spark taxpayer resistance. (The revolt against GEUs in Wisconsin and elsewhere suggests that in some venues the per-person cost is getting high enough to create significant resistance.)

GEUs support their friendly politicians out of dues taken from the workers they represent. All taxpayers pay the wages of government employees, and some of those wages end up as union dues that become campaign donations to big-government politicians. In short all taxpayers, even those who favor smaller government, are forced into making campaign donations to big-government politicians. Meanwhile, the politicians, bureaucrats, and GEUs happily dance around their closed iron triangle, taxpayers be damned.

Keeping It All Going

In February 2009, using the Great Recession as cover, President Obama signed the American Recovery and Reinvestment Act (ARRA). It was a benighted Keynesian scheme based on the popular superstition that a recession can be cured by increasing government spending and handing out temporary lump-sum tax cuts. ARRA increased government spending by $499 billion and cut $288 billion in taxes. What was the result? Research done by Timothy Conley (University of Western Ontario) and Bill Dupor (Ohio State University) reveals that ARRA “created/saved 450 thousand government-sector jobs and destroyed/forestalled one million private-sector jobs” (“The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled”). In short most of the money went to bail out several states so they could avoid laying off GEU dues payers.

Another crony antic of the Obama administration was to impose a GEU on 40,000 TSA officers (TSOs), who thus become union dues payers. The TSA was created after the 9/11 attacks. At its inception most politicians, at least publicly, said that the job of officers was to react rapidly and flexibly to unpredictable security threats. Even politicians know that union-impaired workplaces don’t work like that. Unionization was banned until February 2011, when John Pistole, the Obama-appointed administrator, lifted the ban. Congress tried to intervene, but the effort was defeated in the Senate. The American Federation of Government Employees and the National Treasury Employees Union fought over which would get monopoly bargaining privileges over the officers. The Federation won. Now that they are union-protected, the officers will likely morph from grossly abusive to crudely invasive.

  • Charles Baird is a professor of economics emeritus at California State University at East Bay.

    He specializes in the law and economics of labor relations, a subject on which he has published several articles in refereed journals and numerous shorter pieces with FEE.