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J. KARL MILLER: Facts get lost in Wisconsin union circus

Wednesday, March 23, 2011 | 12:01 a.m. CDT; updated 7:33 p.m. CDT, Saturday, April 9, 2011

COLUMBIA — For what appears to be an eternity, but in reality a mere few weeks, we have been bombarded by the drama of Wisconsin's Gov. Scott Walker versus that state's public employee unions. As is the case with emotion-driven issues, which are lucrative targets for politicians, pundits, columnists and anyone with a personal ax to grind, reason and truth are among the first casualties.

When Walker's effort to rein in a $3.6 billion budget shortfall included requiring employees in public-sector unions to contribute to their retirement and health benefits (as is done in the private sector) and placing certain restrictions on their collective bargaining, a circus atmosphere materialized. Huge demonstrations at the Capitol in Madison, along with teacher "sickouts," school closures and a mass exodus of Democratic senators to a motel over the Illinois border were the order of the moment.

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Demonizing Walker in particular and Republicans in general, the protesters and their nationwide supporters vented their rage with signs, chants, sit-ins and some destruction or defacement of public property; their sole originality was, at long last, in not laying the blame on George W. Bush. Some rather amusing sidelights included demonstrators engaging in the uncivil behavior for which they faulted the tea party and the unflattering nickname given to AWOL senators: "Flee Baggers."

Much of this anti-Republican rhetoric accuses the GOP of attacking the working class, destroying the middle class, denying collective bargaining rights and busting unions. Examination of these allegations discloses that most would not pass muster in Sgt. Joe Friday's quest for "just the facts, ma'am."

Take for instance the assertions regarding the middle and working classes. The percentage of union employees in the work force is about 12 percent (7 percent in trade and labor unions), according to the Bureau of Labor Statistics; accordingly, by what yardstick does one measure the other 88 percent of employees? Are we to believe that the unions hold a monopoly on the "working and middle classes" — the remainder of us divided among the fat-cat employers, management and the poor wretches not protected by unions?

Additionally, the notion pushed by the unions and such media luminaries as The New York Times' Paul Krugman that the legislation denies collective bargaining to public service employees is simply not true. Their right to bargain collectively for wages remains intact: The only points removed from the bargaining table were the destructive pension and health care burdens that have proven fiscally unsustainable in New York, New Jersey, California and Illinois.

I am not anti-union per se — the benefits accruing to workers over the past 100 years or so are well documented. However, I am convinced unions' value has eroded naturally over time. This trend is evidenced in the decline in union workers in the labor force from a 1954 high of 39.2 percent to approximately 7 percent today. The only growth is in the public-employee unions.

There is a world of difference between the private and the public sectors. In the private sector, both labor and capital have skin in the game. While the union strives for the best deal possible for its members, the bargaining is done with the realization on both sides that there is a point at which the company, the store, the mine et al. will cease to exist — thus no more union and no more jobs.

This situation does not exist in the public-employee unions for the simple reason that the public sector is not a free market but rather a government-imposed monopoly. Public-employee unions are funded entirely by taxpayers — consequently, they feed at the government trough, negotiating solely with those whom they seek to or have elected. From 1990 to 2010, the public-sector unions contributed more than $180 million to Democrats and nearly $18 million to Republicans.

Accordingly, if you feel you must support public-sector unions, do so with open eyes and mind. The public pension-plan deficits of California, New York, New Jersey and Illinois threaten those states with bankruptcy.

One of our most remembered and least conservative presidents, Franklin D. Roosevelt, had this to say: "All government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service." He was echoed by AFL-CIO President George Meany, who observed it was impossible to bargain collectively with the government.

Can we really afford the administration's proposed unionization of the Transportation Security Administration?

J. Karl Miller retired as a colonel in the Marine Corps. He is a Columbia resident and can be reached via e-mail at JKarlUSMC@aol.com.


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Comments

Ellis Smith March 23, 2011 | 5:53 a.m.

In a real sense it makes little difference how this particular round turns out, because it has served to "lift the rug" and allow the public at large to see the issues.

Contrary to the way the situation is being portrayed, it is not a continuation of the historic battles for workers' rights and wages of the 1930s. A major issue in several industries then was employee safety.

There is one inescapable fact. Unlike the federal government, states cannot legally operate in the financial "red." Are we going to satisfy state workers' demands by cutting state services? An alternative is to raise state taxes, or states could do some of both.

Maybe we should farm out state services involving phones and the Internet to New Delhi. "Welcome to the Wisconsin Department of _________, this is Almitra speaking." (And there she is, dressed in her best sari.)

(Report Comment)
Brian Wallstin March 23, 2011 | 10:42 a.m.

Colonel,

You seem to think, or want your readers to believe, that before Walker stepped in, taxpayers covered the pension and health benefits of Wisconsin's public employees. In fact, those plans are 100 percent funded by the workers themselves.

To be fair, you're not the only scribe who doesn't understand this, as Pulitzer Prize-winning journalist and tax analyst David Cay Johnston explains:

"Accepting Gov. Walker's assertions as fact, and failing to check, created the impression that somehow the workers are getting something extra, a gift from taxpayers. They are not.

Out of every dollar that funds Wisconsin's pension and health insurance plans for state workers, 100 cents comes from the state workers.

How can that be? Because the "contributions" consist of money that employees chose to take as deferred wages – as pensions when they retire – rather than take immediately in cash. The same is true with the health care plan. If this were not so a serious crime would be taking place, the gift of public funds rather than payment for services.

Thus, state workers are not being asked to simply "contribute more" to Wisconsin' s retirement system (or as the argument goes, "pay their fair share" of retirement costs as do employees in Wisconsin' s private sector who still have pensions and health insurance). They are being asked to accept a cut in their salaries so that the state of Wisconsin can use the money to fill the hole left by tax cuts and reduced audits of corporations in Wisconsin."

http://www.tax.com/taxcom/taxblog.nsf/Pe...

(Report Comment)
Jimmy Bearfield March 23, 2011 | 12:03 p.m.

Brian, if the 100% employee-funded pensions and insurance are unable to meet their obligations (e.g., because employees didn't contribute enough or because the rate-of-return forecasts were overly optimistic), who is forced to cover the shortfall? Employees? Or taxpayers?

(Report Comment)
Brian Wallstin March 23, 2011 | 2:20 p.m.

Jimmy,

That's not a problem in Wisconsin. Look at the data in this study:

http://www.pewcenteronthestates.org/repo...

(Report Comment)
Jimmy Bearfield March 23, 2011 | 2:54 p.m.

Citing a study with four-year-old data doesn't answer my question. That data shows what kind of shape the state's pension fund was like four years ago, when the market was still roaring along. It doesn't tell us who's liable if WI one day becomes another state with an underfunded pension system.

So again, who's liable for any shortfalls? WI public employees? Or WI taxpayers?

(Report Comment)
Brian Wallstin March 23, 2011 | 3:52 p.m.

If you have evidence that the Wisconsin pension fund is not as healthy as it was four years, I'd like to see it.

As for the answer to your question, how about "neither." Unfunded pension liabilities are exactly that - unfunded. Will they remain unfunded? Perhaps, if there is another plunge in the stock market, which is the reason the shortfalls exist in the first place.

That said, even for states with large unfunded liabilities, the shortfall has probably been reduced as the stock market has come back. As it is, the shortfalls in states' pensions range from between .02 percent and .05 percent of the states' economies, per this Feb. 2011 study: http://www.cepr.net/index.php/publicatio...

"This implies that increased revenue equal to 20 cents of every $100 of future output would be more than sufficient to eliminate the shortfall."
That's hardly an unreasonable assumption of return on investment.

The point of the study — and the point of my comment — is that Walker (and Col. Miller) are wrong to blame the public employee pension and health plans for the state's budget shortfall. Worse, the Col. tried to pass off the bogus claim that taxpayers are funding the public employees benefits.

(Report Comment)
Don Milsop March 23, 2011 | 4:01 p.m.

You haven't seen FLEE BAGGERS yet like you will when the Democrats have to face redistricting in the 20 state legislatures they lost in November. Remember in 2001 when the Texas Dems took off because they didn't want to face the results of the election in 2000? Dem legislators just can't handle the consequences when the majority of the citizens have an opinion which is contrary to their own.

(Report Comment)
Jim Clayton March 23, 2011 | 4:21 p.m.

I agree with You Karl. These protestors are all emotion and no facts which is typical liberalism. Many were young people just caugh tup in the circus atomosphere of the whole thing. Some sent death threats to Walker and the republican senators. So much for the peace and love crowd. It wouldn't surprise me that more than half of them don't even realize what they are protesting about. The state is bankrupt due to unions donating all their collected union dues to democratic candidates who in turn give them contracts that they can't afford and the taxpayers have to pay for them. Now these so called members of the peace and love leftist crowd are sending death threats to members of the Republican legislature while sticking up for the 14 cowardly democrats that fled. It would seem that whoever wrote these letters didn’t hear or didn’t understand Pres. Obama’s Arizona speech, you know, the one where he said we needed civility in our political discourse. So much for the peace and love crowd. Only if it goes their way.

(Report Comment)
Jimmy Bearfield March 23, 2011 | 4:56 p.m.

Brian, I don't know why you keep dodging a simple question. I never said that the Wisconsin pension fund is not as healthy as it was four years ago. But as the study you cited shows, the number of states with fully funded pensions is declining. So if WI becomes the next one, who is legally responsible for making up the shortfall?

From what I've read about other state systems, such as Missouri's, taxpayers are legally bound to make up any shortfall to cover the benefits being paid out. All I'm asking is whether that's the case in WI, too. I seriously doubt that simply leaving it underfunded -- in other words, running a deficit for m -- for some period is a legal option. Am I mistaken?

(Report Comment)
Brian Wallstin March 23, 2011 | 6:38 p.m.

Jimmy,
I don't know the answer as it relates to Wisconsin. In other states, there is justifiable concern that taxpayers will be on the hook should the plans not recover. In some states, Ohio, for example, proposed legislation would require employees to work more years or kick in more of their own money to keep the pension funds fully funded. MU asked employees to start contributing a percentage of their salaries a couple years ago, even though the defined-benefit plan is, and always has been, fully funded. MU is also considering switching to a defined contribution plan for new employees.

(Report Comment)
Jimmy Bearfield March 23, 2011 | 7:20 p.m.

Here's a rundown, based on slightly more recent data, of when various state pension funds will run out of money: http://kelloggfinance.wordpress.com/2010... It concludes with the argument that "the most equitable solution is probably one in which both taxpayers and public employees share in the pain to some extent." Good luck convincing people with decades of work ahead of them that they need to cough up more taxes to fund someone else's retirement.

(Report Comment)
Mark Foecking March 24, 2011 | 8:26 a.m.

From Brian Wallstin post 3/23 10:42 am:

Because the "contributions" consist of money that employees chose to take as deferred wages – as pensions when they retire – rather than take immediately in cash. The same is true with the health care plan."

I think this may be more an argument of semantics. This would only be true if employees could opt out of these programs and receive that value as cash. I know I can't at the University - I can choose not to have health insurance, but I can't get my employers contribution added to my paycheck. So these programs would be more an employee benefit (if the WI workers could not take their benefits as cash), and an addition to their pay, not the pay itself.

(I hope that was clear)

DK

(Report Comment)
Brian Wallstin March 24, 2011 | 9:01 a.m.

Jimmy: Interesting paper - and the comments were interesting too. Here's what one state is doing:

http://www.nytimes.com/2010/08/07/your-m...

Mark: I think I understand, but maybe not ... the distinction between benefit and compensation depends, I think, on who you choose to think is making the contribution. If it's deferred compensation, the employee is making the contribution from the compensation package he/she agreed to. It's not coming as an extra benefit from the employer/taxpayer - which was my original point.

(Report Comment)
Gregg Bush March 25, 2011 | 5:37 p.m.

Another fact that got "lost" - police and firefighter unions are exempt.
"Their right to bargain collectively for wages remains intact: The only points removed from the bargaining table were the destructive pension and health care burdens that have proven fiscally unsustainable...." Now if we can just get police and firefighters to stop with their destructive health care burdens.
Nonetheless, you've hit the nail on the head - "From 1990 to 2010, the public-sector unions contributed more than $180 million to Democrats and nearly $18 million to Republicans." This is the real reason Governor Walker has targeted these folks - it ain't financial...it's political.

Please tell us more about the woes of the destructive burdens of healthcare for firefighters and law enforcement - how they are not deserving of workplace protections afforded by unions because they have a monopoly.

(Report Comment)
Don Milsop March 27, 2011 | 12:59 p.m.

Milwaukee Democrat Peggy West says Arizona is not a border state. Great job Wisconsin teachers!!! Proof the taxpayers are getting their money's worth from Wisconin teachers.

(Report Comment)
Gregg Bush March 27, 2011 | 2:28 p.m.

"Proof the taxpayers are getting their money's worth from *Wisconin* teachers."
You should keep a robe handy in your house - the walls are glass.
And glass is transparent.

(Report Comment)
Ellis Smith March 27, 2011 | 3:12 p.m.

"And glass is transparent." Technically, glass can be anything from transparent to opaque, depending upon its batch recipe, how it's processed, and what a customer wants and is willing to pay for.

Often it comes down to whether someone is willing to pay for things they want. That's the bottom line.

(Report Comment)

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