Things We Read Today (37), Thursday

RI Needs the Unions to Rethink Their Strategy

To me, the stunning thing about the RI Center for Freedom & Prosperity’s comparison of public-sector and private-sector pay in Rhode Island and elsewhere as I put the study together was the visible disconnect if we benchmark ourselves against Connecticut and Massachusetts.  Our two neighbors are comparable to each other, and when it comes to public-sector pay, Rhode Island’s in the range, too.  But when it comes to private-sector pay, the Ocean State falls nearly 25% behind.

That observation ought to change the public debate in a number of ways, most of them pointing pro-business free marketers and government workers in the same direction.  The unions ought to change their focus from withdrawing more money from a mediocre private sector and toward rapid economic growth.  And the free marketers ought to take their eye off the impossible dream of knocking our public sector down to the level of Maine and Vermont and give superseding priority to making everybody more prosperous.

This perspective blends interestingly with basic economics if applied to Ethan Shorey’s article in the Valley Breeze about the AFL-CIO’s plan to make Pawtucket “a battleground city” — with the battle being over privatization of government services:

According to [Augie Venice, president of the Local 1012 of the American Federation of State County and Municipal Employees], state union leaders currently see the threat to unions in Rhode Island as being the greatest in Pawtucket, where Mayor Don Grebien is in the process of negotiating with a private company to take over trash services. …

Venice said that representatives for the AFL-CIO are looking to bring back Pawtucket’s old Central Labor Council, a former partnership of all city and school unions, to create a more unified front on issues like privatization.

Take a moment to consider this chart from the Center for Freedom & Prosperity’s report.  It isn’t a stretch to suggest that the low cost of private-sector labor in Rhode Island increases pressure on government officials to privatize because the labor savings are so substantial.

Crazy thought, here: Maybe the unions should adopt the strategy of pricing their non-union, private competition out of the race by letting prosperity drive the cost of private-sector labor higher… not through layering on more regulations and mandates, but by making jobs so plentiful that salaries go up.

The Structural Ratchet of Government Spending

None of the above should be taken to suggest that I’ve become a supporter of public-sector unions or the current spending practices of government officials.  David Malpass has a great quick review of some of the (ahem) adjustments to the Constitutional order of government budgeting and debt that have served to ensure constant growth:

Over time, however, the federal government has expanded its powers dramatically, whether due to lapses in vigilance or the conscious transfer of power. In 1913 the 16th Amendment gave Congress the immense power to tax income but didn’t limit Congress’ ability to borrow against this stream of future revenues. Congress then passed the debt-limit law in 1917 to facilitate debt by ending the cumbersome practice of voting on each debt issue and rollover.

Paving the way to our $16 trillion national debt, Congress invented “mandatory” appropriations to fund entitlements. These allowed spending to take place year after year without Congress having to vote on it. This met the letter but not the spirit of the Constitution’s Article I, Section 9, which states that “no money shall be drawn from the Treasury, but in consequence of appropriations made by law.” The result has been a pool of unaccountable spending that has grown to over half the annual budget—$2 trillion in 2012 out of $3.5 trillion in total outlays.

And on it goes.

If They Spend It, You Don’t Get To (That’s the Point)

George Will’s Washington Post column, yesterday, could be seen as the chapter following Malpass’s essay.  Will renames the “fiscal cliff” as “the Democratic Party’s agenda,” because it advances their longstanding goals of raising taxes and (nationally) cutting the military budget.

It may prove to be the case that the Democrats have found a new innovation toward expanding government while avoiding political accountability by putting forward unpopular tax increases and cuts as a way to force themselves to come up with more palatable solutions before the deadline, only to let the deadline come and go and blaming the opposition or vague “gridlock” for the enactment of the policies.

But the key paragraph from Will’s column has more to do with the ultimate consequence of government spending growth:

Liberals’ strenuous objection to vouchers is that vouchers, as the functional equivalent of cash, empower individuals to make choices. It is the business of the liberals’ administrative state, staffed by experts, to make choices for inexpert individuals. This is why, while Democrats in Washington are working to reduce the portion of Americans’ private income that is disposed of by private choices, two tentacles of the Democratic Party — the Indiana and Louisiana teachers unions — are in their states’ courts waging futile fights against school choice programs, lest thousands of low- and moderate-income parents be as empowered as millions of demobilized servicemen were.

The more aspects of our lives the government pays for, the more government gets to determine what we should be allowed to have and to do.

Advertising for Your Dependency

Among the more surprising (and therefore enlightening) responses I’ve gotten from my work with the Center has been feedback to the concept of the “dependency portal.”  As I’ve described, there appears to be a growing disinclination, in the United States, to see the line between making something available and actively seeking to give it out.

With the “dependency portal,” we’re talking about the government automatically giving people every public handout for which they technically qualify whenever they give the government sufficient information to run the numbers on them.  It’s the difference between a safety net and a sticky web of entitlements.

Jillian Kay Melchoir cites an example of the government crossing the same line that hopefully more people will be able to see as objectionable:

One of the more shocking examples is a Spanish-language telenovela produced by the Department of Agriculture. It depicts a woman who doesn’t want to get on food stamps because she feels her family can adequately provide for itself — which apparently is just silly pride, by the USDA’s reckoning. Her friends pressure her, and finally she gives in. Cue the victorious music.

This is the behavior in which an organization engages when it’s trying to sell a product to as many people as possible, not when it’s trying to offer assistance to people who really need it.  The former isn’t appropriate when somebody else is paying for the product.

Perhaps a better way to put it is that marketing these “benefits” means the government is determining what people need — comfort, not independence and a sense of self-reliance — and, in turn, what other people have to pay for.  They’re telling the woman in the telenovela that she shouldn’t value her sense of pride in self-sufficiency over the cash cushion of food stamps, and they’re making the rest of us pay for that value-call.  Conspicuously, that also entails the power to make decisions about what is provided and who does the providing.

Thus does the expansive web of big-government entitlements ensnare the entire society.



  • Dan

    Perhaps I differ from some here because I don't see privatization as an inherently positive development. Public versus private isn't the distinction I worry about as much as decentralized market competition, which leads to better services at lower costs, versus progressive central economic planning, which leads to poorer services at higher costs. When we focus on privatization of public services, progressives are quick to point to inefficiencies in technically private industries such as banking and health care – not coincidentally the two most heavily regulated and anti-competitive industries in the U.S. – or crony capitalist fiascos such as 38 Studios. Trained economists will recognize that these are not market failures at all, but they nontheless give statists a foothold to take potshots at business in aggregate and rationalize further government intrusion.

    The fundamental problem with a powerful public sector that awards funds to private businesses or heavily regulates them, besides being ripe for corruption, is that it turns what should be a non-zero-sum sector of the economy in which competition would increase aggregate wealth into a zero-sum power grab in which competition actually destroys wealth by lobbying for a fixed government prize at the expense of other firms. As long as government is top-down planning sectors of the economy, restricting competition, and politicizing services that should be non-political, the benefits of privatization will be limited, if any.

  • helen

    When all is said and done it comes down to Government meddling in the economy when and where it shouldn’t.