In France this past fall, even more violent protests disrupted Paris and other cities, when the French government said enough, and raised retirement age from 60 to 62. In both cases, as well as in Spain, these European countries were forced to accept that their generous pensions, retirement, and other negotiated social contract clauses were in the final analysis, an "overpromise" to their citizens. When funds are not available to pay out, either massive inflation or a pullback of outlays is needed.
So in a similar fashion in the US, the "pension and benefit chickens" have come home to roost. Wisconsin's Governor, Scott Walker, took action in February, putting forth his 2011 budget which would force state employees to kick in 5.8% of their pay towards their own pension/retirement savings, and up to 12.6% of the cost of their health insurance. The state is broke, said Walker, we're over three billion in debt, and need to deal with our financial house.
The reaction was striking - literally and figuratively. State employees descended on the capitol in Madison in the thousands, shouting, running through the capitol building itself in protest. At the same time, Democratic Senators fled the state so that they would not have to debate the proposed budget bill (and likely lose the vote), therefore denying the legislature the legal minimum number to enact a fiscal bill. (In Wisconsin this session, there are 19 Republican Senators and 14 Democrats. The rule is that 20 must be present to vote on a bill with fiscal implications, and just 17 on non-fiscal bills.)
After the first few days, it became clear that the real issue at stake was not the increased contributions by state employees, but that the Walker bill also considerably tightened the restraints of public employee union bargaining. The proposed legislation would require that public employee union workers hold a vote each year whether they wanted continued union representation, that items to be negotiated would not include pension and retirement benefits, but only salaries which would be limited to inflation increases.
Walker said that if only salaries were limited, public employee unions could simply ask for more funds in pensions and retirements which was becoming a large part of Wisconsin's monetary liabilities.
The disagreement quickly took on national faultlines. President Obama called it an apparent assault on unions (generic), and Reverend Jesse Jackson appeared to lead the protesters in singing "We Shall Overcome." Protesters even took it international with placards calling Governor Walker the Mubarak of the Midwest, and historical with what seems an inevitable comparison between Hitler and someone an individual disagrees with.
Fiscal conservatives struck back, noting that there was a fundamental difference between unions and management in a private for-profit setting. There, employees and management were theoretically equal - all at risk if the enterprise could not remain profitable. In a public employee setting in contrast, there is no profit motive, taxpayers do not have the option of not paying their taxes to support government costs, as individuals have the option of simply not buying products (such as a car) from a given company.
All this seemed lost on public employee strikers, who tearfully declared that if it was not for unions, we'd not have weekends or a 40 hour week. To be accurate, it was indeed the labor movement in the early 1900s that brought about these needed changes, while public employee unions only began forming in the early 1960s - ironically Wisconsin being a leader. The Jungle, written in 1906 by Upton Sinclair is an American classic on the value of the labor movement.
As Franklin Roosevelt once observed, "... Meticulous attention should be paid to the special relationships and obligations of public servants to the public itself and to the government. All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations ... The very nature and purposes of Government make it impossible for ... officials ... to bind the employer ... The employer is the whole people, who speak by means of laws enacted by their representatives ... "Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of government employees. Upon employees in the federal service rests the obligation to serve the whole people ..."
So, lines are drawn and accurate history is dumped. Even ethics are out the window as Wisconsin doctors were shown on TV apparently writing medical notes saying perfectly healthy teacher/protesters were "sick."
The conflict is being watched closely across the 50 US states - 45 out of 50 states do not have enough money set aside to fund their pension and retirement obligations, and the total nationally is over $3 trillion in "unfunded pension liabilities," according to the Wall Street Journal.
In New Jersey, Governor Christie has moved forcefully on the same issue, as recounted in this narrative from a recent editorial in the Wall Street Journal.
He introduced pension and benefit reforms on a Tuesday in September [2010], and that Friday he went to the state firefighters convention in Wildwood. ... Mr. Christie had proposed raising their retirement age, eliminating the cost-of-living adjustment, increasing employee pension contributions, and rolling back a 9% pay increase approved years before "by a Republican governor and a Republican Legislature."
As Mr. Chrisie recounted it: "You can imagine how that was received by 7,500 firefighters. As I walked into the room and was introduced. I was booed lustily. I made my way up to the stage, they booed some more. . . . So I said, 'Come on, you can do better than that,' and they did!"
He crumpled up his prepared remarks and threw them on the floor. He told them, "Here's the deal: I understand you're angry, and I understand you're frustrated, and I understand you feel deceived and betrayed." And, he said, they were right: "For 20 years, governors have come into this room and lied to you, promised you benefits that they had no way of paying for, making promises they knew they couldn't keep, and just hoping that they wouldn't be the man or women left holding the bag. I understand why you feel angry and betrayed and deceived by those people. Here's what I don't understand. Why are you booing the first guy who came in here and told you the truth?"
He told them there was no political advantage in being truthful: "The way we used to think about politics and, unfortunately, the way I fear they're thinking about politics still in Washington" involves "the old playbook [which] says, "lie, deceive, obfuscate and make it to the next election." He'd seen a study that said New Jersey's pensions may go bankrupt by 2020. A friend told him not to worry, he won't be governor then. "That's the way politics has been practiced in our country for too long. . . . So I said to those firefighters, 'You may hate me now, but 15 years from now, when you have a pension to collect because of what I did, you'll be looking for my address on the Internet so you can send me a thank-you note.'"
And so the US too finds that at some point, spending and funds are tied, and truth is needed but painful. Meanwhile, the Arab unrest remains the issue of these first months of 2011.
2 comments:
I wish there was a like button. I liked this entire post. Informative and realistic.
For a broader overview of US state governments tackling budget deficits, try copying and pasting this URL into your browser,
http://online.wsj.com/article/SB10001424052748703409304576167002450344830.html?mod=googlenews_wsj
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