Guest Post: Government Employees, Unions, And Bankruptcy

Tyler Durden's picture

Submitted by James E. Miller of the Ludwig von Mises Institute of Canada,

During an economic boom, exuberance finds itself lodged in all types of industries.  When profits soar, so does the public’s disregard for prudence.  And as tax revenues rise, politicians can’t help but give in to their bread and butter of buying votes.  Periods of accelerated economic growth typically come in two different forms.  If capital is drawn from a pool of real savings to finance investment in more efficient forms of production, the boost in wages and income will be sustainable as long as consumers remain willing to purchase whatever is being produced in greater amounts.  In the case of a credit-expansion boom fueled primarily by fractional reserve banking and interest rate manipulation through a central bank, the boom conditions are destined toward bust.  Liquidation then becomes necessary as the bust gets underway and malinvestments come to light.

For private industry it means slashing costs, laying off workers, and possible bankruptcy to discharge debt.  For government, it typically means shoring up the lost revenue due to unemployment by raising taxes and promising to cut spending by some significant amount.  Usually those promised cuts never come to fruition.  Political reelection hinges too much upon filling the pockets of voter blocs.   When private enterprise tightens its belt, the state hardly bats an eye since its revenue is dependent on how much it decides to fleece from taxpayers in any given year.

Some levels of government aren’t so lucky however.  Without ready access to a printing press or eager creditors, local municipalities in the U.S. are facing tough choices as the Great Recession drags on.  Unable to cope with the rising cost of providing public services, many cities are taking drastic action.  Three major cities in California have recenlty declared bankruptcy; including San Bernardino which is the second largest city to do so in recent history.  The city council of Detroit, which is facing about $12 billion in pension and benefit obligations, has voted to allow a state advisory board to assist the former manufacturing powerhouse grapple with a fiscal future that is anything but promising.  North Las Vegas, Nevada is facing the same kind of hurdle with a gaping $30 million budget deficit.  According to Mayor Sharon Buck, “We’ve balanced our budget, we’ve paid all of our bills [and] all of our bonds are paid…Our biggest issue is salaries and compensation and benefits. And they’re very unsustainable.”  Most recently, the mayor of Scranton, Pennsylvania cut the wages of city workers to the state’s minimum wage of $7.25 an hour.  The unions which represent the city’s firefighters, police officers, and other public workers are taking the issue to court.

In carrying out such a drastic pay cut, Mayor Chris Doherty defied a previous court order.  The unions’ attorney called the defiance “incredible.”  The president of the International Association of Fire Fighters, Local 60, lamented that “there are kids working at ice cream stands earning more than their fathers, which is ridiculous.”

In actuality, there is nothing ridiculous about Mayor Doherty’s behavior.  The city is out of money to pay its workers.  After riding the taxpayer-funded gravy train, the trip has come to an abrupt end.  The mayor can’t pay money he doesn’t have.  In his words “I can’t print it in the basement.”

But to this writer, Doherty didn’t go far enough in cutting the pay of city workers.  In a just world, public sector workers would be paid the rightful amount equal to their contribution to society: zero dollars an hour.  If production is to entail mutual exchange and careful consideration toward profit and loss accounting, then government produces nothing without a negative effect on some individuals.  The government worker is paid solely through whatever funds were forcefully taken from actual producers of wealth.  The kid working in an ice cream stand whom the president of the firefighter’s union referred to is providing a valued service to society.  His pay is based off of whatever marginal revenue he brings in.  The firefighter paid by tax dollars is a functioning leech whose pay is totally separated from any measure of consumer satisfaction.  Government workers have little, if any, incentive to serve the public in an efficient or convenient manner.  In America, police have no legal obligation to assist you.  And if you think the local fire company will be there at your beck and call, just ask Gene Cranick of Tennessee who watched his house burn down with fire crews standing by as he neglected to pay a $75 dollar fee beforehand.  The selfless civil servants simply watched the spectacle of a man’s home being destroyed even as Cranick offered to pay the fee for service right then and there.  Compare this to the private, for-profit firefighting that existed in many towns in 19th century America.  As urban historian Mark Tebeau describes it in an interview with NPR’s Robert Siegel nearly two years ago:

SIEGEL: Now, I read this today – and you tell me if there’s any truth to it -that sometimes competitive fire brigades in their zeal to be the one to put out fire, maybe to get an award or be backed by an insurer, might actually have played a little defense against another competing fire company.

Prof. TEBEAU: Yeah. They would race to the fires. This reflected community tensions of the era, as well as a sort of manly pride in being first not only to get to the scene, but first to put the fire out.

No doubt Cranick, who found himself on the wrong end of government’s over-bureaucratization, would have jumped for joy at the prospect of multiple fire brigades rushing to save his home.

By virtue of its monopoly on coercion, the public sector exists wholeheartedly at the expense of society.  Worse are the unions that piggyback off this extortion and kick taxpayers in the gut even harder just to take a few extra dollars out of their wallets.  Unions remain empowered through their government-granted privilege of forcing employers to bargain with them; including the various levels of government.  But this only scratches the surface to the despicable nature of both private sector and public sector unions.  As libertarian economist Walter Block notes:

Yes, unions are disgusting and repulsive institutions, as the right side of the political spectrum properly emphasizes. They restrict entry into the labor market, and either beat up potential competitors who they characterize as “scabs” (where are the politically correct opponents of hate speech when we need them?), and/or get the government to do this evil deed for them, via legislation such as the Wagner Act which forbids employers from hiring replacement workers on a permanent basis.

What the city of Scranton has in common with San Bernardino, Detroit, et al. is that its dire fiscal condition is due to one thing and one thing only: benefits promised to unionized workers.   For decades, public sector workers and their professionally dressed cohorts in plunder known as union representatives have operated under the fallacious assumption that government is the gift that never stops giving.  But in today’s environment of economic stagnation, their dreams of living off of stolen fruits of labor are thankfully starting to represent reality.  Whole countries in the European Union are beginning to crumble under the weight of their bloated government workforces and entitlement programs.  American cities are currently facing up to the extravagant benefits promised to public workers.  In a mater of years, Illinois and California will likely follow.

To quote Pat Buchanan,” The salad days of the government employee are coming to an end, as they have already in Greece, Italy and Spain.”  To those sick and tired of the tax-eater mentality that is destroying the very core of society’s productive capacity and moral base, those days can’t come soon enough.

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bob_dabolina's picture

Something made this country great. If you've ever worked 16 hour days, lived within your means and led a responsible life, good for you. You probably find yourself living in a country mired in debt and choking regulation, you didn't do that, someone did it for you. I just get vexed when people worry about their future and that of their progeny, y'all probably think you're real smart, well lemme tell y'all somethin - there's a lot of smart people out there. You probably think you worked real hard to get where you're at - well lemme tell ya'll something - there's a lot of people who don't work at all and are doing just fine thanks to your hardwork and tax dollars. We subsidize loans to people who aren't qualified for college, build roads to nowhere, highspeed rails in states that are going bankrupt, and accumulated debt that will never be paid back. We accomplished this as a nation; together.

From the opening monologue of Newsroom:

And with a straight face you’re going to tell students that America is so star spangled awesome that we’re the only ones in the world that have freedom? Canada has freedom. Japan has freedom. The UK, France, Italy, Germany, Spain, Australia, BELGIUM has freedom. 

So, 207 sovereign states in the world, 180 of them have freedom. 

And you, sorority girl, just in case you accidentally wander into a voting booth one day there’s somethings you should know. One of them is there’s absolutely no evidence to support the statement that we’re the greatest country in the world. We’re 7th in literacy, 27th in math, 22nd in science, 49th in life expectancy, 178th in infant mortality, 3rd in median household income, Number 4 in labor force and Number 4 in exports, we lead the world in only three categories: Number of incarcerated citizens per capita, number of adults who believe angels are real, and defense spending where spend more than the next 26 countries combined, 25 of whom are allies.

Eireann go Brach's picture

What is the difference between a group of monkeys at the zoo flinging poo at each other and a group of useless govt workers?


WestVillageIdiot's picture

One of my favorite parts of this is how academia is now ruled by big-government loving former "hippies" that just absolutely love the government and believe in their role in that massive, humanity wrecking machine.  Never do they see through the fog of their self-interest to see just how destructive their actions are. 

It is like watching former vegetarians slaughter baby lambs for sport and loving it and never once questioning thieir actions. 

strannick's picture

lets vote. whose more responsible for the nations ruinous debt. public sector unions or banks.

Anusocracy's picture



Don't confuse the issue.

AldousHuxley's picture

median wage adjusted for inflation should be $90,000/year.


Government workers just sustaining their social contract.

non government workers who thought they were part of 1% just realized they got screwed.



fuck it all. if you are smart, you work for government and actually have time to enjoy your life.



Rentier's picture

Aldous, this is true.  govt. worker = less job stress and much more free time to enjoy life.  I should know :)...

Da money isn't everything, public workers in some cases could go get a private sector job and make more like $10k-30k (like in IT field) more for same position, but why?  You are then trading time(longer hours at work, maybe travel etc.) for money, smart people know the most important commodity in life is time (even trumps health) is the only limiting factor in life.

AldousHuxley's picture

that's why smartest people don't want to get rich...they dont' want to trade their life for more money after certain threshold is achieved.


Europe = smart people = experienced empire building and its woes of war = learn to live with less, work less, enjoy time more

America = dumb people = not experienced failure as nation/state, aspires for materialism = depends on more stuff, more work.....until it is too late


smart people know time > money (you can print this)


founder /CEO of Lazard investment bank....Bruce worth $2.3 B......died of sudden heart attack at age 61.....thanks for all of the hard mind numbing 90hr/week work and the taxes you paid Bruce!

Bananamerican's picture

i know, without looking, that the down-thread is spittle flecked with "Union Thugs", and "LIBERALZ™" and all the usual right-wing jizz....

As usual, there's a pleasantly ignored "happy medium" between child-laborers and part-time community college history professors making $150,000 a year...

People DO need to collectively stand athwart the feudal HISTORIC tendencies of capital...Jesus, Globalism should have proven that to even the most red-faced Rush lover on ZH...Capital goes where it can GRIND humanity with the LEAST harm done to PROFIT.

American Unions were responsible for raising post industrial living standards in this country above the Dickensian norm of "unfettered capitalism".

However, human nature being what it is, after achieving many of their initial goals, Unions did go too far, fattened up, slacked off and became corrupted, often turning into politically protected corporate extortion rackets....into "Institutions".

Public sector unions for government workers however, ARE a bad idea! Because their "employer" happens to also be their fellow citizens...and the vast, limitless bucket of their FREE tax dollars so fetchingly arrayed around them....

But don't complain about "the passivity of the Sheeple" and then piss on collective action and Unions in toto....

Complain about the tendency of the Human race to swing from pillar to post, class against class, trampling the common ground beneath their feet

Lednbrass's picture

There aren't many Rush lovers posting on ZH. Most here that fall on the general right side of the political spectrum are as contemptuous of him as of the collectivist left.

He pretty much only gets mentioned by the progressive types here who aren't intelligent enough to conceive of people being opposed to their infantile sippy cup banging redistributionist nonsense, they simply claim their opponent part of the Limbaugh/Fox crowd and lack the mental capacity to discern any philosophical difference. It provides an easy out for the dullards.

InjuredThales's picture

Umm, for a socialist, you're not very up on your Marx.  Even Marx admitted social mobility in the US in the mid 19th century militated against his historical materialism.  (FYI, that was pre-unions)

This is what unions do: they trammel social mobility and lock in class differences/class struggle.  They also ensure that consumers pay more for services than what they are worth, and trap industries in uncompetitive and non-profitable products.  What a social benefit!

American history before unions was one of self-made men.  Look today at America and tell me, in every branch of society, whether that is still the case.  The America of the last 100 years has been one of dynasties and the nepotism of the oligarchs.

tenpanhandle's picture

founder /CEO of Lazard investment bank....Bruce worth $2.3 B......died of sudden heart attack at age 61.....thanks for all of the hard mind numbing 90hr/week work and the taxes you paid Bruce!


Of course this sudden heart attack occurred during a marathon sex session with the Swedish bikini team.

BigJim's picture

I'm sure their involvement had absolutely nothing to do with his wealth

BeetleBailey's picture

All that shit may true...but here's the juice.

Damn near EVERY government emloyee I've met is a total dick. I mean, a stinky donkey dick that thinks the world owes them a living.

In fact, now that I think about it, EVERY single government employee I know is a dick.

So, the equation is; work for the government = easy job, but become a dick.


Colonel's picture

Another thing you'll notice is they go from government job to government job because they know which side their bread is buttered on AND they'll also turn around deny their dependence on the government teat. They'll say they worked for the private sector in the past for all of 3 to 5 years once upon a time... wooowww. While the other 30+ years were all about accruing those bennies especially the pensions.

MilleniumJane's picture

Then you would've loved our 2011 Fourth of July party.  Two family members, both working for our financially strapped city, simply gushing over how they love the free monthly one-hour-massage-benefit our tax dollars so generously provide them.  Absolutely sickening.  Made me drink even harder that day.

Rentier's picture

Aldous, only one's junking your post are the losers who don't get it.  Chasing something they themselves will never have.

BeetleBailey, sound like a jaded private sector worker...keep working for da man & enjoying the hate.

InjuredThales's picture

Yes, parasitic predation off the backs of the hard-working and productive members of society should be upheld as wisdom! 

exsisto iustus quod vereor non

ATM's picture

Or you could be really smart and work for a GSA. Not really government but it's government. My daughter-in-law just started a job with the Federal Reserve Bank of Chicago Monday. 20% more pay than her private sector job, 20% signing bonus, and of course better benefits!

otto skorzeny's picture

at what point does the devil take the soul she has sold him? your grandchildren will be picked on at school for their hooved feet

brettd's picture

If you're smart, you'll stop paying the taxes that fund the TSA pat-downers at 90k/year.

Oh regional Indian's picture

Good Handle Assholocracy. Veddy Funny.

The thing is, it's all about WAR. Wars have to be fought constantly and so in truth, nations have been bankrupt TO the money-men for centuries. 

Everything a government does is to support War. War is the crux, the pivot. As the guys in the Iron Mountain report said, this society would collapse with-out war. 

It's not about debt or responsibility or anything. In the minds of the power-mad, war d-fines everything, ongoinng and planned....

We should worry about such things.



AldousHuxley's picture

war is a symptom of collective greed after failing to achieve through merit

(ie. money wasted on bankster bonuses instead of productive investments)


but nature doesn't reward extreme greed in the long run. population sustains only through collective effort to sustain US over SELF.

How many families rebuild old glory after fighting over inheritance?


NidStyles's picture

had the family members been raised and learned how to maintain themselves and understand the bond between them well enough to know that they had to take care of each other, they never would have that issue.


That is Family though, and you are not part of my family, so why in the hell should I support you? Where were you when I needed help? Where was the government, oh that's right they offered for me to join the military in order to provide for myself. Yeah great gig, I go to war and hopefully survive unscathed physically but have a lifetime full of regret and PTSD for my efforts. That's fine though, the government will take care of me until your money runs out, right?

LowProfile's picture


lets vote. whose more responsible for the nations ruinous debt. public sector unions or banks.

We'd have to add it up, but so fucking what if they are only responsible for say, 10%?!

I'd even up the score with the banksters first, the military industrial pigs second, but the public unions would be next on my list.

sebmurray's picture

Right on, any percentage of a gigantic number is still friggin huge

WestVillageIdiot's picture

Are you implying that the banks and government aren't one entity? 

AldousHuxley's picture

bankers = wannabe government employees....they call themselves "federal"

unions = American Bankers Association represnted by union rep Secretary of Treasury

bankruptcy for all

John_Coltrane's picture

A better analogy is the banks (principal dealers/FED) are the drug pushers, the government is the (debt) addict.  To break the connection you need to get rid of the debt thus eliminating the role of the PDs and FED.  Get rid of the FED you break the debt cycle, eliminate all government that can't be funded via cash flow (fees and taxes), and thus get rid of the public sector unions.   The the key is elimination of the FED.  It is the one thing that will break the debt cycle and create an economy funded via production and savings.

BigJim's picture

The government offers to give you back a percentage of the goods it stole from you in the first place.

Such a deal!

tenpanhandle's picture

Hippies were the original anti-governmentists.  Its funny how the oppressed so quickley become the oppressors once they gain the power.  Actually "funny" is not the right word.  God damned hippycrits.

Bendromeda Strain's picture

Beyond that, they became the worst parents imaginable. It's like they decided the Five Man Electrical Band song "Signs" was an instruction manual.

MSimon's picture

Some of us hippies never gave up the fight. I am as anti-govedrnment now as I was in the 60s. More even. And I tell all my former hippie friends. As well as my "conservative" (Moral socialsim) and "liberal" (Economic socialism) "friends".

Anusocracy's picture

The monkeys are earning their keep by entertaining the zoo's customers and govt workers are parasites?

AldousHuxley's picture

today we have workers directly working for the government and workers indirectly working for the government bailed out institutions.


Look around, how many people work for a corporation that is 100% private which do not benefit from tax exemptions, subsidies, bailouts, government contracts, etc.????


agricultural? farm subsidies

energy? subsidies

aerospace/military tech? pentagon budget

private universities? government research dollars and tax exemptions

supermarkets and walmart? depend on SNAP money

small businesses? depend on government sponsored institutions in the town (like military bases, universities, hospitals, etc.)


truth is we are all sort of government is just that some in the "private" sector thought they were capitalists...

LowProfile's picture


Look around, how many people work for a corporation that is 100% private which do not benefit from tax exemptions, subsidies, bailouts, government contracts, etc.????

99% of small businesses & entrepreneurs.


rwe2late's picture

 Incorporation itself is a government approved personal liability exemption.

I doubt whether 99% of small businesses disdain all available tax credits, SBA loans and also disavow doing any work for government .

And more generally, how many refuse police and fire protection, fail to use public roads, and 

... there's more, but I think you get the idea.

BigJim's picture

So, because they're forced to hand over vast amounts of value at virtual gunpoint, and then receive a small amount of it back, they're nett recipients?

  ... there's more, but I think you get the idea.

Yes, we get the idea; you're an idiot.

Hey, the next time the local mafioso wants some 'protection' money, don't feel aggrieved - I'm sure he'll be happy to arbitrate in any disputes that arise in your community.

rwe2late's picture


Do base your argument on another MISES idiocy.

“Taxation is theft.”

In this case, regarding corporate taxation.

Incorporation is a privilege, not a right, which is granted by society through government. Without the public infrastructure, without the protections for property and against liability, there would be neither corporations nor corporate profits.

The contention that corporations do not create costs for society is myopic and absurd. To allow corporations and individuals to freely profit by ignoring the social costs would be sociopathic. Taxation is one legitimate way for society, through government, to recoup costs and discourage destructive corporate business practices.

BigJim's picture

Taxation to pay for public goods is justifiable. Taxation to pay for private goods is theft... or, more accurately, robbery, as theft implies some kind of stealth, whereas taxation is demanding money with menaces.

Remember this? I doubt whether 99% of small businesses disdain all available tax credits, SBA loans and also disavow doing any work for government .

But now here in this post, you're going on about corporate privilege.

Which do you want to discuss?

rwe2late's picture

I was sticking to the discussion of Lowprofiles post above (about corporations).

MilleniumJane's picture

I don't always agree with AH, but I have to disagree with you...I work for a family run hardware and lighting store.  Including myself, we have seven employees total. They have been keeping afloat selling large amounts of energy-saving lighting products to cities and state parks that receive federal grants.  The bidding process is very competitive.  I think there are more small businesses out there that do this than one might realise.

BigJim's picture

Yes, the government sucks out vast amounts of wealth from its citizens and then spends it. If you're lucky/smart/hard working, you might get some of the money they took off you and your fellow citizens.

So what? If you ask nicely the local burglar might sell you some of the stuff he stole from you at a steep discount.

The point is, that wealth they took is wealth your fellow citizens were unable to use to buy stuff from you directly.

This is only good news if you are a nett recipient.

Harlequin001's picture

Some of us educate our own children, pay our own medical costs, build our own businesses and plan to pay as little tax as possible. Some of us have absolutely nothing whatsoever to do with government employees because some of actually are 'capitalists'. That is of course, when we're not taxed to death to pay for everybody else's welfare.

post turtle saver's picture

The monkeys don't have a collective bargaining agreement with the zoo.

AldousHuxley's picture

monkeys get free food, free protection, free toys, free healthcare, shit cleaned by another human, don't pay taxes, free sex, and best of all don't have to give a shit



that's why whenever you go visit the monkeys at the zoo, they are laughing at you.

BigJim's picture

Hmmm, so we should all become monkeys in the zoo?

But where will our free food, free protection, free toys, free healthcare come from?

Parasitism only works if there's a host to parasitize.

midtowng's picture

It's interesting how the right-wing has decided that the cause of all our problems are school teachers, firefighters, and policemen.

   Not the people who actually make the economic and foreign policies of the country.