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Guest Post: Government Employees, Unions, And Bankruptcy
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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Before I go on, you must know that I flew for an air line as a union member. Pilots are underpaid world wide and with the low salaries and gutless leadership we now have pilots in flight going loonie and having to be restained by the their passenges. ALPA has done a terrible job, and most of their leaders end up working for the US Government at very inflated salaries that are little more that pay offs. This is how Government controls most people, by buying leadership that sell out theri people. Enough said.
Public employees should not be allowed to form unions nor participates in any union activities. Public employees in the past always had low pay, but in return they had stability in pay, employment and retirement. JFK changed this I believe with a simple executive order and we have paid dearly ever since. The public sector now in its entirety is extremely over paid and still maintains all stability though in reality it's employees would be easily replaced. If TPTB do not cut slaries, pensions and other benefits for the public sector at all levels there is no doubt in my mind that violence will come to the USA. I am too old to do anything about this totally out of kilter transfer of wealth to government workers but if this extreme continues there is no doubt that others will. People will not stand for the slavery that is taking place very long. When police and fire fighters retire at full pay with benefits after 20 years of service at age 42 this is little more than theft and makes a mockery of those small businessmen and women that make up over 70% of the economy.
Unions in the private sector are held in check because business' have the option to fire and rehire. Governments do not.
You're a joke. You got paid badly doing hard, skilled work and now you demand that others who are equally skilled are paid badly too. What a turncoat. What a class traitor.
Hey did you hear that Goldman Sachs average employee income fell to just $340,000 a year? Man they are doing it tough. But what do you care, you have ordinary workers to stick it into.
So keep attacking other poorly paid peasants why don't you, that's how the elite divide and rule.
You obviously did not read the entire posting.
Please specify which part I missed. The part about all gubbermint workers being grossly overpaid, or the part where all public sector unions should be banned? Or maybe the bit where the turncoat asserts that worker pensions should be slashed?
That if private sector unions are formed I am all for them. Government employees have no "skin in the game." Private sector employees do because they know there is a limit to what they can ask for. If they kill the goose they loose their golden egg. Public employees do not give a shit because they think it is just the government. In reality it is the taxpayer. Put something at risk and I am all for you. Demand top pay for just showing up, early ritirement at full pay, public inflated pensions and full health benefits and I would fire you.
"Government employees have no "skin in the game."
Nonsense. You pretend that government employees don't lose their jobs, aren't forced to resign when they screw up and don't get fired for cause.
You are a dreamer. Get back to the real world please. In reality its the bankster Dimons and Diamonds of this world who are truly unaccountable.
And I don't see you hitting out against them.
"Put something at risk and I am all for you."
The banksters have lost billions out of worker and government pension funds, gambling those worker saved monies in speculative schemes. Public sector workers getting screwed over by private sector interests, in other words. Is that enough "skin in the game" for you?
Sorry, I am sticking to my story. Your zerohedge name says it all, Pay Day Today. You are probably at "work" now. I would guess very young and you think you deserve what ever you are being paid and more-and you may deserve it, I do not know.
You seem like a nice person, but like most US Government employees that complain about the Fascist cohesion of Government and big business, you forget that you are part of the government. That cohesion exists to keep expanding the size of government and providing jobs.
Do you want to share where you work (generally), & what the pay and benefits are? Just saying wish you the best, but THE END IS NEAR!
That's the most sense you've made today.
By the way, keep attacking ordinary American workers who are just trying to buy groceries, meet their rent and power bills, you seem to think its your patriotic duty to make them poorer, so keep it up.
Fcking idiot you can't even spell "lose" right... what public agency would ever hire your retarded ass...
"The public sector now in its entirety is extremely over paid and still maintains all stability though in reality it's employees would be easily replaced."
Overpaid according to WHOM? SOMEBODY is apparently willing to pay them. Maybe we should just eliminate all private companies whose stock you happen to believe is overvalued. Rapacious, unbridled capitalism is just WONDERFUL for you people--until someone else figures out a way to accumulate more capital than you. Union workers--public and private--should be APPLAUDED for making as much money as they can, because THAT'S THE NAME OF THE GAME in this country, you hypocritical losers. Unreal...
Relative to the private sector, but you are correct- I think that the private sector is now less than 50% of the US. Pathetic. You want to retire as a multi-millionaire-go earn it on your own. But you instead seek excessive pay and benefits from the various government entities knowing full well that it is part of what is destroying out Country today.
"God forgive them for they know not what they do."
Damn, the 5 Minute Hate went way overtime here! I thank our would-be Great Leader from the Mises Institute.
Public employees contribute "zero" to the world?
There's a big difference between mere stupidity, sheer insanity, and insanely inflaming mass stupidity in others.
You, sir, have a real gift!
I have to say that I was amazed at your comment about firefighters, which was "The firefighter paid by tax dollars is a functioning leech". Please explain to me how a person that is willing to risk life and limb to go into burning buildings to save someone, unknown to him/her is a "leech".
As a retired "leech" who has been shot twice, blown off two roofs, burned many times and had two fire rescues during my 38 years as a "ghetto firefighter and as a functioning "leech", I am sure that you will be glad to know that I am greatly offended by your comment. Two "leeches" in my family were killed at fire scenes while fighting fires, one was my father.
Paid firefighters in certain locations do receive compensation that is above a national average but not all firefighters receive the same salary. If the politicians in charge of negotiations for union contracts agreed to clauses that were not capable of being fullfilled, then perhaps they need to be dealt with. Furthermore, it was the same politicians that chose not to provide agreed upon pension contributions which now have resulted in many pension funds being under funded.
Having said the above, please explain how your association with the "Ludwig von Mises Institute" provides any great benefit to the citizens of any jurisdiction.
In closing, if you have the unfortunate occasion to need a fire response I suggest that you call an "economist" or as my father would say, fuck you and whores you rode in on.
The US functioned for years with just volunteer fire departments. We could do it again.
Finally, I did call the Fire Department once and the Chief of the department said, "We do not want to get involved."
I will never forget that, and I will suggest that it may also happen to you.
"....In a just world, public sector workers would be paid the rightful amount equal to their contribution to society: zero dollars an hour....."
this is so true - the problem with socialism is that you eventually run out of other people's money....
these problems would never have occurred if governments were required to pay as it went, and if that required exorbitant taxes - then so be it.....debt financed government is a drug with hideous side effects and withdrawal symptoms....
capital owners are rapacious and wicked in the extreme at times, so destroying unions is no solution - even though they are as rapacious and slothful as government itself is. big government is as corrupt and wicked as the unchecked capital owners.
Another MISES pile of crap:
“dire fiscal condition is due to one thing and one thing only: benefits promised to unionized workers.”
That statement is so false as to constitute a deliberate lie -
So much is deliberately ignored:
ZIRP return on pension fund investments, outsourcing of labor trade policies, costs of economic downturn passed to local gov’t, all the state and municipal deficits total only a few months of Pentagon spending.
“then government produces nothing without a negative effect on some individuals.”
More MISES legerdemain.
The MISES propaganda rests on a misleading zero-sum economic argument APPLIED ONLY TO GOVERNMENT.
Actually, were the zero-sum premise true, it would be more accurate to say ALL production, public OR private, theoretically takes away from someone else (negative production by someone else).
The reality is that some “activities” are productive and beneficial to others,
and some are not - regardless whether public or private.
A public teacher or garbage collector can be equally valuable as a private one doing the same work.
A Goldman Sachs con artist can be harmful, as can a Treasury official.
A profit-driven military-industrial CEO can be as harmful to the public as a security-obsessed army general.
Using “money” to “vote” what benefits society fails inasmuch as the super-rich have more “votes”.
Assuming he actually believes the shit he relentlessly broadcasts, he's as fucking crazy as Col. Jack Ripper:
https://www.youtube.com/watch?v=N1KvgtEnABY
My anti-union sentiments are a matter of record. I enjoy a good union-bashing now and again, but this post and the accompanying commentary serve no purpose other than to distract and divide.
We are our own worst enemy and the worst among us use our very nature against us - those are our common enemy.