American Elephants

State Budget Battles: The Showdowns by The Elephant's Child

Coming soon to your state! Protesters are making absurd claims.  Essentially, they are claiming that taxpayers should pay for their health care and their pensions, and in a budget crisis created largely by their own outsized demands, somebody else should pay.  Wisconsin taxpayers now pay 94% of the cost of the teacher’s health care insurance.  The governor is asking teachers to pay a little larger percentage of their own — taxpayers will still pick up 87.2 % of their healthcare.

Sorry, I know it’s hard when your budget is a little tighter, but preferring that large numbers of your fellows lose their jobs to keep you from having to pay the slightest bit more isn’t exactly an admirable quality. Are these folks simply unaware of the nation’s financial problems? If teachers are so uninformed, it’s no wonder that Wisconsin kids can’t read.

Elections Have Consequences. by The Elephant's Child
February 25, 2011, 5:52 pm
Filed under: Capitalism, Economy, Law, Liberalism, Taxes | Tags: , ,

The American people are more concerned about budgets and deficits and debt than ever before.  That doesn’t mean, however, that everyone gets it.  What are students from the University of Wisconsin doing sleeping in the capitol building, and participating in protests?  Well, great fun being part of a big noisy protest, beating drums, singing protest songs.  But the likelihood that they have any idea of what the protests are all about is slim.

Teachers are being asked to pay 12.8% of their health-care premiums, up from 6%.  That means that the taxpayers are still paying 87.2% of their health-care costs.  They are being asked to contribute 5.8% of their salary toward their own pensions.  The unions said they wouldn’t object to that.  So why didn’t all the protesters pack up and go home? The unions don’t want to give up their power. Nobody is taking away their right to bargain collectively over salaries.

The problem is collective bargaining over benefits.  No state can possibly afford that. States are required to balance their budgets, and most states can no longer raise taxes, they’re already too high and significantly damaging the free market and killing jobs. In Wisconsin, either public employees agree to fairly modest cuts, or there will be massive layoffs.  There isn’t another choice.

In the private sector, unions bargain collectively with management.  Private sector management has an interest in keeping labor costs on a par with their competitors.  Thus management has an incentive to push back against union demands. If their labor costs get too high, they will lose business to their competitors, and eventually fail.

Public sector unions donate large amounts of money to the campaigns of the very public officials who will bargain collectively with the same unions.  The public officials have an interest in pleasing the unions so that they can again receive campaign funds from the unions.  They have no incentive to push back against union demands for larger pensions and more generous health care benefits.

People act in their own self-interest.  That’s just the way of the world. You can try to order people to do things they don’t want to do, but it doesn’t work well.  People respond to incentives.  The left seldom understands this.

General Electric and Phillips found it would improve their bottom line to force the American people to buy CFL lightbulbs made cheaply in China , which they could then sell at a larger profit. The American people didn’t like CFL bulbs. GE and Phillips helped the government to write a bill banning the use of incandescent bulbs.  The American people still do not like CFL bulbs and are stocking up on regular incandescent bulbs, and demanding that their congressmen repeal the ban.  People respond to incentives.

The American people don’t like the government telling them what kind of shower head they can use.  They have either installed multiple shower heads, or removed the restrictors from their government-mandated shower heads.  People respond to incentives.

The federal government can order school districts to feed broccoli to the kids.  There are no incentives there.  Kids don’t like broccoli.

The states cannot keep raising taxes, and thus put more people out of work, so that public sector unions can have more power.  The people who receive overly generous benefits from their public sector unions are vastly outnumbered by the ordinary people who have to pay higher taxes so that public sector workers can receive big pensions when they are no longer working.

Last year alone, 612,000 US workers dropped their union memberships — each representing as much as $500 in dues.  The average wage for public sector state and local government workers is $48,742, while the average private sector worker  receives only $45,155 . Used to be that public sector workers accepted a slightly lower wage in return for greater job security and better benefits.

SEIU gave $28 million to the Obama campaign, which went to Organizing for America to deploy activists to agitate for unions in Wisconsin.  As Michael Barone says: public sector unions “are a mechanism by which every taxpayer is forced to fund the Democratic Party.”

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