As Jonathan very correctly observes, Scott Walker’s public-sector union reforms, which he got enacted over extraordinary opposition, scare unions, Democrats, and possible GOP opponents alike should he decide to run for the Republican nomination in 2016. Unions face a massive loss of funds (and therefore political power) if his reforms spread to other states. The Democratic Party faces a loss of those union funds, which go overwhelmingly to that party. And the contenders for the presidency in both parties face the fact that Scott Walker, who comes across in both private and public as a nice, low-key, everyone’s-favorite-uncle sort of guy—a veritable unObama when it comes to self-regard and ego—has proved himself a political mensch of the first order. That could be a very potent combination in 2016.
Scott Walker felt he had to fight the public-service unions, instead of kicking the problem down the road as most politicians are wont to do. That he did so, and succeeded, it seems to me, adds to his political potency in an era when a considerable majority of the people think the political establishment has been avoiding taking on the tough but necessary political jobs—tax reform, legal reform, entitlement reforms, etc.—for purely self-interested reasons, endangering long-term prosperity in the process. The right track/wrong track polling stands at a dismal 30 percent/62 percent and hasn’t been in positive territory for a very long time.
Governor Walker took on reform of public-sector unions not because the crisis would come in his governorship, but because he knew it would otherwise come.
The basic problem here is that the public sector should never have been allowed to unionize on the Wagner Act model that governs private-sector unions, for the private sector and the public sector are two very different economic beasts. FDR—hardly anti-union—adamantly opposed public-sector unionization. The reasons are three.
1) When a profit-seeking corporation sits down to negotiate with its unions, the two sides are basically negotiating over how to divide the profits that capital and labor, working together, create. Both sides know that if they push too hard it can kill the goose that lays the golden eggs of profit. If capital drives too hard a bargain, it will have a sullen labor force and will lose the best workers to the competition. If labor drives too hard a bargain, management will have to raise prices and business will be lost to the competition. They often get the balance wrong, but market signals will tell them that and be a factor in the next negotiation.
But in the public sector, there is no competition, and therefore no market signals. And they are not creating wealth, they are spending other people’s money (i.e. the taxpayers’). As Milton Friedman explained, no one spends other people’s money as carefully as they spend their own. Management here has effectively no skin in the game, so why fight hard to keep down labor costs? It’s better to ensure labor peace.
2) But even worse, while in the private sector neither side has any say in who sits across the table, in the public sector the unions can powerfully influence whom they negotiate with. They use union dues to contribute to campaigns to get union-friendly politicians elected. Those politicians then give the unions a better deal, providing the unions with more money, which is recycled into campaigns and a vicious circle is established.
3) Politicians are always short-sighted. They care about tomorrow’s headline and next year’s election, not a future when they will no longer be in office. In a public-sector labor negotiation, both sides of the table are populated by politicians (union leaders are elected after all, and, like all politicians, need to bring home the bacon). So the long-term consequences of any deal are ignored. After all, they’ll be someone else’s problem. By loading most of the increased costs into future entitlements instead of current wages, they also escape current scrutiny by the press.
The result over fifty years (ironically, it was Wisconsin Governor Gaylord Nelson who signed the first bill to allow the first public-service unions, in 1959) is a public sector that is paid more in wages than their private-sector counterparts and enjoys benefits that private sector workers can only dream of, such as free health benefits and generous defined-benefit retirement plans for which public-sector workers pay nothing. If public-sector workers in Wisconsin are now taking home less than they did before reform, that is largely because they are now contributing to their health and retirement plans, just like their private-sector counterparts have to do.
So it’s not simply “anti-unionism,” as unions and Democrats contend, it’s redressing a grossly unfair situation that should never have been allowed to develop in the first place and that was quickly spiraling out of control. How many Detroits can this country take? Three smaller cities in California have also declared bankruptcy because of unsupportable obligations to public-sector workers. Many more across the country are on the brink.
So someone had to be St. George and slay this dragon despite the personal political risks in taking on so formidable an opponent. Scott Walker had the necessary courage. That will stand him in very good stead in the next few years.