The public pension curse

Mass unionization of government workers decades ago led directly to the out-of-control debt that is ruining us today

September 05, 2010|By Matt Patterson

In January 1962, President John F. Kennedy issued Executive Order 10988, giving federal employees the right to organize. This little-known act, which effectively unionized the vast federal workforce, has had momentous consequences that nearly five decades later threaten to overwhelm our democracy.

Prior to President Kennedy, it was widely considered inappropriate for public employees to have the same organizing rights as private workers. For one, it was accepted that while public workers received lower wages than their private-sector counterparts, they received in exchange valued intangibles such as job security and, as quaint as it sounds now, the honor that came from public service.

Even that great labor benefactor Franklin Roosevelt drew a distinction between public and private unionization, noting: "Meticulous attention should be paid to the special relations and obligations of public servants to the public itself and to the Government. … The process of collective bargaining, as usually understood, cannot be transplanted into the public service."

But President Kennedy, inspired by New York City Mayor Robert Wagner's granting of collective bargaining rights to city employees in 1958 (the so-called "Little Wagner Act"), saw a chance to increase both his and his party's political power through public-sector unionization. And indeed, Kennedy's act produced a succession of public-sector unionizations across all levels of government.

As Dan DiSalvo and Fred Siegel wrote last year in the Weekly Standard, "the expansion of public sector unionism produced a self-generating dynamic for continual expansion." By 2008, public-sector unions — including federal employees — totaled 7.8 million workers, and today all but 12 states allow some level of collective bargaining for public employees. In fact, nearly 40 percent of state and local workers are union members, compared with only 7.6 percent in the private sector.

And just as Kennedy had hoped, this mass unionization of public employees has redounded spectacularly in favor of the Democrat Party. As Richard Ebeling of the American Institute for Economic Research notes, "Public sector unions as a whole have given around $160 million to Democratic candidates between 1990 and 2008, with donations of $6 million in 2008" alone.

What has been very good for Kennedy's party, however, has turned out to be disastrous for the public purse. The cushy benefits, high salaries and generous pensions won by public unions over the years have left municipalities — and, indeed, entire states like California and New Jersey — teetering on the verge of bankruptcy. Public pension funds face total deficits estimated at between $1 trillion and $3 trillion, forcing cities and states to borrow heavily, raise taxes and/or cut back on essential services such as transportation.

The alternative, of course, is for governments to trim or freeze those pensions and benefits. But that is often politically impossible, even as it is fiscally necessary; witness the ongoing controversy in Baltimore over efforts to tinker with police and fire pension formulas. Workers who have extracted such largesse do not easily relinquish it, and indeed, seldom fail to push for more.

This phenomenon is by no means limited to the United States: Around the world, public-sector unions are holding entire countries hostage. In the last weeks of August, large numbers of South Africa's 1.3 million-strong civil service sector went on strike, demanding higher wages and housing allowances — and plunging the nation's hospitals and school system into chaos. According to the Financial Times, "Volunteers and army medics struggled to keep hospitals operating, while school pupils resorted to teaching each other in preparation for exams at the end of the year."

Then there is Europe, where lavish public pensions and benefits have contributed to economy-crippling levels of debt. Greece, deep into a destabilizing fiscal crisis, saw its public-sector unions demonstrating (including deadly riots) throughout the spring in opposition to proposed pension rollbacks, part of the "austerity" package of spending cuts Athens was forced to consider to save the nation from bankruptcy.

Two thousand five hundred years, ago, Greece gave birth to democracy. Is it now foretelling how it may end?

Matt Patterson, a Rockville resident, is editor of Labor Watch, a publication of the Capital Research Center in Washington. His e-mail is mpatterson@capitalresearch.org.

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