FGF E-Package
A Voice from Fly-Over Country
April 6, 2011
Unions — The Manufacturing
and Political Demise of America
by Robert L. Hale
MINOT, NORTH DAKOTA — What does the loss of America’s manufacturing prowess have in common with the growing debt of states, counties, cities, and towns across America? Unions.
In 1971, during my first year of law school, the contracts professor informed us that private-sector union power was declining and would continue to do so. He said, “Watch what happens over the next several decades — unions will thrive by unionizing public employees.”
The decline of unions in the private sector was the result of their success in exacting concession after concession from private business, and it worked — for a while. It worked because the U.S. faced little serious competition in world markets, and companies were able to simply pass on the costs to consumers. As other nations became competitive, the weight of the excessive and unsustainable concessions resulted in industries in the U.S. either closing or moving out of the country.
Escalating union demands for more money, more benefits, and unreasonable work rules continued virtually unchallenged. The blame for this failure to challenge union demands lies, to a great degree, with American industry, which gave these concessions at the cost of its ability to compete in the global marketplace.
By the time the nation realized what union greed and business laxity had accomplished — the decline of America’s manufacturing power — it was too late. Instead of recognizing ad admitting that greed and laxity were a recipe for America’s economic decline, unions and elected officials joined forces and fed the same deadly recipe to taxpayers anew.
Unions and special interest groups saw the taxpayers’ pocketbook as a pot of gold to be savaged. And savage it they have. Government expansion, justified by good intentions, was accelerated by Lyndon Johnson’s promise to end poverty. The net result has been the greatest and most irresponsible expansion of, and spending by, government in human history.
Progressive thinkers and special interests who promoted the expansion found little resistance to their schemes, programs, and claims on the public treasury. Public-employee union expansion led the way. These unions negotiated with elected officials, who often lacked fiscal acumen and were at times swayed by union money and promises. The result was the sellout of the taxpayers.
The sellout came in two forms. First, wages for public employees began to escalate. Civil service was once considered a public calling; it provided job security and guaranteed retirement benefits in exchange for wages more modest than the private-sector counterparts. Today, however, public-employee wages exceed those in the private sector by a factor of 25 percent to 50 percent. Second, public-employee benefit packages have become so generous that taxpayers can no longer fund them. Vacation time, health benefits, and guaranteed retirement packages are so costly they are literally bankrupting political subdivisions across the country.
Public-employee benefits, unlike those in the private sector, are underfunded — no money has been set aside to pay the benefits. Legislative bodies, by not funding these liabilities, were able to spend what they should have saved to fund them. These legislators irresponsibly ignored the taxpayers, who would soon have to fund these liabilities. Unfortunately, the liabilities are now so huge taxpayers simply cannot fund them.
Neither the greed of unions nor the false generosity of elected officials were concerned what their actions would bring about. Now, the consequences of this irresponsibility are becoming clear to everyone.
What is going to happen? We have seeing one possible scenario unfolding in Wisconsin. The governor has put his finger on the core problem and taken steps to halt the irrational pay and benefit programs for that state’s public employees. This is only a first step, however.
The trillions of unfunded entitlements in this country cannot be funded if we are to have a viable economy. The fiscal insanity must stop. Irresponsible public-sector wages and unsustainable health and retirement benefits must be abrogated — now. Unions, irresponsible politicians, and special interests can no longer be permitted to drive public spending. Necessary changes will be painful, but the alternative will be even more so.
The protestors are calling for the strong arm of government to confiscate even more of America’s real wealth to continue funding the irresponsible management by governments over the last 70 years. They are calling for massive tax increases on private earnings and wealth. Such increases will destroy America’s ability to create wealth and hasten the nation’s decline into bankruptcy. Unless Americans become savvy and do so quickly, it is likely that elected officials will indeed impose these tax increases, guaranteeing America’s demise.
The private sector is ruled by the laws of human nature and fiscal rationality. It will respond to more taxes in the only way it can. The private economy will stop producing. This is not a possibility — it is a certainty.
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A Voice from Fly-Over Country is copyright © 2011 by Robert L. Hale and the Fitzgerald Griffin Foundation. All rights reserved.
Robert L. Hale received his J.D. in law from Gonzaga University Law School in Spokane, Washington. He is founder and director of a non-profit public interest law firm. For more than three decades he has been involved in drafting proposed laws and counseling elected officials in ways to remove burdensome and unnecessary rules and regulations.
See a complete biographical sketch.
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