Perspective on Wonderboy's Budget "Cuts"

Former CBO Director Douglas Holtz-Eakins appeared on numerous media outlets since Wonderboy delivered his bloated 2012 budget. Having become a minor budgetary celebrity, Holtz-Eakins provides some objective viewpoints on this subject.

Here's one really bracing item that he's articulated. The so-called freezes in discretionary budget items called for by Wonderboy amount to something like 2-3% of the total budget. So, even getting by the fact that such alleged spending freezes are on top of 2011 amounts which are, in some cases, 25% above Bush-era levels, the imagined savings are basically a rounding error in the total federal spending proposed for 2012.

This is disgraceful.

And the federal debt continues to rise, which is the real, undeniable measure of a failure of the president's budget to address the federal government's excessive spending.

Why Public Sector Unions Are Different Than Private Sector Unions

As Wisconsin and Ohio's GOP-controlled state legislatures respond to their governors' calls to pass bills which will remove collective bargaining rights from various public sector unions, Wonderboy and others on the far left, as well as union leaders and their members claim that it's union busting. That it's unfair.

I think it's disingenuous for governors Walker and Kasich to deny that they are targeting public sector unions. They aren't technically trying to break the unions, but they are certainly aiming to weaken the unions grips on the public purse.

Public sector unions are different than private sector ones. Perhaps more by degree than by nature, but that's in effect what many states are now about to discern.

Private sector unions negotiate with profit-making companies. When the companies strike unwise deals with their unions, then, in time, the companies' fortunes suffer and, shortly thereafter, so do the union members. One only has to consider the fate of railroads, airlines, steel and automakers in the US to see how union excess, combined with management stupidity, results in pain and suffering for the workers and shareholders.

In the private sector, Schumpeterian dynamics and Ricardian trade economics eventually shift economic activity, business and jobs to lower-wage, comparatively higher-productivity regions or countries.

Thus, in the private sector, global and regional competitive forces serve to curb union excesses for compensation and work rules which disadvantage the companies with which they bargain.

This natural competitive force is absent in the state and local government sector. Add to this the transient, largely semi-professional or amateur nature of most elected officials in state and local governments, and you have a recipe for public sector unions representing firemen, police, teachers and other civil service workers to demand- and receive- excessive compensation, benefits, work rules and other rights without a clear countervailing force.

In fact, the only countervailing forces are taxes and the amount and interest rates on state and local government borrowing. The former becomes a political football at each election, while the latter is poorly understood by the average voter. It takes a lot of effort for the average voter to connect the dots between his rising taxes and the lush, above-private-sector average compensation and benefits granted to unionized public sector workers.

You also don't have much choice in the matter of dodging this liability, short of moving to another locale or state. Which, when taxes rise too much, actually happens.

There's another difference, as well.

Suppose your neighbor works for Coca-Cola. Maybe he drives a delivery truck, or is a regional manager.

Do you worry about his job and well-being when you order a Pepsi or some other non-Coke beverage? Probably not.

If Coca-Cola has to cut wages or benefits, do you feel individually responsible? Again, probably not.

But suppose your neighbor works in the county or town clerk's office. Or is a policeman, teacher or fireman. Suddenly, there's an unsettling personal connection between your taxes, your personal share of the local or state government's spending and deficits, and your neighbor's standard of living.

If you vote for a candidate who promises to rein in spending, cut teacher pay, or maybe even retract their right to bargain collectively, you may feel that you are now personally responsible for the children of your neighbor, a public sector worker, being less well-off.

Frankly, it's not fair. It's not fair to the average voter/taxpayer that they are made to feel responsible for funding the lifestyle of a neighbor or friend who lives off the public trough.

That's one reason why I favor making every public sector job that can be, be outsourced to private sector companies via contract. It removes the human face from public sector jobs.

We all make career choices. If I work at Coca-Cola, does that mean I should take it as a personal insult that any of my neighbors or friends don't buy several cases of Coke products each week? They aren't responsible for my career choices- I am.

So why should I feel responsible when a fireman, policeman, town administrator or teacher is the object of expense reductions by state or local government? Why should I feel some personal guilt about my child's ability to read because someone I know chose to enter the teaching profession and is now experiencing lower compensation or work rule changes due to an inability of the local government to fund the existing union agreements?

Public sector unions are also different for the very reason LaGuardia and FDR originally declined to allow them, i.e., they provide critical services for government which cannot be safely interdicted. Thus, allowing them to possibly strike and suspend key government functions such as police and fire protection, schooling, or garbage collection, is unwise and unfair. If these functions were contracted out to private sector firms, then this wouldn't be a risk.

Simply put, why should some small group of our neighbors be allowed special privileges regarding their ability to legally extort us, through state and local governments, just because they happen to work for us in those governments? Isn't that totally backwards?

Yes, it is. Where they work shouldn't have any impact on how they make us feel about their wages, benefits or work rules.

In fact, because government workers serve all citizens, that's precisely why as many of them as possible should be private company employees- so we don't come to view their personal financial fortunes as our responsibilities as taxpayers and citizens.

Why Do State & Local Government Directly Employ So Many Workers?

Amidst all the trouble being caused by teachers and other state and local workers in New Jersey, Wisconsin, and Ohio, I've been wondering just why local and state governments directly employ so many workers?

Let's start with a small, local example- your town's parks and recreation department. I understand hiring a director for the function- sort of. Ideally, a committee of town council members could oversee the function, or one manager could handle several functions. So let's assume that this function, along with a few others, is managed by a managerial-level town employee who is not unionized.

Why would any town want to hire and be responsible for managing and paying the people in a function like this? It's essentially doing landscaping and outdoor maintenance work for the town's properties. So why not just contract with as many local such firms as necessary to perform the work? Bidding such work out to existing firms should get the town something approaching the marginal cost for such work, without incurring headaches involved with actually managing and paying the workers involved. No strikes, no compensation negotiations. And the town would have the advantage of routinely rebidding contracts, not to mention having recourse for work not performed, or poorly performed.

The same could be said with more local functions, such as school staffs, waste treatment plants, etc. If one didn't already have the precedent of existing school staffs, unions and such, why would a town or district bother with hiring anyone below a superintendent of schools? As a town official, I'd much rather outsource teaching to either individually-hired teachers, or a company which supplied whole school teaching and administrative staffs. Prices for the contract could be set relative to student performances, while the town remained free of long term liabilities for benefits paid to the staffs. That would be the concern of the providing company.

About  the only state or local function you might not want outsourced would be the police function, due to their use of force to compel citizens' compliance. Firefighting isn't really all that special, once prices reflect the risks of the work. As with schools, the actual buildings would be built and owned by the town.

By avoiding direct employment of many workers, local and state governments would accomplish several things. First, they'd always be able to solicit the best, most productive solutions from competing bidders for their work. Second, without dedicated employees, redesign of processes, departments, etc., would be much easier, because the government wouldn't directly employ the affected workers.

Third, workers doing government jobs, via contracts, would have the same risks everyone else does regarding employment, yet enjoy private sector labor markets and prices.

Aside from giving state and local government employees special benefits by being employed directly by government, what is the real value of this arrangement? It's fine to have higher-level managers of functions employed by the government, but, lower than that, it would make sense to have citizens' tax dollars used to spend on the best among competing solutions, rather than provide cozy long term employment for those fortunate enough to secure such a job.

What's gone on in New Jersey for over a year and, more recently, in Wisconsin and Ohio makes me think about this topic a lot.

The Left's Illegal Actions In Wisconsin

I last wrote about the standoff between Republican legislators and Governor Scott Walker, and the teachers' union in Wisconsin, in this post a few days ago. Since then, some additional information has surfaced which suggests how the debacle may be resolved.


First, something that the liberal media treats as normal, is the fact that thousands of Wisconsin teachers simply walked off of their jobs to go to Madison to protest. It's behavior which would get an ordinary employee terminated.


Second, doctors from, I believe, the University of Wisconsin, or some other state-affiliated organization, were out among the picketing teachers dispensing fraudulent sick notes. At least one Fox News reporter posed as a teacher and acquired a bogus excuse. This is fraud, apparently by state-paid doctors, to abet an illegal strike by teachers.


Don't you just love municipal unions and their employees? How they abide by no-strike aspects of legislation allowing their existence? This is precisely why LaGuardia and FDR refused to allow public sector workers to unionize and bargain collectively.


Third, the Democratic state senators who fled to Illinois are guilty of two things. They would seem to be derelict in their legislative duties, and subject to some penalty. By some press accounts, there are Wisconsin citizens calling for these senators to be recalled immediately.


However, these state senators are guilty of something actually far worse. It was the subject of a heated debate between Steve Hayes, Charles Krauthammer and Juan Williams on Brett Baier's Fox News program on Monday evening. The debate got so out of hand that it ate up time for another topic Baier had planned to discuss.


What was debated is how these state senators, being in the minority and unable to legally stop an all-Republican-controlled lower house, upper house and governorship from repealing collective bargaining rights for teachers, simply fled the state to prevent a quorum in the state senate. Hayes and Krauthammer noted that, during Congress' efforts to pass Wonderboy's health care bill, the president told Paul Ryan, at a private meeting, that he, Wonderboy, had won the presidential election, so his way was the only way forward.


Having set the national tone as governing at will when in complete, total majority throughout the necessary legislative houses and executive branch, this would be fitting for Wisconsin. This is what Krauthammer and Hayes contended.


Williams, ever the left-leaning apologist, denied this, defending the fugitive Wisconsin state senators as practicing democracy. He heatedly denied that they were violating the political process. He referred to it as 'playing politics,' and Hayes retorted with something like,


'That's not playing politics, Juan. That's taking the ball and going home.'


It's not a small point. In Wisconsin, as in the rest of the US, November's elections settled the public debate. The losers, in this case, the Democrats in Wisconsin, must abide by the will of the elected majority. Just like Congress' Republicans had to endure the tortured process by which the health care bill was passed.


Despite the signs and cries of the picketing Wisconsin teachers and their allies, Scott Walker is not behaving like Hitler, nor engaging in unrepresentative, undemocratic behavior. To follow Wonderboy's lead, the GOP in that state won control of both legislative houses and the governor's office, so they may now repeal the teachers' union's collective bargaining rights.


Isn't that the inspiring lesson of Wonderboy's remark to Paul Ryan- ironically, from Wisconsin- shortly after his inauguration? That since he'd won the November election, and Democrats controlled Congress, it was his way, or the highway? No Republicans need offer any amendments to anything?


What Democrat state senators and teachers are doing in Wisconsin is certainly not the democratic process. It's two groups of liberals behaving illegally because they lost power in a proper election, and now are seeing special benefits stripped by lawmakers representing the rest of the state's citizenry.


It seems to me that public sector collective bargaining is in no way a God-given right. What the legislature granted earlier, in the last century, it can take away. Almost half of US states do not allow this right for public employees.


Further, the left has created what is, for itself and those unions, a virtuous cycle. The public sector unions use union dues, deducted and paid to them by the state, to fund liberal candidates who then vote for better compensation and benefits for the union employees.


In Wisconsin, as governor Scott Walker has explained, this has led to below average payments by teachers for their pensions and health care benefits. Do you think this would have occurred if those workers weren't allowed to bargain collectively?


Probably not.


In short, the union and its employees, in concert with Democratic state officials over decades, finally looted too much money from the rest of the state's citizens. Those citizens gave Walker the governorship, and his party control of both legislative houses last November.


That was the will of the people, expressed at the ballot box. What teachers and Democratic state senators are doing now is whining and throwing a tantrum, now that they've been told things will change.


As I write this on Tuesday afternoon, Ohio and Indiana are now grappling with similar issues. It's a great time for the left and its public sector unions to be acting out in such a public and undemocratic manner.


If Wonderboy were smart, instead of accusing Scott Walker of union busting, he'd be calling on his party's members to buck up, take their medicine, and encourage teachers to behave legally and responsibly. Instead, his silence will come back to haunt the First Rookie in the 2012 election.

Rick Santelli Videos: Sunday & October 2010

Rick Santelli is the CNBC on-air editor from Chicago who is generally credited with sparking the first Tea Party rallies. The second video on that post contains Santelli's original call for the Chicago Tea Party on July 4th of 2009.

Santelli was a guest once more this past Sunday on Meet the Press. Here's video from the appearance.

While I'm on the topic of Santelli, here's a clip of him one morning on CNBC. Note his accurate prediction about the current state fiscal crises. Think about his comments on what the election, still to come at this point, would say about voters' attitudes toward government spending.

Since the overwhelming GOP victories, and Wonderboy's bloated 2012 budget, this pre-election video suggests more powerfully how the president has already forgotten the message sent last November.

I'm a little surprised Immelt never had Santelli fired. There was a point at which he was called to New York for some re-education, but he was muted for only a week or so. At this point, his generally high profile may be saving his job. That and Comcast having taken operating control of the network.

The Larger View of Wisconsin's Teacher's Protests

This post written last week concerned the Wisconsin's teachers' protests. Afterwards, on Friday evening, I saw Frank Luntz give a report on one of the Fox News evening programs explaining that this was about the dumbest thing a municipal union could be doing right now.

What may not have sunk in sufficiently to the rest of us is that parents across Wisconsin, but I believe especially in Milwaukee, have seen their public schools closed as the teachers simply walked off the job to go protest at the state capitol building in Madison. This is the essence of why local, state and the federal government didn't allow unionization of and collective bargaining for public sector workers for so long.

John Fund wrote in a Wall Street Journal editorial this weekend entitled What's at Stake in Wisconsin's Budget Battle, has noted,

"The Badger State became the first to pass a worker-compensation program in 1911, as well as the first to create unemployment compensation in 1932. The American Federation of State, County and Municipal Employees—the chief national union representing non-federal public employees—was founded in Madison in 1936. And in 1959, Wisconsin became the first state to grant public employees collective-bargaining rights, which influenced President John F. Kennedy's decision to grant federal employees the right to join unions three years later."

If you have lived in the Midwest, as I did growing up, you know that Wisconsin and Minnesota are the two very unusual states in the region. The latter has had a quasi-socialist party named the Democratic Farmer Labor Party since, I would guess, the dawn of the Progressive Era. Wisconsin continues to echo the LaFollette tradition of ultra-liberalism. So in that sense, these Wisconsin demonstrations by teachers doesn't surprise me.

However, I'm wondering if, by now, the rest of the populace hasn't grown sick and tired of being extorted by the municipal workers and their friends in the state's Democratic Party. To see why this may be so, here's another passage from Fund's piece,

"The real assault this week was led by Organizing for America, the successor to President's Obama's 2008 campaign organization. It helped fill buses of protesters who flooded the state capital of Madison and ran 15 phone banks urging people to call state legislators.



Mr. Walker's proposals are hardly revolutionary. Facing a $137 million budget deficit, he has decided to try to avoid laying off 5,500 state workers by proposing that they contribute 5.8% of their income towards their pensions and 12.6% towards health insurance. That's roughly the national average for public pension payments, and it is less than half the national average of what government workers contribute to health care. Mr. Walker also wants to limit the power of public-employee unions to negotiate contracts and work rules—something that 24 states already limit or ban.

Mr. Walker's argument—that public workers shouldn't be living high off the hog at the expense of taxpayers—is being made in other states facing budget crises. But the left observed the impact of the tea party last year and seems determined to unleash a more aggressive version of its own by teaming up with union allies. Organizing for America is already coordinating protests against proposed reforms in Ohio, Michigan and Missouri."


Thanks to research which became widely-circulated in the past two years, anyone with a brain who wants to know, knows that average public sector wages are now about 25% higher than those in the private sector, while they pay much less for better health and pension benefits.

This sort of outrageous compensation situation should, once and for all, turn voters against the notion that the public sector should be allowed to organize. Or that we should have so many functions even staffed by public sector workers, as opposed to simply bidding out contracts for the services to the private sector.

The sense of denial on the part of these public sector unions is incredible. For example, I see web ads by NJ's teachers unions accusing Christie's budget cuts of harming children. They conveniently forget or omit that the entire state is making sacrifices. It's not like any one part of the state's budget can be magically increased or left alone. Further, we're all paying for decades of political lies by both parties and ever-more generous settlements with the state's public sector unions. These promises will simply be unaffordable. People will move to escape higher taxes necessary to fulfill these extravagant contracts.

I suspect that many Wisconsinians are also much more upset than the liberal media will let us see over their Democratic state senators fleeing to Illinois to avoid doing their jobs to vote on, if against, Scott Walker's proposed bill.

How hard is it for state officials and, for that matter, local and federal ones, too, to make a best offer as follows: public sector employees of all sorts must make, as cash wages, pensions and health care benefits, no more than the average of private sector workers for each category, excluding these public workers? And that, furthermore, all benefits will be defined-contribution, not defined benefits, so that the annual state budget will pay all the compensation, with no out-year liabilities?

We have to get to a point where government employees are paid, totally, from current-year budgets, and no more than the average of similar workers in the private sector. No more subsidizing public sector workers with more generous compensation than the average taxpayer gets.

Between Wonderboy's cynical political calculations in his bloated budget for 2012, and teachers' unions in several states walking off the job and crying for special treatment and exemptions from financial pain amidst state budget deficits, I believe voters are finally getting the message: politicians of both parties in the federal and many state governments have lied and hidden real costs for far too long. Many politicians have looked on their jobs as permanent careers, and have used public sector union funding to help retain their jobs and recycle the money back to those employees in the form of overly-generous compensation agreements.

I suspect the tide is turning for good. Wisconsin's teachers seem to have roughly the same sense of the situation as do Wonderboy and the House Democrats. So it's timely they are demonstrating their tin ears on the subject of spending, taxes, entitlement spending and public sector unions just in time for the 2102 electoral cycle.

John Boehner's New House Rules

I was pleasantly surprised by Kim Strassel's recent Wall Street Journal editorial which detailed the newly-newsworthy voting activities of House under John Boehner. She wrote,

"In sharp contrast to his recent predecessors, Speaker John Boehner is sticking to his vow to make the chamber more open and accountable. His committee chairmen having presented a base spending bill, Mr. Boehner threw open the floor for full discussion. Some 600 amendments came pouring in.


"Chaos," "a headache," "turmoil," "craziness," "confused," "wild," "uncontrolled" are just a few of the words the Washington press corps has used to describe the ensuing late-night debates. There's a far better word for what happened: democracy. It has been eons since the nation's elected representatives have had to study harder, debate with such earnestness, or commit themselves so publicly. Yes, it is messy. Yes, it is unpredictable. But as this Presidents Day approaches, it's a fabulous thing to behold.

And about time. The Democrats' style of management—on ObamaCare, cap and trade, financial regulation, stimulus—was to secretly craft bills and ram through a vote, denying members a chance to read, to debate, to amend. They learned this from former Majority Leader Tom DeLay, who infamously micro- managed his GOP majority from 2003-2005. The House had become a place where the leadership called all the shots and the majority saluted.


But this week the country witnessed the House coming together to argue over and exercise its foremost responsibility: power over the purse. And from the look of the amendments, both sides were eager to use that funding authority to put the Obama policy machine on notice."


It's difficult to recall a time when there was such open and visible discussion of how Congress spends our money. Strassel continued,
"Americans got to see what happens when members of Congress exercise their collective knowledge of the federal government. Mr. Issa put forward amendments to prohibit the National Institutes of Health from spending money studying the impact of yoga on hot flashes in menopausal women. Minnesota Democrat Betty McCollum offered to strike funding for the Department of Defense to sponsor Nascar race cars. Indiana Republican Todd Rokita proposed getting rid of money provided for dissertation research under a 1970 Housing Act.



The nation witnessed Democrats—the members not in the majority—offer their own amendments, a courtesy Speaker Nancy Pelosi never extended. In the main, that meant seeing that nothing much has changed on that side of the aisle. Most Democratic amendments were to restore funds for even the most minor GOP cuts. Texas's Sheila Jackson Lee even went to the mat to continue funding for those road signs bragging about the stimulus.



Remarkably, voters saw Republicans disagree vehemently with each other. Just as remarkably, the world did not stop spinning. To the contrary, these arguments helped flesh out differences and proved it is possible for gentlemen to have honest disagreements. Nowhere was this more clear than in this week's vote to defund a second (duplicative) engine for the F-35 Joint Strike Fighter. The engine is being developed in a town near Mr. Boehner's Ohio district, and the speaker is a supporter. Yet 100 Republicans joined 123 Democrats (and Defense Secretary Robert Gates) to oppose the second engine and save taxpayers $450 million this year and $3 billion in the long-run.


Mr. Boehner didn't have to allow that vote. Mrs. Pelosi wouldn't have. But in opening the House, Mr. Boehner has done far more than put reform above his own priorities. This week's exercise forced members to read the underlying spending bill; to understand the implications of hundreds of amendments; to remain on the floor for debate; and to go on record with votes for which voters will hold them accountable."


Perhaps the best part of that passage is that Boehner allowed his own pet second jet engine project to be defeated. It's heartening to see a Speaker not use his powers to tilt the playing field for his own district. And not to punish his own party's members for voting against it.

Reading that list of petty, indefensible uses of tax dollars as we are borrowing 40% of them, should do wonders for making Representatives newly-accountable. I suppose the liberal Democrats who are mentioned as trying to restore every sliver of spending the Republicans are cutting may be re-elected in their districts. But maybe not. Perhaps even those voters will begin to see the stupidity of allowing so much money to flow to Washington, only to be wasted in favored, lavish, unnecessary projects nobody would pay for in the private sector.

There are things I don't like about Boehner, but Strassel's piece made me feel much better about him so far.