The debate between Democrat verses Republican, rich verses poor, private verses public, socialism verses capitalism, big business verses small business, union verses non-union have all been used quite often in American politics in order to appeal to the masses. But which is better? We shall see! Two states with two different policies, one implemented longer than the other, one is Democrat and union backed, while the other is Republican and business backed. By comparing them, we put these policies to the test to see which one is working and which one is not! Back in 2009, then Governor Jim Doye of Wisconsin proposed and passed a budget that would cut government services, release certain criminals out into the public, raise income taxes on capital gains, and raise taxes on couples whose income level was at 300,000 or more while using federal stimulus money to maintain government education, health care, and pension costs. "My budget stands up for the people who earn regular paychecks and the people who, through no fault of their own, have lost theirs," Governor Doyle said. |
In 2010, newly elected Governor Walker of Wisconsin made a radical shift in policy, he proposed a bill known as Act 10 which had an objective of obtaining a balanced budget without major cuts in government services or adding on more to a massive debt like what happened with the budget in 2009. Wisconsin at the time was facing a 3 billion dollar deficit. Act 10, would force state workers to contribute more toward their heath-care and pension. Also, state workers would be no longer be forced to pay union dues or join a public union with one exception, firefighters and police unions were excluded. The law cut 5.5 percent in school spending (792 million) but with the cost reduction in heath-care and pensions schools had to pay out, the idea would save money and that savings would replace the 5.5 percent cut, unless the school district like Milwaukee which is still under contract with the union.
As a result, angry pro-union liberals began a massive protest. It's first began at the Governor's residential home where only his wife and kids were present, it then expanded all the way to Madison, Wisconsin were thousands of protesters were protesting the bill including teachers who was suppose to be teaching their students. A group of state senators who were Democrats opposing the bill, not only fled the state capital but fled to another state in order to protest and make themselves unavailable to vote on the bill. If they would have stayed, the law would have force them to vote one way or another. A couple of weeks later a recall petition was circulated which eventually accumulated enough signatures were collected thus causing a recall election to be held! However, to many liberals surprise not only did the governor win the recall election, he won by even a larger margin.
Three years have passed since Act 10 became the law of the land in Wisconsin, what are the results of this controversial bill? Not only has the deficit being paid off, but a surplus accumulated unexpectedly which totaled around 500 million dollars! A one percent raise was given to all state workers including managers who had not received a raise in five years! The rest went for a tax-break and education. On June 6, 2013, the local newspaper in Milwaukee reported that public schools will be spending 45 percent less per pupil on health-care and government pensions by 2020! Act 10 also helped long-term benefit obligations (more than a billion dollars) to retirees who worked for the government. A stunning turnaround, perhaps the most in the state's history or even in the nation by far!
On the other hand, there is Illinois where public employee unions are a powerful force in a heavily Democratic state. Illinois currently retains the most debt of any in the nation! The state's deficit is 44 billion and counting. Less than half of it's government employee pensions are covered and Chicago faces an astounding 615 million dollars in payments for its pensions in this year's budget! For many years, union backed lawmakers promised more and more benefits to retired teachers, police officers, firefighters, and other government workers without facing the reality of where all that money was going to come from! Which is a pattern we seen in other countries such as Argentina which eventually went broke and suffered through many years of hyper-inflation. Chicago Mayor Rahm Emanuel urged the legislature to tackle the crisis during last year’s session. “The day of reckoning has arrived.” All sorts of solutions were being proposed but none have became law such as: raising the retirement age for state employees, increasing state employee contributions (much like Wisconsin did), freezing cost-of-living increases, shifting younger workers into 401-(k) style savings.
Union supporter Emanuel who worked in the Obama administration sounds more like Governor Walker of Wisconsin. but unlike Walker who passed a law, Emanuel is trying to convince unions and public officials backed by unions to compromise. The outlook doesn't look promising, the public unions in Illinois want no change, they argue that their pensions are guaranteed by the state's constitution so the state has no other choice but to met those obligations! Illinois is not the only state with this problem, 34 other states have the same problem with their state employee pensions. Wisconsin state pensions are 100 percent fully funded!
Government Monopolization Of Labor
Unions began to take hold in the 19th and early 20th century in the private sector. The US government stayed out of labor-management relations, unless the president felt compelled to intervene in violent strikes or strikes causing major economic disruptions, such as in the coal and railway industries. President Herbert Hoover was a supporter of collective bargaining, and had close relations with various labor leaders. As a result, Hoover was accommodating to their demands. Union monopolization of labor began when Hoover signed into law the Davis-Bacon Act at the beginning of the Great Depression in 1931. This new law eliminated competition between non-union and union companies for government projects by requiring contractors and subcontractors to pay "prevailing wages" for labor. Prevailing wages was union companies who paid the most for their labor. One of the purposes for this new law was to stop wages from falling during the depression, but the problem with this idea was, it kept wages above what the rest of the market was paying so it would shutout companies who couldn't afford higher union wages. The second purpose was a racist one. Rep. Clayton Allgood said he supported the bill because it would solve what he considered to be a "cheap colored labor" problem which was in competition on what he considered to be "white labor." The law hinders minority businesses today who also can't afford to pay union based rates and it limits their hiring of new employees. By eliminating non-union companies from government projects, the US government successfully monopolized labor which costs the taxpayer more money than it would have under open competition.
A year later the monopolization was strengthen, Congress passed "The Norris-LaGuardia Act" in 1932 which gave labor unions more power by giving immunity to labor unions against prosecution under the antitrust laws. Also, it prohibited federal judges from issuing any injunctions to interrupt strikes even violent strikes, it made non-union contracts which had an agreement that the worker would not be involved with a union unenforceable in the federal courts. The union considered those who worked for non-union contracts as "traitors" and in 1935, non-union contracts for government projects became illegal under "The National Labor Relations Act."
Within the monopolization of labor, unions demanded all workers within a company that is unionized join the union and pay dues. This is known as "closed shop" but after the 1930's unions lost some power because of a huge increase in strikes. And in 1947 Taft-Hartley Act was made law over the veto of President Truman which eliminated the closed shop requirements by giving states the option to pass laws to have an open or close shop. An open shop gives workers an option to join and pay union dues, but once joined, the worker could not quit the union until the contract had expired with the company.
Public Unions verses Private Unions
Aren't they all one in the same, right? Not quite! In the private sector, private unions do not have strong influence over electing or hiring management for negotiation purposes with a contract, like say for example, a school board. Public officials are influenced by their voters and who supplies them with resources. Special interest groups like unions, used money and man power to help get their people who would give them a better contract deal in office. As a result, there is a conflict of interest and the taxpayer ends up paying way above the free-market rate. But are all unions bad? Wouldn't monopolization of non-unions be better? The answer is a resounding "no" because private unions are part of the free-market as long as laws don't favor one over the other.
How would private unions benefit in a free-market system? By competition, for example...The Freelancers Union has a sold low-cost and low-coverage health insurance which involves 25,000 workers since 2009, while operating under this particular program that allows it to sell its plans to members at a much lower cost than the average plan on the free-market! A proposed bill in New York state, would exempt the Freelancers Union from some of Obamacare’s taxes and mandates which many in the business community called, "unfair" and I would agree. If the bill is not passed, those in the Freelancers union will see their premiums go way up causing a major problem for the union to give their workers cheaper coverage. It is interesting to note, the Freelancers Union who are fighting to get themselves exempt from the law supported Obamacare, and has received $340 million in funding from the federal government to set up government mandated insurance plans.
Another example on how unions are great for the free-market...If a company is basing its wages on other competitors who happened to be union, your going to get a higher percent in a wage increase even though your company may not be union. Of course, if you choose to work for a union company whose wages and other coverage is where you want them, is a benefit!
Monopolization of any area in the free-market would be a disaster for the consumer. Let's say you could only buy a car that was made by Honda (or any car maker foreign or domestic), the price of cars would shoot up and if you narrow it down to one model being produced, it would be even worse price wise. Another example would be, if your company is required to go to union based health-care networks only, the costs shoot up greatly which is why public schools are saving money under Wisconsin's Act 10, because union based health-care networks are now subject to open competition with other networks for business.
Based on the two examples given in this article, Wisconsin and Illinois which is working out better? Public union ideals backed by Democrats which are not subject to competition or open competition which is backed by most Republicans? It's your call!
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