Cheeseheads!!!

Today on NBC’s Meet the Press, Governor Scott Walker (R-WI) spoke eloquently (see below) about the ongoing debate over collective bargaining that has halted legislation in Wisconsin and seized the nation’s interest over the past few weeks. Walker, who has resolutely stood firm in his showdown with the Democrats, has proposed legislation that would not only require public unions to bear greater responsibility for certain benefits, but would also end the “right” of collective bargaining for public unions.

In reality there are two major issues at work. The first and most immediate is the budget issue. This has predictably been relatively uncontroversial. As most acknowledge, states across the country are in dire budgetary straits. Accordingly, the Wisconsin public unions have agreed to shoulder the increased responsibility for their fringe benefits.

It is, however, the second issue – namely the proposed abolition of collective bargaining for benefits – that has driven the unions into a fury and their Democratic supporters into Illinois. Democrats have become absolutely apoplectic about the attacks on their supposed rights, effectively shutting down the Wisconsin legislature and moving their foot-soldiers into the capitol building in Madison.

The battle is unsurprising, despite its contemptibility. It is natural to expect unions to defend the unjust handouts and special privileges conferred upon them by the power of the state and to stalwartly fight to prevent their eradication. Nevertheless, it is quite laudable that Governor Walker has had the fortitude to stand-up to the tyranny of collective bargaining and unions.

The argument for such a strong criticism of unions is simple. Unions, like any institution that has coercive power, can – and do – cause severe harm to others that may cross their paths. The unions have been afforded a rare opportunity to wield the coercive power that should only be possessed by governments (and even then in limited fashions). No other institution is granted such sweeping powers of coercion over private individuals. For instance, the automatic and mandatory deduction of union dues from paychecks is simply the power of taxation in private hands.

Furthermore, unions have severe distorting powers. They drive wages up and cause unemployment. A union is essentially a private club, established with explicit government approval, where benefits are unjustly taken from those who are excluded and given to those lucky enough to call themselves members. As Friedrich Hayek argues, the real crushing power of unions is not so much the power they have over their members, but the power they possess over those outside of the union. Not only is this arbitrary and uneconomical, it is blatantly unjust. No organization, whether union or otherwise, should be granted such powers of coercion.

For those union supporters who argue in terms of workers’ protections, their aims are noble yet misguided. Union-busting is about destroying a special interest, not about hurting workers. As Governor Walker argues, Wisconsin workers are comprehensively protected by a multitude of legislation - and rightly so. There is no dispute that workers, like other groups, should have protection from mistreatment. However, unions, due to the inherent harm caused by their coercive power, are simply not the proper forum for maintaining worker protections.

The battle against collective bargaining is a small step in the right direction. Unions should not be afforded any special privileges under the law. They should be allowed to exist like any private organization – free to assist their members in a variety of fashions but stripped of any pseudo-legal power over others. Governor Walker should be applauded for his resilience and justness in attacking a bastion of cronyism and illiberalism.

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A Union of Selfishness

The teachers’ unions are once again on the defensive, following the recent release of the much lauded movie, “Waiting for ‘Superman.’” The film, made by the same people that created “An Inconvenient Truth,” has fomented a surge of discussion on the woes of the American education system and, in particular, the dastardly effects of teachers’ unions.

The documentary highlights Michelle Rhee, the chancellor of the Washington D.C. public school system, as a paragon of what is right in education reform. Rhee, who recently sat down with The Washington Post for an interview, underscores human capital as the number one issue facing the system. In particular, she emphasizes teacher evaluations, pay-for-performance metrics, and tools to attract competent principals as key factors in improving underperforming schools.

Rhee could not be more correct in focusing on what are essentially competitive, free-market solutions to education’s woes. Unfortunately, as America is starting to realize, the teachers’ unions are standing in the way of the reform needed to help the country’s children. This battle has been all too clearly demonstrated in New Jersey, where the endearing Republican Governor, Chris Christie, has taken on the egocentric teachers’ union, heaping much deserved shame upon them for their inordinate selfishness. In a rousing speech (see video below), Christie bluntly countered the all-too-common argument that the unions add any value to society. The interest of the unions is not that of the teachers, who as he admits are mostly well intentioned, and certainly not that of the students, but solely of the union as a vested interest. Christie has continued his campaign against the obdurate unions in a recent political speech in Iowa, where he mocked the unions for their power hungry nature.

The issue is systematic of the market distorting effects that unions – or any consolidated power – have in industry. They often are founded with the notion of protecting a specific marginalized group, but quickly devolve into powerful and obstinate special interests that rarely help those they purportedly represent and always disrupt the industry in which they operate. Unions played a significant role in destroying the Detroit auto industry and have continued to drag America’s education system through the mud.

The problem is that the teachers’ unions not only prevent the best teachers from being favorably compensated and encouraged to excel, but also protect those “teachers” who are utterly useless. The infamous “rubber rooms,” which have been eliminated in New York City largely in name only, are a prime example of the harmful effects of these unions. Likewise, unions are often opposed to such logical and widely accepted business models such as merit-based pay. As The Economist points out, the DC teachers’ union turned down an offer from Rhee to double teachers’ salaries if tenure was removed and merit-based pay instituted. How such a refusal by the union helps the teachers – particularly the good ones – is questionable, but the harm done to students is palpable. A mock discussion, articulated by Christie, between a child and a parent sums up the foolishness of the unions,

To believe that, this is what you have to believe: Let's say your son comes home and he says, "Mom, Dad, I can't study. I can't study, I can't work, my grades are suffering, because you know, Mrs. Smith, she's not getting her pay raises. And it gets worse," he said, feigning whines. "She actually has to pay 1.5 percent of her salary for health benefits. I cannot focus. I cannot focus with that knowledge. Mom, Dad, stop the madness. Give this woman her raise and her free health benefits and I'll get all A's."

Ultimately, it is the schools and the students – and hence America – that suffer. The backward, selfish, and short-sighted policies of the unions sap resources that could otherwise help students. Instead, these resources aid the institutional structure of the union and the worst-of-the-worst teachers. If America wants to continue its growth and not see our children and economy continue to fall behind those of China and India, it is time to break the stranglehold that these partisan interests have on our schools.

After GM the UAW Should Manage Universal Healthcare

In the 1950s the United Auto Workers (UAW) successfully pushed America’s auto companies into granting the unionized workers free healthcare for life. Sixty years later, in the wake of the collapse of two of the big three automakers, the Obama administration is pushing for near-universal healthcare for all Americans. Hopefully, the lessons of the past will be learned before we find the United States in the same position that the auto companies are in today.

The fact of the matter is that the excessive costs heaped on the auto companies by the UAW’s demands, overburdened the companies and ultimately brought about their downfall. GM and Chrysler were unable to remain competitive due to the expensive cost structure. According to the Economist approximately $1400 of every GM car goes to healthcare costs– far more than its competitors.

The union demands were shortsighted at best. Universal autoworker healthcare seems appealing on the surface. Seemingly, this is why the unions pushed for it in the 1950s. However, by forcing a system that reaped short term benefits, the UAW ultimately hurt itself, the auto companies, and consumers in the end. By greedily taking more than their fair share of the pie, the union bosses put an onerous burden on the autoworkers and auto companies of the future.

The healthcare debate today is running a parallel course. It is easy to think that universal healthcare is a great idea. Helping people stay healthy is noble and caring- two characteristics that are generally applauded in America. However, like the unions of yesterday the Democrats of today do not comprehend the huge impacts such a program will have on the country.

As has been discussed elsewhere, (See a prior post: http://anewrepublican.blogspot.com/2009/06/give-me-healthcare-or-give-me-death.html) a government run, universal healthcare program is inefficient and detrimental to the aim of providing good healthcare. Like GM’s shareholders, America’s taxpayers will unduly bear the burden of an excessive and expensive healthcare program. Like GM, American healthcare will slowly begin a drastic decline in quality. Unlike GM, however there will be no one to bail out the colossal failure to come.

The bottom line is that nothing comes free. Providing ‘free’ universal healthcare is a complete misnomer. Ultimately, it is the taxpayer who will foot the bill (especially in a paygo system). Don’t be fooled by the claims of kindness and caring that Obama and his cronies try to instill in their healthcare plan. It is anything but. Universal, government run healthcare may help a couple of people in the short run, but it’ll hurt America– the taxpayers, the healthcare consumers, and the healthcare industry– in the long run.

The Union Between Failure and Inflexibility

As GM heads towards a government deadline, it is scrambling to restructure and avoid bankruptcy. In the process, bondholders are getting the short end of the stick, being cast as the bad guys. The big winners are, of course, the unions which may receive, according to the latest plan up to 20% of the new GM. (See MSNBC report http://www.msnbc.msn.com/id/30938307).

This is a most unfair solution for the failing auto giant. The United Auto Workers (UAW) and the bondholders share an equal claim to GM’s assets. However, our leftist, pro-union government is demonizing the bondholders and unfairly assisting the union. (See a great editorial by the average American bondholder in the Wall Street Journal http://online.wsj.com/article/SB124338330278956585.html#mod=djemEditorialPage).

If anything, the situation should be reversed. The UAW has way too much power and control in the auto industry. The worst possible solution is to give the unions even greater control over the failing industry. While not the sole cause of the auto industry’s failures, the unions have profoundly contributed to its current state. Unions, in general, contribute to rigidity in an industry. They prevent jobs from being phased out when no longer necessary. This ultimately undermines research and development and technological growth, causing unionized companies to lag behind those without unions. While it is impossible to know what GM would look like today without unions, it is clear that it would have had greater flexibility to change its business model, modes of production, and more. Instead, the stiffness of the system has forced GM and other auto companies to continue a model that should have been discarded long ago.

In non-unionized industries, companies are rewarded – or fail – based on their innovations and specialized superiority. Competition encourages them to reinvent and routinely redesign themselves. If they fall behind, everyone – management, workers, suppliers, retailers – lose out. However in the rigid system of the auto industry, as consumer demand shifts the auto companies are unable to appropriately shift the business. Workers cannot be let go and plants cannot be shut down. This prevents the company from developing new products and methods that could be more efficiently performed with workers or factories with different abilities. Instead, the company must continue an outdated business model and sell an inferior product.

And so for all their contribution to the downfall of the industry, the unions are being rewarded. Once again they are unjustly being a given a piece of the pie that they do not deserve. If our government wants to save the auto industry, it better think long and hard about the role of the union. The answer is not to reward those who made the system too inflexible to succeed, but to create a new, more competitive company that excludes the rigid structures and players that previously dominated. This approach may save the auto industry- giving the UAW undue ownership will not.