Wednesday, February 15, 2012

Nitwitery warning: when public sector unions can’t agree on dividing up the spoils

One might be well served to examine the "both sides of the table" phenomena when considering unionized public sector collective bargaining regarding a government monopoly. What is the "both sides of the table" phenomena?


(1) if bureaucrat X is negotiating with collective bargaining public sector union Y, exactly what motivation does bureaucrat X have regarding negotiations? The problem goes back to Milton Friedman's fourth category of spending: other people (bureaucrat X), spending other people's money (tax payers money), on other people (recipient class which in this case is a public sector union). Therefore the bureaucrat has little motivation because he/she is spending other people's money not his/her own money,


(2) public sector unions have found that they can collect dues through members and funnel dues into political action funds. They then fund the campaigns of politicos that promise them [public sector unions] more compensation. They not only fund certain politicos but actively encourage their union members to campaign for the politico. Once they get their particular candidate elected they have now secured a politico who over sees bureaucrat X.


The monopoly [government] through pricing power influence will pass on increased labor compensation costs, the goal/end product of the both sides of the table phenomena, to the end user. In the realm of government, monopoly price is tax and tax is increased to the end user which is the taxpayer aka YOU.


Therefore, unionized collective bargaining in the public sector is a collective bargaining scheme against the taxpayer. The collective bargaining scheme has no incentive to reduce costs as cost can be merely passed onto the end user. Moreover, the collective bargaining scheme, in a government monopoly setting, actually has incentives to pass on larger and larger price increases to the end user in the form of price influence and in this case tax increases. Lastly, the end user, the taxpayer aka YOU is not represented at the negotiating table due to the "both sides of the table" phenomena.


What happens if the “both sides of the table” phenomena morphs into a tax increase proposal before the spoils are determined? That is, rather than hashing out an agreement regarding pay/benefit increases through public sector collective union bargaining via the both sides of the table phenomena and then the new cost passed on as a tax increase…. what if the tax is proposed first representing specific spoils for certain groups that otherwise would be sitting at the table, the magical table known as the “both sides of the table phenomena“?

Oddly enough the differing collective bargaining public sector unions suddenly feel as if the procedure has aspects of picking winners and losers. That is, if a proposed tax increase, the proceeds thereof, are purposely bestowed upon certain attendees of the “both sides of the table” phenomena yet other seats at the table receive no proceeds, suddenly the collective bargaining public sector unions feel they are being targeted as winners/losers? Odd to say the least as the loser is the taxpayer but the taxpayer is completely out of the picture as the focus is on dividing up the spoils.

And now for a lovely story of spoils:



“California Gov. Jerry Brown likes to proclaim the virtues of democracy. But when it comes to ballot initiatives, the Democrat would rather voters have only one choice: Jerry Brown's.


Mr. Brown last year proposed a ballot initiative that would "temporarily" raise the state sales tax by half percentage point and income taxes on those earning more than $250,000 by one percentage point, to 10.3%. Individuals with more than $500,000 in income would pay a top rate of 11.3%. The governor has earmarked most of the projected $7 billion or so in additional revenue for K-12 schools, which explains why the California Teachers Association has thrown its support behind him.

The California Nurses Association, however, isn't set to get a cut of the revenue and is miffed. After all, the CNA helped to bankroll the labor campaign against Republican gubernatorial candidate Meg Whitman in 2010. The California Federation of Teachers (not to be confused with the much larger California Teachers Association) is also none too pleased because the governor's proposal doesn't set aside much money for public colleges, which the CFT represents. They also don't like that the initiative's sales tax component would hit poor and middle income members. The CFT and nurses' union thus are partnering to promote their own tax initiative, which would raise rates on millionaires by 3% and those earning more than $2 million by 5%. Their ballot measure would reserve a quarter of new revenues for public colleges and a quarter for children and senior services (e.g., health care). K-12 schools would get about a third.

Complicating matters further is the wealthy civil rights attorney Molly Munger who doesn't trust that either initiative will send enough money back to the classrooms. So she's financing a ballot measure that would raise rates on all earners, be indexed progressively, and mandate that all new revenues be spent in the classroom -- not on administration or increased benefits and salaries. Polls, however, show little public support for broad-based income-tax hikes, and the unions are loathe to support any measure that could limit future pay and benefit increases.

Mr. Brown has been urging Ms. Munger and the unions to suspend their initiative campaigns because he fears that the multiplicity of tax initiatives might kill Democrats' shot at getting any passed. In the past voters have reacted to competing initiatives, such as the five tax measures on the 2006 ballot, by knocking them all down. However, Ms. Munger isn't backing down and the other two unions think Mr. Brown should be the one to call it quits. The nurses and CFT were out en force at last weekend's California Democratic Party convention pitching their "millionaires' tax" to the party's rank and file.

The fact that the governor can't rally Democrats around his tax initiative is a testament to just how little political capital he holds and how much the public unions control the party. Even so, divisions among the public unions over how taxpayer dollars should be spent are emerging and threatening to undermine the solidarity that has made them so formidable. Perhaps they, too, are finally realizing that there's only so much money to go around.”

-- Allysia Finley, California's Competing Ballot Initiatives, Political Diary, The Wall Street Journal, 02/14/2012

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