Twin Political Dupery: When the Both Sides of the Table Phenomena Dupe the Taxpayer AND the Union Member

What is the "both sides of the table" phenomena regarding collective bargaining in conjunction with a government monopoly? The public choice theory proposition of the both sides of the table phenomena is basically:

　

(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 (taxpayer 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/benefits. 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.


Political dupery in action


The public choice theory proposition of both sides of the table phenomena many times is discussed in terms of collective bargaining by unions and resulting rich benefits bestowed upon the union and its members. However, rather than pointing to the richness of the benefits and the inability of the taxpayer to pay such benefits, what if one focuses on the political dupery of the benefits.


The both sides of the table phenomena, long the norm for public sector unions, is no longer in play in many locals as tax revenue streams have been reduced, the taxpayer can‘t afford more taxes to pay the benefits, and taxpayers have elected politicos that have changed those sitting on one side of the table. Hence the politicos bestowing benefits via taxpayer dollars and/or deficit spending to build dependent political constituency has, for the time being, ended. The accumulation of benefits via the both-sides-of-the-table phenomena is then defended by the now unrepresented yet purposely built dependent political constituency. Hence they can’t rely on the other side of the table and begin a second line of political maneuver which is strike, slow down, picket, etc.


A much overlooked item is the accumulation of benefits bestowed were in fact bestowed based on the short term political time horizons (next election) by a series of politicos (many of which are now long gone). The actual ability to pay the basket of benefits/wages, unfortunately, was never the aim of the politico. That is, its not the accumulation of “unrealistic promises” its really the purposeful accumulation of unrealistic promises [its not an error or oversight, its purposeful].


The result is the union and/or union employee think/perceive they “negotiated” items, when in fact, there never was any true arms-length negotiation. There was never any intent to negotiate long term funded realistic benefits and wages. Rather, the union or union representative, the supposed accumulated “negotiated” benefits/wages thereof, are in reality an accumulation of purposeful politico promises matching politicos short term political time horizon devoid of long term funded realistic benefits and wages.


One might consider this proposition: the both sides of the table phenomena, where the union or union member thought they where negotiating benefits, was a benefit mirage. Stated alternatively, the purposeful political dupery of the politico toward the taxpayer in the both sides of the table phenomena was simultaneously the purposeful political dupery of the union side of the table as the politico actually, in the long run, duped both the taxpayer and the union.

　

To make this concept even clearer, the both sides of the table phenomena is portrayed as duping the taxpayer. True. But the both sides of the table phenomena is duping the union and union worker as well. The politico is duping everyone in the room as well as outside the room.


The end result is a union that thinks they have played a role along with politicos to dupe the highly defused taxpayer when in fact they themselves were duped. The basket of benefits is a basket of promises not a basket of negotiated benefits that are funded and realistic. Therefore, the union strikes, performs walkouts, performs work slow downs and pickets based on dupery. That is, they have yet to figure out that benefits promised are much different than benefits negotiated and funded under a limited tax revenue stream. Stated alternatively, their very strike is occurring as they have yet to figure out they have indeed been duped too.

　

Upon Further Review: “the aristocracy of labor”.

Milton Friedman referred to unions and their particular associated unionized labor as “the aristocracy of labor”. In other words a special class of labor with special wages, special benefits, and special political clout. That the remaining non-unionized labor pays directly and indirectly for the aristocracy class, in this case “the aristocracy of labor”. (1)

If ninety percent of private sector labor is not associated with a union, what about that ninety percent? Why not an argument about the economy of the ninety percent? Why is the argument always about the economy of the ten percent that is unionized?

Consider the following from William Graham Sumner:

A trades-union raises wages (aside from the legitimate and economic means noticed in Chapter VI.) by restricting the number of apprentices who may be taken into the trade. This device acts directly on the supply of laborers, and that produces effects on wages. If, however, the number of apprentices is limited, some are kept out who want to get in. Those who are in have, therefore, made a monopoly, and constituted themselves a privileged class on a basis exactly analogous to that of the old privileged aristocracies. But whatever is gained by this arrangement for those who are in is won at a greater loss to those who are kept out. Hence it is not upon the masters nor upon the public that trades-unions exert the pressure by which they raise wages; it is upon other persons of the labor class who want to get into the trades, but, not being able to do so, are pushed down into the unskilled labor class. These persons, however, are passed by entirely without notice in all the discussions about trades-unions. They are the Forgotten Men. But, since they want to get into the trade and win their living in it, it is fair to suppose that they are fit for it, would succeed at it, would do well for themselves and society in it; that is to say, that, of all persons interested or concerned, they most deserve our sympathy and attention. (2)

Now consider the public sector unions and their particular associated unionized labor as “the aristocracy of labor”. In the public sector the rate of unionization is 36.2% [three and one-half times the rate of private sector labor]. (3) As the argument goes, no one wants to be a public sector employee, hence as the argument goes there would be no excluded class of labor as exogenous labor, as well as current public employees, loath and despise, in the main, employment in the public sector. Stated alternatively, considering the highly used talking point of “no one ever entered a public sector job to get rich”, then logically the talking point argument is that the public sector is an employer of last resort.

Why a three and a half times larger unionized work force in the public sector than private sector? Why unionize if, as the argument goes, the union need not exclude potential workers [the forgotten man] as no one really wants the public sector job? Merely unionizing against a straw man?

In the public sector union arrangement the forgotten man is transposed. The forgotten man is not the excluded laborer who would like the job, the forgotten man is the taxpayer. The highly diffused , unorganized, and largely unrepresented taxpayer who pays for this particular brand of “the aristocracy of labor“. (4)

　

Notes:

(1) Free to Choose, PBS 1980, "Free To Choose 1980 - Vol. 08 Who Protects the Worker?"

(2) What Social Classes Owe to Each Other, 1883, William Graham Sumner, chapter nine, pages 78 and 79.

(3) Bureau of Labor Statistics, Union Members Summary, 01/21/2011.

http://www.bls.gov/news.release/union2.nr0.htm


(4) Wisconsin is coming to a state capital near you!, 02/19/2011.

http://thelastembassy.blogspot.com/2011/02/wisconsin-is-coming-to-state-capital.html#!/2011/02/wisconsin-is-coming-to-state-capital.html

Austerity vs. Stimulus: a False Choice?

Above is a CNBC Squawkbox video from 11/07. Note 8 minutes to 9:50. Below is an excerpt of the text which is of interest:

Question/statement by Liesman of CNBC: If you look at the jobs numbers, there certainly should be higher or would be -- there would be more robust numbers that could engender more confidence if the state and local governments weren't laying off.

Answer by John Ryding of RDO Economics: Steve, let me make this point. I always believe that the distinction between austerity and stimulus is a false choice. It's about sustainability of government programs and the problem is we have a large fiscal deficit at the time of two unsustainable government programs, Medicare and Social Security are kicking in. Now we have to reform those programs ultimately. So they remain viable for the long term. But the U.S. has as many problems with political groups blocking reform....

What Ryding is stating is that X amount of public sector workers, that is completely unsustainable, replaced by a new level of X-1 public sector workers, is not “austerity”. Rather it’s a basic business budget proposition. That remaining at level X as a stimulus approach is a false choice.

An item worth considering is how did one arrive at X amount of public sector workers? X was achieved with state government experiencing increasing tax revenue 2002-2007 (which most states did experience) and additional debt (which many states exercised). Underlying these two phenomena leading to level X amount of public sector workers was politicos that had the same exact mindset as residential homeowners, that is, what goes up continues to go up. Stated alternatively, the rise in tax revenue was considered a constant unending revenue stream leading to level X based upon endlessly rising revenue. In turn additional hiring caused by additional debt which was also based/financed upon the misplaced concept of endlessly rising revenue.

Hence X is/was a false number aka a bubble number. X-1 is the true number. Therefore, reducing to X-1 is not “austerity” its merely returning from a bubble number.

That being said, the counter argument [Keynesian counter argument] is that laying off the public sector workers (movement from X to X-1) reduces demand and hence is counter productive. That “stimulus” needs added to stop the movement from X to X-1 which then stabilizes or enhances demand.

One of the many problems with the Keynesian argument is that “stimulus” proposed to keep X from declining is in essence a continuation of a false bubble number. That in fact the argument regarding "stimulus" is to sustain a component of a larger previous bubble.