The Stakes in Wisconsin

Yesterday I wrote that the decline of unions over the past three decades "has left corporations and the rich with essentially no powerful opposition." Megan McArdle wonders, reasonably enough, what this has to do with Wisconsin:

In what way do public sector unions act as a check on the power of corporations? They are not negotiating against corporations; they are rarely competing with corporations (and certainly not in the case of the teachers' unions); and corporate taxes do not provide the bulk of the revenues for state and local governments.

It is surprising to me how determined both conservatives and liberals seem to be to view this through the lens of the private sector union fights — exploitative corporations and militant workers have been neatly transmogrified into selfish taxpayers and greedy unions.

My union sympathies are much stronger in the private sector than the public sector, primarily because I do indeed think the biggest value of unions is the fact that they act as a bulwark against unfettered corporate control of the political economy. But that doesn't mean this is the only benefit of unions. I also value unions for moral reasons: workers should have the right to effectively bargain with management over wages and working conditions no matter who management happens to be. Taxpayers can act unfairly just as easily as any other employer. And I value them for purely economic reasons: workers should be paid decently no matter who they work for and unions help make that happen. And for reasons of solidarity: the death of public sector unions will only hasten the further demise of private sector unions too. And for reasons of partisan hackery: public sector unions provide considerable support for the more liberal of our two great political parties.

There are some pretty reasonable arguments to be made against public sector unions, prime among them the fact that they exert a lot of control over the politicians who act as "management" in bargaining fights. To some extent this means they get to bargain against themselves, and taxpayers can sometimes end up with the short end of that stick (though see Jon Chait for the other side of this claim). For this reason, I'd support a ban on public sector unions contributing to political campaigns if the same rules applied to corporations and the rich. But they don't, and they never will.

For better or worse, then, I support public sector unions as well as their private sector counterparts. It's not a perfect world we live in, but bargaining for wage gains and decent working conditions is something that everyone should be allowed to do. Working for the government doesn't suddenly mean that right should disappear.

Bad Rumblings in the Economy

Bad economic news #1:

Real estate prices slid again in December, pushing a leading price index within a whisper of its lowest level since the housing crash began, data released Tuesday showed....“Despite improvements in the overall economy, housing continues to drift lower and weaker,” David M. Blitzer, chair of S.&P.’s Index Committee, said in a statement.

Bad economic news #2:

World oil prices are rising sharply as violence spreads through Libya, the first major petroleum exporter to be threatened by unrest sweeping North Africa and the Mideast. As fears mounted that soaring energy costs could derail the global economic recovery, the benchmark price of crude in London on Monday surged $5.48, or more than 5%, to $108.20 a barrel, its highest level since September 2008.

Falling house prices are hardly a surprise, so by itself this isn't that big a deal. Rising oil prices weren't either, back when they'd only gone up to $80 or so. But triple digits? And possibly more to come depending on what happens in Libya and elsewhere? Combine that with stubbornly high unemployment in the U.S., growing inflation in China, financial woes in Europe, and obvious fragility in the overall pace of our recovery from the Great Recession, and we might be wishing we'd opted for a more robust stimulus package pretty soon.

The Death and Life of the Democratic Party

Wisconsin's public sector unions are the ones in the news right now, but it's private sector unions that have shriveled away almost to nothing over the past several decades. In the current issue of Mother Jones, I tell the story of that decline and how it's affected the Democratic Party, changing it from a party that represented the working and middle classes without apology into one torn between its New Deal heritage and its modern funding base:

As unions increasingly withered beginning in the '70s, the Democratic Party turned to the only other source of money and influence available in large-enough quantities to replace big labor: the business community. The rise of neoliberalism in the '80s, given concrete form by the Democratic Leadership Council, was fundamentally an effort to make the party more friendly to business. After all, what choice did Democrats have? Without substantial support from labor or business, no modern party can thrive.

....It's impossible to wind back the clock and see what would have happened if things had been different, but we can take a pretty good guess. Organized labor, for all its faults, acted as an effective countervailing power for decades, representing not just its own interests, but the interests of virtually the entire wage-earning class against the investor class. As veteran Washington Post reporter David Broder wrote a few years ago, labor in the postwar era "did not confine itself to bread-and-butter issues for its own members. It was at the forefront of battles for aid to education, civil rights, housing programs and a host of other social causes important to the whole community. And because it was muscular, it was heard and heeded." If unions had been as strong in the '80s and '90s as they were in the '50s and '60s, it's almost inconceivable that they would have sat by and accepted tax cuts and financial deregulation on the scale that we got. They would have demanded economic policies friendlier to middle-class interests, they would have pressed for the appointment of regulators less captured by the financial industry, and they would have had the muscle to get both.

And that means things would have been different during the first two years of the Obama era, too. Aside from the question of whether the crisis would have been so acute in the first place, a labor-oriented Democratic Party almost certainly would have demanded a bigger stimulus in 2009. It would have fought hard for "cramdown" legislation to help distressed homeowners, instead of caving in to the banks that wanted it killed. It would have resisted the reappointment of Ben Bernanke as Fed chairman. These and other choices would have helped the economic recovery and produced a surge of electoral energy far beyond Obama's first few months. And since elections are won and lost on economic performance, voter turnout, and legislative accomplishments, Democrats probably would have lost something like 10 or 20 seats last November, not 63. Instead of petering out after 18 months, the Obama era might still have several years to run.

For three reasons, I hope you'll read the whole thing. First, because you can't really appreciate what's happening in Wisconsin without first understanding what's happened to organized labor as a whole over the past 50 years. Second, because understanding this history is important for its own sake. It is, I believe, the single most fundamental political story of our era.

Third, and most important, if you don't read it all you'll probably think this is just another cri de coeur for the restoration of a lost age of labor activism. It's not. What it is about is, as I say in the final sentence, "the central task of the new decade" for progressives. This is something that, after reading the whole thing, you might not buy. But right now, whether we want to admit it or not, the progressive movement is on life support. If I'm wrong, we'd sure better figure out what's right.

Qaddafi Bombing His Own People?

From the Guardian:

The two Libyan Air Force fighter pilots who apparently defected earlier with their jets to Malta have told Maltese government officials that they had been ordered to bomb protesters, Reuters reports.

And the New York Times:

The faltering government of the Libyan strongman Col. Muammar el-Qaddafi struck back at mounting protests against his 40-year rule, as helicopters and warplanes besieged parts of the capital Monday, according to witnesses and news reports from Tripoli....Over the last three days Libyan security forces have killed at least 223 people, according to a tally by the group Human Rights Watch.

Qaddafi is carpet bombing his own people? Jesus Christ. His own diplomats are now disowning him, and not a moment too soon. More here, including an explainer and continuous updates.

Conservatives and Cops

Two quick hits today, both responding to posters at Outside the Beltway. First, Steven Taylor notes that Wisconsin Gov. Scott Walker's union busting efforts are aimed only at some public sector unions, not all of them. This prompts a question aimed at Walker's allies:

If it is a fundamental principle that public sector employees ought not to have the right to collective bargaining, why are the police, firefighters and state troopers of Wisconsin not part of the package? Why does Governor Walker and his allies believe that those workers ought to be able to retain their collective bargaining rights?

....However, I would go beyond that and not ask why Walker is doing what Walker is doing, but rather ask why we have not seen (or, at least, I have not seen) his ideological allies calling for him to include police, firefighters and state troopers in the bill? If there is a fundamental philosophical issue here concerning public sector unions, what is the possible rationale for any exceptions?

I dunno. Any conservatives want to take a crack at this? Then, on the subject of pensions more generally, James Joyner reviews the sad state of 401(k) plans and says this:

The days of spending your life working for a company and then retiring in relative luxury on a generous pension are long gone. Part of that is union-busting, corporate greed, or whatever bugaboo you want to call it. Mostly, it’s a consequence of a global economy that is pulling hundreds of millions out of poverty but forcing people in the developed world to compete on a wage basis with those in the developing world. It’s great for Western investors and consumers but not so great for Western workers.

....We can’t rely on private companies, the stock market, or the taxpayers to maintain our lifestyle in our golden years. And not everyone can just keep on working, either. Nor do I advocate the Logan’s Run option. So, I haven’t the foggiest what to do about all this.

This is a pretty common reaction, but in fact, the arithmetic of decent pensions actually works out just fine. Corporations didn't give up on defined benefit pensions because they couldn't afford them any longer, they gave up on them because that allowed them to spend more money on executive salaries. After all, if overseas competition were really the big problem here, then you'd expect to have seen a long, steady decline in corporate profits and corporate compensation. But we haven't seen that. Profits have boomed and compensation has stayed high. The difference hasn't been in the level of compensation, it's been in the distribution of compensation. The executive suite has done fine. The rest of us haven't.

The federal government can spend money on social programs two ways: directly, via ordinary tax-funded programs (Medicare, food stamps, etc.) or indirectly, via tax expenditures (tax deductions for charitable contributions, employer health insurance, etc.). Christopher Faricy, a political science professor at Washington State, recently examined both types of spending over the past 40 years and concluded that the big spenders aren't who you think they are:

The traditional narrative of Democratic party control of the federal government resulting in higher levels of social spending needs to be reconsidered....Social spending over the last 40 years grows on average around 5% a year regardless of which political party is sitting in the majority.

....An increase in indirect social spending has the same budgetary effect as direct social spending. For example, an increase in tax expenditures for private health care insurance that costs the Treasury $100 million dollars has the exact same effect on the budget deficit as a newly proposed public health insurance option that is projected at $100 million dollars....One major implication of these findings is that the jurisdiction of social provision, not the financial effort, shifts with changes to political party control of government.

Republicans, it turns out, actually spend a bit more money on social programs than Democrats, as the green bars in the chart below show (click for a larger image). The main difference? Democrats spend it on direct programs that largely serve "the elderly, the disabled, the unemployed, and the poor...ethnic minorities, racial minorities, and single mothers." Republicans spend it indirectly on programs that "are biased towards workers who are White, full-time, in large companies, and high-wage earners." But spend it they do.

Democrat vs. Republican Spending

Why We Need Unions

Here's a tweet from one of the economists at Modeled Behavior:

I'm highlighting this not to pick on MB or to weigh in on charter schools. Nor even to weigh in on whether teachers unions should be friendlier toward charters. (I happen to think they should be, as long as charters aren't used as merely a sub rosa way of busting unions.) I'm highlighting it because it represents an all too common style of argument, which goes something like this:

Unions do (or support) X.

X is a bad thing.

Therefore unions are bad.

And (sometimes this is implicit, sometime explicit) they should be done away with.

Every single human institution or organization of any size has its bad points. Corporations certainly do. The military does. Organized religion does. Academia does. The media does. The financial industry sure as hell does. But with the exception of a few extremists here and there, nobody uses this as an excuse to suggest that these institutions are hopelessly corrupt and should cease existing. Rather, it's used as fodder for regulatory proposals or as an argument that every right-thinking person should fight these institutions on some particular issue. Corporations should or shouldn't be rewarded for outsourcing jobs. Academics do or don't deserve more state funding. The financial industry should or shouldn't be required to trade credit derivatives on public exchanges.

Unions are the most common big exception to this rule. Sure, conservatives will take whatever chance they can to rein them in, regulate them, make it nearly impossible for them to organize new workplaces. But they also routinely argue that labor unions simply shouldn't exist. This is what's happening in Wisconsin: Gov. Scott Walker isn't satisfied with merely negotiating concessions from public sector unions. He wants to effectively ban collective bargaining and all but do away with public sector unions completely.

Nobody should buy this. Of course unions have pathologies. Every big human institution does. And anyone who thinks they're on the wrong side of an issue should fight it out with them. But unions are also the only large-scale movement left in America that persistently acts as a countervailing power against corporate power. They're the only large-scale movement left that persistently acts in the economic interests of the middle class.

So sure: go ahead and fight the teachers unions on charter schools. Go ahead and insist that public sector unions in Wisconsin need to take pay and benefit cuts if that's what you believe. Go ahead and rail against Davis-Bacon. It's a free country.

But the decline of unions over the past few decades has left corporations and the rich with essentially no powerful opposition. No matter what doubts you might have about unions and their role in the economy, never forget that destroying them destroys the only real organized check on the power of the business community in America. If the last 30 years haven't made that clear, I don't know what will.

More on this tomorrow morning.

A Question for the Democratic Party

E.J. Dionne today:

Lori Montgomery reported in The Post last week that a bipartisan group of senators thinks a sensible deficit reduction package would involve lifting the Social Security retirement age to 69 and reforming taxes, purportedly to raise revenue, in a way that would cut the top income tax rate for the wealthy from 35 percent to 29 percent.

Only a body dominated by millionaires could define "shared sacrifice" as telling nurses' aides and coal miners they have to work until age 69 while sharply cutting tax rates on wealthy people. I see why conservative Republicans like this. I honestly don't get why Democrats — "the party of the people," I've heard — would come near such an idea.

Good question. Anybody know any Democrats who might be able to answer this?

The Sunday Morning Shutout

A couple of years ago Pew Research surveyed news coverage of the economy during the first half of 2009. Who drove stories? Who got quoted in stories? The answer was pretty much what you'd expect: the president, the White House, business leaders, academics, politicians, and ordinary citizens. Do you notice anyone missing from this list? Pew did:

One subset of the American workforce was virtually shut out of the coverage entirely. Representatives of organized labor unions were sources in a mere 2% of all the economy stories studied.

But that was reporting about a financial crisis. Surely things would be different if the story dominating the news was specifically about a state governor's attempt to gut a union and the union's attempt to fight back? Eddie Vale, AFL-CIO political communications director, sets us straight:

While we appreciate coverage of this impt issue quite odd not a single union member or officer invited on any of the Sunday shows

Actually, not so odd at all. In fact, it's par for the course. Unless it's a story about how unions are ruining American education or destroying state pension funds, today's press isn't much interested in what they have to say.

More about this on Tuesday morning, when my piece in the current issue of MoJo about the decline of unions and the not-so-coincidental decline of American liberalism goes online.

How Big Are Wisconsin's Problems?

So how big is Wisconsin's budget problem? And did Gov. Scott Walker help create it? Politifact takes a look at the numbers here and tells us.

Nickel version: the projections from the legislative analyst are necessarily subject to a bit of guesswork, but he estimates that Wisconsin will probably have a modest shortfall in the current fiscal year, amounting to about 1% of the total budget. In the two-year cycle after that, the legislative analyst estimates that tax collections will run $190 million below previous estimates. Nearly two-thirds of this revenue deterioration is due to legislation supported and signed by Walker during a special session he called last month.

Bottom line: Wisconsin's budget problems are fairly modest this year, but substantially larger in the two years after that despite the fact that tax revenues are projected to increase about 4% in both 2012 and 2013. However, whatever the size of the future deficit (which is still a point of dispute), revenues for 2012 are about 1% less than previously estimated thanks to Walker's special session bills. Walker isn't at fault for the current year's shortfall, but he is at fault for making the shortfall worse over the next two-year cycle.

Wisconsin's public sector workers have already taken a 3% cut in wages over the past two years. Maybe that's enough, maybe it isn't. But Walker has taken an already pressing problem, made it incrementally worse, and then used it not just as an excuse to bargain hard on wages and benefits, but as an excuse to gut Wisconsin's public unions entirely. (The Democratic-leaning ones, anyway.) It's just not a good faith exercise.

For more, check out Andy Kroll's explainer here, and be sure to scroll down for the updates. Andy's on the ground in Madison right now and you can follow his Twitter feed here.

UPDATE: The original draft of this post underestimated the size of Wisconsin's future deficits. I've corrected the text to more accurately reflect the legislative analyst's estimates. The most recent estimates from the state budget director are here.