Arkansas Lt. Gov. Bill Halter’s failure to win his state’s Democratic nomination was a crushing defeat for organized labor, which went all-out in supporting Halter in order to punish incumbent Democratic Sen. Blanche Lincoln for her failure to support the unions’ top legislative priority, the so-called Employee Free Choice Act, which was unpopular in her fairly conservative state.
Big Labor did get something out of this, in that it gave Lincoln enough of a scare to make other Democrats think twice before crossing the unions, but her having won shows Democrats that placing their constituents’ priorities over those of their party’s most powerful interest group can be a winning strategy. This is to the good, as politicians of both major parties, especially at the state level, need to confront some powerful public sector unions — which now represent the majority of all unionized workers — to bring government budgets under control. And across the nation, more and more citizens seem to support imposing such fiscal discipline.
A political tide that has helped fuel the growth of government finally seems to be turning in favor of taxpayers. With the nation’s unemployment rate still hovering at just below 10 percent, the public is turning its anger on a protected class of workers that has largely escaped the economic uncertainty, at everybody else’s expense: government employees.
State and local politicians are listening, and some are proposing reforms to curb extremely generous public employee compensation packages that are beyond anything available in the private sector. In short, they are trying to deal with the mess left behind by their predecessors. During the 1990s boom years, many state and local governments, buoyed by increased revenues, spent those new tax dollars as soon as they came in, without much forethought of possible future downturns.
Moreover, states and localities have been paying out even beyond what they negotiated with the unions. Labor contracts have allowed many public employees to game the system through such tricks as double dipping and pension spiking. Double dipping is the phenomenon whereby a government employee “retires” from one job and then takes on a different government job, while collecting the pension from the first job. Pension spiking occurs when a government employee who is about to retire boosts his income during his last year of employment — either by putting in a huge amount of overtime or temporarily taking a higher paying job — thus freezing that final year’s income into pension benefit amounts that are based on an employee’s final year salary.
Even worse, a lot of the benefits came in the form of pensions. While the possibility of taxpayer backlash may have put some sort of check on how much union-supported politicians can pay their union supporters in the present, it provided little incentive for any caution well into the future. When the bill for those pensions would come due, the politicians who approved those benefits would be out of office, and figuring out how to pay for those benefits would be somebody else’s problem.
Such reckless spending made today’s state and local government budget crises inevitable in an economic downturn. Now that a downturn has come to pass, many state and local policy makers have no choice but to try to get their states and municipalities off the road to financial catastrophe. That’s commendable, however belated, and it will be difficult. Yet the time to act is now. The consequences of doing nothing are now apparent, which underscores the urgency of the situation.
And it is fitting that both Republicans and Democrats are coming around to addressing it — because they both helped create it. As Politico reporters Maggie Haberman and Ben Smith note, “local Republicans from coast to coast have often accepted the support of unions and defended their perks.” However, “That day appears to be over, at least for now.”
State and local politicians who want to establish themselves as fiscally responsible stewards of their constituents’ tax dollars now need to show results. There are already some encouraging signs. Recently, the California State Senate approved a bill to address the problems known as double dipping and pension spiking, and the Illinois General Assembly approved a bill to address double dipping and cap pension benefits.
That’s a good start, but much more needs to be done.
Ivan G. Osorio is editorial director at the Competitive Enterprise Institute. His writings focus on labor issues and the new economy.