Look for the Union Label

The Democrats' response to the efforts of Wisconsin Governor Scott Walker's effort to reduce collective bargaining rights for state and local government employees in Wisconsin has been educational.

If it weren't obvious before, we see just how beholden the Democratic party is to public unions for support. From fleeing the state to prevent a quorum to prevent the elected representatives of Wisconsin from completing their jobs, to comparing Governor Walker to Hitler, the Democrats and their supporters have engaged in political warfare to preserve union power in Wisconsin. You would only do this if such power was important to you.

Denying a quorum from being present is an abuse of legislative rules from a time when communications were slow and traveling from a legislator's home to the capital took a long time. Mandating a minimum quorum to vote on a bill therefore was an attempt to prevent members from being denied an opportunity to participate in voting on a bill.

Some have compared denying quorum to the filibuster in the U.S. Senate, whose purpose is to give the minority certain rights if they feel passionately about an issue, but that is a wrong analogy. Requiring a quorum is to allow legislators the time to get to the capital for a legislative session, or to prevent a majority from calling the legislature into session at a time or location that is difficult for the minority to attend and hence tipping the scales in the majority's advantage by denying the minority from being able to participate in the vote.

With modern communication and travel, such concerns are not relevant and could be satisfied with appropriate advance notice provisions to hold a legislative session. Instead, the Wisconsin Democrats used the quorum rules to prevent the legislature from operating, even though they had plenty of time to attend the legislative session.

The language directed at Governor Walker, such as comparing him to Hitler or Hosni Mubarak, is deeply offensive on many levels. Political debates that turn into name-calling don't advance the public's knowledge of the issues and in fact, suggest the name-caller can't advance facts or logic to make his case, so he uses invective instead.

Moreover, after so much commentary about having a civil tone of political discourse in the country after the shooting of the Democratic Representative Gabrielle Giffords in Arizona in January, we now see clearly that such comments were made for an attempted partisan advantage, and not for heartfelt convictions. Many of the commentators or politicians who implicitly or explicitly criticized the Tea Party or Republicans for falsely claiming their rhetoric had anything to do with the Giffords' shooting either have been silent while abusive language has been heaped on Governor Walker or have engaged in such rhetoric themselves. This further undermines the political culture in this country.

We also have learned that union thugs will direct their anger to the people in the public an large. Unions having now turned their attention to Wisconsin businesses, having sent a letter to Wisconsin business owners saying that if you don't actively support union efforts against Governor Walker, the unions will engage in boycotts of your business.

Interestingly, Wisconsin Democrats conceded to the benefit reductions in the new law, but wouldn't agree to the provisions that allowed state workers to opt out of the union or having the right to not have their union dues used for political donations. Why engage in all-out political warfare if the employee benefit issue was off the table?

Because the real issue is union power and campaign contributions to Democrats. As reported in the Wall Street Journal, when Indiana passed a similar law a few years ago, less than 10% of union members continued paying union dues. And without those dues, union leaders lose their own jobs, have to reduce their compensation to reflect diminished union financial resources, and reduce political campaign contributions which go overwhelmingly to Democrats.

And THIS loss of union money, more than the false right to be in a government union, is why the Democrats and their union allies are up in arms about the events in Wisconsin.

True Colors

Facing a dire fiscal crisis, the Camden, NJ government laid off half its police force and one-third its fire department. The city sought to cut pay to avoid or minimize layoffs, and the unions preferred to see many of its members lose their job so the remaining members could have higher pay.

The people of Camden will be the ones who suffer, losing the protections provided by greater numbers of police officers and firemen.

Newark, NJ faced a similar situation, where 167 police officers lost their jobs after the police union wouldn't agree to wage and benefit concessions.

This terrible outcomes highlight the obvious, but often overlooked, incentive that taxpayers have: taxpayers should want the most services for their tax dollars, which implies that, in the efforts to balance government budgets, taxpayers should strongly prefer to see reductions in government employees all-in compensation than layoffs which reduce the quality of government services provided.

This is exactly analogous to how most people view other goods and services they purchase, whether they try to pay less while getting good quality. Most people have bought items on sale, at discount stores, or bargained for a better price such as buying a car. Directly or indirectly, such a focus on getting a good deal serves to reduce the income of someone in the chain of supplying the good or service.

Whether a car salesman who gets a lower commission because you negotiate a lower price on the car you purchase, or lower revenues to the retailer which puts downward pressure on wages when you buy clothes on sale, most people try to get a better deal when they spend their money even if the impact leads to lower wages for someone else.

As taxpayers, we need to have the same mindset, and recognize how normal and natural it is to do so. Otherwise, looming disasters such as will afflict Camden and Newark will become commonplace.

The Education Market

The Wall Street Journal discusses the problems that the Harlem Day Charter School has had. Unlike many charter schools, it has lagging student test scores compared the population from which it draws.

Its charter is up for renewal this year, and the school's Chairman of the Board admits it won't be renewed due to their failures. Instead, the school has proposed that another successful charter school organization, Democracy Prep Public Schools, take over the school and have the charter renewed under their leadership.

While defenders of the status quo in education will use Harlem Day's failures as evidence against charter schools - notwithstanding the strong overall performance of charter schools - in fact their failure and resulting risk of being closed demonstrates another advantage charter schools have over regular public schools: they can be closed for failure due to the need to have their charter renewed every five years.

If public schools faced such a fate, they would be motivated to take even radical steps to avoid closure - and there are few things more radical than Harlem Day's proposal for its administration to be replaced by a new organization.

The result would be improved education for children in failing schools.

The Real Storm

The Wall Street Journal reports that a federal prosecutor is investigating claims by a New York City councilman that sanitation supervisors and workers engaged in a work slowdown during the efforts to remove snow from streets during last week's snow storm.

New York City has reduced sanitation department employment levels to address its budget deficit, so there is certainly motive. And if there is evidence of such a slow down, it highlights the abusive power of public unions and the lopsided power government employees have relative to their government employer.

Milton Friedman Right Again

Milton Friedman, the Nobel-prize winning economist who was one of the intellectual leaders in the rise of free market economics in much of the world over the past 35 years, once described minimum wage laws as among the most racist laws in America.

He said this because by artificially raising wages above what they would be in a free market, minimum wages laws reduce the demand for labor - and hence keep people unemployed who would otherwise be employed. The people most likely effected by minimum wage laws are those with less job experience and skills, which tend to be disproportionately from minority groups.

Recent data from the Bureau of Labor Statistics as published in the Wall Street Journal illustrates this terrible problem. The federal government raised the minimum wage by 40%, from $5.15 to $7.25 per hour, from 2007 to 2009.

This huge percentage increase, at a time of recession, has led to an entirely predictable result. The teen unemployment rate (a good proxy for unskilled workers who tend to be most impacted by minimum wage laws) rose from 15% to over 25%. Even worse, the black teen unemployment rate rose from about 28% to 45%.

Teenage employment provides critical skills that are important for improving a person's job prospects throughout one's lifetime. Minimum wage laws reduce the development of such skills through the unemployment they create.

The Democrats do the unions' bidding on minimum wage laws, and in return hurt all unskilled workers, particularly minorities, by denying them employment opportunities.

Did You Know?

The Wall Street Journal produced an end-of-the-decade recap, and it had some very interesting information.

One analysis depicted the top five donors to the Democratic party and Republican party.

Other than ActBlue, which is self-described as " the online clearinghouse for Democratic action", the top donors to the Democrats were all labor unions, donating $116 million. The top five donors to the Republican party were two companies and three industry associations, donating a total of $59 million.

Add the ability to deliver volunteers for political activities, and now you know why labor unions are so critical to the Democratic party - and it helps explain Barack Obama's massive payoff to unions in the "stimulus" bill, the auto bailout, and other policies.

Sneak Preview

A battle between two unions in California provides a preview of what the Democrats card check legislation would produce in labor relations in this country.

The Wall Street Journal reports on the struggle between the Service Employees International Union (SEIU) and the National Union of Healthcare Workers (NUHW) to organize 10,000 healthcare workers in Fresno, CA. The SEIU won the election earlier this year but the NUHW is suing to overturn the results, claiming the SEIU intimated workers to favor them over the NUHW.

Note, this is a battle over which union gets to represent the workers; it is NOT a battle between a union and a company.

The SEIU is alleged to have visited workers up to five times per day; to threaten them with a loss of wages and benefits if they voted for NUHW; and to question their immigration status.

This shows how valuable it is to union bosses to have more members, and more members' dues filling union coffers.

And it illustrates the type of tactics used by labor to pressure workers to vote for unionization that card check legislation would only make worse. Under card check, a secret ballot would no longer be used in union-organizing elections, and instead workers could just check a card during a period of time to vote for unionization. This means workers could be pressured by union activists, at work or home, to sign the card in front of the activists.

Fortunately, card check legislation has been losing steam due to these concerns. The union battle in California reminds us why it is important card check not be passed.

Let's Bleed 'Em Dry

Ford is running into problems with the auto workers approving concessions which the company and the UAW leadership agreed. These concessions would keep Ford competitive with GM and Chrysler, who previously won the same concessions from the UAW and its members.

Because Ford is doing better than GM and Chrysler, auto workers are thinking that they don't need to make the same concessions - since if Ford is in better financial shape, it has more room to be bled with above-market compensation.

This continues the destructive behavior that the UAW and other large unions have shown for decades, destroying companies and industries (think auto, steel, and airlines with their multiple bankruptcies) in the process.

And thanks to Obama's bailout of GM and Chrysler, Ford pays the price for its success.

How Much Do I Love Thee?

The Obama administration delivered another gift to labor unions, by imposing tariffs on tires imported from China.

So Americans can pay higher prices for tires and have worse relations with China - so Obama can deliver more favors to the unions.

A few days later, Obama spoke to union members in Pennsylvania and Ohio asking for their support for this health care plans.

If you think that's a coincidence, I've got a bridge you can buy.

The Most Powerful Group in America You Have Never Heard Of

The Obama administration is threatening the State of California, which is facing a staggering $42 billion budget deficit due to excessive spending growth and reliance on a "progressive" income tax, with the loss of $7 billion in stimulus money - unless California ends a $74 million budget cut that reduces wages for unionized health care workers.

The Services Employees International Union (SEIU) spent $85 million of union dues to help elect Barack Obama as president, and wants a return on its investment.

This intervention by the Obama administration in a state budget matter shows you the extent to which Obama is beholden to the unions.

The SEIU has had many of its leaders appointed to roles in the Obama administration. Through those jobs, and efforts such as strong-arming California, it is getting a payback on its investment.

And in return, taxpayers suffer.

The Three Most Important Letters in America

The Obama administration is bailing out GMAC, the auto finance arm of GM. Unlike the financial services bail out of large banks, a failure at GMAC (if it came to that) doesn't pose a systemic risk to the financial system.

So why is the Obama administration forking over up to $20 billion to save GMAC?

Could it have anything to do with what we have learned are the three most important letters in America: UAW?

We Don't Need No Stinkin' Rights

Chrysler's secured creditors who are banks, such as Citigroup and JP Morgan, have agreed to accept the government's proposed settlement of their debt - no doubt in whole or in part due to their status as a "tarped" firm. Since they are under the thumb of the Obama administration, they need to do its bidding.

But not all of Chrysler's secured creditors are TARP firms, and they don't like the deal the government has offerred them.

The deal upends the traditional payouts in bankruptcy, because the unsecured creditors (the UAW retirees) are getting a higher recovery rate on their liabilities than the secured creditor (the banks) under Obama's plan.

In a normal bankruptcy, the opposite occurs. This is pure wealth confiscation by the Obama administration, in support of its political ally the UAW.

The bankruptcy judge has to decide if the identities of these lenders need to be revealed, which is a problem, since some have received death threats.

This is just another obscenity that the economic downturn has led to: creditors who have the right to decide for themselves whether to accept a deal being threatened with death for not doing so. Obama's attack on these creditors as "speculators" further inflames passion on the issue, when all they are doing is representing their investors interests - as their fiduciary duty requires.

Along with the death threats made against AIG employees who received contractually agreed bonuses, this shows the naked hatred that exists in the hearts and minds of some.

If you won't speak out in their defense, don't expect anyone to speak out in your defense.

The UAW Cashes In

The extraordinary lengths to which Barack Obama has gone to preserve Chrysler's corporate existence shows the degree to which he is willing to help a key political ally, the UAW, with a massive bailout.

The auto industry was losing money during the economic boom, a sure sign of profound problems. The fundamental problem with the industry has been the restrictions the government has imposed on it, including forcing it to build unprofitable cars that Americans don't want to buy: smaller, more fuel efficient cars made in UAW-manned factories.

The fuel efficiency standards were bad enough, since it meant consumers had to be induced with low prices to buy cars they didn't prefer. But the government also mandated that such cars had to be made in domestic factories, since cars made overseas and imported into the U.S. didn't count to meeting the fuel efficiency standards - a clear payoff to the UAW.

Other damaging government restrictions include labor relations law, which gives the UAW disproportionate leverage vs the auto makers, and the new quest to force the Big Three to make unprofitable, environmentally "friendly" cars.

So now the industry has massive excess capacity: too many factories, dealers, brands, and employees. Normally, excess capacity leads to aggressive plant closures, moving production overseas, M&A deals, and if those aren't sufficient, bankruptcy.

But the UAW preferential negotiating position has prevented the Big Three from taking normal business steps to eliminate this excess capacity.

So now we are left with Chrysler being forced into bankruptcy.

In a bankruptcy untainted by government pressure or money, Fiat would be allowed to bid for those assets that it wants, which would allow many of Chrysler's plants and brands to survive. So many of Chrysler's assets would survive and some jobs - but the above-market UAW retiree health benefits and above-market UAW wage levels would suffer.

Instead, Obama is throwing another $8 billion down the sinkhole of Chrysler to preserve UAW benefits and jobs. The UAW is a reliable Democratic ally, providing money and manpower to help elect Democrats.

So your money is being spent by a Democratic president to help his allies elect Democrats. This is the result of government intervention in the market.

None of this would have happened if the government had allowed the free market to operate in the auto industry.

FedEx Fights Back

FedEx recently announced that it may threaten to cancel a purchase of cargo planes from Beoing worth billions of dollars if Congress passes legislation to make it easier to unionize the shipper.

FedEx is simply making it clear that increasing its costs through unionization has a price.

Auto Debacle Continues

The Obama administration's auto task force, which took five weeks to form after the inauguration despite the crisis, is reported to be set to recommend that GM and Chrysler get more aid and not be placed in bankruptcy. The task force has been scrambling to do its work, given its late start, and three of its members specialize in climate change - which means they bring an ideological commitment to having the auto makers build cars that are unprofitable because people don't want to buy them.

How comforting.

The economically rationale approach is for GM and Chrysler to file for bankruptcy, with Chrysler probably closing shop and GM shrinking in size - with bankruptcy tools making this possible.

But because this is about preserving union jobs at a key Democrat supporter, the UAW, and using the government's power to force the auto makers to make green cars when consumers don't want them, politics is trumping economics.

And we, and our children, will all be poorer because of it.

France, Here We Come

Barack Obama recently endorsed card check legislation, which would make it much easier for unions to organize a work place by doing away with a secret ballot. Instead, voting would be public and occur over time, so workers could be intimated by union advocates to vote for the union. Given the history of union violence in this country, this is both a profoundly unjust effort to coerce employees to vote a certain way and an economically destructive path.

It only exacerbates the capital strike occurring in the country, where businesses and investors are refusing to take risks with their money due to deep concerns over the ability for such investments to be profitable given Obama's plans to raise taxes significantly, engage in a radical restructuring of the health care and energy sectors, spend vasts amounts of money, and run budget deficits at unprecedented levels forever.

To the extent increased unionization leads to higher wages, that would be the fast track to job losses and higher unemployment, particularly in a recession. If workers are too expensive to hire, employers will hire fewer of them or lay them off. Studies of the Great Depression, where FDR pursued a policy to raise wages and to support aggressive unionization, indicate a significant part of the unemployment was due to wages that were above market.

Card check will lead to higher unemployment, reduced business investment, and weakened confidence. A terrible policy at any time, yet alone during a recession.

Obama's Choice

William McGurn of the Wall Street Journal reports on what ought to be a major news story. Congressional Democrats are working to end the Washington, DC school voucher program, a program which is supported by the head of the DC school system.

Two of the program's beneficiaries go to the same private school that Barack Obama's daughter attend, and they may not be able to attend the school without the voucher (unless of course the school or a donor "solves" the political problem by making up the funding provided by the voucher).

So will Obama stand up to the teachers' unions to insist the bill preserve the voucher program? Or will he demonstrate to everyone, including his own children, that quality education is less important than satisfying a key Democratic constituency?

Spending Blow Out Continues

Congressional Democrats are demonstrating just how much budget discipline Barack Obama really expects. The House passed a $410 billion spending bill, an 8.7% increase over the previous year. Future spending bills will now grow from this new, higher base. This is on top of the "stimulus" bill's spending spree.

Moreover, the bill includes additional support for key Democratic constituencies. The bill phases out school vouchers used in the atrocious Washington, DC school system. No doubt the teachers' unions are quite pleased their support for Democrats has been rewarded again.

It would be encouraging if Barack Obama threatened to veto the bill unless the voucher program is restored. Don't count on it.

This is Stimulus?

As an illustration of the misplaced priorities of the recently passed "stimulus" bill, note that significant money will be spent on sectors that have expanded employment during the recession.

Education spending proved to be a source of contention in the "stimulus" bill. This was a priority of Democrats, both to reward an important constituent, the education unions, and to further a long-standing goal of Democrats, the expansion of the federal government's role in education. Likewise, increased spending on health care was also a priority for Democrats, who are taking further incremental steps toward nationalized health care.

Compare those efforts with what employment data from the Labor Department (as reported here). In an otherwise dismal employment picture, with most sectors of the economy showing significant job losses, the education/health sectors experienced significant job creation since the recession began. In fact, the only other sector to experience a growth in employment is in government.

How about that. The "stimulus" bill will result in greater government employment, to oversee and manage all of this new government spending. And education/health care will see additional employment as well, on top of recent gains.

Ballooning Auto Bailout

The initial $17.4 billion cost of the auto bailout will merely be a down payment. Witness that less than two weeks after its introduction, the government is providing an additional $6 billion to GMAC and GM to help stimulate auto lending. And unless the Obama administration is tough with the UAW and requires auto workers to receive market wages and benefits, we should expect the bailout costs to balloon and never be fully repaid.

Chrysler reported that its sales for December plunged 53%, much more than the other auto makers. Although it is very difficult and inappropriate for the government to be in the business of picking winners and losers (then again, it is inappropriate to bailing out these companies to begin with), the government can limit auto company losses by pulling the plug on Chrysler and letting it fail.

There is vast excess capacity in the auto industry, which means factories need to close to return the industry to financial health. And since Chrylser continues to demonstrate, as it has for decades, that it is the weakest of the major auto makers, its demise would bolster GM and Ford and give them a better chance of succeeding.