Monday, December 13, 2010

Pawlenty's WSJ op-ed on municipal unions

Former Minnesota Governor Tim Pawlenty, often mentioned as a Republican presidential contender, has an op-ed in today's WSJ("Government Unions vs. Taxpayers") on the subject of government unions and the burgeoning obligations to fund employees salaries and benefits at all government levels. It mentions the often quoted "fact"(in quotes because I don't know the real numbers) that public sector pay, including benefits, is now twice that of private sector pay for most employees(obviously not at the very top).

This is a subject often raised here in various ways and one that I've considered writing more about recently. Pawlenty does an almost surprising good job of addressing the issue and raising many concerns. The status of many state and local budgets makes the problem obvious. The underlying social aspect of this is less obvious but not hard to see. While private sector employers have spent the last twenty years streamlining, becoming more efficient, and focusing on shareholder returns, public sector employees on the other hand have benefitted from a business as usual mindset like the one that drove GM into the ground.

I'm not sure if Pawlenty's slapping himself on the back for his great job with Minnesota's budget is totally accurate and I diagree with his suggestion that unions have absolutely no place in public institutions. Where I do agree with him, something he implies but doesn't explain, is that there is no natural friction between unions and ultimate management in public institutions. In the private sector the friction that leads to compromise over time is obvious; that's cost cutting, return on capital focused management versus hard working(usually) labor. In the public sector the ultimate bosses(politicians) can actually benefit from overly generous contracts, getting both votes and contributions from those they supervise.

There is not better example of this than Fannie and Freddie, the huge failed mortgage banks run by a congressional committee. They failed and will ultimately cost the government more than all of the bailouts of all banks and auto companies combined. At this point some estimates are that Fannie and Freddie will ultimately cost taxpayers at least $500 billion while most "bailout" banks have already paid back the government with 8.5% interest. That's the only place the taxpayer can get that kind of interest for sure.

This situation has been replicated across the country in municipalities big and small. Many federal employees have the same cozy arrangement with their political management. If both parties bring attention to this issue, that would be a good thing.


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