PrintMarch 3, 2011
America's Fiscal Civil War
The year 2011 marks the 150th anniversary of the Civil War in America. Perhaps it is fitting then that this same year is host to the onset of a great polarization in our nation, the likes of which may get to a point not been seen since the Vietnam War. This fiscal Civil War is between two distinct groups, and although the war is being fought with shouts and legislation, rather than the muskets of old, the end result of the war will have a huge impact upon our country.
Each group is distinct. On one side are public employees -- those who work for a particular local municipality, state, or some type of institution thereof. Many of these employees are unionized. Those sympathizing with this group include public union officials, private union officials, and Democrats.
On the other side, are private industry employees who are not unionized (about 93% of all private industry employees). Their sympathizers are Republicans. Battles between the groups are breaking out in a growing number of state capitals, Madison, Wisconsin being the most prominent, and are certain to migrate to Washington D.C. soon.
Make no mistake on the animosity between the two groups. Simply look at the tone seen in Wisconsin. Joe Taxpayer, who isn't a union worker, sees Mary Union Worker as someone awash with healthcare benefits, a virtually guaranteed job, and a secure, inflation-adjusted pension plan. Meanwhile, Joe Taxpayer faces near 10% unemployment, corporate layoffs and heavy expense reduction at his place of work, rising healthcare costs, and a retirement plan that is far from guaranteed. To add further insult, Joe Taxpayer is paying for the salary, benefits, and retirement plan of Mary Union Worker and many public union workers, and even worse, he's paying Mary's union dues.
It just doesn't measure up.
The battle lines are essentially threefold in this war: collective bargaining, pension plans/healthcare, and right-to-work. A number of states, including Arizona, Alabama, and West Virginia, already ban collective bargaining for public employees, so what is being talked about in Wisconsin is by no means new, but it is of the utmost importance.
The loss of collective bargaining in yet another state could result in a domino effect in other states facing the same budget crunch. This would be a disaster for public unions and their bosses and the justification for their executive positions. That is why the battle of Madison is so electric and why the union bosses, Democrats, and the President of the United States, consider this to be such a critical fight. Don't be fooled. Money and power for the unions are the spoils of this war, not necessarily any gains for the union members.
Regarding pension plans and healthcare, public sector employees in Wisconsin and other states are being asked to pony up more in employee contributions to retirement and healthcare. In Wisconsin, for example, these employees contribute little or nothing to their retirement plans and only about 6% to healthcare. Governor Walker's proposal calls for contributions of 5.8% to retirement plans vs. around a 7% average for non-unionized employees in the public sector and about 12.6% in contributions to healthcare vs. about a 20% average paid by the non-unionized workforce.
That does not seem unreasonable in the eyes of many who pay an increasing amount for their healthcare benefits and/or see their co-payments rise every year or so.
Consider also the guaranteed pension funds most of the unionized employees have. Those are largely extinct in the private sector. Private sector employees are reliant upon retirement accounts that are by no means guaranteed.
The right-to-work issue, meaning when employees may be given the chance to opt out of joining a union and paying union dues, may ultimately be the biggest battle when the smoke clears, because mandatory union membership with paycheck deduction is the driver for funds to flow into the union coffers.
As the money goes, so goes the power of the union heads over their members and so goes their political clout with existing elected officials as well as candidates for office. If the money dries up, then the union has little ability to twist the arms of the politicians. It is do or die for the unions' political power.
It's clear that a number of states are broke, just as a number of Americans are -- floating in a heap of debt and unable to substantially increase their incomes. The only way to get out of red ink in a household is to cut the expenses if no additional revenues can be added to the bank account. That's what Joe Taxpayer is doing in his own house.
State leaders, such as Governor Walker in Wisconsin, are trying to do the same to fix the fiscal health of their states. Should Walker and others lose this battle, or better said abandon their stances, the demand will substantially increase for individuals to move from the private sector to the public sector. There are only so many government jobs to go around. If more are created, then there will need to be more taxes on the public sector. More taxes to pay more and bigger salaries and benefits will further escalate the tension between the public sector workforce and those in government.
Chad Stafko is a writer and political consultant living in the Midwest. He can be reached at stafko@msn.com.
