March 3, 2011

Are Public Unions Speeding American's Destruction?

By Paula Dierkins

The ongoing public employees' union protests in Wisconsin against the (minor) cut in benefits witnesses these protestors comparing their struggle to those of the popular, spontaneous public uprising raging all over the Middle East. Such a claim however is ludicrous and laughable. The public in the Middle Eastern countries is revolting against government tyranny. On the contrary, if the demands of the Wisconsin protestors are heeded, it would result in high taxes and therefore, more government tyranny on the public. Any claims by the unions portraying themselves as pro-children or pro-public to justify their demands are blatantly false. Make no mistake, a victory for the unions' means greater tyranny and suffering for the public.

As Professor Tom Di Lorenzo's article puts it, public employee unions are so successful at getting their way because of a double monopoly situation. Most government services such as public transportation, sanitation, fire fighting, police and teaching are monopolies or near monopolies. And because public employees are unionized, they are a monopoly provider of labor. So therefore, if they strike, the "critical" services they provide are paralyzed and the public is in effect held hostage to their demands.

Nearly all arguments used by unions to justify their demands are economically fallacious. Every supposedly "critical" service provided by the government/public employee union nexus can be and were in fact at various times in history, provided by the private sector. For example, private schools existed for hundreds of years before the first public school, and even New York's subway was private until 1968. And private enterprise would happily pick up the slack if only the government gets out of the way.

Since government monopoly services such as public schools have no profit/loss mechanism or ignore profit/loss (remember Amtrak and USPS?), it is impossible for policy makers to determine if these institutions utilize resources optimally. Therefore, we don't know the optimum number of teachers or police officers or fire fighters needed to serve a community.

Due to the lack of the profit/loss feedback mechanism, it's a certainty that these government services consume more resources than if they had been in the private sector. These resources needed to sustain the government services and pay for public employees have to be supplied by the private sector, the true wealth producing sector. If the unions in Wisconsin have their way, more resources will be diverted to the public sector via higher taxation. That means that fewer resources are available for the private sector to maintain their capital or increase investments to grow their wealth producing activities. Eventually, the private sector will be bled dry and the entire system will collapse on itself. In fact, we may already be at that point with nearly every public sector across the country having deeply underfunded pensions. Even the cost cuts proposed don't go far enough to restore these funds to solvency.

If you want a glimpse of the destruction wrought by unchecked union power, look no further than Detroit. But the auto unions were private sector unions whose employers didn't have an unlimited pool of wealth. On the other hand, the public trough is many times bigger and so can be bled for a longer period. But the end destruction, when it comes, will be all the more spectacular.

While there may be some underpaid teachers or police officers or fire fighters, these individuals would be hard to find unless they plied their services in the private sector. Perhaps one way out is to accept that public pensions are underfunded and will never pay out their promised benefits in full, liquidate these pension funds by paying out lump sum benefits pro-rata, and then privatize all government services. Over the short term, this will no doubt throw a lot of people into the deep end. However, in the long run, this is path of least pain.

Paula Dierkins writes on the topic of Online PhD Degree . Paula can be reached at her email id: paula.dierkins[@]gmail[.]com