Reflections on Wisconsin

       With the New York Times celebrating the return of the absentee Wisconsin senators to victory celebrations in Madison, it is worth a few reflections on what has happened. There are two dimensions:

In Wisconsin

       Wisconsin public employees will be required to contribute 5.8% of their salaries to pensions and 12.6 % to health care plans (about an 8 % salary cut) toward closing a $137 million deficit that Governor Walker inherited in the current budget, avoiding 1500 layoffs.  Future labor negotiations will be limited to wages with increases restricted to the rate of inflation, and workers will have the right to not pay union dues. Over the next two years Wisconsin faces a $2.9 billion deficit, so the direct contribution is just a minor part of the solution.   

    The UW students have had their party, the teachers have had their public classroom, Jesse Jackson of PUSH and Richard Trumka of the AFL-CIO have had their megaphone, and the lawyers will now have their months of opportunity. But Governor Walker has done what he said he would do in the 2010 campaign and he can hope that his poll ratings will return once NBC and the Huffington Post move on to the next story and the students go off for Spring Break.

    The real impact in Wisconsin will occur at the department and local level as county executives and mayors are freed to manage their employee costs and, more importantly, go about consolidating departments and fixing work practices. (Similar steps by Governor Mitch Daniels of Indiana in 2005 were central to his successful efforts to balance the budget while reducing state workers from 25,000 to 20,000, reducing union participation from 66% to 7%, and earning the gratitude of his local officials for taking the heat.)

Nationally  

    Almost all states have budget problems which are making people like Democrat Andrew Cuomo of New York sound like Republican Chris Cristie  of New Jersey.  With stimulus money running out the next year or two will be brutal and the example of Wisconsin's give-backs will be repeated broadly. Similar union-reducing steps are being taken (interestingly with minimal fanfare) in Ohio and initial efforts are being made in Iowa , Michigan, and Missouri.

    But the bigger issue is the trillion dollars of unfunded retirement benefits in the states.  (That is assuming an average return of about 7-8% annually; something like 4-5% would be more reasonable.) There will undoubtedly be a  lot of two-tier systems with new employees having older retirement ages, lower benefits, a reduced ability to spike wages in their last years, and significant employee contributions - and more commonly a change from defined benefit plans to private sector-type defined contribution plans.  The lawyers will have a heyday as governors and mayors try to take back commitments made in the union era.

    Look to a broad challenge to return the the philosophy of  Franklin Roosevelt  who was opposed to public employee unions. And this challenge will not only come from conservatives - given limited money many liberals will look to reducing the cost of government so that their programs don't get starved.

    The battles will be fought state-by-state, but the AFL-CIO, the American Federation of State, County, and Municipal Employees, and the Service Employees International Union have made a strategic choice to draw the line in traditionally union-friendly/progressive Wisconsin. And, as President Obama would say, they have taken a shellacking.

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    Between Libya and Japan we could all use a bit of non-partisan humor from the Capitol Steps.

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    For an ongoing discussion of the aftermath in Wisconsin, follow Fred Dooley's blog at RealDebateWisconsin.

bill bowen - 3/18/11

Comments

[Bill McCormick]

IT IS HARD TO UNDERSTAND----

--how the President goes to Brazil and extends a $3B loan to the STATE OWNED oil company to fund offshore drilling to exploit their $30B Barrel reserves. And, then tells Brazil that "We want to be your best customer." Meanwhile his ban on US offshore drilling has cost Louisiana 9000 jobs so far.

The double talk is killing me. We don't drill because we think that oil is environmentally unsafe but it is ok for Brazil to endanger the environment? Is not Brazil on the same planet?

Purchasing oil from Brazil reduces our dependency on middle east oil and Venezuelan oil but at the same time it promotes another state owned industry over private US business and continues our balance of payments problems. Was this payback for Brazil abstaining from the vote on Libya? If so, what did we promise Russia for their abstaining? (I understand Russia's Muslim problem.)

Drilling in North America for oil can solve many of the US's economic problems and we need to do it now. It creates jobs. It provides tax revenues to both Federal and State budgets. It reduces our balance of payments overseas. It reduces our vulnerability to overseas supplies. It keeps our gasoline prices lower. It increases the value of Federal land (remember the US government owns 66% of the land west of the Mississippi River) for sale and mineral leases allowing us to reduce the national debt through land sales and leasing rights. Oil is oil. It matters not where it comes from when you refine it but with all these benefits why would one prefer Middle East oil, Brazilian oil over our own? We will not stop buying overseas oil for decades no matter how green we become. This policy is unexplainable and the double talk insulting to Americans who understand economics and the danger of our debt burden.

[Bill McCormick]

YOU GOTTA LOVE EM------

The press is all over the politicians for the war effort. Both sides picking at the way it is being handled. The conservatives are complaining there is no clear end game or even objective. They are upset that the people in charge will not say they are targeting Quaddafi. Last I remember it was illegal to target heads of state specifically and you expect them to tell the guy they are after him?
The liberals are claiming that the President didn't go to Congress for authority to attack. I guess that explains why they liked GWB so much because he actually did get Congressional authority to bomb. On the other hand a few months ago the President was on the cover of Time or Newsweek shoulder to shoulder with Reagan. reagan wouldn't have bothered with Congressional authority and perhaps he is Obama's new hero. The press and the politicians should simply be glad we finally did something and watch the results. Then figure out what we will do in Yemen, Syria and Iran to protect the rebels. In the meantime decision making versus indecision seems to have stabalized the markets. This war will be over before we know it. The aftermath of all this remains to unfold. That is the scary part.

[Bill McCormick]

FINALLY------

Libya---Better late than never they say. Let's hope. While international cooperation is usually preferred (over not) there is a tradeoff in war with the urgency and effectiveness. Perhaps there were unknown reasons militarily for the delay but to the casual observer it appeared to be more of a wait for approval. It remains to be seen if the rebels have enough left to overcome the government and to what extent the French and British forces will engage in Air to ground support to help determine the outcome. I suspect in this case a quick war is preferred to a long one so help should be in ample supply.

I would think that this war is a message to the other dicators of the middle east and perhaps the world that it might be better to quietly slink of into exile with your billions of dollars than face the west. Let's hope so because a series of fights are on the horizon in Syria, Yemen, Iran and North Korea perhaps even Pakistan. In the more moderate dicatorships like Jordan, Saudi Arabia, etc perhaps this will bring about a "moment of reflection" about making some moves toward democracy. In the end this transistion in the middle east will either benefit the West as GWB forsaw and President Obama urged in his Cairo speech or it will lead to a big opportunity for the radical Muslims to gain control of a major protion of the world's oil. A coin flip for analysts and President Obama.