Trumka’s False Choice

Imitation is the sincerest form of flattery. But when the imitator inverts the meaning of the phrase they’re imitating, clarification is called for. Such is the case with the esteemed Richard Trumka, president of the AFL-CIO, who has penned an essay in today’s Wall Street Journal entitled “Scott Walker’s False Choice.”

According to Trumka, Wisconsin’s embattled governor Scott Walker has presented the following false choice to the unionized public employees in that state, “if you want to keep your job, give up your rights, if you want to keep your rights, you’re going to get laid off.” But what if it isn’t Governor Walker, but Richard Trumka, who is presenting a false choice to America?

Back in 2009, a courageous reformer in San Diego, California, councilmember Carl DeMaio, was already talking about the false choice that powerful labor unions in that city were presenting to voters. In an April 2009 press release from DeMaio’s office entitled “City Makes Progress with Labor Contracts,” DeMaio had this to say about the choices facing voters:

“City taxpayers have long been presented with the false choice that we must either raise taxes or suffer severe cuts in citizen services.  Today’s action reflects my long-held belief that the better path to solving the city’s financial problems is to make our city government more efficient by reducing labor costs to sustainable levels in line with our local labor market.”

By extension, the false choice that public sector unions were presenting voters in San Diego is the same false choice public sector unions across the United States are presenting voters and politicians who are coming to terms with crippling government deficits.

Trumka, echoing the refrain heard from labor leaders across America these days, claims that “when adjusted for education, experience and training, the data show that public-sector workers are paid less than their private-sector counterparts.” There may be a few places left in America where Trumka’s statement is true, but not in California.

When a U.C. Berkeley study was released in October 2010 entitled “The Truth about Public Employees in California: They are Neither Overpaid nor Overcompensated,” they didn’t disclose anywhere in their report how much the average state or local government employee actually makes in California. If the “normalizing factors” such as education, experience and training are so significant, why hide the number? When our institute went ahead and looked at the same data, in our report last month entitled “What Percent of California’s State AND Local Budgets Are Employee Compensation?” we found that the average state or local government worker in California collects annual total compensation of $106,000 per year. By contrast, using Bureau of Labor Statistics (ref. May 2009 State Occupational Employment and Wage Estimates California) the average private sector worker in California earns total compensation of $57,000 per year – at most, since the BLS data excludes part-time and self-employed workers. Mr. Trumka is invited to check these statistics for himself, and explain why public sector workers are entitled to collect nearly twice as much from their government employers as the taxpayers who must cover those costs.

When labor leaders point out the reality of wage stagnation and the formation of a super-rich elite, they have a point, but they are tragically incorrect as to the cause and the cure for these realities. Tragic, because their arguments carry powerful emotional weight, which, combined with their unparalleled ability to launch taxpayer funded, union purchased media campaigns, has allowed them to dominate elections by presenting their version of the “false choice” for the last several decades. Incorrect, because it is the unions themselves who have exempted public sector workers from the inevitability of globalization, which imposed the burden of higher taxes on the rest of America’s workers who still had to adapt, and because it is public sector union pension funds who have been Wall Street’s willing accomplices, pouring hundreds of billions of dollars per year of taxpayer’s money into Wall Street brokerages so they could gamble with the economic future of the world.

To the extent America’s super-rich made their money on Wall Street, perhaps Trumka is right to criticize them. But the solution is to stop using government unions as Wall Street’s collection agent, and instead put government pensions onto a sustainable, pay-as-you-go footing, where returns on investment are limited to the rate one might earn from a U.S. treasury bill. This, in-turn, will necessitate lowering government employee pension benefits to something somewhat better than social security, but nothing more. And the solution to government deficits is to lower government employee salaries and benefits, which constitute about 80% of most government budgets.

This is the real choice facing American voters. End the partnership of government unions and Wall Street and stop paying government workers nearly twice as much as private sector workers, or continue to engage in deficit spending until the American economy implodes. If American’s make the right choice, it will require refuting the agenda of government unions. But the upside will be fewer Wall Street billionaires to serve as bogeymen for labor leaders, and lower taxes – and hence a higher standard of living – for all American workers.

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