How Construction Worker Unions Can Save California

The California Labor Federation has a membership of more than 1,200 unions, representing over two million workers. And the first of seven key issues they list on their legislative agenda for 2012 is supporting high speed rail. As they put it, “Building high speed rail will grow our economy and create long-term jobs. An estimated 450,000 jobs in operations, maintenance, ticketing, and services will be needed to keep HSR up and running.”

It is difficult to imagine economic thinking more well intentioned yet fundamentally flawed. What private sector unions want, ideally, is to work cooperatively with government and industry to help create well paying jobs. But high speed rail will incur far more economic costs than economic benefits. Massive construction projects, using public/private financing mechanisms, have to benefit the economy. Otherwise they are examples of private gain – high paying jobs for workers who happen to belong to unions involved in the construction and maintenance of the project – in exchange for socialized loss – higher taxes that lower the disposable income of everyone else.

Policy activists who are critical of unions must understand that there are two crucial debates they are engaged in with unions. The first one is an economic argument – convincing union leadership that encouraging free market competition will lower the cost of living for everyone, and that when this happens all workers benefit. This is a tough sell, despite being entirely accurate. But the second debate, which regards what projects unions should be [...] Read More

How to Revive California’s Economy

The previous post, “Balancing California’s Budget,” recommends spending cuts that extend well beyond incoming Governor Brown’s proposed budget (ref. Full Budget Summary), especially in the areas of (1) entitlements, (2) prisons, and (3) education. In all these areas, the case is made that thoughtful restructuring and downsizing of these institutions will actually improve societal outcomes. At the same time, as Governor Brown himself has included in his own budget proposal, state worker salaries and benefits need to be lowered to competitive market rates. But making these reforms to put California into a situation of budget surpluses is only half the battle to revive California’s economy. At the same time, new government initiatives combined with new private investment – spurred by deregulation – are necessary to maximize the speed of California’s economic recovery, and lay the groundwork for a new golden age in the golden state.

Here are some projects – public or private or both – that will make California great again. They are based on a simple premise: It is the job of government to invest in infrastructure that will make energy, water and transportation less expensive, not more expensive.

(1) Build nuclear power plants: The latest generation of nuclear power technologies are safer than ever, and there is an abundant supply of nuclear fuel within North America. Adding a few nuclear power stations in California would have a dramatic impact on the price of electricity. Claims that nuclear [...] Read More