Finally Clarity on Wisconsin’s Real Objective: Bust Unions

Menzie Chinn reports more dispatches from Wisconsin, this time on recent Congressional testimony by Wisconsin’s Governor Scott Walker.  It’s clear the union-busting efforting in Wisconsin is NOT about the state budget or saving money.  It’s ideological. It’s opposition to unions period.  The budget is and was irrelevant. It was pure propaganda by Walker and the Wisconsin Republicans to cover their real objectives.  This is shock doctrine stuff.  Neo-liberals used to force this kind of undemocratic social change onto third-world and developing nations. Now they do it here.

That is Governor Walker’s answer to the question of how much money rescinding collective bargaining for public unions saves the state government. From the Capital Times:

Kucinich said he could not understand how Walker’s bill to strip most collective bargaining rights from nearly all public workers saved the state any money and therefore was relevant to the topic before the committee, which was state and municipal debt.

When Walker failed to address how repealing collective bargaining rights for state workers is related to state debt or how requiring unions to recertify annually saves money — one of the provisions in Walker’s amended budget repair bill — Kucinich tried one more time.

“How much money does it save Gov. Walker?” Kucinich demanded. “Just answer the question.”

“It doesn’t save any,” Walker said.

“That’s right. It obviously had no effect on the state budget,” Kucinich replied.

[Emphasis added — mdc]

Wisconsin Increasingly Looks Like Bizarro World

A couple items from Wisconsin. Menzie Chinn points out how governor Scott Walker, who claims a deficit to be the compelling reason for eliminating collective bargaining rights for public workers, also thinks the way to save money is to have government ignore cost vs. benefit analyses when making decisions.  Actually, Walker doesn’t even want the analysis done in the first place. His mind is made up.  Private contractors will always be cheaper in his eyes, and he doesn’t need any stinkin’ facts or analyses to get in the way.

Digression: Eliminating Benefit-Cost Analysis?

Here is something that struck me — as someone who teaches in a public affairs school with courses in policy analysis — as odd, particularly in a time when resources are limited. From the Milwaukee Journal Sentinel.

Gov. Scott Walker’s budget proposal would eliminate a law requiring state agencies to study the costs and benefits of outsourcing work.

That provision and others in the GOP governor’s 2011-’13 budget drew questions from both Republicans and Democrats at a briefing Tuesday before the Legislature’s budget-writing committee.

Current law says agencies must compare the costs of having private contractors do work costing more than $25,000 against what it would cost to have state workers do the job.

Speaking to the Joint Finance Committee, Administration Secretary Mike Huebsch said that the law was cumbersome and required an analysis of contractor costs to be done even in cases where state workers couldn’t do the work.

“We did a cost-benefit analysis on the cost-benefit analysis and found it was costing us money,” Huebsch told the committee.

That analysis is definitely one I would love to see. (I am hopeful that the “we” in the passage refers to him and staff.) The article continues.

Under Walker’s bill, the cost-benefit analyses would be retained only for engineering services at the state Department of Transportation.

The proposed change drew questions from Sen. Luther Olsen (R-Ripon) and Rep. Tamara Grigsby (D-Milwaukee). Olsen said he didn’t want to burden state agencies with red tape but also wanted to make sure that agencies weren’t spending money unwisely in a time of tight budgets.

“Can you explain why, when we’re in a time of serious fiscal trouble, we would not want to do a serious cost-benefit analysis? . . . When you are cutting government and cutting programs, you can’t afford to make mistakes,” Olsen said.

In May 2009, a legislative audit found that the state Department of Transportation outsourced 125 construction engineering projects over 16 months even though it determined each one of them could have been done for less using state workers.

Using state workers instead of outsourced engineers could have saved $1.2 million during that period, the Legislative Audit Bureau report found.

State officials are often reluctant to hire more workers because of concerns that they will have to pay those costs for years into the future. Contractors, while sometimes more expensive, are paid on a project-by-project basis.

For those interested in learning about CBA, see this collection.

It’s a strange way to get more value out of government money. But then this is the same governor who thinks selling off state-owned assets without a competitive bidding process will get the best price for the state.

In the same posting at Econbrowser, Chinn points out that the state government has chosen to defy a court judge, not once but twice, and go ahead with implementation of a law against the judge’s injunction.  The state is preparing to spend thousands of dollars fighting the judge and appealing when all they really need to do is pass the law in the legislature again, only this time conforming to the state’s open meetings law.

It’s not about the state deficit in Wisconsin. It’s about power and cronyism.  It clearly isn’t about the rule of law.


On Wisconsin

For those who are unaware, street protests have come to Wisconsin. Literally tens of thousands (a local Fox news affiliate admitted they numbered at least 70,000 on Saturday) for what is now at least 4 consecutive days of protests in Madison, Milwaukee, and other cities.  The issue that has brought them out is a proposal that recently elected Republican governor Scott Walker made and looked ready to jam through the Wisconsin legislature (Republican majority) without hearings was allegedly a deficit-reduction budget bill.  But the bill contained provisions to outlaw or severely curtail the rights of public employees to collective bargaining. It is an interesting situation. 52 years ago, in 1959, Wisconsin became the first state to allow unionization and collective bargaining by state and local employees. Now the governor wants to lead (?) by abolishing it.  For more on the protests in general see most any major news outlet.  Here are two reports: ABC News and CNN. This is a significant issue and possible turning point in American political economy.  The proposals to end public employee collective bargaining and the protests are spreading to other states such as Ohio, Indiana, Tennessee, and Nevada.

Most of the national news coverage is taking the governor’s claims at face value. In particular the assertion that the state faces a severe deficit, that public employees are “overpaid” and have too-rich benefits, that the only way to balance the budget is to cut benefits, and that only by ending collective bargaining can that happen.  As usual, the news media have failed.  The facts are otherwise.  I turn to Menzie Chinn, one of the country’s premier econometricians, who happens to be on the scene (he teaches at Univ Wisconsin Madison) for a few of his recent dispatches from the front.

First up, the governor had carefully planned this.  Including alerting the National Guard well over a week ago:

From The Isthmus:

The Wisconsin National Guard has not been activated but it is on alert.

“Plan for the worst, expect the best,” Gov. Scott Walker explained to a jam-packed press conference this morning in the State Capitol.

It was the official roll-out of his broad rollback of collective bargaining rights for unionized government employees, part of his budget repair bill, seeking to resolve a $150 million shortfall in the next five months.

Walker said he was well aware that “some union leaders will try to incite their members.”

Next, the governor and Republicans (and Fox news) are repeating ad nauseum the assertion that public workers, both in Wisconsin and in general, are overpaid and overcompensated when compared to the private sector.  The only studies I’ve seen that draw that conclusion are studies that compared the compensation per job of college-educated full-time public employees to non-educated part-time private sector employees.  Menzie Chinn (he is an econometrician) crunches the numbers and finds public workers are lower paid than comparable private sector employees:

Using the March 2010 CPS data, regression analysis controlling demographic characteristics (full-time, education, years of economic experience, gender, race, citizenship, and organizational size) confirms that total hourly compensation for Wisconsin public sector workers is 4.8% lower than for private sector (-5.1% for Wisconsin State workers, and -4.7% for local government). The differentials are bigger for annual compensation. These estimated differentials are statistically significant, as shown in Table 4. (graphs and tables at the link)

On Friday, the unions called the governor’s bluff.  They proposed to accept the benefit cuts (the financial part) if the governor would give up on the ending collective bargaining. Again Menzie reports:

From Milwaukee Sentinel Journal:

…The Walker statement was in response to a statement earlier Saturday from [State senator] Erpenbach, who said he had been informed that all state and local public employee unions had agreed to the financial aspects of Walker’s budget-repair bill. Erpenbach added in his statement that the groups wanted, in turn, for Walker to agree to let labor groups bargain collectively, as they do now.

Since collective bargaining rights do not in themselves have direct budgetary implications, then it is unclear — from a fiscal perspective — why agreement can not be made.

Local Fox news affiliate estimates the anti-bill crowd at 70,000, and tea party supporters of the governor’s bill in the hundreds.

If the governor has rejected this proposal, then it is clearly NOT about the money or the alleged deficit.  It is about power and breaking unions. It is interesting then that the governor, whose real intent is now clear (break the unions) did not try to propose and argue a change in collective bargaining on any merits of it’s own. Instead, he claimed it was necessary because of money, not because he wanted to argue the inherent rightness or desirability of ending collective bargaining. It is not surprising then that we find that even the claim of deficit and the necessity of trimming state spending was false.  In fact, while Wisconsin faces some deficit – with 9% national unemployment, all levels of government are short of revenue, it was in relatively good shape until Scott Walker came into office as governor in January.  Among Walker and his legislature’s first actions in January were to make the deficit worse by giving tax breaks to special corporate interests. The Cap Times reports how “Walker gins up crisis to reward his cronies”.  It turns out that the $137 million deficit Walker claims is the reason for breaking the unions, is actually the result of the $140 million dollar special interest tax breaks bill passed by Walker and his Republicans. As recently as January 31, the state of Wisconsin was forecasted to end the year with a surplus, not a deficit.

How this all turns out will, I think, have significant repercussions beyond Wisconsin.  The governor of Wisconsin has even managed to anger the Super-bowl champion Green Bay Packers.  I don’t think that’s a good move in the cheese state.