November 1, 2005


The Conspiracy Against the Taxpayers: Why public servants live better than the public (Steven Malanga, Autumn 2005, City Journal)

State tax collections rose by 86 percent, or about $250 billion, from 1990 through 2001, while local property-tax collections soared by $90 billion, or 60 percent, during a period when inflation increased by a mere 30 percent. Rather than give surpluses back to taxpayers, government went on a spree, lavishing opulent pensions on employees and expanding politically popular health and education programs.

Unions and social-services groups were perfectly positioned to funnel this flood of surplus tax revenues into their pockets rather than back to the taxpayers. Starting with virtually no representation in the public sector 50 years ago, unions have relentlessly organized workers, so that in some states as many as 60 to 70 percent of public employees now are members. As a result, these unions wield huge clout at the ballot box, and union dues give them vast resources to sway public opinion and influence legislation. Gradually, public unions have aligned with local social-services and health-care groups that federal (and later, state and local) government began funding heavily during the War on Poverty of the 1960s and early 1970s—creating a new class of organization that lives off government money. These government-financed nonprofits and their union allies now make up a powerful coalition for bigger government and higher taxes in statehouses and big cities across the land, and they didn’t let a nickel of the 1990s tax windfalls slip through their fingers.

All told, the swell of tax revenues produced about $93 billion in surpluses that state governments soaked up, the Cato Institute estimates; indeed, state general-fund spending alone increased by 85 percent from 1990 to 2001, much faster than the combined rate of inflation and population growth. Absurdly, this spending tempo carried over into the economic slowdown that began in late 2001 and lingered into 2003, as budgets that appeared to be on autopilot grew rapidly, producing $85 billion in collective state budget deficits in fiscal 2003 alone. To close their budget gaps, state and local governments boosted taxes and fees on citizens and businesses already hurting from the economic downturn. Local property-tax bills, for instance, grew by about 6 percent a year from 2001 to 2004, even though the consumer price index increased by only 6.7 percent for the entire period.

The prime budget buster has been the outlandish wage and benefits packages of public employees. Contractually guaranteed, they are untouchable even during economic slowdowns. Public-employee unions have so successfully used their political muscle that whereas public-sector compensation once lagged the private sector, now the reverse is true. Astonishingly, the average state and local government employee now collects 46 percent more in total compensation (salary plus benefits) than the average private-sector employee, according to the nonpartisan Employee Benefit Research Institute.

Wages average a hefty 37 percent higher in the public sector, but the differences in benefits are even more dramatic. Local governments pay 128 percent more, on average, than private employers to finance workers’ health-care benefits, and 162 percent more on retirement benefits. Although the private sector’s heavier concentration of low-wage service employment accounts for some of the wage and benefit gap, public-sector employees do better these days even when you compare similar jobs. Total compensation among professional workers in the public sector is on average 11 percent higher than for similar jobs in the private sector, for instance.

Other comparisons of public- and private-sector pay illustrate the same gap. The Citizens Budget Commission, a New York City fiscal watchdog, found that the average public-sector worker in the metropolitan region received 15 percent more in pay (not including benefits) than the average private worker. The gap was greatest in service-sector jobs, like security guards, health-care workers, and building-maintenance workers, where government on average paid 94 percent more than private firms. A 2001 Rhode Island Public Expenditure Council comparison of private- and public-sector average wages across the nation found that the average public-sector wage was higher in 35 states.

The public unions could only achieve this reversal because government is a monopoly, exempt from marketplace discipline. Competition can punish private companies that give away the store to employees or that perform ineffectively—driving the most profligate or inefficient out of business—but government is perpetual regardless of how it performs, and public unions have succeeded over the years in layering new perks and benefits on top of previous collective-bargaining gains that rarely get rolled back, even in tough times. Awash in contributions from the unions and agencies whose pay they set, the gerrymandered state legislatures and one-party city halls that hand out such largesse are well insulated from voter retribution. Thus taxpayers wind up being nicked by a thousand small benefits piled upon one another year after year.

No one has done a better job of trying to keep the Right focussed on the problem of public employee unions than Mr. Malanaga.

Posted by Orrin Judd at November 1, 2005 10:16 AM

Of these groups, none is more rapacious than the Education Sector.

Add to their greed their stated intent on destroying "Liberal Democracy" and replacing it with "Transnationlism" and you have a serious problem.

Until we reduce the level of popular support of the current configuration of "Public Education", the little project started in 1776 is in serious jeopardy.

Fat unions sucking of the public teat is inefficient, but arguably benign. Using that protection to stupify and then indoctrinate a nation is malignant.

Posted by: Bruno at November 1, 2005 10:57 AM

A recent Time article addressed the public employee benefits issue. It explained that federal courts have held that these "defined benefits" MUST be paid once offered and that cities and states will soon be in serious trouble. City and state employees can retire in their mid 40's to early 50's with very high monthly income indexed to inflation. Anecdote Alert: I have a friend (Reno P.D.) retiring at age 43 who will receive over $6,000 per month plus full medical.

Posted by: Patrick H at November 1, 2005 11:18 AM

It's more like suicide by a thousand add-ons. Taxpayers leave for less predatory places to live and work, leaving rising financial and performance costs to be paid by fewer, less capable residents. Contradictions are intensified with each passing day. This is not sustainable.

Enormous pressure is building for a massive voucherization of the "tax-eater" world, a "thirdwayification" that Repubs could leverage to decisively augment their political base, reduce the cost of government, improve the quality of services, further isolate the left, and make rotting localities fit for human habitation.

Posted by: Luciferous at November 1, 2005 2:23 PM

Unions are the bane of any capitalist society. They're for unskilled and easily replaceable laborers to protect their own self-interests. Whereas any other market-driven job would never allow a higher than equilibrium salary, unions short -circuit the market and command a higher salary than otherwise. This results in unemployment for some and fat cushy jobs for others.

For instance, my aunt works in the district attorney's office. When her boss asked her to learn MS Excel, she refused. If I refused my private sector boss, I'd be out on the street in an instant. We've all faced public workers who look like they're half-asleep at their posts. It's time politicians stop prostrating themselves at the feet of unions, lobby groups, minorities, and muslims for their votes.

Posted by: Allan Frick at November 2, 2005 2:52 PM