Silken Slippers and Hobnail Boots Surviving the Decline and Fall

by R.E. Hannay

  LABOR UNIONS

  You might be a member of a public-sector union if you get paid twice as much as a private-sector person doing the same job but make up the difference by doing half as much work. - Jay Leno

  There have been variations of strength between unions and management in the labor history of the United States, with the government a variable force in favor of unions or management. After decades of decline in union power, the current surge of membership and political strength of government unions is threatening America’s economic vitality and prosperity.

  “The concept of collective bargaining is consistent with economic freedom, but the developments of 20th century labor law have compromised economic freedom and the powers given to unions have limited the rights of workers and employers,” said the Cato Institute, adding that the higher cost of union labor has eroded the United States’ manufacturing sector.

  Samuel Gompers, father of the American labor union movement, opposed forcing workers into unions: “No lasting gain has ever come from compulsion,” but Franklin Roosevelt wanted forced unionism and in 1935 signed the Wagner Act (National Labor Relations Act) giving unions extensive powers to facilitate forced union membership or payment of union dues on non-members. The predictable result was a huge increase in union membership that year. Before the Wagner Act, only 8 percent of Americans chose to join unions. After they had to pay dues or not work, that number increased to nearly 29 percent.

  Liberal courts increased union bargaining power by prohibiting businesses from joining forces to bargain collectively the way unions do. Union leaders called strikes without members voting for it, union thugs conducted bloody strikes and riots, intimidating dissenting workers and signing new contracts without members having effective involvement. The Teamsters International grew rapidly by using their thugs to attack non-union competitors when businesses agreed to unionize, forcing the competitors also to unionize.

  One of the most outrageous parts of labor law is the 1931 Davis-Bacon Act. On all federal construction projects, contractors in effect have to pay union wages (the government calls them “prevailing wages”). The purpose of setting these prevailing wages was to prevent public construction projects from destabilizing local construction industries, but the effect is often just the opposite. In April, 2010 Obama issued Executive Order #13502, further strengthening labor unions on federal construction projects. According to Michelle Malkin, “The executive order requires contractors to hand over exclusive bargaining rights, to pay inflated, above-market wages and benefits, and to fork over dues money and pension funding to corrupt, cash-starved labor organizations.”

  Union excesses increase labor costs and reduce productivity in many ways. One union featherbedding tactic that raises costs is “release time,” with union contracts requiring employees to be paid full wages and benefits while actually working for the union. Their "release" work is lobbying, campaigning, soliciting grievances against the employer, recruiting members and negotiating for higher wages and benefits, all at employer expense. In 2011 the City of Phoenix’s seven public employee contracts included 73,000 hours of "release" time.

  The success of union organizing and bullying has had some unintended consequences. The frequent, effective strikes of the United Mine Workers interrupted the supply of coal and raised prices substantially, causing many individuals and businesses to switch to using oil and natural gas. Mines replaced men with machines and there were large reductions in mine employment. Similar things happened in the steel and automobile industries, where union members lost hundreds of thousands of jobs.

  Increased union power was accompanied by legendary corruption. During the 1950s, Congress investigated several unions for corruption and racketeering. According to Carl Horowitz of the National Institute for Labor Relations Research, “The sheer magnitude of corruption is staggering, both in the number of cases and the size of the take.” Two presidents of Teamsters International were sent to prison, and that corruption continues today. During the George W. Bush administration, the Labor Department brought over 1,000 indictments for union fraud and secured 929 convictions. Melissa King embezzled $42 million from the New York City “sandhog” union.

  Since the mid-1950s private-sector union membership has declined from 35 to 7 percent, for a combination of reasons. Unions are often controlled by entrenched, corrupt leaders who dictate policy, steal union funds and make the unions their own private fiefdoms, typically donating union funds to political causes without the approval of their members. Once a union is certified, it is very difficult for a competing union to take over. Decades later the members are saddled with the autocratic and often corrupt original union. Often non-union employers offer better pay, benefits and working conditions than unionized employers do, so union workers are paying union dues without benefits.

  Probably the most important legislation to curb union power, the Taft-Hartley Act allowed states to pass right-to-work laws that prohibit closed and union shops. These laws are now in effect in 24 states and have a significant positive effect on manufacturing activity and employment. The Cato Institute surveyed comparative income from 1977 through 2007. Right-to-work states had a 23 percent greater rise in per capita income. The two regions that lost the most jobs in recent years, the once-industrial Northeast and Midwest, are mostly forced-union states. Demographics are changing, as taxpayers flee heavily unionized states that restrict employment opportunities and have burdensome government and high taxes, and businesses move, including offshore.

  High-tax, high labor-cost cities are atrophying. Since 1950 St. Louis, Pittsburgh, Buffalo and Cleveland all suffered population declines greater than or equal to Detroit’s current downturn. Much of Detroit is in ruins today; its median household income, once 29 percent above the national average, is now 44 percent below it. Its poverty and crime rates are more than three times the national average. The destruction of Detroit is a result of unions pressuring manufacturers to sign labor agreements that simply made the employers uncompetitive, compounded by political and union corruption.

  U.S. automobile companies are no longer just that; now they are pension companies. General Motors provides one million people with health-care coverage but has fewer than 100,000 employees. The liberals cry about jobs moving overseas, but with high American labor costs and the Obama administration threatening, harassing and strangling American businesses with new regulations, restrictions and higher taxes, businesses that don’t seek lower cost, friendlier business environments will suffer and possibly fail.

  The unions, their political puppets and the liberal news media would have everyone believe most workers want union representation. In February 2009 the Opinion Research Corporation of Princeton, New Jersey reported that 82 percent of non-unionized American workers did not want to join a union. But while private-sector union membership is shrinking, there is an explosive growth in government-union membership and influence.

  Even FDR, the godfather of modern unionism, felt that permitting government workers to bargain collectively would be disastrous, creating an intolerable situation of workers striking against the government. In 1959 the AFL-CIO Council agreed that government workers have no right to bargain collectively with the government, beyond every citizen’s right to petition Congress. Then in 1962, pro-union John Kennedy signed Executive Order No. #10,988 extending the Wagner Act’s monopoly bargaining powers to permit government employees to organize and bargain collectively.

  The result is disastrous. Compared with 7 percent of private workers, now 41 percent of government workers are unionized. Aside from increasing union power exponentially, the Cato Institute noted that the unionization of government employees creates a powerful, permanent constituency for bigger government. The unions spend large amounts of money to elect politicians who pass legislation favorable to unions and they punish uncooperative politicians. The process feeds on itself: union funds elect political toadys, the toadys pass more union legislation, the unions get
more members and elect more toadys to pass more union legislation.

  Liberals and politicians who pander to unions for votes and contributions are often hypocrites. Nancy Pelosi is a big union supporter, but the businesses she and her husband own are non-union. The liberal New York Times filters news in favor of unions and promotes them in editorials, but in 2010 they eliminated 28 Newspaper Guild jobs and moved the work to non-union jobs in Gainesville, Florida.

  Before Kennedy legislated approval of government unions by executive order, ignoring the Constitution, government workers were paid about 20 percent less than for comparable private-sector jobs. Lower pay was offset by generous retirement pensions, vacations, holidays and paid sick leave. Since Kennedy’s proclamation, comparative pay and benefits have reversed. Now government pay and benefits are typically about 30 percent or more higher, with vacations, holidays and sick leave totaling almost ten weeks annually for unionized government employees. In effect, those people have slightly over four-day work-weeks. In 2010 USA Today did an analysis of U.S. civil servants. Combining pay and benefits for comparable jobs, they found that government employees received an average of $108,476 per year while private-sector employees received $69,928.

  On December 14, 2010 the Wall Street Journal reported, “Since January, 2008 the private sector has lost nearly eight million jobs while local, state and federal governments have added a half-million … Federal employees receive an average $123,049 annually in pay and benefits, twice the average of the private sector … Public-sector unions have become the exploiters and working families the exploited.”

  The big difference in pay that is bankrupting cities and states involves retirement pensions. California policies are some of the worst and are being copied nationally, with their “3% at 50” schemes that started with the California Highway Patrol and have spread to other cities, counties and school districts. They grant pensions for life based on 3 percent of final-year compensation times the number of years of employment, later indexed for inflation. Someone hired at 20 can retire at 50 with 90 percent of his last year’s pay for life. As a result, California’s pension liabilities increased 2,000 percent in the 10 years ending in 2009. Unfunded pension liabilities are a national disaster waiting to be dumped on taxpayers. Unionized government workers receive pension benefits averaging 68 percent higher than non-union government workers. On June 12, 2012 the Wall Street Journal reported the average pay of San Jose, California policemen was $109,000 and that they can retire at 50 or before with an average pension of $95,336 for life.

  Some union bosses are participating in several pension funds at the same time and accruing retirement benefits as high as $500,000 per year. Some union members have qualified for substantial lifetime pensions after working for one day. New York City is paying lifetime retirement to 10,000 policemen who are under 50 years old. One Illinois school superintendent’s pension is valued at $26 million.

  New York mayor Michael Bloomberg, leaving office after twelve years, told the New York Economic Club that the union-political machine has ruined many American cities. When he took office in 2001, New York City spent $1.5 billion per year on pensions. In 2013 it spends $8.2 billion, five times as much. "The future of cities is jeopardized by the explosion in the cost of pension and health-care benefits for municipal workers." Part of the scheme is pension-spiking. Many pensions are based on final-year pay, so many workers inflate that number substantially by working overtime that year and accumulating large amounts of unused vacation and sick-leave credits. That can easily increase the lifetime pension benefits of a cop or fireman by more than $1 million.

  According to Mallory Factor, “Our government is no longer answering to the American people; it has new masters. We’ve lost control of our government, and our politicians ignore us in favor of influential union bosses.“ He says these unions act more like bosses of government employees than their representatives and that the labor movement is now focused on government employees for its expansion. Government employees are now the majority of all union members in the U.S. The federal government and 43 states permit unions to be the exclusive bargaining agent for some or all of their workers if the union receives half of the votes in an election. Whether they join the union or not, all future workers will be represented by the union.

  The public employees’ unions are now the largest political spender. Andy Stern, president of the Service Employees International Union, said in 2010, “We spent a fortune to elect Barack Obama -- $60.7 million, to be exact -- and we’re proud of it.” Obama admits in his autobiography, “We owe those unions.” The Democrat party has become a subsidiary of the labor movement, and the liberal news media are the propaganda subsidiary of the Democrats. As the government unions gain more power, the Democrats get closer to becoming the permanent party in power.

  Some of the worst government unions now are the teachers’ unions. Before Kennedy’s executive order they were professional associations working to improve education in public schools. Now they are just militant unions dedicated to policies that raise the costs and lower the quality of education: more teachers, higher pay and benefits, protection of mediocre and incompetent teachers, shielding schools and teachers from competition through school choice and blocking improved teaching methods. In short, they use huge political funding and clout to further expensive, mediocre education and to benefit teachers at the expense of taxpayers and our children. Albert Shanker, nefarious head of the American Federation of Teachers, said, “When schoolchildren start paying union dues, that’s when I’ll start representing the interests of schoolchildren.”

  Their unions continually press for smaller classrooms, with one recent study reporting the ratio of students to teachers dropping from 18 to 1 in 1960 to 8 to 1 today, with children as poorly educated as before. The U.S. spends almost $10,000 per student annually, exclusive of building costs; 68 percent more than Germany and 84 percent more than South Korea. The payoff is zero. Average test scores place the United States well down in the world’s rankings, in spite of our union-generated higher costs.

  School teachers are no longer poorly paid, either in pay per hours worked or in pensions and other benefits. In 2012 Chicago teachers, with teaching hours among the shortest in the nation and with their summers off, picketed for a 30 percent raise. They already averaged $76,000 per year compared with their taxpayers averaging $47,000, working all year.

  Three-fourths of U.S. public school teachers are union members. There are virtually no provisions for paying excellent teachers more than poor ones or for teaching more difficult subjects. In New York City and elsewhere, firing incompetent teachers is difficult and expensive. Seven hundred or so incompetent suspended teachers show up in “rubber rooms” every school day and do nothing while receiving full pay and benefits. This usually goes on for two to five years, the time it takes to fire an incompetent teacher. Another way unions increase education costs is to force schools to hire union members to replace volunteers helping schools in various ways, like crossing guards and library assistants. Altogether, the public school monopoly imposes an enormous cost on American children and taxpayers. Inner city schools are the worst. The blacks plead for school vouchers and charter schools but the Democrat politicians vote against them, pandering to the teachers’ unions, knowing the blacks will blindly continue to vote Democrat.

  Private education is substantially better, with lower costs and better education than most government schools. However, the competition provided by charter schools, vouchers and private education is shaking up some government schools and forcing improvements. In Wisconsin Governor Scott Walker fought the teachers’ union to a standstill, doing away with collective bargaining for teachers and unlocking the union’s hold on benefit funds. The funds had been going to an insurance company owned and operated by the teachers’ union, so the costs were inflated and the insurance company was making large donations to their Democrat political puppets. When a competitive insurance company took over,
some school districts went from an operating deficit as high as $400,000 to a $1,500,000 surplus.

  The evidence is clear. Forced unionism and the cancerous growth of government unions are harmful to America’s economic vitality and prosperity. The right-to-work states show the advantages of ending forced unionism. Initiatives such as charter schools and voucher programs are needed to temper the monopoly power of public employee unions and improve the fortunes of struggling cities. The partnership between unions and politicians is bankrupting governments at all levels and debilitating our government schools. The public needs to understand the facts and get involved in solving the problems.

  HOW POLITICIANS AND BUREAUCRATS CAUSE RECESSIONS

  The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by an inherent instability of the private economy. – Milton Friedman

  There’s a new and corrosive phenomenon in the U.S. economy. The lenders, mortgage holders, politicians, bureaucrats and the news media are now collecting data and talking about “underwater” mortgages, those with remaining balances estimated to be higher than the value of the houses involved.

  When loans are classified “underwater,” there are several harmful results. The lender or owner of the mortgage is required by the bureaucrats to reclassify the loan as non-performing even if the borrower is making his payments. That results in the lender or mortgage holder having to debit his capital account as if the loan were actually non-performing. During this Great Recession, for the first time, the media are discussing these “underwater” mortgages, asking whether homeowners whose loan balance may be higher than the present market value of their homes should leave their homes and default on their financial commitments.

  This is new. If the same rules had been in place during other economic slowdowns, many lenders would have had to be closed and their assets sold. If these rules were applied now to automobile and other types of installment loans, the lenders would be shut down completely. In a typical five-year loan on a new car, the collateral often isn’t worth as much as the loan balance until two years or more after the purchase. Some credit purchases are never worth the loan balance; consider a last-year's vacation trip to the Caribbean. Ours is an economy powered by personal and business credit, and our brain-damaged politicians and bureaucrats have devised yet another way to damage the economy, comparing loan principal balances with collateral.

  Their next-to-last last wrecking ball was encouraging or demanding that lenders make unsound loans to increase home ownership, even to people who couldn't afford it. That absurd practice was continued and expanded during the Clintons' reign, and then George Dubya sent Congress a proposal actually titled American Dream Down-Payment Initiative and signed it into law in 2003. Through government policies, instead of reasonable down payments, 20 or even 10 percent, verifying borrowers’ credit histories, income and debt, sound lending practices were largely abandoned. Eventually many loans were made with no down payment. All this was enabled by the Federal Reserve printing large amounts of money and keeping the interest rates paid by banks on their borrowings close to zero.

  In The Housing Boom and Bust, economist Thomas Sowell said, “In the wake of the housing bust, Congressman Barney Frank and Senator Chris Dodd, as chairmen of the House and Senate committees most involved in the housing markets – and long-time promoters of the very policies that led to the housing boom and bust – were all over the media, where they were treated as experts, able to explain the problems and provide solutions.” After the bust, the Democrats repeated and expanded their mistake of encouraging unsound home loans. Not only could people again buy or refinance homes with as little as 3 percent down payment or equity, for some time Obama gave first-time buyers an additional $8,000 handout of taxpayer money to enable their purchase. Yet the Democrats, liberals and their puppets in the liberal media continue to blame the housing boom and bust on the lenders and Wall Street.

  The easy money policies not only facilitated home purchases by unqualified persons for their own use, it started a wave of speculative buying of houses. Loose credit policies caused rising prices of houses and many people bought one or more houses on speculation, often “flipping” them even before they were finished. Demand and prices went up, down payments went down, the housing market boomed, and the bubble finally burst. Then the politicians and bureaucrats who caused the boom by forcing and facilitating unsound lending practices blamed the lenders and the Wall Street investment bankers who packaged and sold the unsound loans to banks and other investors around the world.

  After the bubble burst, instead of letting the prices of houses settle back down to a normal supply and demand level, in jumped the politicians to solve the problem they had created. As usual, their solution merely compounded their felony. Having crippled the lenders with their underwater rules, they printed huge amounts of money to give to favored political groups to stimulate the economy. That hasn’t helped except for the favored big banks but it has burdened us, our children and grandchildren with unprecedented federal debts.

  Another act of our populist president was giving money to reduce monthly payments for borrowers having difficulty paying for their unsound mortgages. His goal is to do that for three million existing loans, but at this point only some 200,000 have been done, and half of those went back into default within six months. In effect, Obama is guaranteeing that these unqualified buyers’ house values will not drop below a certain level. Barry, our apprentice president, cavalier spender of trillions, cannot cite his constitutional authority to do that or much of anything else he does.

  Homes, like jewelry and trips to the Caribbean, are expenses. Many of our purchases go down in value or become worthless eventually, but that doesn’t mean the federal government has either a legal or rational basis for interfering or subsidizing them. A home is to live in. Jewelry is to wear. A vacation is to enjoy. If the value of a home goes below the balance still due on a loan, it is still the family’s home. If the borrowers are able to continue making their promised payments, they should. The property may go back up in value – historically, most do – but it is still their home, not just a speculation or security investment. In the inevitable inflation that is following the government’s printing of trillions of dollars of unbacked currency, the values of real estate and commodities are likely to rise substantially.

  This bureaucratic and media-driven obsession about present estimated market values vs. loan balances is causing many home owners to consider abandoning their homes and their obligations. Classifying performing loans as non-performing makes no sense. The combination is aggravating the recession problems.

  What to do about it?

  1. Stop unconstitutional federal borrowing to bail out unsound home loans and let the housing market settle on its natural supply-and-demand balance.

  2. Restore sound lending requirements – adequate down payments to provide protection of lenders and borrowers from fluctuating markets, reduction of borrowers’ income, unemployment or other unforeseen problems. Vermont’s strict 1990s mortgage lending laws prevented their residents from getting unsound loans, making brokers who arranged loans responsible if their customers defaulted. The result is that Vermont has the lowest foreclosure rate in most categories.

  3. Let people learn money management by paying the price of their reckless financial lifestyles. The Me/Now Generation have largely lived their lives spending and borrowing freely, keeping little or no rainy-day money. Their savings rates have been close to zero, and when their inevitable financial problems occurred, they have expected someone – the government (taxpayers), family or someone else – to rescue them. The politicians, always ready to help a voter, stepped in with yet another unconstitutional expenditure, taking money from one class of citizens, the thrifty ones, to give to the spendthrift class.

  4. Stop requiring lenders to classify performing loans as non-performing, impairing their capital and frightenin
g lenders into conserving their assets rather than making needed commercial and real estate loans. Large, strong businesses are able to get credit now, but small businesses and entrepreneurs are generally still having difficulties getting loans, with the banks afraid of what the anti-business Democrats are going to do next to impair their bank’s capital. Much of the Federal Reserve’s trillions of printed dollars are still sitting on banks’ balance sheets, never put in circulation, while the Fed pays interest on their excess balances. The Obama gang consider businesses to be greedy and downright evil, useful only as a source of taxes to spend for favored projects and groups. No wonder the banks aren’t lending, in spite of the massive amounts of money pumped into the banking system.

  Except for a return to honest elections and the groundswell of distrust of politicians among our citizens, it appears there is no force capable of putting down the takeover of our government by the statist tyrants as long as they control the White House and Senate.

  POVERTY BY FEDERAL DECREE

  The Heritage Foundation published a January 5, 2004 report by two researchers titled “Understanding Poverty in America.” It is a long, scholarly report, but their conclusion is clear and simple: What the federal government defines as living in poverty is far from it.

  Poverty, in a rational world, would be people lacking nutritious food, adequate housing and clothing. The researchers concluded that relatively few of the 35 million people identified by the Census Bureau as being “in poverty” should correctly be characterized as comparatively poor, and that while material hardship does exist in the United States, it is quite restricted in scope and severity.

  The researchers have taken the following facts from various government reports:

  * Forty-six percent of all poor households actually own their own homes. Their average home is a three-bedroom house with one-and-a-half baths, a garage and a porch or patio.

  * Seventy-six percent of poor households have air conditioning. Thirty years ago, only 36 percent of the entire U.S. population enjoyed air conditioning.

  * The typical poor American has more living space than the average [non-poor] individual living in Paris, London, Vienna and other cities throughout Europe.

  * Nearly three-quarters of poor households own a car; 30 percent own two or more.

  * Ninety-seven percent of poor households have a color television; over half own two or more.

  * Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.

  * Seventy-three percent own microwave ovens, more than half have a stereo and one-third have an automatic dishwasher.