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Monday, May 02, 2011


What does the loss of America’s manufacturing prowess and the growing debt of states, counties, cities and towns across America have in common?  Unions.
In 1971, my first year of law school, our contracts professor informed us that private sector union power was declining and would continue to do so.  He said, “Watch what happenes over the next several decades – unions will thrive by unionizing public employees”.
Union decline in the private sector was the result of their success in exacting concession after concession from private business, and it worked - for awhile.  This was because America was still the most advanced, productive and prolific manufacturing machine the world had ever known. 
Escalating demands by unions for more money, more benefits, and unreasonable work rules continued virtually unchallenged.  This was, to a great degree, American industries own fault.  It willingly gave more and more, failing to recognize that its ability to compete was being eroded.  The result was the demise of industry after industry in America. 
By the time it was realized what union greed and business laxity had accomplished – the decline of America’s manufacturing power - it was too late.  Instead of recognizing that greed and laxity were a recipe for America’s industrial decline, unions and elected officials joined forces and fed the same deadly recipe to taxpayers.
  Unions and special interest groups saw the taxpayers’ pocketbook as a pot of gold to be savaged.  And savage it they have.  Government expansion, justified by good intentions was lead by Lyndon Johnson’s promise to end poverty.  The net result has been the greatest and most irresponsible expansion of, and spending by, government in human history. 
Progressive thinkers and special interests promoted the expansion.  They found little resistance to their schemes, programs and claims on the public treasury.  Public employee union expansion led the way.  Negotiating with elected officials lacking fiscal acumen and swayed by union money and promises resulted in taxpayers being sold out. 
The sell out came in two forms.  First, wages for public employees began to escalate.  Civil service was once considered public calling; it provided job security and guaranteed retirement benefits, in exchange for wages more modest than their private sector counterparts who did not have such benefit guarantees. Today public employee wages exceed those in the private sector by a factor of 25- 50%.  
Second, public employee benefit packages have become so generous, taxpayers can no longer fund them.  Vacation time, health benefits and guaranteed retirement packages are so costly they are literally bankrupting political subdivisions across the country. 
Public employee benefits, unlike those in the private sector, are underfunded.  This means no money has been set aside to pay the benefits.  Legislative bodies, by not funding these liabilities, were allowed to spend what should have been saved to fund them.  They irresponsibly ignored the taxpayers who would soon have to fund these liabilities.  Unfortunately, the liabilities are now so huge taxpayers simply cannot fund them. 
Neither the greed of unions nor the false generosity of elected officials cared what their actions would bring about.  Now, the consequences of this irresponsibility are becoming clear to everyone.
The question is what’s going to happen?  We’ve seeing one possible scenario unfolding in Wisconsin.  The governor there has put his finger on the core problem and has taken steps to put a halt to irrational pay and benefit programs for that state’s public employees.  This is only a first step. 
The trillions of unfunded entitlements in this country cannot be funded if we are to have a viable economy.  The fiscal insanity of the last 70 years must stop.  Irresponsible public sector wages and unsustainable health and retirement benefits must be abrogated – now. 
Unions, irresponsible politicians, and special interests can no longer be permitted to drive public spending.  Necessary changes will be painful but the alternative even more so. 
What the protestors are calling for is the strong arm of government to confiscate even more of America’s real wealth to continue funding the excesses and irresponsible management by government over the last 70 years.  They’re calling for massive tax increases on private earnings and wealth.  This will destroy America’s ability to create any wealth or prosperity, sinking America into bankruptcy and third world status.  Unless Americans become savvy and do so quickly, it is likely elected officials will impose massive tax increases, guaranteeing America’s demise.
The private sector is ruled by the laws of human nature and fiscal rationality. It will respond to more taxes in the only way it can.  The private economy will stop producing.  This isn’t a possibility – it’s a certainty. 

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