Major structural defeat for the left in America; the political center is now clearly moving to the right

Wisconsin's governor made headlines when he took on public employee unions and sought to strip them of their collective bargaining powers. Historically, public employees were not allowed to form unions and it was illegal until President Kennedy allowed it in the 1960s. Mish has a quote from FDR on collective bargaining for government workers:
All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management.

The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees.

A strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable.
I believe FDR and previous American law had it right because public workers have a close relationship with government and importantly, government doesn't spend it's own money. Whereas private unions will strike and management will lockout workers, government workers and politicians have a much closer relationship because public unions fund their campaigns. If the United Autoworkers were paying big bribes to auto executives, I'd also expect them to have more favorable outcomes.

Unions are default allies of the left (except where it involves fighting environmental restrictions that reduce job opportunities), doubly so for public employee unions. Since private unions have slowly decreased in size and power with the transformation of the American economy away from manufacturing, public employees became the bulk of union supporters for left-wing politicians. Furthermore, they form a massive support force. Unions can force government workers to join unions and force them to pay dues. Those dues are funneled to Democrat politicians, while many unions also volunteer to work on campaigns, in some states having the laws changes so that workers can leave to campaign without losing pay.

In and of itself, this is incestuous politics that the right would like to clean up, but never had the chance because most of the public doesn't see the debate this way. Usually, when public unions are challenged, it is painted as evil politicians trying to fire teachers. Voters always want to spend more money on education and that means more money for the teachers, and on it went for decade. Until now, that is, because the accumulated structural imbalances in local governments are now too large to bear.

Usually the debates center on pension costs. Politicians over promised and underfunded pensions and the bill is coming due. But that's not the whole story. I've served (unelected) in local government in the U.S. working on government finances and seen first hand how government has transformed over the past 50 years since collective bargaining for public employees was established, and what I saw in my local community is no doubt repeated all over America.

Have you heard that U.S. infrastructure is deteriorating and in need of investment? Why hasn't the government been repairing infrastructure, a basic function of government spending in the U.S.? The answer is that labor costs have slowly grown to account for the bulk of government spending. In my town, public wages and pension costs were 70% of the budget. Simple repairs to buildings and roads were delayed or put off because there was "no money" in the budget; the funds went to labor. With the economy growing well below trend for several years in a row and federal stimulus running out, local governments have no where to turn except labor.

Enter Governor Walker of Wisconsin. Due to collective bargaining rights, unions are able to successfully fight local governments on spending. Essentially, and I do not exaggerate this point, public employee unions can hold a budget hostage because they help determine how money is spent by controlling who is hired and fired. For example, if the town wants to make teachers pay more for their healthcare and pensions and use these savings to retain all jobs, the union can refuse. Instead, teachers are fired. Unions fight to keep their members' wages and benefits high, not to expand their membership at the expense of wages and benefits.

Facing deep spending cuts that would lead to many job cuts, Walker proposed to strip public employees of their collective bargaining rights. The Democrats fled the state house in order to forestall a vote that would pass the Republican controlled legislature. In the end, they returned and the measures passed. In the interim, there have been acrimonious debates over the law—but it has worked. Cities and towns across Wisconsin were able to cut spending and public employees had to accept the results, which have been good for local communities. They've avoided layoffs and cuts to services while closing fiscal deficits.

However, the law has an even greater affect. Members are no longer forced to pay dues or even join the public unions and many have quit. This in turn means that a major funding source and labor source for the Democrats was in danger of being destroyed, which is why they fought extremely hard against Walker. They threw everything they had into this election because they know that they are fundamentally and permanently weakened if his policy remains in effect. For this reason, they tried to have him recalled. Yesterday, he won reelection.

Walker's victory paves the way for other governors to follow suit, and the end result will be the destruction of a major pillar of left-wing political support. There's almost no way for the left to replace this loss of funding and labor supply for campaigns. They were essentially getting free support funded indirectly by taxpayers and they must find new private sources. Those sources will want to influence policy, unlike the unions which only sought to grow government. It is possible that a more left-wing funding source will emerge, but my expectation is that the political center will shift right as the Democrats find their greater support by moving towards the center.

Elections are one thing, but major policy shifts are rare. The post-9/11 growth of the security state at the federal level was the first great political change in the wake of post-peak social mood. This is the second. Whereas the security state doesn't necessarily benefit one side over the other, this is the first clear victory for right or left.

This period of declining social mood is long from over, but the road map is starting to unfold. Ironically, while it favors the right, it's a very mild political victory. The Democrats may move slightly to the center, but the big losers are the public unions. Walker's policy is 80% good government and 20% good for the right because his cost savings help fund the existing welfare and entitlement state, not reform it or roll it back, as many on the right may like. Democrats aren't happy, but there's still plenty of time for momentum to shift before negative social mood bottoms out.

Russ Douthat in the NYTimes echoes my take: No Recall
A similar message is currently being telegraphed by the respective postures of the two parties in Washington. The House Republicans have spent the past two years taking tough votes on entitlement reform, preparing themselves for an ambitious offensive should 2012 deliver the opportunity to cast those same votes and have them count. The Senate Democrats, on the other hand, have failed to even pass a budget: There is no Democratic equivalent of Paul Ryan’s fiscal blueprint, no Democratic plan to swallow hard and raise middle class taxes the way Republicans look poised to swallow hard and overhaul Medicare. Indeed, there’s no liberal agenda to speak of at the moment, beyond a resounding “no!” to whatever conservatism intends to do.

That “no!” might still be enough to win Barack Obama re-election. But November 2012 will just be one battle in a longer war, and the outcome in Wisconsin suggests that the edge in that war currently (and to some extent unexpectedly, given the demographic trends that favor the left) belongs to a limited government conservatism. The Democrats threw almost everything they had at Scott Walker, and it wasn’t nearly enough. And when you fail in what is essentially a defensive campaign, it makes it that much more difficult to get back on offense.

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