Economist on Government Unions

John Seiler:

Economist Thomas DiLorenzo, who recently testified in Congress before Ron Paul’s subcommittee on monetary policy, has a great new article on public-employee unions. He writes:

The main reason why so many state and local governments are bankrupt, or on the verge of bankruptcy, is the combination of government-run monopolies and government-employee unions. Government-employee unions have vastly more power than do private-sector unions because the entities they work for are typically monopolies.

When the employees of a grocery store, for example, go on strike and shut down the store, consumers can simply shop elsewhere, and the grocery-store management is perfectly free to hire replacement workers. In contrast, when a city teachers’ or garbage-truck drivers’ union goes on strike, there is no school and no garbage collection as long as the strike goes on. In addition, teachers’ tenure (typically after two or three years in government schools) and civil-service regulations make it extremely costly if not virtually impossible to hire replacement workers….

Thirty years ago, the economist Sharon Smith was publishing research showing that government employees were paid as much as 40 percent more than comparable private-sector employees. If anything, that wage premium has likely increased.

The enormous power of government-employee unions effectively transfers the power to tax from voters to the unions. Because government-employee unions can so easily force elected officials to raise taxes to meet their “demands,” it is they, not the voters, who control the rate of taxation within a political jurisdiction.

He writes that politicians long have mollified union demands by pushing the cost into the future through expanding pension promises. But now:

As taxpayers in California, Wisconsin, Indiana, and many other states are realizing, the future has arrived. The Wall Street Journal reports that state and local governments in the United States currently have $3.5 trillion in unfunded pension liabilities. They must either raise taxes dramatically to fund these liabilities, as some have already done, or drastically cut back or eliminate government-employee pensions….

This charade is over. American taxpayers finally seem to be aware that they are the servants, not the masters, of government at all levels. Government-employee unions have played a key role in causing bankruptcy in most American states, and their pleas for more bailouts financed by endless tax increases are finally ringing hollow.

‘Bout time.

Read DiLorenzo’s full article here.

Feb. 24, 2011

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  1. StevefromSacto
    StevefromSacto 24 February, 2011, 12:07

    Just wanted to pass along something that shows where the unbelievable hatred of public employees regularly spewed on this blog and elsewhere can lead:

    “Indiana deputy attorney general Jeffrey Cox responded ‘Use live ammunition’ to a Saturday night posting on a Twitter account that said riot police could sweep protesters out of the Wisconsin capitol, where thousands have been protesting a bill that would strip public employees of collective bargaining rights.

    “Cox also referred to the protesters as ‘thugs physically threatening legally-elected state legislators and governor’ and said ‘You’re damn right I advocate deadly force….'”

    Do you really want blood on your hands?

    Reply this comment
  2. David from Oceanside
    David from Oceanside 24 February, 2011, 12:16

    Indiana Deputy Attorney General Jeffrey Cox was rightly and quickly fired for his comments.

    There are many that go overboard on both sides of a labor dispute and there is no excuse for that behavior.

    It can not go unmentioned however that the vast majority of violence in labor relations involving unions has come from the unions and not management. Historian Thomas Woods has an excellent podcast addressing this at if you are interested.

    Reply this comment
  3. David from Oceanside
    David from Oceanside 24 February, 2011, 12:41

    Forgot to mention Thomas DiLorenzo, the author of the referenced article, is an excellent speaker. Unfortunately there are only a dozen or fewer free podcasts of his on ITunes.

    His books are excellent, of which two books are on Lincoln and one on Alexander Hamilton. All should be required reading for anyone who wishes to be free.

    Reply this comment
  4. StevefromSacto
    StevefromSacto 24 February, 2011, 16:26

    The “vast majority”, David? Give me a break. Go back to the Pullman Strike, the Homestead Massacre, and many many more examples of attacks on workers by management-hired thugs. History does show how difficult it was for workers to organize and win the right to bargain for wages, benefits and working conditions. Right here in California, the United Farm Workers was a perfect example.

    Another point: You conservatives are fond of blaming Democrats who bring up the huge disparity in this country between the poor and the wealthy for encouraging “envy” and fomenting “class warfare”. So how come it’s OK for you to do the same between public and private employees?

    Reply this comment
  5. Dann
    Dann 24 February, 2011, 17:34

    There was a time when private sector unions made a lot of sense and were a huge bonus to workers country wide.

    The protections provided by the unions via workers rights agreements was critically important, until legislation was passed in nearly every state, and by the feds, which negated the need for union protections, especially in public sector work.

    In more recent times, union officials have earned the label “thugs.” They own it, they deserve it. In many cases, especially in the public sector, unions represent decreased eficiency by workers who enjoy an elite status in terms of pay, health and retirement benefits and protection from layoffs. In bad economic times such as those we are experiencing today, these benefits cannot be justified.

    It is time for the elimination of unions in the public sector. The country cannot afford, and should not tolerate, the expense and abuse perpetrated on the taxpayer by the unions.

    Union dues are being spent to elect liberals who turn around and raise taxes to support the pay and benefits of the public sector union members who heled elect them. If this isn’t a corrupt system I don’t know what is.

    This must end. Bankruptcy of the states is the primary alternative to the status quo and the union members will be fired by the thousands if they force the issue..

    Reply this comment
  6. Kate
    Kate 25 February, 2011, 07:03

    I live in Illinois….the state that is allowing renegade democrats to hideout afraid to lose the golden goose (unions) that lays the golden egggs (taxpayer funded government unions that line the pockets of democrates – FACT)
    I have called our governor several times asking how he can support a system that allows teachers to collect pensions in excess of $500,000.00 (yes that is us$) at the ripe old age of 54. We have just such a sitatuion in Illinois.
    I cannot speak for other states but the situation for government employees is outright criminal. What amazes me is how government workers are tyring to stir up private unions in support of them.
    The information on government pensions is available online. Everyone can check what I am saying. The average teacher in Illinois receives pensions of $80,000.00 – this after working only 20 years – gets to retire at 54 with a cadillac health care plan. You will be amazed when you see those in our North Shore that make the 1/2 million dollar pensions. If you retire at 54 years old with 1/2 million dollars you no doubt will live a very long time in the lap of luxury on the backs of the rest of us.
    This at the very same time Social Security age is being raised to 70 – benefits cut – Medicare cuts coming too.
    Private unions handle their funds within the company – NO TAX DOLLARS – and for that matter they are not even close to the lavish lifestyles afforded government workers. Private unions are inline with social security…..enought to maybe feed you and see a doctor if you are sick.

    Reply this comment
  7. Adelita for liberty
    Adelita for liberty 26 February, 2011, 00:36

    This isn’t Republican v Democrat. It’s public sector dictating policy that enslaves the public sector workers. We’re workers too, and we don’t have the Cadillac benefits and retirement funds you have, and we’re not your slaves to fulfill your demands and expectations no matter what. You didn’t read the post, because if you did, if you comprehended it, you wouldn’t talk as if your union was a fair union, instead of a monopoly that has extraordinary power over our elected politicians who then raise taxes on us each time your union “negotiates” for more.
    If you came to comment with respect for your audience, you wouldn’t call the writers conservatives to be dismissive. John Seiler sounds pretty libertarian to me, his arguments firmly rooted in principles of individual liberty and a limited government.

    Reply this comment

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