Unions unloading on Prop. 32

Oct. 25, 2012

By John Seiler

The latest report shows California’s ultra-powerful government-worker unions surpassing $60 million in donations to stop Proposition 32, which would curb their clout. They obviously have shifted their focus from Proposition 30, Gov. Jerry Brown’s $8.5 billion tax increase, to focus on Prop. 32.

Sure, they would like to get that money to fund their lucrative pay, perks and pensions. But more important is keeping their power. Prop. 30 looks like a loser anyway. That will mean budget cuts, mostly to new union members. But power is the real game, and keeping it must be maintained at all costs.

But the unions’ power already peaked in 2010 when they got Brown elected. Eventually, probably in 2014, they will gain two-thirds’ Democratic control of both houses of the California Legislature. The unions then could impose tax increases without finagling any Republican support.

But California at this point is taxed-out. Even if tax rates are raised, the tax revenues won’t follow. More businesses and jobs will just leave the state. Because there’s no more money, that means the next recession, when it hits, will slam state budgets again, forcing cuts in the state and local government work forces.

Recession

I suspect that the next recession will hit in 2013, regardless of who wins the presidency. Recessions and depressions strike every four to six years. The last one started in 2007, five years ago. So we’re about due.

The “fiscal cliff” is about to hit on Jan. 1, with taxes going up almost no matter what, including on the middle class. So a lot of economic activity is taking place this year, in 2012, in the lower tax climate, providing a modest boost just before the election (that’s a coincidence!). But that favorable tax climate expires in 2013.

The Federal Reserve Board also is going to have to start increasing interest rates, if not in 2013, then in 2014. You can’t keep interest rates forever at close to 0 percent. A jump in interest rates will slam the housing market, sparking another recession.

The public sector in America, and especially in California, has grown rapidly for 80 years, since the New Deal. But America now faces leaner competition from China, Brazil, India, etc.

The productive, private part of the U.S. economy no longer can sustain the parasitic, government part at such high levels.

The unions likely will win by defeating Prop. 32 on election day, but they will lose in the end because uninhibited power eventually is brought down.