‘The Enemy Within’
From the December 20, 2010, issue of NR


And this isn’t the first time unions have received special treatment under Obamacare. The president’s “compromise” with Big Labor earlier this year exempted union health plans from the excise tax on high-end “Cadillac” plans until 2018.

As bad as they are, such federal exemptions and carve-outs are only the tip of the iceberg. As Heritage Foundation labor analyst James Sherk has found, federal workers earn a nominal 22 percent more per hour than their private-sector counterparts — and when benefits are included, the difference rises to 40 percent. Moreover, federal employees enjoy much greater job security (their employment has risen even during the recession). Small wonder federal workers quit their jobs at a rate only a third of that in the private sector. Many of the public-sector unions’ greatest privileges are found at the state and local level, where they have used their political muscle to gain extremely generous compensation packages at taxpayers’ expense.

Such outlandish public-employee compensation is economic folly and bad policy — so why has it gone on for so long on such a massive scale? Quite simply, because government employees have, for years, cared more about their compensation than most taxpayers have. As public-choice theory shows, organized constituencies that stand to gain concentrated benefits have a great incentive to agitate politically for those benefits. Meanwhile, the large, unorganized general population that has to pay the taxes to support those benefits has much less of an incentive to oppose them, because the costs are diffused among a much larger number of individuals, each of whom bears only a small fraction of the total.

This results in a vicious circle. Politicians kowtow to government-employees’ unions, who in turn support their election campaigns. Once those pro-union candidates are elected, they can provide more pay and benefits to the unionized government employees. The union then collects dues from its members, which enables it to give more political support to the politicians, and the cycle goes on.

But politics can only trump economic reality for so long. Ultimately, such an arrangement is not sustainable. And the American people are now waking up to the fact that they’re getting a very bad deal. A Washington Post poll in early October found that over half the population believes federal workers are overpaid; 49 percent believe they do not work as hard as their private-sector counterparts.

With state- and local-government budgets under increasing financial strain, the dangers of legally entrenched benefits to an overpaid special interest have become impossible to ignore. Cities around the country are feeling the pinch. Vallejo, Calif., was forced into bankruptcy in 2008 after all other efforts to control costs proved futile. The city spent two years trying to negotiate pay and benefit cuts with its police and firefighter unions. Those two departments made up 74 percent of the city’s $80 million budget. The unions refused to contemplate any changes, arguing that cuts would compromise public safety. And their generous compensation packages came with a built-in political defense mechanism: Vallejo’s 100 firefighters were paying $230 in dues a month, and its 140 police officers $254 a month — which means that the city was paying almost three-quarters of a million dollars each year to fund the war chest with which the unions fought budget cuts.