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Archive for May, 2012

America has had a federal civil service system in place since 1871. Fair hiring practices were first codified by the Pendleton Civil Service Reform Act in 1883, and the standardized General Service (GS) Pay Scales were first introduced in 1923. Civil servants rarely made claims of unsafe working conditions or egregiously unfair pay.

Why then do we have public employee unions? In the private sector, one could (perhaps) make the argument that labor unions balance the inherently lesser negotiating power of workers with those of their bosses to set pay and working conditions. Trade unions first arose during the Industrial Revolution not only to negotiate wages, but to improve safety and unsafe working conditions in a world where regulation was virtually nonexistent. Today of course, we have a panoply of worker protections; among them are the Occupational Safety Health Administration, the Employment Retirement Insurance Safety Act, the Americans with Disabilities Act, the Civil Rights Act,  the Age Discrimination in Employment Act and the Fair Labor Standards Act.

The founders of the labor movement viewed unions as a vehicle to get workers more of the profits they help create. Government workers, however, don’t generate profits. They merely negotiate for more tax money and more jobs. It would be ironic if unionization didn’t increase public sector pay. After all, isn’t that what a union is for, to get workers better compensation than they could get on their own?

In the private sector, companies rightfully fight to get pay right. Those that do stay in business. Those that don’t either lose their workers to other employers or go out of business. But there is no incentive for public workers to limit their wage and benefit demands.

” the only private sector workers who get the same package of pay, benefits, and job security as government employees are workers at large, unionized companies. Should the public sector be governed by the same salary, benefits, and job rules that caused so many problems at General Motors?

Do we want government jobs to be more desirable than those in the private sector? Many Americans think that public sector employees are on average paid less than private sector employees with the implicit bargain being that government workers would have job security that private company workers lack. This is an erroneous assumption.

Full-time federal employees earned an average of $81,258 in pay last year and $41,791 in benefits, the Bureau of Economic Analysis (BEA) reports. By comparison, the private worker earned $50,462 in pay and $10,589 in benefits, meaning that federal workers earn about half more in pay but four times as much in benefits, the BEA says.

The big advantage for federal workers over private-sector workers comes in time off, pensions and lesser-known benefits. After three years, federal workers get 20 days of vacation, 10 paid holidays and 13 sick days. For older workers, a federal pension is a sweet reward. Lifetime benefits are based on the highest three years of salary, rather than the five years typical of defined pension plans in the private sector. Retirement can start as early as 56 years old with medical benefits.

President Obama instituted a federal pay freeze in 2010, and has called for a 0.5% increase for 2013. But when government workers get a pay freeze, they still get a bump in pay for an additional years of service. Does this make sense?

Liberals argue that civil servants have a right to join labor unions, citing the 14th Amendment’s Equal Protection Clause. But even a champion of labor rights such as FDR recognized that government employees have a “special relationship” to the people that should preclude their ability to strike. Other government employees such as the military have never been allowed to organize. As recently as 1958, George Meany, President of the AFL-CIO thought it was “impossible to collectively bargain with the government” (though later he was happy enough to accept their union dues). So how did government workers unions become entrenched in federal,  state and local politics?

In 1962, President Kennedy was facing poor prospects in midterm elections. JFK saw how in Wisconsin and New York, which had recently allowed public unions to take hold, local liberal politicians benefited politically and financially. So Mr. Kennedy lifted the ban on federal government workers unions by executive order. Today, there are about a million federal employees represented by unions, about 31% of the total workforce, whereas in the private sector, only 7% of the workforce is unionized. At the state and local level, 36% of workers are unionized.

Union membership in the private sector has been declining steadily for years, and is now at levels last seen in the 1930s at the beginning of the organized labor movement. Clearly, private sector unions are a spent force, remaining mostly in service industries and local construction work for government jobs (see my post “On the Davis Bacon Act and Public Works”). In manufacturing, most union jobs have been exported, moved to “right to work” states, or been automated out of existence.

So at the end of the day, what has some 50 years of government employees unions brought us?  Decades of over promising and fiscal malpractice by state and local officials have created unfunded public employee benefit liabilities of more than $3 trillion.  Years of overly optimistic growth projections, underfunding and over promising by politicians have rendered many of these public pension systems toxic assets on states’ books. Some jurisdictions around the U.S. already spend more money on retired workers than on current employees, and more on retired teachers than on existing students and schools.

Even more troublesome than the current or future economic costs of public employee unions is that unions interpose themselves in the administration of government. For a prime example look no further than our schools. Education is easily the most important social equalizer in our society, yet there is clear evidence that despite spending more than 3 times the inflation adjusted cost on K-12 since 1970, student performance levels have not increased. Many factors harm student performance—including that we don’t fire our worst teachers and don’t reward our best, thanks to union contracts that forbid merit-based compensation and block the dismissal of teachers except in rare circumstances. Last week Newark Mayor Cory Booker said that he was considering using some of the $100 million donated by Facebook founder Mark Zuckerberg to a foundation for Newark schools to fund buyouts of the worst teachers in the city’s system. “If we could fire the 300 to 400 lowest-performing teachers…(we) wouldn’t have a financial crisis.”

It is difficult today for defenders of public sector unions to make any sort of convincing case that such unions benefit the public at large. These “public servants” are better paid than their private sector brethren, and they interfere with the proper administration of government by our elected officials. It is time to end government unions.

 

 

This week’s Mutua Madrid Open tournament inaugurates a stunning technological move forward for a tradition bound game. For the first time, an ATP Tour event will be played on blue clay. The announced reason for the change is to enhance the contrast to the yellow balls for both the players and the television audience. The playing characteristics of the surface are said to be identical to that of traditional red clay, also known as “terre batu.”

Blue Clay in Madrid

The change came about at the initiative of former player and now billionaire businessman Ion Tiriac, the owner of the tournament. Known as “Count Dracula” because of his Transylvanian roots and trademark mustache, he has sparked other innovations in this Masters Series event, which is one of 13 tournaments ranked in importance just behind the 4 Grand Slams.

At most tour events, ball boys and girls are either promising local junior players or members of the club where the event is held. Several years ago, Madrid inaugurated the use of professional models for televised matches. Seeing the very slim, pretty girls next to the tour players made the athletes appear even more superhuman. While the mostly male audience clearly approved of the models, by the second year, the models were selected with an eye toward their ability to throw and catch tennis balls. By the third year of the change, male models were used for the WTA Tour event, to the delight of female audiences.

In 2009, the Madrid Open moved into “La Caja Magica” (the Magic Box), a stunning, $200 million structure that is the most modern municipal tennis facility in the world. Although the tournament is an outdoor event,  La Caja has three stadium courts with retractable roofs that lift away like giant lids to a box.

Traditional red clay courts are made not of natural clay but of crushed bricks fired from red clay. The crushed brick is then covered with a topping of other crushed particles. American green clay courts (Har-Tru) are constructed similarly using crushed basalt that is faster drying, but also harder and “faster” (the balls bounce lower so a player has less time to get to it).

The blue Madrid clay courts are also made from red clay, but iron oxide is removed from it before the bricks are made, resulting in a “white” clay. The white clay compound is immersed in a water soluble blue dye for 24 hours before being formed in bricks and fired. The bricks are dyed again after firing before they are crushed to form the court surface.

Mr. Tiriac has a long history of tennis innovation, claiming that 25 years ago he was the first to use a blue surface for an indoor hard court tournament in Stuttgart. Since that time, blue hard courts have been widely adopted around the world and are used for the US Open and the Australian Open events. Says Tiriac “for the players on the court, it’s about a 22 percent improvement. For the television viewer, it’s even more: about 27 percent.”

The bounce of the ball on the new blue clay courts is supposed to be exactly the same as for red clay. But playing conditions are always affected by altitude, humidity, wind, temperature and other local conditions, and some of the players are not happy about the change in Madrid. Most vocal has been French Open defending champion Rafa Nadal, arguably the best clay court player ever. Nadal thinks the conditions in Madrid are already hard to adjust to because of the altitude (2200 feet), and that yet another variable such as the blue clay provides another unnecessary distraction in the middle of the clay court season. Of course, if you are a creature of habit and legendary ritualized behaviors such as Nadal, why would you want any changes in the game?

I applaud the effort to make  tennis more video friendly. My favorite parts of the tour are the “dirt ball” events of the clay court season because the slow surface forces the players to construct long grinding points that showcase the range of their skills. But there are many televised matches I have stopped watching because it is just too hard to follow the ball on my screen. This week Diogenes will be in blue heaven.

 

Effective leadership is using one’s influence to enlist others in support of achieving a specific goal. In America’s two party democracy, our leaders are rarely able to craft legislation that is purely to their liking. The give and take that is the sausage of Congress usually forces our presidents to make concessions in order to pass new laws that move our country in a positive direction. This process normally provides effective checks and balances on the party in power. It is only when one party has large majorities in both houses of Congress and control of the White House that uncompromising legislation such as the Affordable Care Act (Obama Care) is passed without input from the minority.

One of the most urgent problems facing America’s economic health is the unsustainable mismatch between revenue (taxes) and expenditures. Republicans generally want to cut expenditures while keeping tax rates constant while Democrats generally want to raise taxes (only on the rich of course) while keeping expenditures at their historically high rates. One need only look at Greece, Italy or Portugal to see where the current course is taking our country.

In 2010, President Obama heeded calls from Congress and created the National Commission on Fiscal Responsibility and Reform (often called the Simpson-Bowles Commission from the names of co-chairs Alan Simpson and Erskine Bowles) to come up with a bipartisan plan to deal with the pending crisis. He appointed 18 members to the group: 12 were serving members of Congress, of which there were 6 Democrats and 6 Republicans. The 2 co-chairs were politicians not in office, one Democrat and one Republican. There were 2 CEOs, one Democrat and one Republican. The remaining two members were Alice Rivlin (Brookings Institution; former director CBO and OMB and Fed vice chair), and Andy Stern (former president of Service Employees International Union), both Democrats. Of course, the executive director of the commission was also a Democrat. So out of a total of 18 members, 10 were Democrats and 8 were Republicans. Theoretically, as a bipartisan group, the commission would give both sides the political cover to make difficult compromises and still achieve the common goal of fiscal reform. Because Democrats outnumbered the Republicans and controlled the agenda, the president’s party would still drive the conclusions.

Simpson-Bowles came up with over $4 trillion in recommendations for deficit reduction. For every dollar of new taxes, $3 of spending cuts were to be made over time. Cuts were to come not only from discretionary spending but from “sacred cow” entitlement programs such as Social Security. Higher revenues were to come from increases in gasoline taxes and reductions in tax deductions such as home mortgage interest. The debt commission offered a blueprint for turning the corner on the federal debt, breaking its peak and having it constitute a declining share of GDP over time.

The members of the Commission voted in favor of its conclusions by 11-7. Democrats were 6-4, and Republicans were 5-3. The conclusions were widely criticized by both right and left, although many others from both sides thought it was clearly a move in the right direction. President Obama could have sent the Commission’s report for almost certain, bipartisan approval from both houses of Congress. Instead, he chose not only not to send it up as his proposed budget; he failed to propose any budget! Why Obama would appoint the debt commission and then largely ignore its recommendations is a political mystery and one of history’s great missed opportunities. But he did, and he has not offered an alternative approach to turning the corner on the national debt.

Even Andy Stern, the labor leader who voted against the Commission report — a decision he says he regrets, because while he had reservations about the 67-page proposal, he now says he would have liked to have seen Congress take it up. Co-chair Erskine Bowles has noted his surprise at Obama’s stiff-arm, telling a Wall Street Journal forum in November that the report “exceeded every single one of the goals that he had given us” before the commission started its work.

Mitt Romney effectively secured the Republican nomination for president last week with sweeping victories in five more primary states as Newt Gingrich and Rick Santorum dropped out of the race. Current polls indicate that the general election race is currently very close, with Mr. Obama slightly ahead. Now that Mr. Romney no longer has to pander to extreme fiscal conservatives in his party to win the nomination, he is more free to win over the roughly 1/3 of American independents who will decide the election.

As Diogenes, I would hope for better, less compromising fiscal reform than the recommendations of the Simpson-Bowles Commission. As an ordinary citizen, I want to see action taken sooner, rather than later, to head off an impending fiscal catastrophe. It may be that the Republicans will sweep the November elections and be able to dictate alternative plans that eliminate new tax revenues. But it is my hope that Mr. Romney will propose that Congress again take up the Commission’s conclusions. Such a move would show far more leadership than his currently “safe” economic proposals.  Although Mr. Romney might win the election anyway, such a bold move would clearly show that he is prepared to govern.