America's Civic Deadlock and the Politics of Crisis

America's Civic Deadlock and the Politics of Crisis

Mini Teaser: Congress is paralyzed. National debt is skyrocketing. America’s political consensus can no longer address the country’s most basic problems. We must resolve the question of what will replace it.

by Author(s): Robert W. Merry

How has this happened? In part, it’s because public-employee unions have managed to make these benefits so large that some states simply can’t afford them. Note that public-employee unions have a form of leverage that no other union has: they can fire their bosses. Dues money represents political power and can be used to campaign against politicians deemed insufficiently solicitous of public employees’ interests. At contract time, this translates into bargaining clout that yields big benefit packages.

California, for example, has a “3 percent-at-fifty” retirement policy, whereby at age fifty many categories of state employees are eligible for 3 percent of their final year’s pay multiplied by their number of years of employment. Thus, an employee who began work at age twenty can retire at fifty with 90 percent of his last year’s pay. Consider the financial liability this entails as more and more early retirees jam this money-lined retirement system and then seek employment elsewhere, often in new government jobs. In many public fields, in California and elsewhere, workers also game the system by finding ways to boost their final years’ pay in order to increase their pensions—through added overtime, disability claims or temporary assignments with added compensation.

In just eight years, from 2004–2012, state pension payments doubled in California. According to then governor Arnold Schwarzenegger, writing in the Wall Street Journal in August 2010, his state was saddled with $550 billion in retirement debt. Add preretirement compensation to pension payouts, said Schwarzenegger, and spending on state employees grew at nearly triple the rate of state revenues. As a result, other programs inevitably got squeezed. The picture is no better in other states. Illinois has unfunded pension obligations of $80 billion, with unfunded retiree-health obligations adding another $40 billion. New York State’s local governments likely will have to triple their annual pension contributions during the next six years, from $2.6 billion to $8 billion.

WHO IS going to pay for all this? The governments and their public-sector unions have an answer: taxpayers. Whenever the suggestion of cutting back on government-employee pay and benefits is broached, public-sector opposition forces kick into high dudgeon and high gear.

This was seen in last year’s battle between Wisconsin’s Republican governor Scott Walker and the unions and lawmakers representing state workers. That political drama rivaled December 1849 in Washington. Walker mustered the votes to pass legislation requiring teachers to contribute 5.8 percent of their income toward their pensions and all state employees to pay 12.6 percent of their health-care premiums. The latter requirement, amounting to about half of what many private-sector employees pay, was necessary, argued Walker, to offset the exploding costs in state retiree funding. But the unions and their legislative allies fought back. Some fourteen Democratic senators fled the state to thwart a vote. Protesters flooded the statehouse, and Walker needed a security detail of twenty-five officers to escort him through the capitol building.

Ultimately, the issue was less about pay than power. Walker’s legislation would have reduced the bargaining clout of the unions, particularly by ending automatic withholding of union dues from the paychecks of three hundred thousand municipal workers. This would have given workers, who could have saved as much as $1,400 a year by opting out of dues payments, more leeway in exiting the system. The result would have been a huge blow to the unions, whose political reach stemmed from that income flow. It also would have given the state greater leverage in bargaining with its employee unions.

In the end, Walker got his legislation. But in today’s political environment, no opposition victory is accepted as a legitimate outcome. A judge ruled the law was passed illegally, and his ruling went to the state supreme court for review. In the meantime, outside groups directed some $3.5 million to upend a conservative supreme-court justice in his forthcoming reelection battle so he couldn’t rule on the case. He won, and the lower-court ruling was reversed. Then union supporters spent some $35 million in an attempt to recall enough state-senate Republicans to return the chamber to Democratic control. That failed. Now, anti-Walker groups have forced the governor into a recall election expected to generate some $70 million in campaign spending.

So we have, in a medium-sized state, legislation designed to address an undeniable looming financial crisis, and yet opposition elements appear willing to force campaign spending of more than $100 million to overturn it. This doesn’t happen in ordinary times; it happens in crisis times when the nation faces widely divergent future paths and powerful interests have big stakes in which path is chosen.

If Wall Street’s self-aggrandizement and capture of Washington in a time of crisis helped spawn the Occupy movement, the growing scope and intrusiveness of the federal government generated the Tea Party backlash a couple years before. This expansion had been going on for decades, but it accelerated mightily in this century’s first decade, beginning with George W. Bush’s reaction to the 9/11 attacks. The result, as the Washington Post reported, was a vast new national-security bureaucracy. It encompasses some 1,200 government agencies and 1,900 private companies working on counterterrorism, homeland security and intelligence gathering at some ten thousand sites throughout the nation. Officials with top-secret security clearances, nearly a million strong, produce some fifty thousand reports a year, a number that defies suppositions that most of them are read by anyone important.

Then came President Obama’s expansion of the government’s domestic apparatus. His health-care law created 183 new agencies, commissions, panels and other entities. As Times columnist David Brooks has noted, the purpose was to transfer power from the private sector to government commissions and panels of “experts” presumed to be smarter and more knowing than ordinary citizens. Brooks calls another of Obama’s legislative victories, his 2,319-page financial-reform law, “an intricately engineered technocratic apparatus.” Again, the power to direct behavior is transferred from citizens to governmental technocrats, charged with writing new rules in some 243 separate policy areas.

Brooks says such numbers reflect today’s “progressive era,” characterized by “faith in government experts and their ability to use social science analysis to manage complex systems.” But he adds this development has unleashed

a fierce, almost culture-war-style backlash . . . among people who do not have faith in Washington, who do not have faith that trained experts have superior abilities to organize society, who do not believe national rules can successfully contend with the intricacies of local contexts and cultures.

People with power inevitably leverage it for self-aggrandizement. Thus do we see that federal employees earned average pay and benefits worth $123,000 in 2009, compared to $61,000 in the private sector. Average benefits for federal workers amount to nearly $42,000 a year, mostly in government contributions to pension plans. The average federal salary has expanded 33 percent faster than inflation since 2000. usa Today reports that the federal government pays an average of 20 percent more than private firms for comparable work. These trends are ongoing. Federal compensation has expanded by nearly 40 percent since 2000, after adjusting for inflation, compared to 8.8 percent for private workers.

In Congress, we see power aggrandizement that is nakedly brazen. Those famous earmarks—embedding specific benefits for favored constituents in legislation, often in return for campaign contributions—are widely seen as a recipe for corruption. Redistricting in recent decades has gerrymandered congressional districts into contorted territories designed to protect incumbents, shielding them from shifting winds of public sentiment and contributing to the polarization of Congress. Congress only recently began grappling seriously with lawmakers’ widespread practice of trading in the stock market based on inside information gained in the course of their official duties.

And the ethos of buying votes with federal largesse has contributed to one of the most pervasive elements of the country’s ongoing crisis—the unfunded liabilities represented by federal entitlements. Annual spending on Social Security now exceeds defense spending, while Medicare’s proportion of the federal budget hit 15 percent in 2010, up from 8.5 percent in 1990. By the end of the decade, it is projected to exceed 17 percent. Federal spending for all health programs topped 27 percent of the federal budget in 2010, compared to 20 percent for defense. As Yuval Levin wrote in the Weekly Standard, “Medicare is at the center of both our health care dilemma and our fiscal crunch, and it will be very difficult to avoid a calamitous debt crisis without making changes to the program’s basic structure.”

And yet, as Levin adds, “recipients of benefits are powerfully resistant to change.” Even members of the antigovernment Tea Party movement, according to polls, oppose major entitlement reductions. Without such reductions, there is no solution to the country’s looming debt crisis. The Congressional Budget Office speculates that it would take $15 trillion in spending reductions or tax increases, or both, over the next decade just to maintain the country’s ratio of debt to GDP at current levels. As journalist Peter Coy has written in Bloomberg Businessweek, “The U.S. is in danger of reaching a generational tipping point at which older Americans have the clout to vote themselves benefits that sap the strength of the younger generation.”

Image: Pullquote: Many in America cling to the old days, holding fast to the status quo as if that could somehow forestall the decline of that heady postwar era when abundance was the normEssay Types: Essay