Government by the Unions, of the Unions, for the Unions
Philip K. Howard is the founder of Common Good, a nonpartisan organization devoted to streamlining laws so that Americans can use sound judgment in their everyday decisions. Philip is the author of Not Accountable, which persuasively contends that public employee unions weaken our democracy and should be (and I will contend already are) unconstitutional. We'll spend the next hour making that argument. Links * The Yale Law Journal - Forum: From Progressivism to Paralysis * A New Governing Vision — Common Good * Opinion | Government Is Flailing, in Part Because Liberals Hobbled It - The New York Times, by Ezra Klein The Bob Zadek Show is the country's longest running libertarian broadcast – nationally streamed at 8 AM PT Sundays. Subscribe for weekly transcripts, book summaries and additional resources: Transcript Transcript has been edited for conciseness and clarity Bob Zadek (1:59): Philip, what caught my attention at the start of the course was the preface to your book, written by Mitch Daniels. To me, Mitch Daniels personifies the ideal leader of our country, and I was disappointed when he decided not to enter the Republican primary in 2008. How did you persuade him to write the preface to your book? Philip K. Howard (02:53): I did a number of reforms with Mitch when he was Governor of Indiana. Then, when he became president of Purdue, he asked me to give a talk to his senior staff about why they should focus on making sensible decisions day to day instead of just following a rulebook. Mitch Daniels is an extraordinary leader who focuses on how things work, such as improving the Department of Motor Vehicles in Indiana or managing public personnel. This is much more important to most Americans than abstract debates about immigration or other issues. What makes public service unions different? Bob Zadek (03:50): Now we're going to be spending most of this hour talking about a special type of organization: public sector unions. That is the focus of your book, Not Accountable. We will learn what you mean by associating the phrase not accountable with public sector unions. What makes public sector unions different than private unions.? Philip K. Howard: Everybody said, "Well, it's a union. It's always a union." In fact, the collective bargaining power of public employee unions, which only came about really in the late 1960s, was done not because there was any scandal or abuse, but because union leaders wanted more power. Whereas private unions, which were prevalent during the Progressive Era, had their origin story in factories abusing child labor and having endless work hours and horrible safety records, there was never a need for public employee unions. People thought they should just be treated fairly. But in fact, it's the difference between fish and mammals. The incentives are completely different in a trade union context like the Auto Workers Union. Both sides have a vested interest in the viability of the enterprise. If they have inefficient work rules or demand too much, the company may move out of town or go out of business, resulting in the loss of their jobs. In contrast, with public unions, you can demand anything and the government cannot move. In a private context, the private trade union, the argument is about the split between capital and labor. It's all about how to divide the profits. In the public union context, it's very limited. This is because the government can't move and officials don't pay for it. So, taxpayers have to foot the bill. Public unions can demand anything they can get away with and taxpayers must pay. This is why FDR opposed public unions. He said collective bargaining cannot be transferred to the public sector because public employees have a sworn duty of loyalty to serve the public, not to negotiate against the public interest with inefficient work rules. There is an ethical difference here. “It is impossible to bargain collectively with the government.” – Franklin Delano Roosevelt Most importantly, trade union negotiations are an honest adversarial process, where it would be unlawful for management and labor to collude and come up with something that is not in the interest of either side. Public unions negotiations are nothing but collusion. They amass a great deal of power: they get people elected, staff campaigns, and send people in buses to knock on doors. Once the official is elected, they don't sit on the opposite side of the table; they sit on the same side. This isn't a negotiation; it's a payoff. Bad Math: How Fund Accounting Robs Future Generations Bob Zadek (08:14): You used the word "collusion," which has a criminal connotation. You didn't mean that what they were doing was illegal; it was cynical, they work together. However, neither party is breaking any laws, due to the system itself. Philip K. Howard (08:47): It would be illegal if it were done in the private sector. Bob Zadek (08:48): That's correct. But it's not collusion in the public sector. Philip K. Howard (08:52): It's not illegal, but it's dishonest. Bob Zadek (08:56): Because I'm an accountant and I love spreadsheets, I have this embarrassing personality flaw: I just love when things balance. In the private sector, financial statements—the reports to shareholders, the "voters," if you will—are published according to rules that record expenses when they are incurred and income when it is earned, not paid. This makes it harder for a private employer to spend future dollars, as the creation of that obligation will impact the current employer's performance. In the public sector, however, there is a different approach to accounting, often referred to as "fund accounting," which means expenses are only recorded when they are paid, not when they are incurred. This means an elected official can support, for example, high union pension costs that are paid in the future without incurring a deficit in their budget. I have always maintained that so much would change if municipalities and states had to use accrual basis accounting. Political officials negotiating with the union are spending a future elected official's money, which means the present political official doesn't get dinged with a deficit in their budget. Philip K. Howard (11:32): I think they did improve those accounting rules somewhat in the last decade or so. But the process is exactly as you described, which is that they come to the negotiating table and say, "What can we get?" They can’t get away with paying people hundreds of thousands of dollars in current income. So, how do they squeeze their pound of flesh out of the government? One way is by making future promises that only come due after the politician leaves office, so they won’t have to pay it. It isn’t accounted for honestly. The other way was through restrictive work rules that made the government virtually unmanageable. For example, if you wanted to move a desk, you had to negotiate it. If there was a pandemic, there was nothing in the contract about working in a pandemic or doing remote learning or teaching. It was like the spokes were disconnected from the hub—you couldn't move forward until you got union approval. A Brief History of Public Sector Unions Bob Zadek (12:37): Public service unions have been around for a while, and most people listening to this podcast were born into a world where they already existed. Examples include teachers unions, SEIU, and other public service workers unions. However, this is a relatively recent phenomenon. If our listeners are older, they may remember a time before public service unions. So, let's take a brief look at the history of how we got to where we are now, with the teachers union playing a major role in the Covid recovery and pandemic recovery efforts. Philip K. Howard (13:30): Prior to the 1960s, public unions had no collective bargaining power. They were like any other interest group, such as the National Education Association, a professional group with ideas in their self-interest, but without power over politicians. Then, Kennedy was elected and, as payback for union support, he issued an executive order authorizing collective bargaining in the federal government. A report chaired by Arthur Goldberg had looked into this beforehand, but it was largely vacuous and substance-less. In the late 1960s, unions kept agitating with state governors and parties. The civil service system, created in the late 19th century, allowed public employees to organize, and as government grew, they became more influential. New York state agreed to consider collective bargaining, and a report by labor law professor George Taylor outlined how it should work. He said that you could not give up management control and that disagreements should not be decided by arbitrators, as this would be unconstitutional. However, the law passed in exactly the opposite way, and other states, including California, followed suit. The Taylor Report also said that managers must maintain their power and that elected officials must make decisions, but the law did exactly what the report said not to do. What Makes Public Sector Unions Special? Bob Zadek (16:34): Let’s return to the question we started our show with: why are public sector unions a separate topic, not lumped in with private sector? Think back to Covid: one would think that the decision to close schools would be the result of the democratic process, if one were naive and idealistic. That's the way it's supposed to work. But, in reality, the teachers unions called all the shots. Philip K. Howard (18:04): For a long time, people have known that public employee unions are a headache and make managing government difficult. However, few understand how wasteful the system is. Approximately $2 out of every three dollars spent on personnel and related costs is wasted. This leads to a lack of accountability and a failure to fix any issues. As a result, we keep electing new people, yet nothing
