WI Public Sector Compensation: Examining the EPI Data

In my previous post on why the unions aren't winning the Wisconsin protests, Dean brought up a recent study showing that public sector workers in Wisconsin are undercompensated by 4.8%. The study was produced by EPI (Economic Policy Institute), which the New York Times describes as,"a nonprofit research organization supported by labor unions."  Predictably, some on the right, less sympathetic to organized labor, have denounced the study as flawed.

 

That both sides of this issue can look at the facts and draw opposing conclusions says more about statistics than anything else, but does this mean we should just throw up our hands and not even consider the question?  If I thought that was the right response, I wouldn't bother writing this blog.  So by giving EPI the benefit of the doubt and looking at the data, here is what I came away with regarding public sector worker compensation in Wisconsin.

1.  The 4.8% differential is not the same for all levels of education.  Workers with the least amount of education actually do better in the public sector than the private sector.  As education level increases, the wage discrepancy becomes greater.  I have seen this result reported elsewhere, and I believe it is relatively non-controversial.

2.  On average, public sector workers have more education than those in the private sector.

3.  This means that, on some level, the protesters in Madison are fighting for the wages of a workforce that is more highly educated on average.  Admittedly, calling the budget repair bill an, "assault on the middle class," is rhetorically more effective than, "these college graduates can't afford wage cuts."

4.  The percentage of teachers in the public sector work force have a dramatic impact on the results.  When you don't account for hours worked, EPI found that Wisconsin workers were, "undercompensated by 8.2%," but when they controlled for hours worked that number decreased to 4.8%.  EPI reports:

Full-time public employees work fewer annual hours, particularly employees with bachelor’s, master’s, and professional degrees (because many are teachers or university professors).

5.  To say that teachers work fewer hours than private sector workers is not a slight.  Having holidays and time off in the summer go with the job, the same way that working swing shift goes with some mill jobs.  Common sense would indicate that there is a value to having time off and that this value would show up as a discrepancy in compensation between public and private sector workers.  EPI downplays this with their control for hours worked.  My question on this, then, is whether all hours are treated equally.  Couldn't part of the compensation differential, even after adjusting for total hours worked, reflect the fact that teachers spend some of the most valuable hours away from work (i.e. at the holidays and in the summer)?

Finally, we should try to grapple with why it is that the compensation differential gets worse as education increases.  This reflects the fact that the rate of wage growth due to education is much higher in the private sector, but why should that be.  I see two possible reasons:

7.  First, for some jobs requiring high levels of education cultural and political norms are a barrier to paying compensation equal to the private sector.  As a society we may simply believe that these folks should be motivated, in part, by a desire to do public service.  For example, do you think we are ever going to pay SEC employees salaries comparable to what they could get on Wall Street?  I don't.  At the same time I suspect this is a relatively small factor in the compensation differential story.

8.  The other reason may, once again, come back to the presence of a large number of teachers in the public sector work force.  According to the EPI data 22% of state and local government workers had a master's degree, compared with only 5% of the private work force.  According to the US Department of Education, in 2007-2008 there were over 175,000 master's degrees conferred where the field of study was education.  Education has been the most popular field of study for master's degrees at least since 1970-1971.  The only other field that comes close is business.  Given that so many public sector workers work in the education field, the relative abundance of master's degrees in education could be contributing to the public sector wage differential.  It is true that EPI controls for level of education, but do they treat all master's degrees the same?  This would seem to be a mistake given education's popularity as a field for graduate level study.

While the discussion continues here in Wisconsin and beyond, you will no doubt continue to hear that public sector workers are undercompensated by 4.8%.  I hope that this discussion has shown you can be skeptical of that number, even without resorting to partisan attacks on the study's authors.  For me, the telling sing of the day when most public sector workers are undercompensated will come when we are no longer able to hire and retain workers.  In a timely bit of blogging from Eggster, we see that we are nowhere near that point yet. 

Clearing the Capitol won't get legislature back to work

Reports are that the Wisconsin Capitol will be cleared of protesters starting later this afternoon.  If this is in fact the case, I hope that it happens peacefully.  A violent or disruptive process at this point could overshadow a protest that has been remarkably civil. 

More importantly though, what does clearing the Capitol building accomplish at this point?  The short answer has to be nothing.

As long as the fourteen Senate Democrats remain in hiding, all fiscal legislation remains on hold.  Since we are in the midst of trying to address our current budget shortfall and have to put in place the next budget before July, 1, the flight of the fourteen amounts to shutting down the important work of Wisconsin's government.

Whatever happens this afternoon, it's important to remember that the missing Senate Democrats have silenced the voice of many voters who went to the polls last November and elected Governor Walker and GOP majorities in the legislature.

Why the unions aren't winning in one graphic

What you are looking at is the pay and benefits for a teacher in the village of Denmark, WI.  A small community in NE Wisconsin, where 46% of the tax levy goes to the school district.  As you can see, the total compensation for this teacher is over $77,000 per year.  You can also see that this person is able to command this level of compensation with just a bachelor's degree.  When you think about the number of hours of work required for this compensation, the difference between this teacher and a typical private sector worker becomes even more stark.

This information is available in a searchable database from the Post Crescent, you can check it out for yourself and see how teachers in your area compare.

When many private sector workers, including some with bachelor's degrees, look at this level of compensation, the benefits of collective bargaining for the public sector start to come into focus.  For many folks, the Governor's proposal to cut public sector employee pay by around 8% and end collective bargaining suddenly doesn't sound so scary after all.

Prank call shows we need to separate Walker from his policies

Fresh off what I thought was a well executed fireside chat in defense of his position on the Wisconsin budget repair bill, Governor Scott Walker spent most of Wednesday trying to snatch defeat from the jaws of victory. His method self-inflicted damage was falling for a prank phone call by someone pretending to be one of the Koch brothers.

I doubt the call will change many minds about the issue. Walker comes off badly, but not terribly so. His critics have been telling us he is a puppet of the Koch brothers for more than a week now and it hasn't moved opinion much. The call is unlikely to change this dynamic.

From my perspective, the most damning portion of the call came when the caller suggested planting troublemakers in the protest crowd. Walker stammers and pauses, which makes me think his conscience is pricked, but he doesn't bring himself to do the right thing and denounce such a suggestion.

I do believe character counts in politicians. Walker chose to curry favor with a wealthy donor rather than stand up for what he knows is right and perhaps this lapse disqualifies Walker for high office. If you think this is the case, you will get your chance to make your voice heard in four years. In the mean time this call may tip off Senate Democrats to his legislative strategy, but does little else to change the current situation.

Here is liberal pundit Ezra Klein:

But if the transcript of the conversation is unexceptional, the fact of it is lethal. The state's Democratic senators can't get Walker on the phone, but someone can call the governor's front desk, identify themselves as David Koch, and then speak with both the governor and his chief of staff? That's where you see the access and power that major corporations and wealthy contributors will have in a Walker administration, and why so many in Wisconsin are reluctant to see the only major interest group representing workers taken out of the game.

In Walker, Klein sees a GOP politician in thrall to wealthy business interests and his response, spoken like a true Washington insider, is that we need Democratic politicians in thrall to big labor to offset this. Talk about the cure being as bad as the disease.

Crushed between big business and big labor, what is a conservative, or any right-thinking average citizen to do?

First, recognize that politicians do a lot of unsavory things in pursuit of campaign cash. Part of the reason is relatively few people give money to candidates, and in some sense we get what we pay for. This goes for both sides. One blogger referred to our previous executive as "Governor Jim Doyle -- a wholly owned subsidiary of WEAC--" and I don't think he got much argument about the characterization.

Second, the fact that this goes on, does not give Scott Walker, the man, a free pass on bad behavior. I, for one, expect more out of our leaders and I hope that he will reflect hard on this episode and make better decisions the next time the opportunity presents itself.

Finally, we need to recognize that sometimes the interests of average citizens are aligned with the interests of billionaire GOP donors. In those cases, we should act on these interests not because they help the billionaires, but because those actions help the citizens of the state. By the same token, there will be times when the interests of citizens and the interests of WEAC are in harmony. Again, we should act in the interests of citizens and if the teacher's union also benefits, so be it.

So the question is, in the case of public sector collective bargaining, do the interests of the citizens align more with WEAC or with the Koch brothers?

The thousands who have rallied at the Capitol would seem to demonstrate the unpopularity of Walker's proposal, but outside of the protesters and union members themselves, I see little evidence that popular sentiment is in favor of keeping collective bargaining for public sector workers.

With no ground swell of opposition to the Walker plan despite the protests and the national media spotlight, I can only conclude that people may not be enthusiastic about this bill, but they see it as a necessary step to putting our fiscal house in order. This attitude may stem, at least in part, from the fact that we can now look back over the good years and see just how little we did to prepare ourselves for the lean years. Did we really think they would never come?

Even if the prank call revealed a seedier side of Governor Walker, it really doesn't matter. What matters is whether or not the voters and the taxpayers of Wisconsin think the budget repair bill takes the steps that are needed to address the issues facing us. Many people think it does. Nothing in this headline grabbing phone call is likely to change that.

DOMA, ACA and a legal question

NPR reports the Obama administration will no longer defend DOMA (my bold):

U.S. Will No Longer Defend Anti-Gay Marriage Law : NPR

From now on, the Justice Department will no longer fight to support the 1996 Defense of Marriage Act in court. But the government will continue to enforce the law across the executive branch unless Congress repeals it or a federal judge throws it out.

At least one federal judge struck down part of the Affordable Care Act, while another ruled against the law in its entirety. I assume that does not mean the Obama administration is about to stop trying to enforce it.

Could a GOP president in 2013 use a similar rationale to not enforce any or all of the health reform law?

Yglesias v. Cowen

During a defense of Social Security, Matthew Yglesias offers this:

Under the circumstances, I don’t think anyone would be saying “saving for your retirement is a pyramid scheme—it depends on the assumption of future economic growth!” Future growth is a prudent assumption. But I also don’t think people would just be saying “well, we need to make some tough choices.” I think they’d be saying that we shouldn’t meekly accept the premise of slower economic growth. They’d be calling for more immigration, especially of high-skill people.

Discussing the implications of his theory that we are in The Great Stagnation, Tyler Cowen offers this:

5. If threshold savings is not an issue for you (e.g., needing to save a certain amount to put a kid through college), you should consider higher levels of consumption as a response to The Great Stagnation. Real rates of return on savings will not be fantastic, and risk-taking will be rewarded less. Spending is one sure way to get your money's worth.

Recall Wisconsin State Senator Dave Hansen

Recall of State Senator Dave Hansen | Try 2 Focus

Still gathering details on this but efforts are underway to begin a recall of State Senator Dave Hansen.

Dave Hansen needs to be recalled for serious gross neglect of duty to his constituents in the 30th Senate district, for not showing up to work.

In addition it looks as though Jerry Bader will be encouraging a recall of State Senator Hansen as well as State Senator Julie Lassa.

I'm not a fan of recalls, since I think elections really do matter, but if you are so inclined, be sure to check out the link at Try2Focus.

I do believe recall power is necessary for gross negligence. I suppose one could make the case that bringing the legislature to a standstill on all fiscal matters by leaving the state might fall into that category.

The outrage double standard of Representatives Barca and Hintz

Wisconsin State Representative Gordon Hintz (D-Oshkosh) has gotten some attention for his impassioned speech in the Assembly on Friday evening. Ostensibly, he was alarmed by Speaker Fitzgerald and his GOP colleagues holding a vote on Governor Walker's budget repair bill before the 5:00 time that Fitzgerald had previously indicated. The vote was taken without any Democrats in the Assembly chamber. Hintz's outrage, and that expressed by Representative Peter Barca (D-Kenosha), seems forced on at least two counts.

Hintz claims that he was surprised because the first place he heard of the budget repair bill was on a radio ad while in his car. The ad was run by an outside group supporting the bill. If Hintz really was surprised by the introduction of a budget repair bill, then he is simply not paying attention to anything going on in Madison. I don't really think that is the case. The alternative is that this claim was nothing more than a way to make the bill seem sinister. The people of Wisconsin should be alert for such rhetorical tricks and be wary of anyone who employs them.

After the initial GOP vote passed, Speaker Fitzgerald eventually relented and struck the vote from the record. Implicitly at least, agreeing with Hintz and Barca that the GOP vote took place prior to the announced time and was not done in good faith. For this the Speaker deserves some criticism. If nothing else, it was a tactical mistake. A good bit of voter sentiment still remains with Walker, the GOP, and this bill. Why diminish that by playing games with the vote? A vote he could win on the numbers alone no less. Poor leadership by the Speaker in this case created an opening for Hintz & Barca to shout that they were shocked (shocked!) to find voting going on in the Assembly chamber.

Perhaps they should be shocked to find voting taking place in the Capitol. With their Democratic colleagues in the Senate currently in hiding outside of the state, voting in that chamber has been seriously curtailed. If Hintz is going to denounce the Assembly Speaker for taking away his vote (and the voice of his constituents) why isn't he just as outraged at the actions of Senate Democrats. By fleeing, they have essentially silenced the voice of every Wisconsin voter on the issue of the budget repair bill, since a vote cannot happen with fewer than twenty Senators present.

Even if we take these two gentlemen at their word, and assume they really were upset last week, I would advise Barca and Hintz to remember there are many Wisconsin voters who feel similarly about the flight of all fourteen Democrats from the Senate.

Elections Really Do Matter

Kevin at Lakeshore Laments notes:

From Ann Althouse, about a protest sign in Madison:

The sign says: "Russ teaches at Marquette/Scotty dropped out/It takes an education to value an education." Let's rewrite that: Russ was voted out of office/Scotty was voted in/It takes losing an electoral loss to devalue election results.

Keep wondering to myself how much of the actions in Madison are an attempt to overturn November.

To hear those opposing Governor Walker's budget repair bill, what they are engaged in is "democracy."  To which I would say that one man's democracy is another man's mob.  This has been true at least since the debate over health care, if not always.

Angry crowds shouting at then representative Steve Kagen over the health care bill and cap and trade in the Brown county library in 2009 were branded mobs and "astroturf" by those who supported such measures.  Now the shoes are on the other foot, thousands of them, and the same folks that downplayed popular sentiment when it came to the priorities of the Democratic party now herald the demonstrations as indicating genuine democracy.

As a conservative, I'm skeptical of mass movements.  Sometimes such movements are supported by the force of natural law and are legitimate, like the American Revolution or the Civil Rights Movement.  Does the current fight share more with those examples, or does it seem more like the continuation of the issues surrounding the last election?  The assertions of Jesse Jackson aside, the current situation seems to resemble the latter more than the former.

Genes vs. Culture

Marginal Revolution: What do twin adoption studies show?

Another way to put the point is to examine Judith Harris's claim that genes and peer selection are what shape children. Is the claim about peers -- which falls out of the statistics -- causal? Or are peers best thought of as a sufficient statistic for the broader surrounding culture, thereby placing the causal force in that culture?

If it is the latter, the Harris evidence is simply showing, once again, that both genes and culture matter. Which is fine, but it's hardly a revelation. It also leaves open the possibility that parents who wish to influence their children simply need to try harder to shape their surrounding culture. The Amish are not the only ones who succeed in that endeavor, even if most people do not succeed or wish to try very hard.

When asked why we have chosen to home school our five young boys, my wife and I often cite excessive peer influence.  I wonder if it would be more convincing if we explained that we are trying to limit the influence of the broader surrounding culture?

Whether it is in fact the peers themselves or if they are merely carriers of cultural memes, passing these amongst each other in settings like public schools, doesn't really matter to my wife or me in this regard.  For us, the case for the dominance of gene influence is not yet convincing and the peer/cultural factors still matter tremendously.

Paul Krugman Should Take a Look at Wisconsin

While making a point about Governor Scott Walker being beholden to the Koch brothers, Capper highlights the following (my bold):

This from Think Progress:

Koch owns a coal company subsidiary with facilities in Green Bay, Manitowoc, Ashland and Sheboygan.... At a time when Koch Industries owners David and Charles Koch awarded themselves an extra $11 billion of income from the company, Koch slashed jobs at their Green Bay plant:

Officials at Georgia-Pacific said the company is laying off 158 workers its Day Street plant because out-of-date equipment at the facility is being replaced with newer, more-efficient equipment. The company said much of the new, papermaking equipment will be automated. [...] Malach tells FOX 11 that the layoffs are not because of a drop in demand. In fact, Malach said demand is high for the bath tissue and napkins manufactured at the plant.

I realize this doesn't tell us anything about the relationship between Walker and the Kochs. I also happen to believe that untangling the drop in demand from the structural factors of unemployment is crucial to reducing unemployment and probably more important than whether or not Walker is doing the Kochs' bidding.

Here's Matthew Yglesias, also of Think Progress, arguing against the structural story.

National Media Seeks to Rehabilitate Governor Jim Doyle

File this under it takes a lot to laugh, it takes a meme to cry.

Slate's news aggregator is the latest to get in on the act with this:

Meanwhile, the commentariat is lambasting Walker for creating a fiscal disaster and then trying to punish public-sector unions for it. Ezra Klein points out that Walker actually inherited a surplus, but eviscerated it with business tax cuts and a "conservative health care policy experiment." "That's how you keep a crisis from going to waste," Klein says. "You take a complicated problem that requires the apparent need for bold action and use it to achieve a longtime ideological objective." Steve Benen agrees, characterizing the situation thusly: "a far-right governor inherited sound state finances, made them worse on purpose, and now [expects] public employees to fix his problem

Got that? It's a Governor and GOP legislative majority that is six weeks old that have created the current budget situation.

No mention of the $58 million the state of Wisconsin owes Minnesota as part of a now defunct tax reciprocity agreement.

No mention of the $200 million that Governor Doyle transferred from the patient compensation fund to avoid cutting spending. An amount that the State Supreme Court has ordered must be returned with interest.

To his credit, Ezra Klein came back with this update (my bold):

I've been persuaded that the surplus-to-deficit picture is more complicated that I initially understood. The budget report is working with two time periods simultaneously: 2010-2011, and then 2011-13. The $130 million deficit now projected for 2011 isn't the fault of the tax breaks passed during Walker's special session

Despite Klein's laudable effort, it would appear that the protests have claimed at least one casualty, the truth.

Klein: Feds & 46 States Engaged in 'Experiment'

In the course of trying to discredit Governor Scott Walker's budget repair bill, Washington DC pundit Ezra Klein offers this (my bold):

In English: The governor called a special session of the legislature and signed two business tax breaks and a conservative health-care policy experiment that lowers overall tax revenues (among other things). The new legislation was not offset, and it helped turn a surplus into a deficit

The "health-care policy experiment" to which he refers is the ability to deduct contributions to a health savings account (HSA) from your taxable income.

The federal government and forty-six states offered this tax treatment of HSA contributions before Wisconsin.

If that qualifies as experimental, I wonder how Mr. Klein would describe President Obama's health care reform bill.

Advantage Walker

When Governor Scott Walker unveiled his budget repair bill late last week he accompanied his announcement with some vaguely threatening statements about the National Guard. Commentators on the left seized on these remarks and tried to paint Walker as petty and dictatorial. What a difference a week makes.

With schools closed in Madison and elsewhere due to teacher sick-outs and thousands gathered at the Capitol to protest, Walker's resolve seems to only have grown. And now that we know the legislative per diem gets you at least as far as a Best Western in Rockford, it is the Senate Democrats that appear petty. Faced with the prospect of losing the vote, this group chose to escape Wisconsin, but to what end?

An argument can be made that such an extreme measure could be employed to allow time for a compromise measure to be worked out, but as Governor Walker said the other day, when you negotiate, you have to have something to offer. What, exactly, do the Democrats and their allies in labor have to offer?

Walker pays absolutely no political price for angry WEAC and AFSCME members. They didn't vote for him last November and they weren't ever going to vote for him in the future. The only lever over Walker they may have been able to pull would have been to sway public opinion to their side. Any such possibility was lost somewhere between the WEAC pleas to close schools and the flight to Illinois of the Democratic Gang of Fourteen.

I'm not ready to pronounce Governor Walker champion in this fight, perhaps most of the work has been done by his opponent's missteps. Regardless, Governor Walker was clearly today's winner.

Collective Bargaining Provision Could Pass Without Democrats

Law professor Rick Esenberg writes:

Shark and Shepherd: Senate Democrats:Down By Law?

So what to do? Here's something to think about. A quorum is normally a majority of each house. The reason that the Republicans can't proceed without Democrats here is because the budget adjustment bill is a fiscal bill and the state constitution provides that, for a fiscal bill, the required quorum is three-fifths of each house.

Ironically, though, the provisions that are most objected to by the Democrats - the prospective limitation of collective bargaining rights - are not fiscal provisions. They could presumably be put in a seperate bill and passed by the Republicans with no Democrats in attendance because, for that bill, a simple majority would constitute a quorum. I'm not suggesting that the GOP Senators would or should do this. But I think that they could.

The Anit-Market Feature of Governor Walker's Budget Repair Bill

Essentially all of the furor over Governor Scott Walker's budget repair bill has focused on the anti-union portions of the bill, namely the elimination of the right to bargain collectively. Coupled with this item, however, is another that might initially get categorized as anti-union, but is really anti-market. I am talking about the provision limiting wage increases of public employees to the rate of inflation (CPI).

Wages, after all, are a price for labor. Limiting a price by government fiat, any price, is inherently anti-market. I am skeptical that ObamaCare can contain the Medicare growth rate by decree, and by the same token I doubt Walker can hold the wages of public sector workers to the rate of inflation during times when market conditions are pushing them higher.

When the government is engaged in production (say, of enforcing prison sentences) and has need of individuals to carry out the actual work, it draws those workers from the pool of private labor. When deciding whether or not to join the public sector, those workers are going to compare the opportunities offered by the government to those available in the private sector. The government hires people to do many different types of jobs, there will inevitably be some times when the demand for certain skills outstrips supply, and wages may need to rise faster than inflation in order to fill the related positions. At the same time, the supply of some types of labor will be relatively plentiful and the state can offer wages that grow at or even below the rate of inflation.

I suspect that if the CPI limit is allowed to stand within a matter of a few years we will still have enough teachers to staff our classrooms (and that the quality of the median teacher will be lower), but that we won't have enough corrections officers to staff our prisons.

It is true that Walker's proposal allows for an increase larger than the CPI if approved through a referendum. I suspect that this provision is more of a token offer of hope rather than a serious proposal, but either way it's a bad idea. We have a representative form of government, not a direct democracy. If a vote on wages is appropriate, why not let collective bargaining stand and we can vote on working condition and vacation time policies as well? Because this would quickly become unworkable, and I suspect Walker would acknowledge this.

If you believe, like I do, and like Governor Walker says he does, that markets are the best way to determine prices, then the proposed limit on wages is nothing more than a price ceiling. Government meddling with market prices was certainly popular with the GOP during the Nixon administration, but I thought we had moved past that.

We're All Underwriters Now

Ezra Klein - The U.S. Government: An insurance conglomerate protected by a large, standing army

If you want to know what the federal government is really doing, just look where it’s spending our money.

Two of every five dollars goes to Social Security, Medicare or Medicaid, all of which provide some form of insurance. A bit more than a buck goes to the military. Then there’s a $1.50 or so for assorted other programs -- education, infrastructure, environmental protection, farm subsidies, etc. Some of that, like unemployment checks and food stamps, is also best understood insurance spending. And then there’s another 40 cents of debt repayment. Calvin Coolidge once said that the business of America is business. Well, the business of the American government is insurance. Literally. If you look at how the federal government spends our money, it’s an insurance conglomerate protected by a large, standing army.

And GM was an insurance company with an interest in automobiles. A business model that ultimately turned out to be less than sustainable.

Doyle=Bush, Walker=Obama

As the story of Governor Scott Walker's budget repair bill continues to unfold, I am struck by the parallel between Wisconsin in 2011 and the nation as a whole at the beginning of 2009.

 

In President George W. Bush and Governor Jim Doyle, we have politicians who presided over a time of prosperity but did very little, if anything, to prepare their constituencies for the lean years.  In both cases their successors have been able to point to these former leaders as the source of much of the current problems.  Phrases such as, "drove us into the ditch," or, "now the adults have to clean up the mess," are common.  In this respect, the Fitzgerald brothers of 2011 don't sound all that different from Nancy Pelosi in the 2006-2008 period.

 

In President Obama and Governor Scott Walker we have politicians who came to power right at a time of crisis.  Both had legislative majorities that were, or likely will be in Walker's case, decisive.  Both men used the early period in their tenure to push an aggressive agenda clothed in the language of crisis response.  To their supporters this reasoning was credible.  Their detractors, on the other hand, see long-held policy positions being foisted on the people in disguise.  This is the "never let a crisis go to waste" school of political science.  I think you can actually make the case that given their relative impacts, Governor Walker's special session may be more aggressive than Obama's twin legislative accomplishments of the stimulus and health reform.

 

It is still the case that we live in a closely divided country.  This division can manifest itself in at least two ways:  Election cycles that result in razor thin legislative majorities.  Because the majorities are so small, it may not matter much whether these are passed back and forth between the parties or held by one party for an extended period.  The alternative is a world in which every two years brings a large change in legislative majorities.  When we have this case along with the election of an executive officer of the same party, we get the Obama/Walker effect.

Posted via email from rhymeswithclown's posterous

Scott Walker's Budget Repair Bill

Reaction to Governor Scott Walker's budget repair bill continued today and is likely only a shadow of what we will see in the week ahead. While the bill itself contains a number of measures, it is the provisions stripping or limiting the collective bargaining rights of public sector employees that have caused the most anguish. If enacted, these provisions will be a tremendous change in the relationship between the state and public sector workers here in Wisconsin. Whatever the outcome, I believe this bill will have national implications.

Part of the furor over the bill arises from the fact that it was somewhat unexpected, Walker's comments downplaying this aspect notwithstanding. Yes, additional contributions toward pensions and health care by public employees were expected, but how many of us thought that within six weeks of taking office Governor Walker would propose legislation that essentially ends the power of public sector unions? I thought there was a possibility that Walker saw being governor as the culmination of his efforts, rather than just the start of them. This proposal shows how wrong I was.

By its nature this proposal will have a group of supporters who are already Walker fans, and a group of detractors who are already Walker foes. The numbers in the legislature point toward easy passage, but that doesn't necessarily mean the proposals will be supported by a majority of Wisconsin voters. Whether or not these proposals gain popular support and, by extension, whether or not Walker does, may rest with those who don't already have a dog in the fight.

Opponents of the bill have adopted at least three themes in attacking it: It is an assault on the middle class, it denies the history of labor relations and the gains for workers made possible by unions, and it is a power grab by the governor.

My wife and I consider ourselves middle class, and I doubt very much that either of us feels "assaulted" by the governor's proposal. It is quite possible many other middle class Wisconsinites will feel the same way. Not a good sign for opponents of the measures.

The proposals are a dramatic break with history in labor relations between the state and public workers for sure, but is that in and of itself a bad thing? Is it not possible that we need a change in the way this relationship works in order to meet the challenges of a 21st century economy?

As far as the gains made by unions throughout history to improve working conditions in this country, I don't doubt for a minute they are real. One could argue that many of these have become common features of the workplace, eliminating or greatly reducing the need for collective bargaining to secure any further changes. After all, we have yet to see a proposal from the Governor eliminating the 8 hour work day. Some of the Governor's opponents have adopted a rallying cry of "solidarity," but Milwaukee in 2011 is a far cry from Gdansk in 1980.

Finally, there is the power grab argument. This is the one that Walker has done the most to bolster with his somewhat cryptic comment about readying the Wisconsin National Guard. It is proper for chief executives to prepare for contingencies. If Walker was merely suggesting that the Guard could stand in for striking corrections officers, then his remark seems warranted. But if that is what he meant, then why didn't he say just that?

If, on the other hand, he meant something else, then I would urge him to be very careful. Calling out the National Guard on dissenting citizens is NOT commensurate with a small government philosophy. In case there was any question, public sector employees have not given up their first amendment rights (at least not outside of work hours).

If anyone tells you they are certain how this will turn out, don't believe it. It is simply too soon and this change is too big. Once, I thought Walker's handling of the structural budget deficit would define his governorship, with this proposal, however, that is clearly no longer the case.

Scott Walker Budget Repair Bill Reaction

No it's not Egypt, but let's face it, Governor Scott Walker's budget repair bill was a big deal. It's just too bad Rebecca Kleefisch is no Joe Biden.

Here's a quick roundup to some reaction to Walker's proposal:

Updated - New links 2/12 (More 9:21 AM)

FDL - "This self-orchestrated air of crisis is simply the Republican governor’s way of introducing the shock doctrine concept to state government."

Josh Marshall - " And to add a weirdly Mubarak-like angle to it he's now flaunting the fact that he's put the state national guard on alert "

WisPolitics links including Walker's press releases, the bill, and news conference.

MacIver video, including Walker's press conference


Representative Michelle Litjens - “This is precisely why the voters sent us here. They expect us to balance the budget, end the shell games and take the tough votes."

Gov. Walker from the JS - "I get why unions make sense in the private sector . . .  but at the public level, it's the government, it's the people, who are the ones who are the employers," Walker said. "Whether someone is in the union or not . . .  we protect sick leave, vacation time. We protect work rules."

AP - MADISON — Gov. Scott Walker said Friday he wants to end collective bargaining for nearly all public employees because the state is broke and there's no point negotiating with the unions when there is nothing to offer.

Steve Hanson - "I think this letter may explain why Scott Walker says he's been working on a plan for months to send out the Nationsl Guard in case of labor unrest."

For a full roundup of links and more, be sure to check out The Wheeler Report.

Reaction on the blogs is pretty thin. This is probably just because it is a weekend, but some of it may be that people are still quite shocked.

From 2/11
Dad29- "Bombs bursting in (Madison) Air"

Eggster - "Walker to limit state union negotiations to compensation"

The Chief - "Walker has just handed public unions a PR gift."

Dan Cody - "So instead of going to the bargaining table in good faith, he's just deciding to pull out the rug all together on State workers."

WPRI - "In November, we elected a governor who said he was going to do something about it. And now he is. And the unions and their sycophantic legislators are serving notice – don’t ever take the steps necessary to balance the state’s books, or else. A lesson Scott Walker’s predecessor took to heart."

James Rowen - "A day after letting it be known that he intended to strip state workers of most of their collective bargaining power - - hence lowering their standard of living - - Scott Walker will send each state employee an email today thanking them for their service and asking them to understand how tough a job he hast."

The Sconz - "However, the backlash against a direct assault on their existence will be brutal. We could see work stoppages. But I don't think Walker is going to budge."

NPR & GOP Freshman Confused by Health Insurance

Rich Nugent, a freshman GOP congressman from Florida, was featured in an NPR news story yesterday about members of congress who have declined the federal health care that comes with their jobs.

It is revealed that Mr. Nugent is now paying almost $1,300 per month for insurance. The story is framed as if he is going out to buy his own insurance in the private market, but it's clear that this is not exactly what is going on here:

SIEGEL: But isn't the essence of your problem right now that you're in the individual insurance market and that if we could find some way for you and the other people who have retired from the sheriff's office to be part of a group buy, a massive group buy, you could do a lot better than $1,200 to $1,300 a month?

Rep. NUGENT: Well, actually, that is part of the group buy. But we pay 100 percent of it. The government doesn't subsidize any portion of it. So that's why it's so expensive.

So when Nugent is talking about the $1,300 per month, he is talking about the full cost of the insurance that someone in the federal employee group pays. He is NOT talking about an individual policy. And the subsidy he mentions:

Rep. NUGENT: ...when you look at what they were going to charge me for family coverage, it was subsidized to the tune of almost 75 percent. And that's the actual cost that the federal government is paying for an elected official's health care.

What the Representative is describing here, is the fact that the federal government typically pays about 75% of the annual premium to cover a member of Congress. Where I come from that is not a subsidy, that is called compensation. Perhaps Mr. Nugent also thinks his congressional paycheck is a subsidy for his lawmaking activity, but to me that sounds like a salary.

Given this, the entire thrust of the story simply falls apart. That thrust being most folks can't afford $1,300 per month premiums on their current salary. What this leaves out is that the portion of a premium paid by an employer is also part of total compensation.

It's true most people can't afford to go from paying $1,000 a year to $15,000 a year for health insurance on their current salary. But if their salary increases by $14,000 a year, just like their insurance premiums, they are in exactly the same position!

It's a basic rule of economics, focus on the unseen as well as the seen. In this case no one seems to notice the part of Nugent's compensation that goes toward health insurance. They only account for his current cash salary and the fact that he has chosen to pay the full amount of his insurance premiums himself. This guy hasn't opted out of federal health care so much as he has engineered a pay cut for himself.

The fact that a member of Congress and an elite media institution can't appreciate these simple facts does not bode well for a successful transformation of the health insurance industry in this country any time in the near future.

Left Seizes the (Im)Moral High Ground

Illusory Tenant noted that today is Hump Day of National Marriage Week, and, as if on cue, we have the latest in the seemingly endless string of stories about philandering GOP politicians.

The gang at One Wisconsin Now highlights the Craigslist exploits of (now apparently former) GOP congressman Chris Lee:

Rep. Christopher Lee is a married Republican congressman serving the 26th District of New York. But when he trolls Craigslist's "Women Seeking Men" forum, he's Christopher Lee, "divorced" "lobbyist" and "fit fun classy guy."

Uh oh. Hypocritical GOPer -1 : National Marriage Week - 0.

Apparently, the persistence of womanizing GOP'ers somehow proves that opposition to gay marriage is wrong. I'm not sure exactly how, that part is never really explained, but before and after the accompanying compromising photo in the post, they manage to get in "hell-bent", "ultra-conservative base", and "extreme right wing" just to remove any lingering doubts.

These episodes are inevitable and despite the left's best effort to turn them into a story about the GOP writ large, they simply aren't. These instances of bad behavior by individual men are simply that, nothing more. The blame for such bad conduct lies squarely with the individuals involved, not their party, and not the people with whom they happen to agree on a certain issue. I doubt the left can ever fully understand this for at least two reasons.

The first is that when your philosophy of individual liberty revolves around immediate personal gratification, it's impossible to fault these men for pursuing the same. As liberal blogger Matthew Yglesias tweeted, "Not sure I understand what wrongdoing Rep Lee has committed." Self-indulgence practically doesn't exist as a concept for many on the left, with the notable exception of wanting to keep more of the money you have earned.

Then there is the matter of a world view which seeks to transfer blame from the individual to some outside factor. When you believe that poverty, the existence of guns, or big business are the real reasons for the wrongdoing by individuals, there simply is no way to assign blame to a single man for the bad things he has done. The Koch brothers have come in for some heavy criticism from the left of late, but even there they can't narrow it down to just one guy!

I for one am glad Mr. Lee is leaving congress and I'll be just as happy if serial monogamist Newt Gingrich stays out of office, but these incidents have nothing to do with my views on marriage. Infidelity is about individual bad behavior and little else.

How Not to Help the Poor

Rich Take From Poor as U.S. Subsidy Law Funds Luxury Hotels - Bloomberg

The landmark Blackstone Hotel in downtown Chicago, which has hosted 12 U.S. presidents, opened in 2008 after a two-year, $116 million renovation....

What’s surprising isn’t the opulent makeover: It’s how the project was financed. The work was subsidized by a federal development program intended to help poor communities.

The biggest beneficiary of taxpayer help for the Blackstone revamp was Prudential Financial Inc., the second-largest U.S. life insurer. The company got $15.6 million in tax credits from the U.S. Department of the Treasury for helping to fund the project, according to Chicago city records, Bloomberg Markets magazine reports in its March issue....

Building high-end commercial projects goes against the intent of the New Markets program, says Cliff Kellogg, a former senior policy adviser at the Treasury Department who helped design New Markets.

“Things like luxury hotels are entirely contrary to what we set out to do,” says Kellogg, who’s now a bank consultant. “Some hotels may create jobs and spur other nearby investment, but you have to ask if these projects prevent worthwhile ones from getting done.”

Be sure to visit the link for more depressing details of how another program intended to help the poor, does little more than enrich private enterprises.

Such stories reinforce my pessimism about government's ability to carry out complex schemes designed to help the poor. I really think we should just use Social Security as the model of a highly effective and efficient anti-poverty program: Define a simple criteria for who needs help, write that person a check, collect taxes to cover the checks.

Anything beyond that and we are just as likely to create opportunities for the rich and well-connected to game the system as we are to actually help any poor people.

Whither the GOP

The American Conservative » The American Conservative at CPAC

Donald Rumsfeld may be receiving a “Defender of the Constitution” award — they must mean the Soviet constitution — but in many ways this looks to be a very bad CPAC for neocons.

Elsewhere, National Review's Rich Lowry presents eight (count 'em!) reasons for Jeb Bush to run for president in 2012.

It Takes a Village of Tiger Mothers

Marginal Revolution: Observations about Chinese (Chinese-American?) mothers

4. Bryan, like Judith Harris, argues that the influence of parents is typically mediated through peers and peer effects. But we should not confuse the partial and general equilibrium mechanisms here. For any single parent, the peers may well carry the chain of influence to their child and a lot of the parenting style applied to that individual kid will appear irrelevant. But for the culture as a whole, the peers can serve this function only because of the general influence of culture and parenting on all of the peers as a whole. In other words, peer quality is endogenous and a single family is free-riding upon the parenting efforts of others. That's a better model than just looking at the partial equilibrium coefficient on the parent effect and concluding that parenting doesn't matter. This is a mistake commonly made by Harris fans.

Tyler Cowen on the tiger mother school of parenting.

Excessive peer influence is among the top reasons my wife and I have decided to home school our younger children.

Socialism, Snow Removal, & Public Goods

The other day, I saw this on the Blogging Blue Twitter feed:

I say we do away with socialized snowplowing. Get the government out of my snowbanks!!!

I realize that socialism has been used as an epithet by those on the right, particularly during the healthcare debate, and that those on the left may feel the need to try and defuse some the word's power. The sentiment in this tweet may be designed to do exactly that, but both sides could benefit from some more clear-headed thinking when it comes to the use of the S word.

Socialism is typically defined in economics as "a centrally planned economy in which the government controls all means of production," a concept most of us can easily understand. As a means of administering an entire modern economy, this method has been thoroughly discredited by the example of the former Soviet Union. Obviously, there are current examples of specific countries or industries that resemble Socialism to greater or lesser degrees. For example, a healthcare system where a government only permits doctors in its employ to practice medicine would be described as having socialized medicine. (Note that this is distinct from allowing anyone who demonstrates minimum qualifications to offer medical services for sale.) Whether or not such a system is your preference, calling it socialized medicine is an accurate description, not a slander.

So is it accurate to say we have socialized snow removal?

While government entities are responsible for much of the snow removal that occurs, they certainly don't do it all. Many private enterprises offer snow removal services, though these services are generally limited to private homes and businesses rather than on public streets. The very existence of private snow removal services would seem to argue against snow removal being accurately described as socialized. At the same time, the primary role of government in providing this service is clear. So what, exactly, is going on here? Before we answer that we should think about another economic concept, public goods.

For a full discussion of public goods read this article, for our purposes, I will just focus on this aspect of the definition by Tyler Cowen:

Public goods have two distinct aspects: nonexcludability and...“Nonexcludability” means that the cost of keeping nonpayers from enjoying the benefits of the good or service is prohibitive. If an entrepreneur stages a fireworks show, for example, people can watch the show from their windows or backyards

Now I happen to live on a court, which is the name they give cul-de-sacs in areas with high property taxes, and, as such, my street is among the lowest priority for snow removal following a storm. Budding entrepreneur that I am say I hook a plow to my Chevy 1-ton van and start plowing my court ahead of the city after every storm. I would bet that my neighbors will appreciate this. It's not that far-fetched to think that some of them might even be willing to pay me for performing this service.

If the city gets wind of this and slaps me with a cease and desist, that would be pretty strong evidence that we are on the verge of a socialized snow removal regime. Supposing they don't and I am allowed to continue my small scale operation, would I?

It's doubtful that I could get all fifteen or so of the houses on my court to pay me for my quicker than the city snow removal, so what are my options? First, I could only plow in front of the houses that pay me, leaving a sort of patchwork quilt of unplowed street. This could quickly become a problem as my paying customers would rightly complain that paying for my service is only worth it to them if the entire street is plowed. If they still have to punch it in order to get through a drift every forty feet, why bother paying at all.

My response to this is likely to include plowing the entire street in order to keep my paying customers happy. This also means that everyone who didn't pay me gets to benefit from the plowed street. Unfortunately, this will quickly bring an end to my dreams of early retirement financed through snow removal efforts as my paying customers realize their neighbors are enjoying the benefit of the plowed street without paying. In economic jargon, the non-payers are free-riding. Once this is apparent, there is little incentive for anyone to pay and shortly after that there is no incentive for me to plow and all the residents of the court are left waiting for the city.

I hope this little illustration demonstrates the concept of nonexcludability and suggests that snow removal might meet at least this criteria of a public good. If so, that makes the means for producing snow removal on public streets easier to deal with. There is a broad consensus that public goods are most efficiently produced when financed by taxes and supplied by the government. So the real question is, which goods are public goods?

We won't always agree on the answer of course, but these days, I'm not sure if anyone is even asking the question.

To those on the right, I would suggest that we not cry "socialism!" at every government encroachment lest we end up like the boy who cried wolf and no one listens when we are confronted with the real thing. Additionally, there is a role for government to play beyond law and order, we should acknowledge those cases and endeavor to make government's operations there the best it can possibly be.

To those on the left I would remind you that not every outcome you don't like represents a market failure, begging for a government solution. Relative to other cultures, maybe the United States is more suited to a smaller government sector simply as a matter of temperament. And if some of us detect that some of your preferred solutions to our national woes may lead to government control over the means of production, we should be able to call that what it is, the road to socialism.

The Tort Reform We Need

Marginal Revolution: Dialogue with David Leonhardt

I also favor reduced liability standards for major new innovations. Take the various plans for robot-driven cars. They will kill some people, as do human-driven cars. We run the risk of having the status quo so locked into place, so grandfathered, and so implicitly favored by the realities of regulation and lawsuits, that such an idea might never get off the ground.

That's Tyler Cowen

1099 Reasons to Doubt the Senate

Today the US Senate voted on two amendments related to the health reform. One was a vote on repeal, which failed on a party-line vote. The other amendment was successful with 81 Senators voting to repeal the 1099 provision of the health reform law.

So an actual law, voted on by the majority in Congress and signed by the President, is able to garner 81 votes for repeal in the Senate after only 11 months? Not to mention the fact that the 1099 provision hasn't even gone into effect yet, so we have not even seen it in action.

I thought this was exactly the kind of thing the Senate was designed to protect against.

Here's a description of the 1099 provision from back in May (from CNN Money):

Section 9006 of the health care bill -- just a few lines buried in the 2,409-page document -- mandates that beginning in 2012 all companies will have to issue 1099 tax forms not just to contract workers but to any individual or corporation from which they buy more than $600 in goods or services in a tax year.

The stealth change radically alters the nature of 1099s and means businesses will have to issue millions of new tax documents each year...

While all but unnoticed at the time -- a Pennsylvania business group issued the first warning last October as the idea emerged in draft Senate legislation

And from coverage of today's debate:

By a bipartisan vote of 81-17, the Senate on Wednesday evening passed an amendment by Sen. Debbie Stabenow (D-Mich.) that would repeal a provision from the ACA that requires all businesses to fill out a tax form known as a "1099" each time they spend $600 or more....

...businesses complained that the provision was too onerous, congressional Republicans and Democrats didn't like it, and even President Obama called the provision a "flaw" during his State of the Union address last week and said that he was open to removing it from the law.

If you are just going to gulp your coffee, what is the point of a cooling saucer?