Badger State

I never saw you look like this without a reason
Another promise fallen through, another season passes by you
--Big Country

Challenges to collective bargaining policies between government and public sector employees raised last week by the state of Wisconsin are now migrating to other states including Ohio. Teacher's unions have been a particular focus so far, although the issue applies across all govt sectors.

Reaching this point was inevitable. Government has been socializing sectors of the economy for years. As we have constantly noted in these pages, this process leads to predictable consequences. Resources get misallocated. Lower standards of living drive bureaucrats to borrow or tax to fill the void. Declining real incomes are unable to pay back the ever growing mountain of debt. More resources are misallocated. Standard of living declines further. More debt. At some point, further iterations are impossible and the system falls apart.

The proper solution to this problem, of course, is for government to get out of the various lines of economic activity that they have meddled in (e.g., education). The government.com bubble needs to pop, and the boundaries of government need to regress to Constitutional limits.

Unlikely you say? Well, the current situation in Wisconsin is laying bare the existing system for the public to inspect and absorb. And it takes no genius to recognize the corrupt cycle currently in place. Public sector workers, who are also voters, group together and elect politicians who kick back sweet labor packages to those special interest groups (SIGs) that got them into office.

In the private sector, profit motive motivates employer to prudently manage labor negotiations. If employers agree to overly generous concessions to labor, then the employers will lose property. Indeed, the future viability of the enterprise may be jeopardized (see GM).

In the public sector, the risk associated with labor negotiations is socialized. There are no market forces to govern the decisions of bureaucrats. Instead, we have a classic agency problem, where politicians (the agents) act in their own self interest while the public (the principals) are incapable of influencing the content of the resulting contracts before they are enacted. And the public is on the hook for agents imprudence and mischief.

Until, of course, the system locks up...which it is doing now...

no positions