Sunday, February 27, 2011

Red Flag Warning: Where We Went Wrong

The watchman has been tuned into the recent controversy in Wisconsin where pro-union and government is at odds over collective bargining rights, benefits, and pending state bankrupcy. The seeds of this conflict go way back to when unionization of government workers was first autorized. At that time the general government worker did have pretty shabby pay, benefits, and work conditions. In essence government leaders pretty much treated their employees as low paid servants in trade for certain job protections. While a government worker couldn't be fired, they traded that security for below average wages and benefits. Unions were able to "buy-off" enough leaders to gain a foothold into the system. Thus began the upward sprial of ever increasing wages (good) with every increasing long-term benefits (bad). Stupidly we all fell for the game and most local, state, and federal budgets are stretched to the breaking point with greater than 50% of the budget going to pay salary and benefits of employees. Had the good times continued we wouldn't be in this mess, but we forgot that what goes up usually comes down. Pensions that were predicated on 12 and 15% ROIs by government planners actually were more in line with 3% to 5%. The baby boomers grew up and now have their hand-out asking for their retirements. Property tax revenue has dropped like a rock off a cliff. The "wealthy" either are tapped out or smartly moved money off-shore. The rhyme of ol'mother hubbard has come home in a most painful way. Collectively we are like a life boat bobbing in a sea of debt with a leak in the bottom and we're fighting over what size of plug to fit in the hole!

The solution is for wise people to follow what the good book admonishes us to do: think more highly of others than we do of ourselves. Each side back away from the edge of the cliff and vow to work together to resolve the conflict before jointly jumping off the cliff, arguing on the way down. This requires the government leaders to assure they won't treat our public servants poorly as in prior decades. It requires unions to have expectations that are realistic. It means having unions the right to organize, but government not act as their dues collector and employees free to chose to join or not. It means full and open accountability of budgets and expenditures of the government. No more funny math or putting off to tomorrow what must be paid today. And employees also need to see their need to lower expectations of outcomes.

We went wrong long ago. We need to go right now or the life-boat is going to sink, economically killing us all.