Showdown in Wisconsin

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The circus in Wisconsin is rapidly blowing up into the national issue of the moment, thanks in no small part to President Obama and of course Organizing for America, the group that grew out of his 2008 campaign, which seems to be playing a prominent role in building up the protests.


On one level, this is extraordinarily odd--is it really the president's job to be taking sides in a dispute between Wisconsin's elected government and its state employees?  But in another way, it's logical, even necessary.  State governments are where some of the hardest choices about taxes and spending have to be made.  And thanks to a confluence of factors--ObamaCare rules that keep states from cutting Medicaid spending, poorly thought-out pension obligations that are now coming due, crashing revenue thanks to the recession, and in all but one states, a balanced budget requirement--those choices have to be made now.  Wisconsin is facing a $3.6 billion shortfall over the next two years.  The money is going to have to come from somewhere.

The pundits on both sides are teeing up the outrage.  The right turns on the outrage that teachers are leaving students untaught in order to protest fairly modest requirements that they contribute to their health care and pension obligations.  The left fires back that the cuts are just a sideshow, and that the real problem is the other provisions in the bill, which restrict collective bargaining to wages, rather than benefits, and state that pay increases cannot exceed the CPI without a public referendum.  The New York Times angrily complains that the GOP is declaring a spending emergency after blowing a hole in the budget with a series of tax breaks for individuals and businesses.

I'm not outraged by either side.  Of course the teachers would like to be paid more, contribute less to their pensions and health care, and be able to collectively bargain for their benefits.  One of the prime attractions of a career in K-12 teaching is that you can almost never be fired, and you have a powerful union that spends a lot of time lobbying the legislature.  Naturally, they are going to fiercely resist having this taken away after many of them have given a decade or two to a career based on this assumption.

On the other hand, of course the legislature needs to balance what the teachers want with the other needs of the state.  I am, as a matter of policy, against special tax breaks, so I agree that Wisconsin should not have spent $120 million on them.  But the actual targets--businesses that hire new employees, businesses that relocate to the state, and health savings accounts--are not prima facie morally inferior to allowing teachers to collectively bargain higher pensions and health benefits.  In fact, on average, they're targeted towards groups that are worse off than the teachers--the unemployed, and people with high medical costs.  Overall, as a matter of policy, I would prefer to spend money on those people than on teachers who are fairly well paid for the number of days they work.  

To the conservatives I would have to ask the same question:  is it good policy to tie the hands of politicians in seeking to attract and retain teachers?   On that question, I don't know the answer.

On the one hand, freezing your salary bumps at CPI doesn't seem like a great way to attract and retain the best workers; it seems like Wisconsin school districts will be at a competitive disadvantage with other industries and states.  On the other hand, those things are already collectively bargained, and bumping the wages of an entire class of people in order to attract a few more workers does not seem to be a very efficient way to go--indeed, it's the basis of all those monopsony models of labor market failure.  

So I have my doubts as to whether the current system does much to attract and retain the best workers, which means that the new rules can hardly make it much worse.  Indeed, you can make a fairly compelling argument that teachers wages are not set so much on the basis of what's needed to get the workers, as how much political muscle the teachers can muster.  In which case the proposed rules will probably help restrain the bad political incentives that put pressure on the state budget.  There are legitimate reasons that politicians to seek to tie their own hands on certain questions.

Of course, there are also legitimate drawbacks, as the state of California illustrates.  Over the long haul, these mechanisms break down one way or another--in the case of Wisconsin, I'd bet that eventually there will be a shortage of math and science teachers that will need to be rectified by legislative intervention.

But until then, is it somehow morally wrong for the Wisconsin legislature to change the rules under which it will bargain with its employees?  It's incoherent even as a question. The legislature is the entity which is supposed to set those terms--and it's no more outrageous for the GOP to favor small businessmen and the self-employed than it was for Democrats to favor a constituency which has become (as we now see) a de facto arm of the Democratic Party.
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Megan McArdle is a columnist at Bloomberg View and a former senior editor at The Atlantic. Her new book is The Up Side of Down.

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