The Peril of Procedural Reform

By Megan McArdle

I'm finally reading The Ungovernable City, the biography of Mayor Lindsay's tenure.  Though he ran as a Republican, Lindsay was a progressive reformer in the model of New York's liberal party.  Like the Liberals of the time, Lindsay had a vision of tearing down the old, inefficient machine and building a vast new system that ran on the highest of principles.  This made him a stand-out hero in the House of Representatives, but it didn't make him particularly effective even there.  And it was a disaster when he tried to run the nation's largest city, filled with fractious interest groups who didn't share his particular set of principles.  Arguably, politics is the art of getting a deal when you can't agree on the matter of principles.

I may blog more about this later, but I was particularly struck by this passage:

Quill's name has become permanently associated with the 1966 transit strike, but it was arguably Mayor Wagner who made it a possibility when he signed Executive Order 49 into law on March 31, 1958.  The act gave municipal unions the right of collective bargaining.  Alex Rose, the vice chairman and effective head of the Liberal Party, president of the United Hatters, Cap and Millinery International Union, and a Wagner adviser, had urged Wagner to sign the bill, which became known as the" Little Wagner Act" (a reference to federal labor legislation introduced by his father, Senator Robert F. Wagner, in 1935).  Toward the end of his life, though, Rose came to regret doing so because "the city is not an employer in the traditional sense.  Profits do not exist.  Workers are not extracting a share of the profits but rather a share of taxes.  Unlike bargaining in the private sector, municipal collective bargaining is part of the political rather than the adversary process."

Mayor Wagner made it work because he had strong political ties to the unions; he co-opted the collective bargaining process to deliver results that were politically palatable to the taxpayers.  But this was undone by two things.  First, Wagner's wife died, and the city grew more fractious; with his popularity waning and his private life in turmoil, Wagner declined to run for another turn.  And second, the transit union grew more diverse.  "Red Mike" Quill had been able to deliver his union for Wagner when it was composed largely of Irish Catholics like himself.  But by the mid-sixties, he had growing numbers of black and Puerto Rican members who did not feel the same bonds with the union establishment; moreover, since the minority members of the union disproportionately had low wage jobs, they resented the deals that kept them, they felt, underpaid relative to other city workers, and indeed others in the transit system.

The result was a series of demands that would have cost an already fiscally precarious city between $250 million and $650 million over the next two years.  On the first day of Lindsay's term, Quill took his workers out on strike; businesses lost millions, and the city was crippled by the traffic.  The problem was compounded by Lindsay's imperious manner, lack of political skill, and the woeful inexperience of his staff, who made deals that they had to match for other unions in later years.

This process was not unique to New York.  And now we are facing a pensions crisis driven by decisions like this.  I share the anger at politicians who gave away lavish unfunded pension increases as "free" political sweeteners to favored unions, and put their budgets on the inevitable road to ruin.  But it's easy to forget that often, these politicians were in a no-win situation.  When crucial public sector workers collectively bargain, they end up with ruinous power over the taxpayers:  how many days can a city survive without its police, its transit workers, or its teachers?  In New York, strikes by such workers are technically illegal, but in practice, unless you've got a spare pot of policemen or transit workers, the illegality doesn't do you any good, because you can't fire the workers.  A single industrial company can maybe ride out such a transition, but a city like New York simply cannot.

That's why those unions were historically barred from collective bargaining.  And perhaps unsurprisingly, I think that was the right call.  As we're seeing in GM, even a mighty private sector union like the UAW can be forced to confront reality.  I'm not sure how that's going to happen in the public sector, where the bargainers elect the folks on the other side of the table.

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