Recipe for Disaster, or: How Your Kid’s Schoolteacher Caused A Budget Crisis

February 8, 2010 | Aaron Keating

Reading Richard Davis’ latest opinion column in the Puget Sound Business Journal is like eating a meal prepared by a blindfolded cook.

We begin with a helping of red herring, in which Mr. Davis cites a Heritage Foundation report that says unionized government jobs pay $430 per week more than comparable jobs in the private sector. He leaves out the real economic beef, which is that real wages in the private sector have been flat for more than 20 years while costs for everything from housing, child care, college, and health care have taken up more and more of the family budget.

Of course by comparison, union jobs are better paid. The unions bargained for a better deal from their employers. According to a recent report by the Center for Economic and Policy Research:

…unionization is associated with about a 15 percent increase in hourly wages (roughly $2.50 per hour), a 19-percentage-point increase in the likelihood of having employer-provided health insurance, and a 24-percentage-point increase in the likelihood of having an employer-sponsored retirement plan.

Later, Mr. Davis writes that “Main Street employers find it hard to compete for new hires. The market is the best test: If there’s a general shortage of applicants for government jobs, I’ve not seen it.” It’s too bad he didn’t have an H.R. professional in the kitchen with him when he wrote that, because Mr. Davis would have learned that these days, listing a job — any job — on Craigslist is an invitation for a very (very!) full in-box. Hard to compete? Hardly. The rest is a kind of let them eat cake logic in which long unemployment lines signal a market success, not failure.

The proof is in the pudding: with more families than ever having trouble putting food on the table, does Mr. Davis devote any part of his column to proposals to help unemployed workers and struggling small businesses get through the Great Recession — say, with better access to job training, low-interest business loans, reduced tuition costs at state schools, improved unemployment insurance benefits, or affordable health care?

No. Instead he serves a bitter brew of pay cuts for our schoolteachers, nurses, firefighters and other members of Washington’s public employee unions — the very people we all rely on, recession be damned, to continue to serve the public day in and day out.

Plop plop, fizz fizz. Reading this stuff gives me indigestion indignation. But not because members of Washington’s public employee unions earn a living wage or have a good pension plan. Quite the contrary: I want private sector workers to be paid enough to get ahead — or at the very least, keep up — and have a dignified retirement after a lifetime of hard work, regardless of employer.

Mr. Davis closes by writing of a “business-led economic recovery [that] is being stifled by the weight of higher taxes and regulation.” With unemployment still this high, I think it’s a bit premature to say a recovery is underway. But when it begins, it will be more of a chicken-and-egg process: led on the one hand by consumers with secure jobs and healthy paychecks who are ready to start buying goods and services, and on the other by business owners who see demand tick up and are ready to start hiring.

In the meantime, government spending is needed to stimulate demand and keep people employed. And that requires tax money — though not all taxes are created equal, to be sure. (More on that in a minute.)  As for the regulation bogeyman, by now it’s quite clear to anyone with both eyes open that a lack of regulation is the main reason we’re in this recession in the first place. A collapsed souffle of irresponsible lending and lax oversight of the nation’s financial sector destroyed our housing market, taking tens of thousands of Washington jobs — and state and local property, payroll and business tax revenue — with it.

Small business owners know that, and want more government regulation to keep it from happening again. Check out this recent poll of 1200 small business owners (138 of them in Washington): only six percent said they’d like to see less government involvement in the financial industry, while 87 percent said they want Congress to pass stronger financial reforms.

Slashing public payrolls in the middle of a recession won’t help fix our economy. It will threaten the jobs of the very people we depend on to protect our quality of life. Without good schools, affordable health care, a safety net for the most vulnerable, affordable housing, public safety, and a clean environment, the state’s business climate and job market will suffer, undermining any future economic recovery.

A more responsible way to address this year’s revenue shortfall is to close tax exemptions that no longer serve a compelling public purpose, and carefully select new revenue sources — especially those that will: 1) expand the tax base, 2) discourage behaviors and practices that raise public costs, and 3) be paid by those most able to afford it — including corporations whose shareholders live mostly in other states. Doing so will help stabilize state revenue over the long run, and make our tax structure more equitable.

That’s a recipe for building an economy that works — for everyone.

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Posted in State Economy, Tax and Budget

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