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Mona Charen / Feb. 22, 2011

What Madison Revealed: Teachers as Rent Seekers

The particular defunct economist who most dominates the minds of the Obama administration and the Democratic Party is Keynes himself. But events in Wisconsin and a few other states are bringing other economists -- some still very much alive -- to the fore.

In Wisconsin and other states facing severe budget crises, we are witnessing the clash of special interests versus the public interest. Though the term "special interests" is usually deployed as an epithet by Democrats and is meant to refer to oil companies, "the rich," or other undesirables, in fact, as economist James M. Buchanan and other "public choice" theorists explain, a special interest is any community that attempts to gain a particular advantage from government.

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.” – John Maynard Keynes

The particular defunct economist who most dominates the minds of the Obama administration and the Democratic Party is Keynes himself. But events in Wisconsin and a few other states are bringing other economists – some still very much alive – to the fore.

In Wisconsin and other states facing severe budget crises, we are witnessing the clash of special interests versus the public interest. Though the term “special interests” is usually deployed as an epithet by Democrats and is meant to refer to oil companies, “the rich,” or other undesirables, in fact, as economist James M. Buchanan and other “public choice” theorists explain, a special interest is any community that attempts to gain a particular advantage from government.

Buchanan taught that government officials – office holders and bureaucrats alike – respond to incentives and pursue their self-interest just as other economic actors do. So do “rent seekers.” The classic example offered is that of protectionism. An industry – say, the sugar growers – lobbies the government to impose tariffs on imported sugar in order to keep prices high (they are the rent seekers). A tariff will benefit each and every sugar grower substantially. So it is in the sugar growers’ interest to form a trade association, to make campaign contributions, and to pay close attention to the way office holders vote on the question.

The broad public, by contrast, is potentially disadvantaged by a tariff on imported sugar because prices for candy, soda, and other products that contain sugar will rise. But the incremental added cost, per consumer, is very small. It is therefore extremely difficult to organize the public to oppose sugar quotas, or a host of other measures. Thus does government spending ratchet ever upward.

Public employees in many states are classic rent seekers, but they do sugar growers and the like one better. Through collective bargaining, unions negotiate with elected officials for wages and benefits. They then get the state to collect union dues for them by withholding the dues from public employees’ checks. With the accumulated cash, the union then makes campaign contributions to the favored public officials. Neat.

As labor historian Fred Siegel told John Fund of the Wall Street Journal: “Ending dues deductions breaks the political cycle in which government collects dues, gives them to the unions, who then use the dues to back their favorite candidates and also lobby for bigger government and more pay and benefits.”

This system has worked well for public employees across the nation. Until 2010, New Jersey teachers contributed nothing to their lavish health care packages. Permitted to retire after 25 years of service, teachers receive pensions of 70 percent or more of their top salary (among the highest in the country) as well as health care for life. Yet the NJ Education Association howled when Gov. Chris Christie asked them, in light of the state’s dire financial straits, to accept a one-year wage freeze and to contribute 1.5 percent of their salaries to the cost of their health plans.

Wisconsin teachers, too, have negotiated cushy deals for themselves. As Gov. Scott Walker has pointed out, private employees contribute an average of 29 percent of the cost of health benefits. Wisconsin union members contribute only about 6 percent. With the state budget in the red, something had to be done.

The bargains between governments and unions (or other special interests) require one thing above all to be successful – an inattentive electorate. Just as the sugar growers would be eager to keep people in the dark about quotas or subsidies, so unions want the public to be kept ignorant of the overly generous compensation packages that are negotiated at the taxpayers’ expense.

That’s why the massive, tub-thumping, sign-waving, hippie sit-in staged by teachers and their allies in Madison over the last week makes no sense. (By the way, did you notice the demise of “civility” in politics? Where are the denunciations of the pictures of Walker as Hitler and Mubarak? The signs calling him a “Midwest Mussolini”?) The protests, with their attendant disdain for the school kids (so many teachers fraudulently called in sick that schools in Milwaukee, Madison, and Janesville had to close), serve as a huge neon sign alerting the sleeping electorate to what has been happening to their tax dollars.

The rent seekers stand exposed. Nothing that Walker and the Republican legislature had in mind is as damaging to the teachers union as that spotlight.

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