Just to be clear: Jeb Bush hates unions … teachers unions, police unions, firefighters unions … basically any brand or form of public employee union that exists in nature.
When Bush was governor, he went to war with the teachers unions, pushing for reforms that would all-but eliminate public schooling and replace it with vouchers to religious schools. His “reform” plans failed, only to be revived by his minion, Senator John Thrasher — a revival that met the business end of Gov. Charlie Crist’s veto pen. If you want to understand the origins of Jeb’s distaste for his predecessor, start with education (Crist had downplayed Jeb’s reforms long before the end-of-term veto.)
Now out of power (at least for now) Jeb has found a new way to get at the thing he hates. He and his friend Newt Gingrich are pushing for a radical new solution to the fiscal crises facing several states with significant public pension obligations: allow those states to declare bankruptcy; the one way those states could legally void their union contracts. After that, Jeb suggests simply doing away with the very idea of pensions. After all, anyone who wants to retire should simply get rich on Wall Street or inherit money (he did both), the way God intended.
From the op-ed, which ran in today’s Los Angeles Times, the Bush-Gingrich three-step plan:
First, as with municipal bankruptcy, it would have to be completely voluntary. This means that neither the federal government nor state creditors could push an unwilling state into bankruptcy, no matter how catastrophic the state’s finances may be, as this would violate the U.S. Constitution’s protection for a state’s sovereign immunity.
Second, as with municipal bankruptcy, a new bankruptcy law would allow states in default or in danger of default to reorganize their finances free from their union contractual obligations. In such a reorganization, a state could propose to terminate some, all or none of its government employee union contracts and establish new compensation rates, work rules, etc. The new law could also allow states an opportunity to reform their bloated, broken and underfunded pension systems for current and future workers. The lucrative pay and benefits packages that government employee unions have received from obliging politicians over the years are perhaps the most significant hurdles for many states trying to restore fiscal health.
Third, the new law should allow for the restructuring of a state’s debt and other contractual obligations. In a voluntary bankruptcy scenario, states, like municipalities, will have every incentive to file a reorganization plan that protects state bondholder claims and their ultimate recovery. States will evaluate their future access to bond markets and their prospective borrowing rates as they formulate the optimal restructuring plan.
Note who Jeb and Newt want protected in any process: the bondholders — meaning, Wall Street firms like Jeb’s former haunt Lehman Bros. (may it rest in peace) and wealthy stockholders. Go figure. And funny that the BushRich wants their crazy scheme to have a built-in prohibition on states fill the holes in their budgets the old fashioned way: by raising taxes.
Now keep in mind that Jeb’s state, Florida, and Virginia, where Gingrich now lives with his third wife/former mistress (with whom he carried on an affair while married to his second wife who too was his former mistress, but I digress…) are non-union, “right to work” states. Notably, public employee unions are exempt from that status, and Jeb in particular has been a big proponent of breaking those unions. In that goal, he is aligned ideologically with people like NJ Gov. Chris Christie, who has made union busting (and opposing infrastructure projects) the centerpiece of his administration. This additional paragraph from the op-ed is telling:
An additional benefit of a new voluntary bankruptcy law for states is that its mere existence may deter any state from ever availing itself of its provisions. If government employee union bosses know that they could have all their contracts annulled under federal bankruptcy law, either through a plan of reorganization voluntarily entered into by state leaders or by the voters through proposition, they may be far more accommodating with state governments to restructure government employee union workforces, pensions and work rules.
From Politico’s Arena, a few comments…
Joe Matthews, a senior fellow at the New America Foundation, had this to say:
This is an idea so terrible and without merit that one has to wonder if some of its backers are simply trying to make money by taking short positions on municipal bonds.
Even talking about bankruptcy of states is bad — for everyone (except those with short positions). The discussion of bankruptcy makes it harder for states to borrow and balance their books. And while Republicans may think the prospect of state bankruptcy hurts public employee unions (and it does), it’s also undermining the business community by increasing pressure for tax and fee increases, as well as for cuts in education and infrastructure.
Eric Cantor’s opposition is likely based on the fact that he’s no dummy and he realizes the potential damage to businesses and bondholders, many of whom are Republicans.
It’s one thing to say the federal government shouldn’t be helping out states in a time of fiscal need. That’s a legitimate argument. But it’s a long and crazy leap from there to say bankruptcy is the solution. States are sovereign entities that can cut spending and raise taxes. None are anywhere close to defaulting on their obligations.
So what’s going on here? Beyond the possiblity of self-enrichment, some proponents of this bankruptcy idea are seeking to score political points by noting the problems of states such as California, Illinois and New York — all big Democratic states. Here’s another thing about those states that state bankruptcy proponents don’t mention — those states are all big net donors to the federal government, which is to say: their taxpayers send far more to Washington than they get back in services.
For all the mindless talk about bailouts and redistribution, the real bailout and redistribution have been the steady stream of billions going from these big states to smaller, mostly red states.
And more to the point, per Dean Baker of the Theda Skocpol:
Great Britain has followed the kinds of sudden slash and disemploy policies that the GOP here is calling for. The result? The British economy has gone into contraction, reversing the earlier gradual recovery from economic crisis. Negative growth has just been announced in Britain, and this is turning their politics on its head again. After all, their conservatives promised that slashing government would “unleash” prosperity — utter nonsense.
I am wondering if the GOP really wants to push the U.S. back into recession? I hope that is not what they are trying to do. But whether they try or not, that will be the result of ideologically-driven, sudden policies of letting states go bankrupt, canceling infrastructure projects, and throwing thousands of public employees out of work. The nation will pay a high price for unrealistic right-wing ideology. So will the GOP.
More on the dumb economics of austerity to come.
UPDATE: An astute reader clarifies the meaning of “right to work” state, and how that applies to public employees in Florida and Virginia:
…. if an employee is represented by a union, he enjoys the benefits of unionization, but need not become a member of the union, and does not have to contribute financially to the union (either in the form of union dues, representation fees or anything else). Such employees nevertheless enjoy the benefits of unionization, which is why they are politely referred to as “free riders”.
Florida has for many years been a “right-to-work state” with respect to both private and public sector employees.
As an aside, most people confuse “right-to-work” with “employment-at-will”: the former being the situation where employees never have to contribute anything for the benefits of union representation, and the latter meaning that employees can be fired for any reason, except that narrow range of reasons prohibited by statute or contract (in the latter case, if you are fortunate enough to have a contract).