How Much do Wisconsin Teachers "Really" Contribute to Their Benefits Package?

One of our graduate students brought these two articles to the attention of her Facebook friends (which includes me) yesterday: this one in the Wall Street Journal and this one in the web site tax.com. The WSJ tells a rather hair-raising story about what a large contribution the state government and school districts are paying into the pension plans and medical insurance of public school teachers. In some cases the teacher's own contribution is zero. The Tax.com article claims that in every case the teachers own contribution is actually 100%! How, my young FF wondered, can there be such wild disagreement about a plain matter of fact?

Good question! I think the answer is that there is really no substantive disagreement here at all. They are simply describing exactly the same facts in different ways. The Tax.com author, David Cay Johnston, maintains that medical insurance and pension contributions from the government are really from the worker. The reasoning seems to be this: "Wages" properly refers to everything you are given in compensation for your work. Since the state and the districts give the teachers these benefits as compensation for work, they are really part of the worker's wages. Therefore the worker's contribution to their benefits packages from their wages is not 4% or 8% but 100%. They already contribute it all!

This is of course nothing but word-magic.

In one way, though, it is simply not true. If it were actually true that compensation with benefits is actually equivalent to compensation with pay, then it would also be true that, if the teachers were given no benefits at all, they would be getting its full value in pay. That would mean that the Milwaukee teachers being discussed in the above video would be getting an average of $100,000 a year in cold, hard cash for 9 months of work. That of course is absurd. Taxpayers in the private sector are slow to anger and their anger has usually has little effect, but they would never sit down for that.

It makes a difference, probably a big one, that about half of Wisconsin teacher compensation is concealed in the form of perqs rather than pay. I means that it does not show up on transparency web sites like this one. It means that workers in the private sector -- about half of whom have no pensions at all -- cannot accurately assess how much they have to work in order to support these people.

(HT to Molly Gardner.)

The Libertarian Penumbra

Bryan Caplan introduced a useful concept: the libertarian penumbra, or ideas and attitudes libertarians tend to share even though they have little to do with liberty.

Bryan's examples:

• Most libertarians accept the validity of IQ testing. A perfectly good libertarian could reject IQ tests as "culturally biased," but few do.

• Libertarians have favorable views of home schooling - even though conventional private schooling is equally consistent with libertarian principles.
  

• Libertarianism implies opposition to government population control, but it doesn't imply another view common among libertarians: that population growth has major economic benefits because people are "the ultimate resource." Notice: A statist who took this idea seriously could easily argue for government intervention to raise the birth rate.

Here is Will Wilkinson's list:

1. Crackpot theories of money/macro. A tendency to overlook the problem of demand shocks.
2. Global warming denial. (But skepticism about Gore-type solutions is fine.)
3. Overlooking the importance of having a “civic-minded” culture, such as you observe in Denmark.
4. Distrust of democracy.
5. Overlooking the importance of private non-profit enterprises.
6. Making the perfect be the enemy of the “much better.”
7. Confusing individualism with libertarianism.
8. Seeing history through middle class white male eyes.
9. Too much nostalgia for the past, and for the future. Right now was once the future, and will soon be the past.
10. I can’t think of anything else, but all lists should have ten items.

I would add a couple of others:

1. A tendency to think believe in "negative liberty" (not being interfered with) rather than "positive liberty" (being able to actually do what you would like to do) even though if negative liberty did not increase positive liberty it would have little or no value.

2. Belief in conspiracy theories. Pearl Harbor, the JFK assassination, 9/11 and God know what else were inside jobs. As I have pointed out before, the psychology of conspiracy theories is actually profoundly freedom-unfriendly. The two most influential conspiracy theories of the twentieth century were Nazism (it's all a Jewish plot!) and Communism (it's all a capitalism plot!). On the other hand, the logic of the case for free markets is the opposite of a conspiracy theory: it argues that things that look like they are the product of human intention actually are not. Gas prices do not rise in times of shortage just because speculators behind the scenes are pulling strings to screw the consumers. (Hat-tip to the late Robert Nozick for this point.)

Two things I would consider taking off the above lists:

1. Homeschooling boosterism makes sense to me. If one parent was going to stay home anyway, it is a lot cheaper than private schooling and hence more within the reach of everybody. Also, for various reasons, private schooling is not that different from public. The obnoxious ideas that contaminate the latter are actually worse in private schools: eg., fanatical diversity-worship, environmentalism practiced with the fervency and sanctimony of a religious faith. Unless your private school offers something that is simply not allowed in public schools (eg., the Montessori method, or religious indoctrination) your private school is probably a huge, tragic waste of money.

2. Why on Earth does Will think distrust of democracy is irrelevant to liberty?

Update in response to a question in the comment section: I can see two sorts of motivations for the unnecessary and in some cases silly beliefs in the above lists:

1. A false notion that the belief is supportive of liberty. Libertarian conspiracy theories always have governments doing evil things. I would point out though that they also show them doing evil with super-human efficiency, bringing about only the evil effects that they fiendishly intend, never bringing about counter-productive unforeseen side-effects, and always brilliantly concealing virtually every visible trace of their fiendish plots. This of course is grossly inconsistent with libertarianism.

2. As Bryan says, there is also a sort of contrarian, iconoclastic mind-set at work here. If the intellectual elites say everything is racist, then by God we're going to say nothing is racist. If they say a) global warming is real, b) it is human-caused, c) they have a human-caused solution ready for deployment, and d) said deployment will be worth the cost -- then by God we will deny (a) through (d), not just (c) and (d). That'll show them!!

Signs at the Wisconsin Union Protests

Deborah, my better half, went to the protest in Madison yesterday and collected some pictures of signs there. Everyone was quite nice about letting her photograph them. I hope they won't mind my putting them here! (All pictures have been cropped so as not to show faces.)

Some of them were rather complicated and hard to follow. It seems to me that Tea Party signs are generally more pithy. (Click to enlarge.)

Relevance to the collective bargaining issue was not always immediately apparent.

A number of signs compared Gov. Walker to Hitler. This gentleman, to his credit, was thoughtful enough to ask Deborah, "Is this offensive?" "Very," she said, "I'm Jewish." He replied, "I'm sorry." The apology seemed to be sincere.

I have to say, also, that this one is more literate than the average Hitler comparison.

I think democracy looks more like that election in November that you people lost.

This one is pretty obscure, at least to me. Is Mississippi one of the 26 states that do not allow collective bargaining by government workers? Is that what this sign is about?


The taxpayers will be so glad to hear that the deficit does not exist! (In case you are wondering what the heck this is about, see this article. Hat-tip to economist Steve Horwitz.)

That was fun. Thanks Deborah!

Wisconsin PS Teachers Underpaid?

The public schools in my town, Oregon WI, have been closed three days in a row, as teachers falsely call in sick to protest a threat to their right to collectively bargain over how much the taxpayers will have to pay them.

How has the status quo worked out for the K-12 teachers of Wisconsin? The above video suggests: pretty well for them, not so well for those who pay them.

Public Service Employee Unions are Different

Last night as I was entering the Madison College building to go to orchestra rehearsal I saw bus after bus, paid for by voluminous union money, unloading scores of union members with professionally printed signs to launch this protest against Gov. Walker's just-begun attempt to force state workers to accept reductions in pay and perqs. His plan is to strip most state employees of some of their collective bargaining rights, on the theory that this is what has so far blocked them from having to accept their share of the reductions that workers in the private sector have had to suffer.

In the angry comments on the plan, you could hardly guess that the downtrodden "workers" being discussed are government workers, and that the "unions" are public service unions only. However, they are, and it is very important to realize that.

We are not talking about the proletariat here. We are talking about people who have the power to tax: something the rest of us do not have.

If Walker were trying to break the back of private sector unions, I would agree that this is an atrocity of Hitlerian proportions. (Come to think of it, crushing the private sector unions is exactly what the Führer did, soon after taking office.) But I think private sector unions and public sector unions are completely different animals: economically, ethically, and politically different.

There is a powerful rationale for having private sector unions. Suppose you work in a competitive market, and you persuade your employer to raise your salary significantly. Your boss is competing with people who did not incur that particular expense. That is a reason, maybe a good one, for the employer not to give you the raise. If all the workers in your company bargain as one, that blunts this reason considerably. If all in your industry do -- so much the better! Now your boss will not have to compete against people who did not incur this expense.

Great! The discipline of competitive markets exerts a downward pressure on all business expenses, including employee salaries. Unions are anti-competitive devices, instruments of monopoly power, and thus highly attractive to those who believe that their bargaining position in a competitive market is weak.

With government employees this argument is completely lacking. You employer does not compete in the market. To give you more money, all they need do is take some more from the taxpayers, either present taxpayers or - better yet - future ones. (If they are a nation-state, they can just print it up!) People have often commented that public and private unions behave very differently. Private sector unions, they say, are adversarial, while public sector unions are "collusive."

Obviously, if you combine this with collective bargaining, you can get some inequitable distributions of benefits and burdens. For three years now, UW professors have endured a 3% cut in pay. Meanwhile, the K-12 teachers in the same community have experienced merely a lack of pay increases. Why the difference? The public school teachers are unionized and the professors are not. Why should the the K-12 teachers not experience their fair share of the pain? The private sector workers who must work to support them with their tax dollars are suffering losses, in some cases devastating ones. Government workers should not be a privileged aristocracy.

If to achieve this end we need to strip them in many cases of the "right" to collective bargaining, then so be it.
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Update: Here Jonah Goldberg argues that the real reason for public sector unions is not, and never was, based on considerations of justice or fairness: The actual reason is purely political. See also this.

The Ethics of Taxation

This is Mitch Daniels, the Gov. of Indiana, addressing CPAC yesterday. (Sorry, I can't find an embeddable video. Here is a non-embeddable one with good sound quality.) One part of his speech I liked very much is this:

We believe it wrong ever to take a dollar from a free citizen without a very necessary public purpose, because each such taking diminishes the freedom to spend that dollar as its owner would prefer. When we do find it necessary, we feel a profound duty to use that dollar as carefully and effectively as possible, else we should never have taken it at all.

This strikes me as the most lucid sort of ethical common sense. When you tax someone, you are coercively taking from then money that they have earned. You should only tax someone for a purpose sufficiently weighty to justify that sort of coercive taking.

Here's another rule that seems obviously true to me: you should only go to war for a reason sufficiently weighty to justify mass killing. More than that: it has to be so important that it justifies actions that you know in advance will kill large numbers of innocent civilians, people who plainly do not deserve violent death.

We can disagree on how weighty a purpose would have to be to justify mass coercion and killing, but it seems undeniable that such actions are morally evil if they do not measure up to these obvious standards, however we might spell these standards out in detail.

It also seems undeniable that, however they are spelled out, these standards are very stringent. If adopted and acted on consistently, there would be few taxes and very, very few wars.

Peace through Coke!

This was my favorite of yesterday's Superbowl commercials. Maybe I'm just a a sucker for the message of peace and understanding through sugary soft drinks.

I also loved the surrealist juxtaposition of Napoleonic-era uniforms and the obvious radio tower in the near background. Also the volcanic cinder cone in the distance.

Also, there's the music! As economist David R. Henderson pointed out to me on Facebook, the majestic music track is the Sarabande from the Harpsichord Suite #11 in D Minor by Handel. Old George Frederick sure know his way around a minor key!

Stanley Kubrick used this piece for the main titles in Barry Lyndon. I think it also appears in a fatal dueling scene later in the picture.

When is a Compromise a Betrayal?

What a fine first speech in the Senate from Rand Paul! He addresses an important issue: When is compromising a good thing and when is it bad? I think "compromise" generally refers to two very different things. There really should be two different words here.

Suppose I am trying to sell my car. I'm asking $1,000. I am offered $700. That's too little. I would rather keep the car. It's worth more than $700 to me. I say, "Will you compromise at $850?" Sometimes "compromise" means accepting something that's "good enough" when you were hoping for something great.

On the other hand, suppose that the issue is whether to support the institution of slavery, which you know (or should know) to be wrong. If you do, your compromise will achieve a result you think is better on the whole than if you don't: you enhance your chances of becoming president, perhaps, or you diminish the chances of a civil war somewhat. But you achieve these supposedly good results by means of supporting a violation of human rights. I would say you have to forgo this opportunity to achieve those results. In this case, compromise means compromising on basic principles.

Bottom line: Compromise between better and worse, not between right and wrong.

Given his principles, Sen. Paul is making a perfectly good application of this idea. In his view, spending is the cause of the current problem. In his terms, to compromise between cutting spending and raising taxes would be a compromise between right and wrong.

Happy Ayn Rand's Birthday Everybody!

This clip is from "Love Letters," a film she wrote for Hal Wallis (dir. William Dieterle, 1945). She didn't write the original story, but selected it from several that were offered her. The theme: "you cannot live a lie."

My favorite Rand quote: "Those who fight for the future live in it today."

[Hat-tip to Michael Richard Brown for this clip.]