Dissecting Richard Trumka
- Posted by Jeff Carter
- on March 5th, 2011
Richard Trumka was given a large space in yesterday’s Wall Street Journal to make his pro-union case. Let’s go point by point and see how far off the reservation Trumka is. I am sure this summer at the union country club, they will be slapping his back while he plays 18 with some Democratic politicians. You can bend the facts as much as you want, but sooner or later they have a way of slapping you in the face.
Trumka asserts that workers have been given a choice. Give up their rights or get laid off. His first mistake is to assume collective bargaining is a “right”. It’s not a right. Nowhere in Thomas Jefferson’s eloquent elucidation of the “inalienable rights” to man, was a carve out for collective bargaining. Collective bargaining is a point that was won at a bargaining table, and now is being lost at a bargaining table. Remember, they did have an election in Wisconsin and it was no secret what the Republicans wanted to do. Collective bargaining is better classified as a privilege, like a drivers license.
There is a side point here too. Unionized collective bargaining for public employees is a gigantic conflict of interest. It’s not at all like a union negotiating with a private firm-which can be advantageous for the firm.
His second straw man is the assumption that unions built the middle class. That’s totally false. The middle class was built by entrepreneurs. They developed great businesses and hired workers for them. As a matter of fact, many times unions impede the development of more innovation within many businesses depriving people of innovative jobs. They also add to the cost of doing business, making the economy less efficient.
Trumka goes on to cite the Universal Declaration of Human Rights.
“It’s also recognized in Article 23 of the Universal Declaration of Human Rights. This right ensures that there is sufficient spending power to drive the consumer demand, which makes up two-thirds of our GDP.”
Of course, that’s not a United States concept, we already codified that in our Constitution back in 1778. This is that beacon of liberty and hope, the United Nations paradigm. You know, the UN, where Libya sits on the Human Rights Council. If I followed all the commands of the UN, I get the feeling I’d wind up in a gulag somewhere.
Trumka then characterizes the Republican governors as radical evil emperors, seeking to destroy people.
“a group of radical Republican governors is working overtime to export the most short-sighted private-sector labor practices into the public sector. Not only are they demanding steep cuts in wages and pensions for public workers, they also want to take away workplace rights, so that workers can no longer bargain for better compensation and benefits”
In fact, these guys aren’t radical at all. They are just asking that employees contribute a little more toward their benefit packages. Trumka also cites a poll that has been proven to be biased in the way it asks questions about collective bargaining and workers. Rather than be objective, Trumka shades the truth.
He goes on to say that government budgets are in trouble because of the recession. Well, he is correct that because of higher unemployment there is less tax revenue to pay for things. However, the core reason government budgets are in trouble is because of the medical and pension liabilities they are liable for in the future. Additionally, many of these governments used a fallacious net present value discounting factor to put these liabilities on their balance sheets, understating the amount by billions of dollars. The federal government has also understated it’s liabilities by trillions by keeping Social Security and Medicare off balance sheet. It’s not the recession stupid, it’s the true cost of the future liabilities that is breaking the bank.
If they were publicly traded corporations, they’d be in jail.
Trumka advocates for tough rules and doesn’t specify what they would be. I assume a higher wage, trade barriers, more restrictions and regulation, and mandatory division of cash flows. For a peek at how that works out, just look at the economic development in the US over the past two years.
If one takes a peek at year over year unemployment numbers, Trumka makes even less sense.
Weekly earnings are up $18 year over year for a 2.3% rise. Hours worked is up. Overtime is up. Of course, the labor participation rate is down to it’s lowest point in years at 64.2%.
CPI excluding energy and food is up only 1.6%. Energy was up 13.4%, and food was up 2.1%. These are January 2011 numbers so you know that the energy component will be up significantly in February.
If Trumka really wanted to help his workers, he would advocate for three changes in public policy
- End the ethanol subsidies. This would bring food prices down tremendously.
- Allow for exploration of all energy resources, no strings attached. Allow nuclear plants to be built. Cost of energy would plummet.
- Make the corporate tax rate a flat tax of 15%, and end all subsidies to corporations.
The American worker would find a job as our economy exploded.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Jeffrey Carter is an angel investor and independent trader. He specializes in turning concepts into profits. He co-founded Hyde Park Angels one of the most active angel groups in the United States in April of 2007. He previously served on the Chicago Mercantile Exchange Board of Directors. He has done market commentary for (More...)
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