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« Cake -- (1) | Main | On Quantitative Methods in Law and Politics »
Saturday
Mar122011

Money and Union Politics

(in reply to correspondence from a former colleague)

... well that was helpful theoretical advice, Robert. But on the union issue, all I was really offering you was testimony. I'm over here. You should see it. Every day, what used to be called "Reagan Democrats" (back in the day) are becoming angry-Democratic again. The union thing hits home to the right strata of voters -- police offers, firefighters, teachers, and anyone who works for government (e.g., corrections officers). People don't like what Kasich is doing or the way he is doing it. The energy over here is interesting. There is an alliance building between (e.g.,) people of color and police officers. If you sit at a booth to collect signatures, it is interesting to see the people who come over. You have people who have teachers as moms signing the same thing that someone who is in the military signs. It's almost like the material conditions of politics has reverted back to an elder period of time, when blue collar people held the promise of class solidarity. It's very interesting to see the bedfellows that are joining. The people who are on the other side are the Chamber of Commerce types. It's like the Republicans have lost the middle class. If this dynamic keeps up -- and there is no reason to believe it will not -- Ohio is going to go Democratic in 2012.

For the record, I think Obama is making a mistake by not standing by Wisconsin workers. He's making a big mistake. It's the mistake he's always made: wanting to be adored by the wine-sector and wanting to be pragmatic and liked by everyone, hoping that savior politics will be what gets him to connect with the underlings. He's making a huge mistake. The political theme is clear: Republicans in Ohio and Wisconsin and elsewhere are out to damage the middle class. Polling wise, that's the theme that works on the union issue. That's the way it needs painted.

I tell you with no uncertainty: there is kerosene upon the political lands of the rust belt. It's simply waiting for someone to throw a flame on it. The Reagan Democrats are there, waiting to be captured. Obama should be mentioning the issue. He should be telling Ohio that balancing the budget requires pragmatism, not fanaticism, and that Kasich is about to run the middle class into oblivion in Ohio. If he says these things, he'll get some new friends. If he does it the right way -- if he tries to intelligently court this sentiment -- it will payoff huge in 2012.

Imagine what Anne Oakley would be doing right now.

Regards and thanks.

Dr. Sean Wilson, Esq.

----- Original Message ----To: Sean Wilson Sent: Sat, March 12, 2011 10:34:15 AMSubject: Re: Money and Union Politics

Sean,

We have seen higher than normal growth in the money supply since 2008. That is what "quantitative easing" is all about -- and we have seen two rounds of it (QE1 just as the recession was hitting in late 2008 thru mid-2010, and QE2 since late last summer when it appeared that the recovery had stalled). Fed Chair Bernanke wrote his dissertation on monetary policy during the Depression, and concluded that overly restrictive monetary policy in the early 1930s exacerbated the situation -- i.e., by first turning a financial panic into a full blown depression, and second by prematurely ending what easing that did occur after the depression hit, which led to a double-dip in 1937. Thus, Benanke argued that monetary policy during financial panics should be to throw as much money out as possible (we can call this monetary "shock and awe"). Recessions occur due to unwanted business inventories. Businesses cannot sell their goods because people believe that prices will fall in the future (i.e., why buy now, if I can buy at lower prices later). Because businesses cannot sell their products, they lay off workers. The purpose of QE is to flood the economy with so much money that people will be persuaded to buy goods again (i.e., the new money will partially make up for the lost wealth in the financial panic), and to change consumer expectations from one of future falling prices to one of future rising prices (i.e., I'd better buy now before prices go up). Thus, businesses are able to sell off their inventories and rehire workers. Yes, the Fed WANTS to induce inflation expectations, in order restart consumer spending.

As for 2012, I'm in partial argument with you. The Big Ten states will hold the key to the 2012 election and the new Republican governors from Pennsylvania to Wisconsin, inspired by Tea Party conservatism, are making public sector unions a key target. The economics are quite simple: the percentage of union households have fallen from 40% in the early 1960s to the teens today. All of that decline has come in the private sector. Whereas in the 1940s thru 1970s union power was in the auto, steel, and coal-mining industries, today there are more public sector (i.e., teachers and other state, county, and municipal government employees) than private sector union members. These public sector workers rely on large government outlays, and conservatives argue that these unionized workers are a principal reason for the growth of government spending over the past three decades. Public sector defined-benefit pensions create massive unfunded liabilities that create glaring budget shortfalls for the states. By breaking collective bargaining for public sector workers, Republicans can renegotiate contracts: changing from defined-benefit to defined-contribution pensions, reducing COLA, and changing work rules from a tenure- to a performance-based system. Indiana has already moved in that direction.Just as important politically, public-sector unions are a cash machine for the Democratic Party, and their decline would mean a critical source of funding will dry up. There is no doubt that politics, as well as economics, are driving the current fight over collective bargaining.Will this fight reenergize the union movement? Perhaps, but the upside for the Democrats is limited due to the reality of budget constraints and high private-sector unemployment. The Republican political strategy is clear: pit private-sector workers in the auto, steel, and coal-mining industries - who have lost jobs and faced wage cuts - against public-sector workers, whose pay and benefit packages rely upon government spending and taxes. Whatever happens in 2012 will be a great case-study of private-sector worker identity. Do they identify with fellow public-sector workers or with fellow non-union taxpayers?

The Reagan Democrat private-sector union voter will hold the key to 2012 in the Big Ten states.

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