Yves Smith-NakedCapitalism.com
Posted: 17 Feb 2011 03:36 PM PST
A major row has been under way in Wisconsin as governor Walker has been trying to push through state-union-breaking changes as part of his program to deal with a projected $3 billion shortfall in the state budget over the next two years. (Update: as reader petrograd indicates, an analysis of the state’s finances shows this shortfall to be entirely the result of spending increases planned by Walker. The state ran a modest surplus in the latest fiscal year and the projected falls in tax receipts over the next two years were less than $200 million cumulative. So this budget hysteria is a gross distortion of the state’s true condition). His state budget plan included ending state worker collective bargaining rights and cutting pay and benefits. He not only said he would not negotiate, but announced he had alerted the National Guard in the event of worker protests (note the last time the Guard was called in to handle a labor dispute was in 1934). Walker since backed down on this particular threat, but has now sent out state police to round up Democratic state senators who are refusing to vote on the latest iteration of Walker’s proposal, From PRWatch:
Mary Bottari reports that the state capitol police are scouring the Wisconsin Capitol in an attempt to track down the Wisconsin Senate Democratic Caucus. The Wisconsin Senate was slated to vote on the budget bill today, but they were prevented from doing so because all Democratic Senators walked out denying the Republicans a necessary quorum. The Republicans issued a “call of the house” empowering the state capitol police to round up missing Senators, but the Democrats were prepared for this and promptly departed the building and may even have left the state.It’s bad enough that the “make the workers suffer” push is misguided (any budgetary pain should be shared, not dumped on a single target group). According to David Cay Johnson of Tax.com, the average Wisconsin pension is $24,500 a year, which is hardly lavish. But what is stunning is that 15% of the money contributed to the fund each year is going to Wall Street in fees. Thus the blame for any shortfall should go in very large measure to
Most of the pension shortfall using the current methodology is attributable to the plunge in the stock market in the years 2007-2009. If pension funds had earned returns just equal to the interest rate on 30-year Treasury bonds in the three years since 2007, their assets would be more than $850 billion greater than they are today. This is by far the major cause of pension funding shortfalls. While there are certainly cases of pensions that had been under-funded even before the market plunge, prior years of under-funding is not the main reason that pensions face difficulties now. Another $80 billion of the shortfall is the result of the fact that states have cutback their contributions as a result of the downturn.In addition, the governor has poor-mouthed about the state pension and budgetary concerns generally while handing out further tax breaks to business. And in a strained economic climate, the state has been increasing gimmies to corporations. The state had tried tightening up provisions which had contributed to 2/3 paying no taxes in 2007, often due to income shifting to lower tax states. But tax expert Lee Sheppard believes that corporate tax cuts implemented by Walker will probably undo 2009 tax law changes intended to increase revenues from corporations. And note corporations pay for only 5% of the state’s general revenues.
This is completely different normal budgetary smoke, mirrors, and scapegoating. Walker is engaging in thuggish tactics to push his measures through in the face of rising protests in front of the Wisconsin Capitol by citizens, nurses, teachers, and students. The opposition is in keeping (admittedly at a much lower level) to anti-austerity protests in Europe. People may be waking up to the fact that an undue amount of the pain that ordinary citizens are taking is to preserve and extend the privileges of those at the top, and they are finally starting to say they’ve had enough.
Update 12:30 AM, 2/18: From Mary Bottari at PRWatch:
Outside the capitol, I bumped into UW Professor (Law, Political Science, Sociology, Public Affairs) Joel Rogers and asked him to explain the budget number to me. The national media can’t seem to decide if Wisconsin has a budget deficit or not, or whether $30 million in concessions being demanded from workers is significant or not. Rogers explained that the $3.5 billion shortfall projected over the next biennium is about half what the one projected last time, which WI survived, and that $30 million was both trivial and dwarfed by new concessions unions had already offered to make. Says Rogers, “you just can’t make sense of this as a deficit reduction strategy. It’s a political strategy. Destroy public sector unions and you destroy the campaign organization of your opposition, Democrats. Of course he won’t ever just say this.” Rogers thinks the budget repair bill is “in three words: deceptive, dishonest, destruction. Deceptive because its not what people elected him to do. He’s got no mandate to take away worker rights. Dishonest because unions are really not the source of our budget problems. A lousy national economy is, and unions are anxious to work with him in surviving in it. They’re really not the problem, but can be part of the solution. And it’s destructive because their help is needed. Nothing is gain by blowing up a 50 year tradition of public sector collective bargaining that was born in Wisconsin and gives a lot of people a great deal of civic pride.”Via : NakedCapitalism
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