The standoff between Wisconsin Gov. Scott Walker and public-sector employees comes to a head today as the Governor’s ultimatum runs out for the 14 state senate democrats who fled to Illinois to avoid a budget vote .
If the Senators do not return home and vote on Walker's budget -- which includes ending public unions' right to bargain collectively on pension and health-care benefits -- the state will face dire consequences.
Most Americans agree that time for austerity has arrived in the U.S. at all levels of government: state, local and federal. But, the majority of Americans do not agree that weakening labor unions is the right way to achieve this goal. Elizabeth Warren, special adviser to the Consumer Financial Protection Bureau and fervent supporter of America’s middle class, agrees.
When Tech Ticker’s Aaron Task sat down with Warren in Washington last week, he asked about our recent interview with the president of the International Fire Fighters’ Association Harold Schaitberger. The union chief finds it galling that some Wall Street “single-year bonuses exceed the average life time benefits” of the average firefighter and paramedic. (See:"This is All About the Money": Pension Fund 'Crisis' a Red Herring, Union Chief Says)
Her response: “The middle class has been under assault now, really, for a generation.”
The 1-2 Punch
The middle class got hit by a "one-two punch" of rising daily living expenses plus flat wages, Warren tells Aaron in the accompanying clip. The world became a “far more dangerous” for American families when Congress “deregulated credit and turned the lender loose," starting in the 1990s, she continues.
As more people turned to buying the necessities with plastic -- including health-care, college tuition and groceries -- Americans became inundated with debt and “more of them started falling over the cliff financially,” she says. “We’ve got a middle class that is under assault from multiple directions.”
Union critics blame the public-sector for ballooning state deficits and lack of jobs. But, Warren says those arguments are simply not supported by the facts.
Unions are one of the few institutions trying to strengthen America’s middle class by fighting for fair wages, she says. “We should be in a world in which we all are a little better off when this country produces more, not that the part left over for those who work for a living keeps shrinking, while those who manage investments get an ever bigger piece.” (From 1976 to 2007, the top 1% of U.S. earners received 58% of all real income growth, according to economics professor Raghuramu Rajan of the University of Chicago's Booth School.)
Madison Showdown
What happens in Wisconsin is likely to set the stage for other bitter labor battles across the country.
What’s at stake? $165 million of taxpayers' money, which could be saved if the state refinanced its debt. If the standoff persists, 1500 jobs will be lost by July and up to 12,000 jobs are eventually at stake.
Gov. Walker says the goal of his budget plan is to close Wisconsin's $3.6 billion shortfall this year while AFL-CIO President Richard Trumka says this is all about politics. (See: Gov. Walker Is "Playing Politics With People's Lives," AFL-CIO's Trumka Says)
Whether or not you agree with Walker’s methods, he's like almost every other Governor in the country trying to figure out how to push his or her state’s finances out of the red in the face of growing public-employee pension and health-care benefits.
If labor unions lose this fight, the very fabric of this country will be unrecognizable, says Warren. “If as a country we don’t concentrate on rebuilding that middle class what we knew as America just doesn’t exist anymore."
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