It looks as if Ohio will not be following Wisconsin’s lead in attempting serious public-sector labor reform. Polls indicate Buckeye State voters next Tuesday will reject a comprehensive package of labor reforms, known as Senate Bill 5, that the Ohio legislature passed this year with support from Gov. John Kasich (R). Although voters do approve many of the individual elements of the package, including merit pay for teachers and a hike in employee pension and health contributions, opponents have successfully portrayed the whole as an overstuffed “Republican wish list” mixing short-term fiscal savings with longer-term measures aimed at weakening unions’ political strength over the longer term.

Last Tuesday I spoke at Capital University Law School in Columbus as part of a two-on-two debate moderated by Dean Rich Simpson on Issue 2, the measure that would repeal S.B. 5. The speakers defending the union position spent relatively little time defending the particulars of current union benefit packages (which include $3 million pensions for some Columbus police commanders, as the Buckeye Institute has noted, though overall Ohio seems to generate fewer compensation horror stories than do the Northeastern states, Illinois or California). Instead, they concentrated on defending the favorable state laws that put the unions in such a strong bargaining position in the first place. Prominent among these: 1) provisions in current law obligating Ohio counties and towns to bargain with unions over staffing and a wide range of other workplace policies unrelated to wages, health or compensation; and 2) provisions in current law providing that, on the event of a bargaining impasse, the issue will be handed over to an outside labor arbitrator whose say-so will bind the parties.

It happened that these were also the elements of S.B. 5 I thought most important, because over the long term keeping public unions from acquiring a stranglehold on local governance is indeed more important than saving a buck or even a lot of bucks in next year’s budget. Mandatory bargaining on topics of workplace organization (which makes it actively unlawful for the employer to take a principled stand refusing concessions on a given issue) and imposition of contract clauses by un-consented-to outside arbitrators are serious infringements of liberty as applied to private employers. As applied to public-sector employers, these rules have the distinctive vice of preventing voters and taxpayers from deciding how public programs will be run. In floundering public school systems, it is often union work rules as opposed to teacher compensation that foils every reform impulse. Police unions have been known to demand changes in arrest policies and weapons issuance, though it is vital that decisions affecting the citizenry and its everyday liberties be reserved for representatives answerable to the voters and courts.

In 1937 Franklin Delano Roosevelt famously warned against government unionism, much as Dwight Eisenhower was later to warn against the military-industrial complex. In the decades since then, public unionism has been on an extraordinary roll: states have steadily enacted laws more favorable to the unions, to the point where they have come to see such legal boons as a permanent entitlement (“how dare they take away our rights!”). But voters and taxpayers have their rights too—and among them is to back away from an ill-chosen path.

Incidentally, before the debate, the law school audience was asked to register its opinion of S.B. 5, and opposed the reforms by a margin of 27–76 with 27 undecided. Afterward, the vote was 34–82 with 10 still undecided.

The latest Fortune magazine contains a page on “The Growing Wealth Gap.” The author, Doris Burke, says, “here are some of the facts.” But they aren’t facts, or even official estimates.
The opening line is, “The top 1% owns 36% of all wealth” as of 2009. Yet the latest figure was 33.8 percent in the Arthur Kennickell’s report on the Federal Reserve’s triennial Survey of Consumer Finances (SCF) and that was for 2007, not 2009. There will never be an estimate for 2009 (the next one is for 2010), so something is obviously fishy.

Using actual SCF estimates instead of Fortune’s made-up numbers, the first column in my table shows that the top 1 percent’s share of household net worth briefly spurted to 34.6 percent in 1995, but subsequently stabilized at 33.9% in 1998, 32.7% in 2001, 33.4% in 2004 and 33.8% in 2007.

An alternative source − a study of estate tax data in June 2004 The National Tax Journal by Wojciech Kopczuk of Columbia University and Emmanuel Saez at UC Berkeley − found the top 1 percent’s wealth share has fallen over the years from 26 percent in 1939 to 24.4 percent in 1962, 22% in 1989 to 20.8% in 2000 (shown in the table as 2001). The press repeatedly cites Saez’s estimates of the top 1 percent’s average income up until 2007 (since top incomes fell by 19.7 percent in 2008 and by a similar amount in 2009), but nobody ever mentions Saez’s estimates about the top 1 percent’s share of wealth.

So where did Fortune’s estimate of 36% (actually 35.6%) come from? The author cites the left-of-center Economic Policy Institute (EPI), which turns out to mean a paper by Sylvia Allegretto. (Fortune’s more amateurish sources include Deloitte and somebody named Mark Kroll). The EPI estimates, shown in the second column of the table, purport to be from the SCF but are simply mysterious. The dates were supposedly “chosen based on the data available,” but there is no data for 2009 while there is data for the strangely missing years of 1992 and 1995. Ironically, these enigmatic EPI estimates show the top 1 percent’s share of wealth declining since 1989 or 1998, which is not the impression that the EPI or Fortune hope to convey.

To fabricate a number for 2009, Ms. Allegretto relies on her own “author’s analysis” of an “unpublished analysis” by Ed Wolff “prepared for” the EPI but not on the website of Wolff or the EPI. Allegretto’s inexplicable analysis of Wolff’’s invisible analysis supposedly “updates” the official figures “based on changes in asset prices between 2007 and 2009 using Federal Reserve Flow of Funds data.” But changes in the flow of funds estimates are also rough and incomparable with the SCF, partly because they combine households with nonprofit organizations and unincorporated businesses.

Financial assets of households and nonprofits were worth $78.6 trillion at the end of 2007, according to the flow of funds, while homes were worth only $20.9 trillion and half of that was mortgaged. Allegretto implies that the top 1 percent’s share rose in 2009 because the flow of funds’ estimated 18 percent drop in the value of homes from 2007 to 2009 supposedly exceeded the drop in the value of assets that dominate the top 1 percent’s assets in 2007 – such as unincorporated business (whose value fell by 28.7 percent) and stocks (down 23.5 percent). Even if the flow of funds data confirmed the allegedly greater drop in home values than in, say, stocks, Allegretto’s own figures (her Table 6) show that stocks accounted for 30.8 percent of the wealth of the bottom 95 percent, but only 19.2 percent for the top 1 percent. In any case, home equity is too modest fraction of total wealth to drive the top 1 percent’s share upward at a time when stocks and small businesses were crashing. There is ample evidence (e.g., my forthcoming Wall Street Journal article updating the “new” CBO estimates to 2009) that recessions always drive down the top 1 percent’s share of both wealth and income. For those who obsess over the top 1 percent’s share, including the CBO and the Occupy Wall Street crowd, deep recessions should properly be celebrated as a wonderful decline in “inequality” by their twisted definition.

Fortune does not know what the top 1 percent’s share of wealth was in 2009, and it never will (because the next SCF survey will be for 2010). When the 2010 results are released, however, the top 1 percent’s wealth share will surely be lower than it was in 2007, not higher.

One reason to shift infrastructure financing to the private sector is that governments and their contractors often give taxpayers the shaft. They say a big project will cost a certain amount, but then the project gets underway and they reveal that—whoops!—the project actually costs much more. No one gets fired, the money has been spent, taxes and debt have been increased, and officials move onto the next boondoggle.

Here is a 2009 essay on the topic, and here are a few recent examples that have piled up on my desk:

• High-Speed Rail. California voters approved bond funding for what they were promised was a $43 billion rail project in 2008. But a new report by the plan’s sponsors shows that the project is now expected to cost $98 billion, although part of the higher cost estimate reflects inflation.
• Air Traffic Control. “The Federal Aviation Administration continues to struggle with budgets, deadlines, and management of its multi-billion dollar upgrades to the nation’s air traffic control systems.” One project — the En Route Automatic Modernization system — “is about five years behind schedule and as much as $500 million over budget.”
• FBI Computer System. “The Sept. 11, 2001, attacks exposed the FBI’s troubles with information sharing, and the bureau accelerated plans to replace its unwieldy case-management system with new software. That technology project was called Trilogy and was supposed to deliver software called Virtual Case File that was to help FBI agents share investigative documents electronically. The inspector general called the project a fiasco and said the FBI and its contractors wasted $170 million and three years.” The FBI then launched a new project, Sentinel, but by last Fall the new system was already two years behind schedule and $100 million over budget.
• Washington Bicycle Trail. “The cost to rebuild the Capital Crescent Trail along a future Purple Line has ballooned from an estimated $65 million to $103 million, almost half of which would be spent to squeeze the trail and light-rail trains through a tunnel in downtown Bethesda.” Wow! That’s got to be the world’s most expensive bicycle trail at $103 million.
• Washington, D.C. Subway. The final bill isn’t in yet on the Metro’s Silver line to Dulles Airport, and the cost of the proposed Purple Line has crept up only modestly, but the precedents aren’t good. Historian Zachary Schrag found that the cost of the original system in 1969 soared from a promised $2.5 billion to $3.8 billion. Schrag comes to a similar conclusion as I have: “It is kind of a vicious spiral where people low-ball the estimates to get their project approved,” he told the WaPo.

When the Solyndra scandal broke in September, I wrote that “Republicans should be careful when casting stones given their past and present support for energy subsidies.” The left has been ripping congressional Republicans for making political hay of the Solyndra affair after having lobbied the Department of Energy to bestow their constituents with similar taxpayer handouts.

ThinkProgress released a report that documents letters sent by 62 Republican members of Congress to Energy officials groveling for subsidies. Are these Republicans hypocrites? I’d say that it depends. I think the members who justified their request on the basis of “job creation” while criticizing the Obama administration for justifying its stimulus packages on the same grounds belong in the “yes” column. Also belonging in the “yes” column are those subsidy-seeking members who have chastised the administration for engaging in “crony capitalism” and “picking winners and losers.” On the other hand, I don’t think the sole act of criticizing the Solyndra deal while begging Energy for money necessarily makes one a hypocrite.

According to ThinkProgress, “Republicans are on a war path to defund all clean energy programs – despite the fact that these Republicans previously were proponents of the program when it helped clean energy companies in their districts.” Even if it were true that Republicans now want to “defund all clean energy programs” (I wish), I wouldn’t have a problem with policymakers suddenly finding religion on the issue. As far as I can tell, all of the letters that ThinkProgress lists were sent pre-Solyndra, which means that the “sinners” now have a chance to repent.

Sen. Jim DeMint (R‑SC) recently did this when he called for the abolition of the Economic Development Administration while acknowledging that he wrongly supported the program in the past. Prominent Republicans cited in the report (e.g., Sen. Jeff Sessions (R‑AL), Rep. Mike Pence (R‑IN), and Republican Study Committee chairman Jim Jordan (R‑OH)) now have an opportunity to admit that they were wrong and atone for their mistake by working to eliminate the programs they sought to benefit from.

My expectations for this happening are admittedly very low. Instead, I expect most – if not all – of the Republicans in question to respond with a combination of silence and excuse-making. The chief excuse will be that the money was already appropriated so they might as well try to secure a piece of the pie for their taxpaying constituents. That excuse might fly with some folks on the right, but I think it’s absolute hogwash: you’re either part of the solution or you’re part of the problem.

See this Cato essay for more on why energy subsidies should be abolished.

Last week in New York City, during my Intelligence Squared debate about stimulus, I pointed out that Germany is doing better than the United States and explained that they largely avoided any Bush/​Obama Keynesian spending binges.

One of my opponents disagreed and asserted that I was wrong. Germany, this person argued, was dong better because it was more Keynesian thanks to “automatic stabilizers” that resulted in big spending increases.

This claim was made with such certainty that I wondered if I made a mistake.

Well, we were both right about Germany doing better. In the past few years, it has been enjoying yearly growth of about 3.5 percent while growth in the United States has remained below 3 percent.

But who was right about the key issue of whether Germany has been more Keynesian? At first, I was going to be lazy and not bother combing the data. But then I got motivated after reading an excellent post about Germany’s pro-growth reforms, written for National Review by Veronique de Rugy of the Mercatus Center.

So I looked up the data on annual government spending in the United States and Germany and discovered that I was right (gee, what a shock). As the chart shows, the burden of government spending has increased faster in the United States. And that is true whether 2007 or 2008 is used as the base year.

To make sure the comparison was fair, I sliced the numbers every possible way. But the results were the same, regardless of whether state and local government spending was included, whether TARP spending was included, which base year was selected, or whether I used annual spending increases or multi-year spending increases.

In every single case, the burden of government spending grew faster in the United States from 2007 to 2011.

This does not mean Germany is a role model. Government spending in Germany is far too high and it continues to grow. All we can say is that Germany is not going in the wrong direction as fast as the United States.

Oh, I suppose we also can say that I was right and my opponent was wrong. The United States has been more Keynesian than Germany.

Speaking of Germany, I combed my archives and found only one post that said anything nice about German politicians.

My other German posts mocked the country’s scheme to tax prostitutes, mocked the government for losing the blueprints for its new spy headquarters, mocked the government for a money-losing scheme to tax coffee, and even mocked the supposedly conservative Chancellor for wanting to impose new taxes.

So even though Veronique is correct about some positive changes, the Germans have a long way to go.

An amendment to a Senate appropriations bill introduced by Sen. Tom Coburn (R‑OK) that would have reduced funding for rural development subsidies at the Department of Agriculture by $1 billion was easily voted down today. Only 13 Republicans voted to cut the program. Thirty-two Republicans joined all Democrats in voting to spare it, including minority leader Mitch McConnell (R‑KY), ranking budget committee member Jeff Sessions (R‑AL), and tea party favorite Marco Rubio (R‑FL).

This was a business-as-usual vote that will receive virtually no media attention. However, it is a vote that symbolizes just how unserious most policymakers are when it comes to making specific spending cuts. That’s to be expected with the Democrats. On the other hand, Republicans generally talk a good game about the need to cut spending and they rarely miss an opportunity to criticize the Obama administration for its reckless profligacy. Republicans instead fall back on their support of a Balanced Budget Amendment and other reforms like biennial budgeting.

I think most Republicans are in favor of a BBA because they believe it gets them off the hook of having to name exactly what they’d cut. There are several reasons why Republican policymakers won’t get specific: 1) they really don’t want to cut spending; 2) they’re afraid of cheesing off special interests and constituents who benefit from government programs; 3) they’re more concerned with being in power and getting reelected; 4) they’re just plain ignorant of, or disinterested in, the particulars of government programs.

As for biennial budgeting, Republicans would have us believe that appropriating money every other year will give policymakers more time to conduct oversight of government programs. I think it’s another cop-out. Coburn’s office put out plenty of information on the problems associated with USDA rural development subsidies (see here). A Cato essay on rural development subsidies provides more information, including findings from the Government Accountability Office that are readily available to policymakers.

(Note: I worked for both Jeff Sessions and Tom Coburn.)

I have sometimes wondered whether it is accurate to say that Republicans are the “Stupid Party.”

We’ll soon know the answer to that question. As part of the debt limit agreement, the politicians agreed to set up a “Supercommittee” comprised of six Republicans and six Democrats that was responsible for producing at least $1.2 trillion of supposed deficit reduction.

But the Democrats appointed a group of hardcore leftists to the Supercommittee, which means that it is virtually impossible to get the necessary seven votes for a good agreement. Indeed, the more relevant question is whether one or more of the Republicans surrenders to a big tax hike.

Fortunately, there is an alternative. The law says that there will be automatic spending reductions if the Supercommittee does not reach an agreement. The political establishment in Washington thinks that this outcome—known as sequestration—would be horrible.

They tell as that a sequester would mean “savage” and “draconian” budget cuts. The only “responsible” approach, we are told, is to go along with a tax increase.

This is hogwash. The automatic spending cuts are only “cuts” using Washington’s dishonest budget math. Here’s a chart showing how much spending will grow over the next 10 years, and the relatively tiny reduction in budgetary growth that will be caused if there is a sequester.

We’ve actually been down this path before. There was a small sequester back in the mid-1980s, shortly after the Gramm-Rudman-Hollings law was enacted. There was much wailing and gnashing of teeth, but the sequestration helped restrain the growth of spending and helped bring about a record amount of deficit reduction in 1987.

There was a similar (unsuccessful) fight in 1989. Here’s what then-Senator Bob Packwood of Oregon wrote in 1989.

…the sequester has become the focus of partisan debate . Each side accuses the other of being responsible for “deep and arbitrary” budget cuts . Some legislators say we should do whatever it takes to cancel the sequester, even if it means higher taxes. While a sequester is certainly not the ideal way to resolve this year’s budget dispute, there are reasons to believe that the fiscal discipline of a sequester is the medicine we need to cure the budget process. For all its drawbacks, a sequester is real deficit reduction . Instead of budget gimmicks, accounting tricks, phony cuts, and “revenue enhancements,” a sequester would reduce spending levels by a fixed percentage in eligible spending programs . In other words, unlike most deficit reduction packages, sequestration would actually reduce the deficit.

The only argument against a sequester, at least among conservatives, is that a sequester would impose too much of a burden on the defense budget. But I’ve already explained in this post that the defense budget will climb by about $100 billion under sequestration.

I don’t know whether Republicans are the stupid party, but I know they will be very stupid if they don’t take the sequester and declare victory.