(Editor’s note: The following is an edited
version of a speech delivered by Mackinac Center President Joseph G. Lehman at
the West Michigan Policy Forum in Grand Rapids on Sept. 16, 2010.)
It’s an honor to
address the group and a delight to connect with Mackinac Center friends and
supporters. Congratulations to the Grand Rapids Chamber. Your decision to
establish this annual forum three years ago fills a real void in the policy
debate. There’s never been a better time for fresh perspectives.
Perspective can make
all the difference. I hunt deer with our three young sons and our daughter.
Circumstances have conspired against the middle boy, Stephen, who is now 12.
He’s the only brother who has never been with Dad when we’ve actually gotten a
deer. So I take Stephen out with me even more than the other boys.
Last year’s hunt
with Stephen was an entire day that started and ended in darkness, inside a
cramped, smelly deer blind, in weather that was even bad for November. We
didn’t even see one deer that day. My one-word description for the day would have
On New Year’s Day I
asked everyone in the family if they could remember the best thing that
happened to them in the last year. The only answer I remember is the one Stephen
gave. He said, “Dad, I think it was that one day I got to spend the whole day
with just you in the deer blind.”
perspective changed the way I’ll look at a bad day in the woods from now on.
For instance, tax-funded universities might have a perspective that causes them
to see more of the upside of tax-funded programs than the downside. Maybe
that’s why we don’t see reports coming from those universities that include lists
of low-priority government programs that might be shut down or taxes that could
be reduced. So when the Mackinac Center produces that kind of report, we
believe we’re filling a real void.
Words shape perspective
in powerful ways. We could study the state’s cash flow and conclude the budget
suffers from a “structural deficit.” We could
say that deficit arises from a “revenue shortfall.” But isn’t it just as
accurate to say the deficit arises from “overspending?”
I used the term
“structural overspending” in the title of this talk because it points us toward
one way to get the state’s budget back in the black. It might make as much
difference as there is between a miserable day in the woods and the best day of
The Mackinac Center
has recommended hundreds specific ideas to save the state more than $2 billion a
year. Most of them involve getting government out of certain activities, or
eliminating costly privileges to certain groups. I won’t list them here, but
the conference organizers will send you an e-mail that includes a link to one
of our papers called “101 Recommendations to Revitalize Michigan.”
After we published
this pamphlet, we found one idea bigger than all of them combined. This idea does
not require eliminating a single government employee or program. It’s an idea
that appeals to the idea of basic equity. And it could save $5.7 billion a
Let’s look at it.
How did the gap get
so big? The reason is due to what I call “compound monopoly.”
Let’s examine what
we know about monopolies: first, as the sole provider of a product or service
they have the ability to keep out competitors; second, they are known for high
costs, low efficiency, unresponsiveness and low quality.
In this assessment,
the first description aptly describes government. The second description
captures the essence of unions.
Combine these two
types — a government employee union — and you have a compound monopoly.
constituencies will oppose the $5.7 billion savings plan. But they’ll have to
argue they deserve better insurance and pensions and vacations than the people
they work for.
Why is this idea
worth pursuing? That answer to that question is A Tale of Two Willies.
The man on the left
is legendary bank robber Willie Sutton, who is famous for something he may or
may not have said. When someone asked him why he robbed banks, he reportedly
responded, “Because that’s where the money is.”
That’s one reason to
pursue this $5.7 billion in savings. Employee benefits are simply where the
money is in state and local government. At least in the sense that there may be
no more achievable, necessary and fair way to trim $5.7 billion in one fell
The man on the right
is Willie Brown. He’s the famous former mayor of San Francisco and speaker of
the California State Assembly. It would be hard to identify a better friend of
government spending and unions in general.
But even Willie
Brown knows the political winds are changing. I’m going to read something he
wrote last January for the San Francisco Chronicle that I couldn’t have said any
“The deal used to be that civil
servants were paid less than private-sector workers in exchange for an
understanding that they had job security for life.
“But we politicians, pushed by our
friends in labor, gradually expanded pay and benefits to private-sector levels
while keeping the job protections and layering on incredibly generous
retirement packages that pay ex-workers almost as much as current workers.
“Talking about this is politically
unpopular and potentially even career suicide for most officeholders. But at
some point, someone is going to have to get honest about the fact that 80
percent of the state, county and city budget deficits are due to employee
perspective has changed.
government matters. Is government sort of a Swiss Army knife with infinitely
elastic capacity to add new blades and tools to fine tune the economy? Or is it
more of an umpire that enforces basic rules and sets a framework for play, but
otherwise stays out of the way of the players?
If government is a
Swiss Army knife, then we’d better start working harder in the private sector
to pay for all the new government we’re going to need. But if it’s an umpire,
the state’s going to have to get its fiscal house in order.
All of us on the
panel agreed on the phone a few weeks ago that Michigan doesn’t have any
problems that another million new jobs wouldn’t solve. I would argue that state
government can do a lot more to prevent the creation of a million jobs
than it can do to create those jobs. Especially when the battery jobs the
governor touted last week are subsidized to the tune of $113,000 apiece.
The more state
government can’t live within its means, the harder it will be to create jobs
Let’s take a look at
some data that will shape the policy, and the politics, of saving this $5.7
Chart one shows the
difference between Michigan’s public and private sector wages and benefits.
As you can see, the
gap in hourly benefits is a difference of $6.66.
We’ve had to make
some assumptions because of disparate data. We believe our assumptions are
defensible. But our methodology is open to review on our website, or we will send you our calculations.
Now I’d like to show
you some trends that will be important in understanding how we got here, and
how this idea could have political appeal.
government wages have been increasing much faster than in the private sector,
and this trend has only been exacerbated in recent years.
The next chart shows
that the wages and benefits of a state employee now cost taxpayers more than
$93,000 a year.
Michigan’s private sector wages and benefits have fallen substantially while
government employees have been protected. Indeed, government workers began
receiving higher average compensation than private workers in 2005.
In 1999, state
employees’ pay and benefits averaged $57,622. By 2009 that average had risen to
You can see where
public compensation passed private compensation in 2005.
This chart shows
that government jobs in Michigan make up a larger percentage of the economy
than they did a decade ago.
And here you can see
how the government class was also protected in the recent recession.
I’m showing you this
chart because it illustrates so perfectly how good the public-sector
unions are at increasing funding for their constituencies
in the face of a declining overall economy. So we have our work cut out for us.
The $5.7 billion in
savings is spread through multiple levels of government. Unions have built
fortresses around these benefits via hundreds of collective bargaining
agreements, the Public Employment Relations Act, various pension acts, court
decisions and maybe even the Constitution. It’s hard to imagine a single bill
that could capture all $5.7 billion.
We should be under
no illusion that bringing equity to public and private employment benefits will
be politically easy. But the gap grows worse each year, and the public is more
open than ever to ideas that couldn’t have been advanced three years ago. And
we know that what can’t continue forever, won’t.
The Mackinac Center
is developing a blueprint for capturing the $5.7 billion, or as much of that
amount as possible. We’ll be presenting it to the new governor and Legislature,
but most importantly to the public. We invite your support and input along the
Good ideas and solid
data are not inherently persuasive, especially in politics. That’s why it’s
important to make the strongest possible case for equity and fairness at the
same time. It’s simply not right or fair to have a government that spends too
much to do things it’s not good at while protecting a privileged class of
government employees who expect their private-sector neighbors to provide them deluxe
health and retirement benefits.
Joseph G. Lehman is
president of the Mackinac Center for Public Policy, a research and educational
institute headquartered in Midland, Mich. Permission to reprint in whole or in
part is hereby authorized, provided that the author and the Center are properly