What Do Public Employee Unions Want?

In keeping with my New Year’s resolution, let me say that I agree with Mallory Factor & Phil Kerpen with respect to at least part of the following:

Currently, the long-term fiscal-policy outlook is bleak. A report issued last month by the Congressional Budget Office shows that federal spending as a percentage of the U.S. economy, a number that has never historically deviated much from 20 percent, is now scheduled to nearly double in size to 38 percent by 2050.

Factor & Kerpen are rightfully concerned about the tax burden that we will bestow upon our children and grandchildren if we continue to have current taxes set below government spending. But when they bash the “Liberal public employee unions”, they somehow lose me – especially when they say the following:

Government employees understandably would like to see the government take over as much of the U.S. economy as possible.

I find this allegation odd for several reasons. The first reason relates to the following chart that shows the ratio of government employees to total employment (data from the Bureau of Labor Statistics). Note that this ratio fell from 1993 to 2000 and then rose as a result of the increase in our security efforts following 9/11. This ratio subsequently fell with the percentage of employment from the government now being around 16.25% as compared to around 17.25% when Bill Clinton took office. So with a smaller share of employees working for the government, I thought the position of Factor & Kerpen might be that public employees had received some massive increase in their real compensation. In terms of total compensation relative to the consumer price index, the Bureau of Labor Statistics reports that those in public administration receive 8.67% more than they did at the beginning of 1993 as compared to a 7.41% increase in real compensation for all civilian employees.

So why are Factor & Kerpen angry at the American Federation of State, County and Municipal Employees and the Service Employees International Union? It seems that Factor & Kerpen want to reduce “entitlement spending” and they do not like this ad where Act Now is opposing the efforts of the GOP to have an $8 billion per year reduction in spending following by tax cuts that are about twice as large. If Factor & Kerpen think reducing transfer payments by $8 billion and reducing taxes by $16 billion will reduce the deficit, they must be practicing new math.

Of course, the real problem is that they have confused transfer payments with government purchases. As we noted here the ratio of non-defense Federal purchases to GDP has not change very much over the past half century. Factor & Kerpen are concerned that transfer payments will rise over time. The long-run balanced budget constraint dictates that someone’s net taxes (taxes minus transfer payments) have to increase if policy makers cannot find a way to slash government purchases (a reasonable assumption). So I share their general concern. I would just hope someone over at the National Review finally realizes the difference between transfer payments and government purchases.