Who is to blame?

Opinion: April 21, 2011 at 12:00a.m.

By Daniel Akst

Newsday

As public employee unions have come under growing pressure from financially strapped states, their defenders have often claimed the unions are being scapegoated for someone else’s failings. It was the bankers that brought us the recession, this argument goes.

That in turn cut state revenue, which led to demands for givebacks from the unions.

On the other side of the political spectrum, of course, public employee unions are said to be at the heart of the problem, with their rigid work rules, bloated benefits and early retirements. The spiraling cost of teachers, cops and other government workers — in particular, their pensions — was going to do us in sooner or later, regardless of the recession.

Customarily, this is the point at which the columnist, citing some larger yet less noticed issue, triumphantly pronounces both sides wrong. Yet here is a dispute in which both sides are absolutely right.

Too much power

You don’t have to love bankers to recognize that public employees, at least in a state like New York, have far too much power, which they’ve exercised to the detriment of the public. In Suffolk County, for instance, it costs roughly $200,000 a year to put a police officer on the street. And across the country, teachers unions have stymied reform and protected incompetents, even while (in New York at least) school taxes rise faster than inflation year after year. It’s not even clear why public employees should have collective bargaining rights. Most federal employees don’t, yet federal employment remains highly desirable. Private sector unions exist to fight over how much of the profit workers should get. But in the public sector, there is no profit.

Taxpayers, moreover, have noticed that government workers have better pensions and pay little or nothing for medical insurance. Out here in the rest of the world, it doesn’t work that way anymore. Perhaps it should, but meanwhile it’s hard to see how the current arrangement is fair — especially given how much influence the unions have in Albany.

Bankers

That brings us to the bankers, whose recklessness did bring on the recession, which did in turn torpedo state revenues. Workers without paychecks don’t pay much in taxes, after all, and if stocks fall, there are no capital gains. But that’s not all. The bankers in question — the people who run giant financial institutions — are among the top 1 percent of earners. And over the years this top group has garnered more and more of total earnings.

In 1976, our bicentennial year, these folks were paid 8.9 percent of national income. In 2007, they got 23.5 percent. Yet after inflation, average wages across all jobs actually fell. So over time, states became ever more dependent on taxing the top 1 percent. The journalist Robert Frank notes that in 1994 this group accounted for 25 percent of New York’s income taxes. In 2007 the figure was 41 percent. But their income is volatile, the poor dears, often depending on bonuses and capital gains. And it fell sharply in the panic of 2008, stressing state budgets.

So it makes a certain sense for public servants and bankers to blame one another for state fiscal troubles. To the average working person, though, each is a kind of elite enjoying special privileges.

Daniel Akst, a columnist for Newsday, is the author of “We Have Met the Enemy: Self-Control in an Age of Excess” from Penguin Press. Distributed by McClatchy-Tribune Information Services.