Hurrah for Governor Walker and honest money

Walker's victory in Wisconsin is terrific not only for him, but for the moral principle of honest money too

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Walker celebrates his victory
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Charles Crawford
On 7 June 2012 13:29

What’s the story in Wisconsin? Why the fuss?

Wisconsin has nearly 6 million people and a GDP comparable with Greece or Finland. So it counts for something in the greater scheme of things.

Wisconsin Governor Scott Walker (a Republican) has been under sustained attack from Left/progressive forces for all sorts of things, but above all for scaling back the power of public sector unions. The Guardian, before the election, gave us a handy summary written of all the horrible things he has been doing. And here at Forbes is the opposite view, explaining why Wisconsin needed some medicine to help stabilise its public finances.

Why should it bother us, one way or the other?

Most people, even ardent pro-EU, pro-Europeans, these days accept that ‘something must be done’ to reform the Eurozone and the wider European economy. But then views differ sharply. Some clamour for more Europe – to take whatever institutional steps are needed to keep the Eurozone going. Others say that the Eurozone idea itself is the real problem – reforms to prop it up prolong the cancer, not cure the disease.

These are vast issues, and can be looked at either in microscopic technical detail or by stepping right back to look at bigger trends. In the latter camp comes this devastating piece by Mark Steyn:

Once upon a time, you were a kid till you were 13 or so; then you worked; then you died. That bit between childhood and death has been chewed away at both ends. … The bit in between adolescence and retirement is your working life, and it’s been getting shorter and shorter. Which is unfortunate, as it has to pay for everything else.

… our generation is running up debt that will have to be repaid by our shrunken progeny. One hundred Greek grandparents have 42 Greek grandchildren. Is it likely that 42 Greeks can repay the debts run up by 100 Greeks? No wonder they’d rather stick it to the Germans.

But the thriftier Germans have the same deathbed demographics. If 100 Germans resent having to pick up the check for an entire continent, is it likely 42 Germans will be able to do it?

His conclusion?

… the developed world is all playing the same recessional. In the world after Western prosperity, we will work till we’re older and we will start younger — and we will despise those who thought they could defy not just the rules of economic gravity but the basic human life cycle.

In other words, we are now entering an inter-generational war of far-reaching practical and moral complexity. Wisconsin was the latest battlefield.

In Wisconsin and many other US states (as in Europe) we have seen over the past few decades the growth of a collectivist idea that ‘the state’ has to solve most problems. Once the state has unlimited responsibilities, it is not surprising that those who work for ‘the state’ have started to treat public money as itself ‘unlimited.

Why? Because the state is (in theory) uniquely unable to go bust – either it uses force against its own citizens to raise more taxes, or it borrows unfeasibly large sums of money against that monopoly of force, or it prints more money to pay its way and lets someone else take the hit as inflation emerges.

In these ignominious circumstances public sector unions have managed to win for themselves all sorts of incremental benefits and privileges, above all in respect of their pensions. (Disclosure: as a former UK public sector worker, I benefit from just this. I have a pension that is in principle inflation-proofed).

All of which seems fine when things are growing. But when the economy falters and different background compound interest effects remorselessly reveal themselves, public sector pension pots can start to grow beyond any manageable limit and suck in unaffordable tax contributions. Look at the ghastly numbers in California, where different cities face disaster as public sector costs run out of control; Democrats too are demanding painful choices.

In these circumstances, it is madness to allow a situation under which public sector unions can compel all union members to pay lavishly into their political funds to help unions lobby intensely for ever greater benefits and against reasonable reforms. Governor Walker stopped that happening by breaking ‘closed shops’ and making union dues voluntary. Union membership has dropped sharply, in part because of this. Plus he compelled union members to pay rather more into their pension and health funds. Brutality!  Class war!

No. Just putting in place vital common sense checks and balances. The key fact in last night’s Wisconsin recall election? Over 30 percent of households with a union member in them voted for Walker. A strong majority of people in Wisconsin got the core Tea Party political and moral message: stop unaffordable spending

We are going to have to deal with a sprawling moral hazard issue in democracy itself as the bills dumped on the future continue to rise, but the people required to pay them decline in numbers as demographic trends unfold. Under what circumstances should people who don’t work have a claim on the product of those who do, or will?

Putting it another way, why should Germans work well into their 60s to pay for EU olive-belters who retire well before that? Why should Germans work well into their 60s to pay for EU olive-belters who retire well before that?  Why should Germans work well into their 60s to pay for EU olive-belters who retire well before that?

This explains why it is a Good Thing that the Walker camp outspent the anti-Walker camp. To those who wail that Big Money is now unfairly buying political outcomes, the answer is that that is a far sounder basis for long-term public spending than Big Stupidity using monopoly power to define the options and ending up creating ruin, as has happened for far too long across much of the European Union.

Scott Walker has gone through a hellish ordeal simply because he is determined to keep Wisconsin’s strategic public funding issues under adult supervision. This victory is a terrific win for him, but most importantly for the moral principle articulated so well by Margaret Thatcher in the 1980s: honest money. President Obama’s, and the wider Democratic Party’s, inability to articulate a credible alternative is now a serious political weakness.

Charles Crawford is a Contributing Editor to The Commentator. A former British Ambassador in Sarajevo, Belgrade and Warsaw, he is now a private consultant and writer: www.charlescrawford.biz. He tweets @charlescrawford

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