Sorting Out Right to Work Laws, Collective Bargaining Rights and Democrat Hysteria

The mass hysteria involving labor union rights escalated with the Wisconsin recall election of Gov. Scott Walter. One would have thought June 5, 2012 was the equivalent of 9/11 by all the media apoplectic and angry indignation over Scott Walter who was utterly vilified for the crime of being re-elected by the people in Wisconsin, again. Clearly, the hype was super charged and at a feverish pitch because the Wisconsin recall election was a voter referendum on big spending Democrats and public sector unions vs. the taxpayers and a governor who claimed to wipe out a multi-billion dollar deficit that he inherited from his Democrat predecessor.

If only my washing machine spun as fast as the media spin machine on the Wisconsin Gov. Walker recall election and the recent Michigan passage of a Right to Work law.

On the Walker recall election, Politico is reported that Walker decisively defeated Barrett 53.2 to 46.3, or 1,334,430 votes to 1,161,870 votes. It wasn’t even close, at least not close enough for the Dems to call in the heavy artillery of the Obama Department of Justice and Eric Holder. The Huffington Post even ran a headline suggesting that Republican vote fraud was a relevant issue. Well, there was no vote fraud and while the media probably did hang out at solidly Democratic precincts to document its spin machine exit polls, Walker won because the voters in Wisconsin turned out in massive numbers to reject higher taxes for the pampered overpaid public sector.

What precisely did Gov. Walker do to earn the wrath of public sector employees, the media and the Democrats? That question is best explained by a Democrat, albeit a solid card carrying Dem who actually supported Gov. Walker. Democrat.  Policymic.com journalist David Asche writes, here.

It is no secret to people who know me, and to people who read my articles, that on many issues I am a democrat. I am socially liberal, support higher taxes on the top earners in the country….So it may surprise people that in today's recall election in Wisconsin, I will be pulling for Republican Gov. Scott Walker to keep his job.

If there is one thing that really annoys me about democrats, it is their love affair with unions who I believe have run their course in this country....

Here is what is at the heart of the Wisconsin recall: when Gov. Walker came into office, Wisconsin was facing a $3.6 billion budget shortfall. Walker believed that one of the solutions to this problem was to force members of the state's public employee unions to put 12.6% of their paycheck towards their health care and 5.8% towards their pensions (far less than what private sectors pay into theirs). Prior to Walker's reforms, public union members were paying next tonothing for their health care and pensions and it was being funded primarily by the taxpayers of Wisconsin. Walker also eliminated collective bargaining rights for all public employee unions with the exception of firefighters and policemen.

These reforms were absolute no brainers. Why should public employee unions be exempt from paying into their own health care and retirement while everybody else in the state (and in the country) has to pay into theirs? Democrats love to talk about a shared sacrifice, but they certainly do not apply it to their union allies.

Astoundingly, 38% of Voters from Union Households Voted for Walker, a fact that left the left babbling incoherently as they plunged into a state of disbelief.  But many Wisconsin union employees were happy.  Why?   Because they got an automatic pay raise.  Besides requiring public sector employee to pay a higher share of there substantial benefits, Walker also signed into law a measure banning non-voluntary and the forced withholding of union dues from their paychecks.  The law does not affect the collective bargaining rights of unions, just their right to extort union dues from workers.

It's no secret that public and private sector unions are nothing more than a mechanism to extort forced contributions from workers for the Democratic Party fundraising machine.  It's a non-consensual campaign contribution.  Even worse, the federal government does in fact use tax dollars to fund union bosses who run the union dues extortion rackets.

REPORT: TAXPAYERS PAY $4.8M FOR UNION BOSSES' SALARIES IN SINGLE DEPT.

The ALG report used documents the group obtained through the Freedom of Information Act (FOIA) showing that taxpayers are actually paying these 35 union officials’ salaries. Only three of them make less than $100,000 per year, and the average taxpayer-funded union boss salary is $138,175 per year. Eight of the union bosses on the taxpayer payroll at the Department of Transportation make more than $170,000, too.

The union officials taxpayers are paying for come from various labor unions, too. They include the American Federation of State County and Municipal Employees (AFSCME), National Air Traffic Controllers Association (NATCA), National Federation of Federal Employees (NFFE) and the AFL-CIO affiliated Professional Aviation Safety Specialists (PASS).

ALG president Bill Wilson said in a release announcing the report that it’s “obscene that in one Department alone, taxpayers are being stuck with almost $5 million in public employee union salary costs, these unions collect member dues and should pay for their own employees.”

Moving on to Michigan, we need to start with labor union driven ballot box initiatives that went down in flames on election day.  The Michigan Protect Our Jobs (Prop 2) ballot initiative was a labor union driven project to change the Michigan constitution to effectively give labor unions more power than elected officials and legislators, as well as the absolute power to override all local collective bargaining agreements between local government entities and unions.  Protect Our Jobs also banned Right to Work.  Another union supported initiative, Prop 4, would have forced all home healthcare workers into joining the SEIU and forced these workers to pay SEIU union dues.  Both Prop 2 and Prop 4 went down badly with only 42% and 43% respectively, and way short of the 50% required for passage, here.

With the ballot box defeats of union power, the path was cleared for the Michigan legislature and the governor to pass a Right to Work law, which they did.  Michigan became the 24th state to pass a Right to Work law, here.  Right to Work states have strong economies, higher incomes and lower unemployment than states without Right to Work.

Right To Work States Have Lower Unemployment, Higher Income and Healthcare Coverage, NRTW President Says

In an exclusive interview with "The Right Views," Mix discusses the benefits Michigan will reap by becoming the nation's 24th Right to Work state and explains that the goal is to promote prosperity and individual freedom, not to bust unions:

"First of all, Right to Work is about individual worker freedom. It is wrong to think that, in this country, we could force a worker to pay a private organization for the privilege of working. So, on a fundamental basis, it's about individual freedom."

"But secondarily, it's pretty demonstrable that economic benefit comes to those states that pass Right to Work Laws.

"Indiana, I believe, has led the nation in new private sector job growth since they passed the Right to Work law in February. The economic development department out in Indiana has indicated there have been 90 new deals of companies that have come and said 'we're interested - now that you're in a Right to Work state - to either expand or relocate in your state.' So, it has had a dramatic impact on the economic activity in the state of Indiana."

Mix notes that workers in Right to Work states not only tend to have as much as $4,300 more purchasing power, but also are more likely to have health insurance:

"And if you look at the other 22 Right to Work states, you find when it relates to private sector job growth, when it relates to increase in private sector per-capita purchasing power, or adjusted for cost of living, you find those states are doing much better.

"So, there's lots of data out there that talks about this, including a study from the George Mason Department of Economics. They did a study when, adjusting wages for cost of living, they found workers in Right to Work states have about $2,300 more to spend than workers in forced-unionism states.

The taxpaying voters in America are indeed sick and tired of being plundered by Fedzilla in the District of Crime, their governors and their state legislatures, especially considering that most folks are finally and angrily rejecting the burden of higher taxes when they are monumentally suffering because of a busted economy.

There just comes a time in every voters life when the two bit whore is just too darned expensive, and I do indeed apologize to whores who engaged in a far more honest and honorable profession than the plundering political class and their labor unions.

Americans are simple basic folks. They want to go to their neighborhood Thai dive where they find real value for their money. Government at all levels no longer even harbors the delusion of a decent bang for the buck.

Voters are finally beginning to see the union extortion racket, especially in public sector unions, for precisely what it is - a job killing, economy killing and a very costly taxpayer ripoff.

With so much suffering in America, it's downright arrogant and selfish of public sector employees to demand a perpetual license to steal from the taxpayers, many of whom are suffering profoundly themselves from the loss of jobs and benefits. They don't have a taxpayer funded slush fund to plunder.

A Twinkie Autopsy

Twinkie-gate is getting a ton of media and blogger attention because of its bankruptcy and the loss of over 18,000 jobs. However, there is a whole lot more to the story besides the emotional aspect, and like everything else it's a whole lot more complicated than soundbites and rants from the left and right.

The right wing Twinkie meme:  A fine capitalist company like Hostess was forced out of business by the evil labor unions.

The left wing Twinkie meme:  The evil and greedy capitalists treat their labor like expendable garbage and only care about profits.

The Libertarian free market meme: Let the markets sort it out.

Some even believe that changes in consumer tastes and demand killed Twinkie and dubbed it creative destruction.

The Free Market Killed Hostess, And That’s A Good Thing

It’s unfortunate to see this company go away, of course. Not just for the history, but for the tens of thousands of people who are now unemployed....

Herein lies the paradox of progress. A society cannot reap the rewards of creative destruction without accepting that some individuals might be worse off, not just in the short term, but perhaps forever. At the same time, attempts to soften the harsher aspects of creative destruction by trying to preserve jobs or protect industries will lead to stagnation and decline, short-circuiting the march of progress. Schumpeter’s enduring term reminds us that capitalism’s pain and gain are inextricably linked. The process of creating new industries does not go forward without sweeping away the preexisting order.

Over the past two centuries, the Western nations that embraced capitalism have achieved tremendous economic progress as new industries supplanted old ones. Even with the higher living standards, however, the constant flux of free enterprise is not always welcome. The disruption of lost jobs and shuttered businesses is immediate, while the payoff from creative destruction comes mainly in the long term. As a result, societies will always be tempted to block the process of creative destruction, implementing policies to resist economic change.

Attempts to save jobs almost always backfire. Instead of going out of business, inefficient producers hang on, at a high cost to consumers or taxpayers. The tinkering short circuits market signals that shift resources to emerging industries.

It's unclear whether or not the company, Hostess Brands, and its well known and popular brands that included Hostess®, Drakes® and Dolly Madison®, which make iconic cake products such as Twinkies®, CupCakes, Ding Dongs®, Ho Ho’s®, Sno Balls® and Donettes® and also includes bread brands that include Wonder®, Nature’s Pride ®, Merita®, Home Pride®, Butternut®, and Beefsteak® and others just arrived at a natural free market death or if other considerations were involved

The website of Hostess Brands says:

Hostess Brands is Closed....

We are sorry to announce that Hostess Brands, Inc. has been forced by a Bakers Union strike to shut down all operations and sell all company assets. For more information, go to hostessbrands.info. Thank you for all of your loyalty and support over the years

HOSTESS BRANDS TO WIND DOWN COMPANY AFTER BCTGM UNION STRIKE CRIPPLES OPERATIONS...

The Board of Directors authorized the wind down of Hostess Brands to preserve and maximize the value of the estate after one of the Company’s largest unions, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM), initiated a nationwide strike that crippled the Company’s ability to produce and deliver products at multiple facilities.

Jonathan Turley's liberal leaning website reported on the Hostess bankruptcy, here:

The company is in its second bankruptcy in a decade. Hostess sold about $2.5 billion worth of snack products last year with Twinkies leading the pack. However, the company has nearly $1 billion in debt and has $2 billion in unfunded pension obligations..

While Hostess CEO Gregory Rayburn was planning to ask his employees for wage and benefit concessions, he was awarded a 300 percent raise (from approximately $750,000 to $2,550,000). Nine other top executives of the company received massive pay raises.

Over the eight years since the first bankruptcy, Hostess employees have watched as:

money from previous concessions that was supposed to go towards capital investment, product development, plant improvement and new equipment, was squandered in executive bonuses, payouts to Wall Street investors and payments to high-priced attorneys and consultants.

Is the Hostess bankruptcy an engineered bankruptcy, a chapter straight out of the famous Wall Street movie staring Michael Douglas, a legal maneuver to avoid pension liability, a scheme to wiggle out of paying its debts, a strategy to kill the unions or is it something even more sinister?

Synergy is defined as the belief that the whole is greater than the individual parts.  In Wall Street speak, the individual parts are worth vastly more than the whole.  All those Hostess Registered Trademarks have value, probably considerable value, and there is no doubt that they will be sold for the highest possible price.

Creatures like Hostess, who are wallowing in mountains of debt, are all products of the leveraged buyout (LBO) fever that was born in the 1980's after the dollar was de-tethered from gold and easy fiat money became as prevalent as grains of sand in the Sahara Desert.

Understanding the LBO game requires understanding the concept of leverage.  Simply put, leverage is very little equity (no skin in the game) and a big pile of debt to play the takeover game and frequently the hostile takeover game.  The LBO players are typically Wall Streeters, Hedge fund operators, private equity firms and just about any financial high roller seeking to make a big play with borrowed money.  Many of these takeovers absolutely included plans to bust up companies and sell them off piece by piece.

There are many famous LBO's including an LBO involving former Treasury Secretary William Simon, here.

It may be argued that LBO fever first set in through a demonstration of its potential in a wildly successful deal by former Treasury Secretary William Simon in 1983. He had participated in an LBO takeover of Gibson Greeting Cards which was financed by $1M in equity and $79M in debt (total purchase value $80M); 1.5 years later Gibson was refloated on the market for $300M. Simon's original investment of $330K (1/3 of the total equity stake) turned into a fortune of $66M (ie. 1/3 of the total market capitalisation), thanks to the power of 80:1 leverage.

Having started my Libertarian education back in the early 1970's that included reading and learning about free market capitalism, the LBO craze left be scratching my head in bewilderment.  The debt fueled LBO craze wasn't creating new plants, new companies, new products, new jobs or even R & D for the future.  The LBO craze was strictly predicated on raiding and plundering corporations, their assets and renouncing unions and pension obligations.

What Republicans dub plain old fashion venture capitalism is perceived by Democrats and the left as vulture capitalism.  Mitt Romney earned his mega fortune doing LBO deals.  A lot of these deals came packaged with government loans and subsidies (corporate welfare).

Let's get back to Hostess Brands because the company is possibly just another victim of the LBO as told by Firedog Lake.

Death By Twinkie: What the Hostess Liquidation Says About Labor and the Economy

Hostess has apparently not kept up with market share – with such good products like Twinkies and Wonder Bread, imagine! – but as you see above, the real trigger for this liquidation was the strike. This is the second Hostess bankruptcy since 2004. The BCTGM union took multiple concessions in the first bankruptcy, and offered multiple concessions (I’d tell you exactly what they are but apparently they’re having bandwidth issues at their site today) on wages and benefits this time around. But the contract the company tried to unilaterally impose was so bad, with a 27-32% wage cut and benefit slashes and the elimination of the eight-hour workday, that 92% of workers rejected it. And after the strike initiated, Hostess moved right to shutting down the company rather than working with the union on a resolution.

In fact, Wall Street hedge funds and private equity firms own Hostess brands, and they took massive bonuses and payouts over the past eight years or so. They dumped the company pensions, unilaterally stopped making pension payments that would have totaled $160 million, and plan to pay themselves with the sale of the liquidated assets of the company. Their current CEO’s main credential for the job is his “expertise in corporate liquidations,” according to the union (he’s also seen his pay triple).

This is an object lesson in how management looks at labor relations these days. Workers are expected to take their lumps, and if they protest, management will just blow up the company. And the owners will still make a profit. This is Romneyism and Bainism writ large. AFL-CIO President Rich Trumka reacted today:

What’s happening with Hostess Brands is a microcosm of what’s wrong with America, as Bain-style Wall Street vultures make themselves rich by making America poor. Crony capitalism and consistently poor management drove Hostess into the ground, but its workers are paying the price. These workers, who consistently make great products Americans love and have offered multiple concessions, want their company to succeed. They have bravely taken a stand against the corporate race-to-the-bottom. And now they and their communities are suffering the tragedy of a needless layoff. This is wrong. It has to stop. It’s wrecking America.

It's definitely refreshing to hear the AFL-CIO president invoke crony capitalism as a cause of America's economic decline.

Also, there is something inherently repugnant and unjust about an economic system that makes the rich richer and the poor poorer.  America was once a nation with the strongest middle class in human history.  Now the once proud and prosperous American middle class is vanishing as we increasingly morph into a society of the rich and the poor.

Not only is this a very bad situation that will continue to explode into class warfare, it's also a situation that was substantially advanced when Nixon de-tethered the dollar from gold in 1971.  The unleashing of "Banksters Gone Wild" has resulted in all kinds of horrors from birthing the LBO in the 1980's to massive $15 trillion bankster bailouts to a busted economy.

The real tragedy, however, is that capitalism always get blamed. The truth of the matter is that America doesn't have free market capitalism.  We've got this insidious hybrid command and control corporatist and bankster run economy that maintains its absolute control through the buying of Congress Critters and the ownership of the DNC and RNC money laundering machines.

When we think of companies like Hostess that are saddled with incredible debt stemming from LBO shenanigans we also have to think about "how did all this happen, why did it happen and who is really benefitting?".  The workers, consumers and free marketd are not among the beneficiaries.