Indentured Servitude in the USA and the Biggest Ponzi Scheme Ever

by John Loudon

“People everywhere enjoy believing things that they know are not true. It spares them the ordeal of thinking for themselves and taking responsibility for what they know.”

Brooks Atkinson

red-tape

It is trite to say that things often are not what they seem, but sometimes they are so much “not what they seem” that discovery creates in the newly informed, initial disbelief.  This disbelief will sometimes be followed by shock and then outrage and then inertia resulting from a general disgust.   That is why it is so immensely encouraging to this activist, that so many patriots are rising up to “take responsibility for what they know.”  Hopefully, enough readers will latch onto this issue and take action both nationally and locally to head of a bad combination of injustices that hurt our neighbors individually and all of us in the end.  The issue is modern indentured servitude that supports a ponzi scheme to on the backs of young tradesmen that is doomed to collapse.

The Wall Street Journal opined Wednesday in an article entitled “Crony Contracts” that  “There’s almost a direct correlation these days between the Obama Administration’s complaints about “special interests” and its own fealty to such interests. Consider its latest decree that federal contractors must be union shops.”  While fealty to unions is a troubling issue to many, what underlies the fealty is much more sinister.

To the casual observer, Democrat attempts to steer all federal construction work to union contractors is the same as Republicans rewarding non-union contractors.  The Republican position is in fact, that all workers get a shot to work as long as their employer proffers the lowest, best bid without regard to union status.  Clinton first wrote the executive order to steer federal construction work to union contractors.  Bush reversed the policy, and Obama has reinstated it.  What most people never see is the true motive behind this policy of reserving public work for union members only using the union-only PLA.

The union-only PLA is a clever modification of the innocuous “Project Labor Agreement.”  This is a fairly standard contract clause in construction that stipulates who will do what work, like who hangs 100 sets of window blinds in a new hospital wing, the carpenters or the electricians?   (hint:  it may depend on whether the blinds are electric)  The cronyism that the Wall Street Journal discusses is the cynical modification to these policies that began creeping into contracts about 20 years ago.  It stipulates that no matter what the jurisdictional issues are, all of the workers will be supporting the union pension fund.  Huh?

The union propagandists will say that the policies are good because they limit union strikes.  “Help me, help you” in other words.  Big labor is saying if you bar the competition from the work, they promise not to cause problems for you.  Even though that would be extortion in any other segment of the market, some might see that as a reasonable cost of doing business.  Amazingly, union-only PLAs do not actually even eliminate work stoppages.  In fact, they barely reduce the number of strikes.  You see, a lot of people think this is a question of unions united against non-union contractors.  That is not it at all.  You have not seen a fight until you have seen one union fighting another.

Big labor is quick to point out that while some PLA contracts say all workers must be union members, others “allow” all contractors and subcontractors to work as long as they are “signatories” with the AFL-CIO.  The effect is that the merit shop (non-union) contractor can do the work under the condition that for every hour his workers put in, payments are made to the union “health and welfare” plan.  The result is that the taxpayers, because they are paying the bill, are paying not only for the health and pension benefits of the merit shop worker, but are also coerced out of an average $6 per every man hour, in order to fund the union pension fund.  As the Wall Street Journal article cites, even the Veteran’s Administration, a government agency, put the added cost at 9% on top of the real cost of any project.  Logic would dictate that by eliminating merit shop contractors from the bidding pool, which happens to be 85% of all construction workers, cost are going to increase.  Other studies put the added cost at 10-20%.

The worst part of the Obama executive order is the real reason for it.  According to a September, 2009 report by Moody’s Investor Services, construction union pensions in 2008 were just 54% funded.  Just like Social Security, the promised union pensions were too fat.  They were built on the similar demographic flaw of social security.  The system would pay full benefits to the earliest retirees, but would only be able to continue to do that if the ratio of workers to retirees is sustainable.  So what does it mean when the ratio fails?  How do you restore the footing on a plan so underfunded when the ration of worker to retiree continues to get worse?

You cannot violate existing contracts by slashing benefits to the retirees enjoying archaic, fat benefits.   If you offer dramatically reduced benefits to the new workers, it will be difficult to attract them.  What worker wants to put in a lifetime of work to fund the retirement of a bunch of people he never met, who are receiving benefits many times as rich as what he will receive?  The answer is very few.   The savvy skilled tradesman would rather go the merit shop contractor and build up his own 401k.  Who wouldn’t?  But since “Mars needs women”, and the union retirees and older members still need people paying in, no one is telling the younger tradesmen they are hosed.  Meanwhile, since you can only “cheat some of younger union members some of the time, the search is on for new funding sources.  There are exactly two.  Before moving to those, consider this dilemma.  What about those workers who have put two, three, or even ten years in and are now vested in the union pension plan?  How can they leave and walk away from their investment?  On the other hand, how can they keep working, knowing that pension plan is insolvent?  They are the ponzies, trapped in service to their masters.

A number of proposals in Congress would unload the liability onto taxpayers.   Not only is continuing the “too big to fail” bailout strategy, a violation of all that is just, but it continues to reward irresponsible planning.  It would allow union employers to unload their liability, which now tips the playing field against the employers who are planning properly.

The second strategy to screw non-union workers and their employers is the current course of forcing union-only PLAs at all levels of government.  Not only does this create more union man hours, it does something much more in the category of evil genius.  When a non-union tradesman works under a PLA, the employer puts around $6 per hour into the union pension fund.  These are dollars the worker earns but will never enjoy because the vesting period is five years and few if any construction projects run for five years.  Clever, huh?

The Associated Builders and Contractors (ABC) has been on the forefront of battling this issue for the last 20 years.  Trade unions have been meticulously stacking school boards city councils, fire districts and other public boards with candidates whose first priority may not be to the kids or taxpayers, but to making sure that when the public entity builds, it builds union-only.   This strategy has been so stealthy, that even the upper middle class municipality in St. Louis County, Des Peres, Missouri, with a median household income of $106,000, has an RFP for electrical work which specifies that union contractors are preferred.  Sometimes the battle is not so stealthy.  When control hinges on one vote, unions will spend hundreds of thousands of dollars to win a single city council seat or even an unpaid fire district seat.

So what will people do with this information?  The first thing to do is realize that your school board may not be working for you, as a taxpayer or parent.  Here is a clue:  if the candidate for the fireboard is endorsed by the firefighters, he might not be looking out for you.  Just sayin’.  Does the teachers union endorse your school board candidate?  Helloooo?

So how bad is the problem?  Congress (through the Pension Protection Act of 2006) considers funds with less than 80% of needed assets to be in “endangered” status, and those with less than 65% to be in “critical” status. According to Real Clear Markets, the list has grown from 230 pension plans in 2008 to 640 at the end of 2009.

As broad as the problem is, there are many ways to fight it.  If you are a contractor, join your local merit shop contractor association.   Let your Congressional delegation know that you are 100% against private pension fund bailouts.  Meanwhile, pay attention to all elections, not just those for partisan offices.  At least take note whether your public boards are working for you.  Finally, consider becoming a candidate yourself.  There may not be as much glamor in a City council seat, but there just may be an ABC chapter that is hungry for a candidate, willing to donate some seed money.  Help them help you.


Email this to a friend | Print | Share on Facebook | | Bookmark and Share

Tags: , , , , ,
Posted Apr 25th 2010 at 10:29 am in Big Labor, Uncategorized | 121 Comments