The Public Sector Coup

The classical liberal views the government as a real-world necessity that nevertheless presents risks to liberty. History informs us of the dangers that government presents to the maintenance of liberty. Government has a tendency to grow, so maintaining a limited, circumspect government requires constant vigilance to protect citizens from the potential excesses of its activities. The classical liberal also accepts that while many of the contemporary duties assigned to government may be provided by the private sector, there are possible efficiency gains when the public sector provides some basic services—think sewers, security, a legal system, and other things that government in theory should be able to do reasonably well.

The offices of government are staffed by people who are neither angels nor demons. Politicians and the public sector employees they oversee are regular people who share the interests and biases of ordinary citizens. We must maintain strict limits on the scope of government and constant oversight to confirm that the public sector is doing a reasonable job of providing services. Ultimately, citizens must act through political means if lines are crossed and the need for change arises. If the state cannot do the things it is empowered to do, or if government officials put their own interests plainly above those of the citizens they serve, then citizens must act within the institutional constraints to protect liberty.

Which brings us to the past 12 months. There is a growing need to rein in the political excesses of the public sector, both in long suffering areas such as police reform and in newer, alarming, abuses of unionization, such as the increasing investment activism of public sector pension funds.

Obviously, many defenders of liberty have had concerns over the wide-ranging public health powers that the government is now wielding with little nuance or skill. However, there has also been an increasingly conspicuous pattern among certain public sector employees and their union representatives to pursue blatantly self-interested goals that have had devastating consequences for society during this pandemic. While we have rightly lauded “first responders” and health care workers during this crisis, we seem to have forgotten that the police and their unions were one of the primary catalysts of the riots and now sizeable divisions in American society over the nature of law enforcement in Minnesota, Wisconsin, and elsewhere. Even the US Capitol police failed in their primary duty of maintaining order and safety for the Congress during a critical moment in our political life.

The controversies over police actions this summer led to widespread protests, violence against businesses, and civil unrest. Many individuals in the media, entertainment, and sports became professional virtue signalers shouting slogans, wearing t-shirts, and violating public health rules to push for changes in American policing. We were assured by many of our opinion leaders on the left that despite the apparent contradictions in their pronouncements about public health rules and support for these mass gatherings, the protests and the corresponding looting and destruction of private property were necessary to pressure our politicians to bend to the public’s wish for serious police reform. What has occurred? Police union power has not even bent, let alone broken.

In Minnesota, the state legislature met in secret in the summer to pass a very weak reform that essentially promised to end the use of chokeholds and “warrior training” for police officers. This came after the first public attempts at passing a bill led nowhere. The will to defy the police unions and take on more serious issues such as qualified immunity for officers has faded since the protests ended and pressure abated. The untangling of qualified immunity for government officials now looks as entrenched as ever and will probably require both judicial and legislative actions for any serious change to happen. Already there have been new calls for reform in Minnesota after the wrongful shooting of an unarmed African American by a police officer in January. In Wisconsin the state’s largest police union has avoided the need for secret negotiations and simply issued its own reform plan to the legislature —notably lacking in the reform are any real changes in punishing officers or ending qualified immunity.

And the police are not alone in their self-interested actions. Many teachers’ unions in large cities such as New York, Washington, and Chicago, just to name a few, have refused to return to full time in person teaching even though the scientific evidence continues to show that schools, particularly those with younger students, are not locations of super spreader events and that children don’t pose significant risks to older members of extended families. In Chicago, despite embarrassing public pleas from the city’s mayor, the teachers’ union is openly defying her attempts to get the schools reopened for this semester. The New York and Washington DC teachers’ unions, with the indifference of the Biden Administration on full display, have made extravagant demands that include a massive expansion of personnel and additional spending to the tune of hundreds of billions of dollars to mitigate risks that don’t exist. These new expenditures will expand the size of the unions and their financial power in future budgeting battles, all while the children they supposedly serve fall further and further behind in their learning. In fact, many public schools throughout the country remain closed while many private schools and public schools in more conservative areas have opened safely to in person instruction.

Both of these groups have received some, but certainly not enough, public attention for openly defying the wishes of the public—the calls for teachers to actually teach again are growing in volume. Unfortunately, the Democrats who run the large blue cities facing the most aggressive union tactics are reluctant to take on organized labor that robustly supports the mayors and state legislatures in these states.

A well-known politician publicly argued way back in 1937 against the idea that government employees should organize into unions and have the right to collectively bargain with the government. That politician was Franklin Delano Roosevelt.

A less obvious and extremely costly campaign by public sector employees is underway to change our investment industry and possibly the private investments, retirement accounts, and financial security of millions of Americans. You may not know the acronym CalPERS, but it stands for the California public employees retirement system. And it’s the largest pension plan in the United States, with estimated assets of over 440 billion dollars. It invests the retirement funds for all public sector employees from the state of California. The New York State Common Retirement Fund is the third-largest pension fund in America and it has a little less than 200 billion to invest.

Both funds have decided to openly advocate for politicized investment agendas regarding greenhouse gas emissions. Whether or not managers at publicly held companies or fund managers for private investors agree with these policies is irrelevant because the size of these large public pension funds gives them considerable weight and power.

At present the California and New York funds have now decided to only invest in companies that do not produce carbon energy, for example coal, or have pledged to move towards “green” energy policies. These policies have been estimated to have cost the beneficiaries in California at least 3 billion dollars, but when a political bailout is always available, what’s a couple of billion dollars in pursuit of saving polar bears and spotted owls? In addition, CalPERS has explored the possibility of only investing in companies that pay their employees “fairly” based on the pay gap between CEOs and lower-paid employees.

Now you may be saying to yourself, but aren’t there large private pension funds to offset the potential power of the public sector plans that seem to be pivoting to enforce a left-wing political agenda on the private sector that will cost investors billions? Well, the second-largest pension fund in American is CalSTRS—the California Teachers Retirement System. CalSTRS includes university faculty as well as teachers, many of whom are protesting school reopenings or advocating for changing the name of a public school named after Abraham Lincoln in San Francisco because it was deemed to be offensive to people of color. In fact, all of the top ten largest pension funds in America are public sector employee pensions with the possibility of becoming forces for pushing political agendas completely at odds with the interests of individual investors. It is not merely the case that large parts of the public sector are refusing to reform their policies or even do their jobs, now their investment managers want to tell companies how to do business without serious regard for profitability.

A well-known politician publicly argued way back in 1937 against the idea that government employees should organize into unions and have the right to collectively bargain with the government. That politician was Franklin Delano Roosevelt, who argued that collective bargaining for public sector employees was unwise because the government set their wages, and as servants of the government, public sector employees have a responsibility to the public, not themselves. I don’t often write the phrase “and obviously FDR was right” but I’m happy to write it in this article. We should remember FDR’s prescient warnings particularly today as the risks he identified have spiraled far beyond the limited concerns he had about collective bargaining. Public employees no longer seem at all concerned about public service and their organized political and economic power is being wielded in a manner directly contrary to the interests of millions of private citizens. If the public sector is telling private citizens how to invest and live, without even bothering to do its important jobs in a reasonable fashion, it’s time to revive FDR’s words and battle this coup head on.