MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Teachers and other state employees in Wisconsin have kept up their protests against Gov. Scott Walker's plan to limit future collective bargaining rights. The budget battle in Wisconsin is similar to those likely to (word?) by the state capitals in the coming week. It's already in full swing here in Washington. Joining me in the studio to talk about the role of public unions and efforts to cut spending, Chris Edwards of the Cato Institute and Ron Blackwell, he's chief economist for the AFL-CIO. But, first, joining us by phone from Indianapolis is Mitch Daniels. He's governor of Illinois (sic). Good morning to you, sir.

GOV. MITCH DANIELSGood morning. You just promoted me, I guess, 'cause this is Indiana out here, Diane. But...

REHMI sure did, didn't I? I sure did. Well, that's okay. You never know.

DANIELSThat's fine. They're a great state. I wouldn't want to trade places with them in certain respects right now, but they're a great state and great neighbors.

REHMYou never know. Gov. Daniels, Scott Walker, the governor of Wisconsin, has called you his great mentor and inspiration. To what extent do you agree with attack he's taking there in Wisconsin?

DANIELSWell, I hadn't heard that Scott had said that, but, in general, I think, you know, he's simply doing what he promised the people of Wisconsin he would do. Their state is in a very desperate financial shape. They've overspent and overpromised, and he was elected explicitly to try to bring some economic rationality back to that state. And, I think, the attacks on him are very -- are predictable, but I do hope that, in general, he'll make the progress that his state needs him to make.

REHMOf course, the unions he has cited have already exceeded to some budget cuts. So what is it about collective bargaining rights excluding police, fire and others that's so special? And are you doing the same?

DANIELSWell, first of all, you know, collective bargaining is a very important part of the fabric of a free society. But even its most passionate advocates over the decades -- Franklin Delano Roosevelt being a great example -- said it really had no place in the public sector. We've evolved to a situation where the privileged, the elite in American society, really, are government unions, which no longer represent people who are paid less than the public that they serve but are paid much more and with much richer benefits and perfect job security in many cases. So, I think, bringing some balance back to that is necessary if states like Wisconsin and our nation, for that matter, are going to, you know, regain our balance and not kill the American dream for everybody else.

REHMHelp me to understand. Is there concrete evidence that Wisconsin public employees or Indiana public employees are better paid than their counterparts in the private sector?

DANIELSWell, heavens, yes. The average federal employee is paid 50 percent more than the average taxpayer who supports him. The average teacher in the state of Indiana's paid 22 percent more with much more generous benefits, perfect -- you know, almost perfect job security and a shorter work year. So there ain't any question about that. By the way, in some cases, that's entirely appropriate. It's just that the balance may have gotten a little out of hand, Diane. And Indiana is in a little different shape. We are not -- we've been able to keep a books-balanced year and without all the severe cuts. And, you know, I'm incredibly proud of the job that our state employees are doing. So we're not in quite the same position or advocating quite the same things they are up in Madison.

REHMHelp me to understand how taking away the rights of collective bargaining would fix or help to fix the budget shortfall.

DANIELSWell, the most powerful special interest in America today are the government unions. They're the leading financial contributors. They have the biggest packs. They have muscle. A lot of times their contracts provide for time off to go politic and lobby. And over the course of the last few decades, if there were ever injustices or shortfalls in how we took care of government employees, it has been fixed and over-fixed. And so I think that the -- you know, he's trying -- what he's trying to do is, in the public interest, interrupt this fortuitous process in which taxpayer dollars pay for very solid salaries for government employees.

DANIELSSome of the money is siphoned into political union dues, goes back into politics and elects people who will vote for more and more and more. Everybody knows this is going on, and it is, you know, really, I think, part of the problem -- not the whole problem -- but part of the problem that has gotten us into the debts we're into and the, you know, bad corner we're in fiscally.

REHMOne of the curious aspects of this whole discussion in Wisconsin is that state troopers, police and firefighter unions who supported the governor are exempt from this pending decertification process. How do you figure, Gov. Daniels?

DANIELSWell, you know, I'm not an expert on what the exact situation is in Wisconsin. All I know is that many, many years of excess up there -- feather-bedded payrolls, very expensive salaries and benefits -- have got that state, like so many other states, in a terrible fiscal hole. It's been very unfair to the taxpayers who have to pay for all of it. And, you know, the governor -- the new governor up there promised to try to do something about it. And, I think, he should be commended, not castigated, for trying to live up to his promise.

REHMI still am totally in the dark as to how bargaining and the bargaining power of unions and taking that away is going to affect the budget process.

DANIELSWell, if my newspaper is correct, he is not talking about that. He's talking about narrowing the scope down to wages and, you know, that...

REHMBut they've already conceded wages.

DANIELSWell, you know, this is -- I think he's trying to fix a structural problem, which I've demonstrated or discussed to you already, Diane. The problem comes from the, you know, forced expropriation, whether they like it or not, of money from -- that started with the taxpayers, from the salaries of government workers, circulated back into a political machine that is the most powerful out there. If you're worried about special interest power and special interest pressure in America, that's -- the government unions is where you ought to start.

REHMWhat about -- how would you compare the government unions to, say, the oil lobby?

DANIELSWell, in many ways, they're vastly more effective. They -- as I say, they're -- year in, year out, they're the number one donor of money into our political process. And, plus, in many cases, they can deliver muscle that these other interests that you might ask me about cannot. People and so forth -- often, it's in the terms of their contracts that they get time off to politic.

REHMIt -- I want to just expand this discussion for a moment because I know you were director of the Office of Management and Budget during the Bush years. During those years, the federal budget went from black to red. I wonder, in retrospect, do you think you might have done things differently?

DANIELSWell, that administration could have made some different choices. But let me point out that any deficits around then are a tiny fraction of what we're doing now. Current administration will triple the national debt on the track they're on, more in a few years than all the president's predecessors, including President Bush, ever added. So, of course, you know, things could've been done differently here and there. But, you know, just as recently as 2007, we had a tiny deficit, less than 2 percent of gross national product and one we would love dearly to get back to anytime, frankly, in the foreseeable future.

REHMAnd then, of course, came both the cost of the wars in Iraq and in Afghanistan. I seem to recall a report by Lawrence Lindsey estimating that the cost of Operation Iraqi Freedom would run between $1 and $200 billion, and you thought that was very high.

DANIELSWell, I was right, and he was wrong. The question at the time was, what will it -- you know, that we were just asked at OMB to make an estimate -- what would it cost to win a war with the Iraqi army and stay six months? The answer we gave turned out to be a little on the safe side. No one asked because no one knew what would it cost to defeat the Iraqi army and stay eight years. If anybody had been asked that question, they'd have gotten a very, very different answer from the expert professionals that I was reporting at OMB back then.

REHMI gather that you delivered a recent address at CPAC, the Conservative Political Action Committee. What was the gist of the message you gave them?

DANIELSI said that America is facing a threat right now that's just about as severe as those we've faced militarily in the past in the form of an enormous debt that we have. It's mathematically certain. It's not an ideological point of view. It's a matter of arithmetic that, on the current track, we will not be a successful or even self-governing country if we go that deep and hawk to other people, and so that -- we need bold action. And, I think, the speech was fairly characterized as more of a challenge to people I agree with than to people I might disagree with...

REHMMitch Daniels...

DANIELS...saying, you know, people who call themselves Republicans or conservatives need to step up to this in a very specific and very forthright way. And I...

REHMAll right. And I'm afraid we're out of time, Governor. Thanks for joining us. Mitch Daniels, governor of Indiana.

REHMAnd after our conversation with Gov. Mitch Daniels of Indiana, we turn now to Chris Edwards. He's director of tax policy studies at the Cato Institute. And Ron Block -- why do I keep saying Blockwell? -- Blackwell, chief economist for the AFL-CIO. And, Ron, we have an e-mail here from Johnny. He says, "Please do not allow the statements of the governor on the phone to go unchallenged."

REHM"Government employees are not paid 50 percent more than private sector. Would you really call the unions the most powerful interest and special interest group in this country? If the governor thinks that union management is the elite in this country, then we ought to consider a new definition of unique."

MR. RON BLACKWELLWell, I absolutely agree with both of those points. I think the idea that public sector unions are the most powerful interest in the country is bizarre. I wish we had more power. We'd be able to defend the middle class more effectively than we're now able to do that. I would ask Gov. Daniels if he's not concerned about the organized power of finance in our nation's politics, which is financing much of the activity and had poured over a billion dollars into our politics to elect politicians like Mitch Daniels and the governor in Wisconsin.

REHMAll right. And turning to you, Chris Edwards, here's another e-mail -- let's see -- from Kim, who says, "Do your homework. If nothing is done about collective bargaining, this is what will happen. The state will cut funding to the municipalities. The municipalities -- in other words, school districts -- will levy taxes to make up the difference. They're allowed to do this in Wisconsin without any voter approval or referenda. I know. I pay these taxes on my property." Chris.

MR. CHRIS EDWARDSWell, I think public sector unions do raise the cost of government on both the state and local levels, and they prevent often-needed reforms like in pension plans. The -- many states have pension plans that are deeply in debt, and they need to be reformed. But I'm also against collective bargaining in the public sector for philosophical reasons. I think they deny choice in two ways. Government services, like fire and police, are often monopolies. And when you tie a monopoly union on top of it, it makes for inefficiency. I mean, if consumers have the choice to go to, say, a grocery store that has unionized workforce or a grocery store that doesn't, you don't have that same sort of choice in government.

MR. CHRIS EDWARDSAnd I would also say that, in the states where they have collective bargaining in the public sector, you're denying individuals who want to serve their state -- who don't like the union -- from serving their state without being forced to pay union dues or join the union.

REHMAll right. And joining us now from the state capital in Madison, Wis., is Ben Manski. He is a member of the faculty of Madison College and a spokesperson for a Liberty Tree. Good morning to you, Ben. Thanks for joining us.

MR. BEN MANSKIYou bet, Diane. Thanks for having me.

REHMPlease explain Liberty Tree.

MANSKIAbsolutely. We're a pro-democracy organization based in Wisconsin. We were founded in 2004, and we work to expand democracy in all areas of American life, including the right to organize. And, when you look at what is happening in Wisconsin right now, it is very clear that choices are being taken away from workers. This is not a plan on the part of a governor to expand workers' power. It is to take away our ability to self-organize.

REHMDescribe for us the scene there this morning.

MANSKII'm sorry. I couldn't hear that.

REHMCan you describe for us the scene there this morning?

MANSKIOh, absolutely. Absolutely. People here are very tired, but there have been many people traveling from all over Wisconsin to come here and to relieve those who have been here all week. What has not been reported in the national media is that there have actually been major demonstrations all over Wisconsin, including in the far Northwoods. Three thousand people turned out just the other day to demonstrate against this proposal, this attack on workers' rights. In Madison right now, it's gotten somewhat colder. We had freezing rain, but yet there are already thousands collecting at the capital. And we expect the momentum to start to pick up again as the week goes on.

REHMIs it true that public employees' union leaders have already agreed to upping contributions for pensions and health care?

MANSKIWell, the reality is the labor movement is not a monolith. There are many different unions here. There are some labor leaders who have said, yes, we understand that, that the governor is a conservative and that we will have to negotiate with him. And we are willing to negotiate with him on benefits, but we're -- the labor movement across the board is united. And, also, I would say, many young people who want to have a future in the state, are united with us, is on this question of collective bargaining and the right to organize.

MANSKIYou know, I think it's kind of a canard. It's a joke to suggest that somehow workers have rights and free choice otherwise. When you go to the workplace, you do not have free speech rights. That's what the Supreme Court has said. There are all kinds of rights that are denied to us. At least the First Amendment right to collectively associate, to advocate in our own interest, must be protected if we're to have a democracy in the country.

REHMHowever, you have said that you were anticipating that this call for an end to collective bargaining was coming, but you just didn't expect it would come this soon. What do you mean?

MANSKIWell, to be very clear, we actually had no idea that he was going to go after collective bargaining. He did not campaign on that question. We knew that there were going to be very harsh austerity measures proposed. This governor is not only going after organized labor, but he's going after students. He's proposing what sounds to be a 26 percent tuition hike in the UW system. He wants to privatize the UW Madison, the home of Bucky Badger. He wants to cut spending for the poor and for social services by 20 percent across the board.

MANSKISo we knew that was coming. We knew something bad was coming, but we didn't realize it was coming this quickly. And what has happened this past week -- I mean, you have to get a sense of perspective. Everybody should. This is a state of 6 million people. There were 70,000 people demonstrating on Saturday, that's nearly 71 margin according to local police in terms of those who are pro-union versus anti. This has totally changed the politics in the state.

REHMBut, Ben, help me to understand and show me that you understand that when the governor says, the state is broke, he means it. What do you think ought to be done?

MANSKIWell, the state is broke because of two main factors. Number one, the poor and the middle class have been getting squeezed for an entire generation, and we are unable to pay anymore. And yet, at the same time, the reality that taxes on the very wealthy and taxes on major corporations have declined dramatically and, in many cases, have disappeared. So we are only broke because the poor and the middle class cannot pay anymore and because the wealthy are not paying, and there is a revenue side to this question. We must tax the wealthy. We must tax major corporations. If we do that, there is no fiscal crisis in Wisconsin.

REHMWhen were those taxes on major corporations given -- those tax breaks, given?

MANSKIWell, to give you a sense, I was born in 1974, so I'm 36 years old. And when I was born, the top marginal tax rate in the state of Wisconsin was between 11 and 12 percent for the wealthy. In addition, you had taxation on major corporations in the 1950s that headed into the 30 percentile. What has happened in the last generation -- it's happened under governors of both parties, both Republicans and Democrats, and this has happened nationally as well -- is that that burden has been cut away in terms of what the -- those most able to afford it have shouldered. And it has been passed on through all kinds of other means to those who could least afford it. So, for example, tuition across the country has skyrocketed because, essentially, young people are being taxed.

MANSKIThey're being put into indentured servitude in order to enable tax breaks for the rich. And that is part of what is going on here. Wisconsinites are aware that we have a structural crisis. We're aware that it's not inevitable, that it is actually caused by an agenda coming out of the Chamber of Commerce, out of the National Association of Manufacturers. We've had enough. It's gotten to the point where it's insufferable. And when the governor not only said that he was going to effectively cut our wages through these pension and health care changes by 10 to 15 percent, that he was also going to take away our ability to advocate in our own interests. That's what caused this uprising. That's what caused this Wisconsin wave.

REHMAnd with the Democratic representatives having disappeared for the time being, refusing to return to the state capital to create a quorum necessary to take any legislation seriously, what do you figure is going to happen?

MANSKIWell, this is going to go on for a long time because the governor is not negotiating. He is not picking up the phone. He refuses to appear in public. He's refused to hold hearings. Remember that this proposal was introduced on a Friday morning. That is not the time in which you introduce a proposal in which you want to have discussion and debate. And he has been very consistent and steadfast, in his own mind, that he is not going to negotiate with the, literally, hundreds of thousands of people -- I would say a million people -- who will be pushed over the edge by this proposal in terms of the immediate families who will be impacted. So this is going to go on for a long time.

REHMAll right. I think Chris Edwards of CATO would like to ask a question.

MANSKIYou bet.

EDWARDSWell, you talk about collective bargaining in the public sector as if it was a fundamental right, but is it really? I mean, there's a dozen states, including where I live in Virginia, where there is no collective bargaining allowed in the public sector. And in Virginia, for example, that law was put into place by Democratic Gov. Douglas Wilder about two decades ago. So teachers and firemen in Virginia can form voluntary associations and they do to lobby. And I'm all for that. They can lobby all they want, but they don't need collective bargaining to do that. So do you really -- isn't it really a privilege, collective bargaining, in the public sector in states like Wisconsin and not a right because, after all, in Virginia they don't have it?

REHMBen.

MANSKILet's be clear on two things, and that's a fair question. Number one, not only is he going after collective bargaining, but he's also going after fair share dues collection. He essentially wants to bankrupt the union movement in Wisconsin. So that is something that has not been discussed, but it is also, obviously, very serious in the short term. It would mean the collapse of organized labor, and that's why this is seen as a political attack. It's not a fiscal solution. But, secondly, in terms of the question of whether collective bargaining is a right or a privilege, I think working people have always seen collective bargaining as a right. The state, the government, and oftentimes the courts, in American history have not.

MANSKIAnd it's important for us to remember that 100 years ago labor unions in many parts of the country were unlawful. They were suppressed. That is what the court said. Working people did not accept that. We had to change state law in order to essentially change what came down from the courts. But that does not mean that we do not have a natural right to engage in collective bargaining. And, I think, if the governor takes away these collective bargaining rights through changing state statute, what he risks is returning Wisconsin to the period of 50 or 60 years ago when we did not have labor peace. After all, collective bargaining was really a negotiated agreement to maintain labor peace and to settle things amicably, and this governor is not doing that.

REHMAll right. And, I think, Ron Blackwell has a question.

BLACKWELLI think -- Ben, by the way, I want to congratulate you and the others that are there in that cold weather in Madison, Wis. You're inspiring the labor movement throughout the country. But I...

MANSKIWell, thank you.

BLACKWELLI have to say, trade unions -- and from their very beginning -- have seen the right of freedom of opinion and freedom of association and freedom to organize unions with their brothers and sisters at work and bargain collectively with their employers as fundamental human rights, whether or not they're represented in law and whether or not it's in the public sector or the private sector and that that is one of the core principles of democracy. And it's by challenging this gratuitously that the governor -- using the argument about budget deficits challenging these fundamental rights gratuitously -- has provoked this enormous reaction, not just in Wisconsin but throughout the country.

BLACKWELLThe stakes and the struggle are extremely high. But, I think, the fact that the unions have signaled their clear intent to bargain collectively to resolve this budget problem, which really doesn't matter. And the governor has, instead of doing that, rejected collective bargaining, abandoned the bargaining table and challenged the very existence of these workers' essential freedoms. It shows exactly what the political motivation is here at (word?).

REHMRon Blackwell, he is chief economist for the AFL-CIO. Ben Manski, I want to thank you so much for joining us this morning.

MANSKIYou bet. Thanks for having me.

REHMOkay. And joining us now is Gerald McEntee. He is president at the American Federation of State, County and Municipal Employees. Good morning to you.

MR. GERALD MCENTEEGood morning.

REHMTalk about why you think public employees are front and center in state budget battles.

MCENTEEWell, I think that with the influx of Republican -- the members of the Republican Party winning various gubernatorial seats, whereas when they were running, they talked about the creation of jobs and jobs. And now they're in a mode of paying back, paying back public workers who have had the right to organize and bargain collectively and using their power, in a way, to take that from them. And, I think, that's -- and they're making the fact that budget deficits are due to public workers and individual states. Now, Diane, that's just not accurate. I mean, in Wisconsin, when Scott Walker came in, he was given a balanced budget. Within about four or five months, he took the balanced budget and turned it into a negative by giving tax cuts to corporations and to the ultra-rich.

MCENTEEAnd, as a result, he's -- he has created this problem in Wisconsin. Our people, who represent thousands of workers in Wisconsin and represent thousands of state employees, offered just last Friday to even accept his demands in regards to wages and the pension, which was really in good shape when he came in compared to the rest of the country. And he turned that down. And what he wants is for collective bargaining and recognition of unions -- teachers' unions, and our union -- to cease.

REHMAll right. Now, I want to get Chris Edwards in on this conversation.

MCENTEESure.

REHMChris, what is your response to what Gerald McEntee has just said?

EDWARDSI think the issue here is that, you know, the statistical studies show that overall, state and local worker wages are reasonable overall. There is a long line of academic research that shows that unionization in either the public or private sector does boosts wages by about 10 or 15 percent. But the big problem is the pension problem. And I do think collective bargaining in unions stand in the way of this giant pension problem, which runs $3 or $4 trillion for state and local workers. You ask why it's such a big issue. It's because there's about 18 million state and local workers. Half of all state and local spending -- over a trillion a year -- is in the wages and benefits of government workers, so that's why it's important. But -- and so...

REHMAll right. We've got to take just a short break. Gerald McEntee, can you hold on?

MCENTEESure. Sure.

REHMOkay. A short break, and we'll be right back.

REHMWe are talking about what's happening out in Wisconsin to public sector unions, what may, in fact, be happening in other parts of the country as well. On line with us -- before we open the phones -- Gerald McEntee, he's president of the American Federation of State, County and Municipal Employees. I want to ask you one more question before we go to the phones, Mr. McEntee...

MCENTEEMm hmm.

REHM...and that is whether there have been negotiations with public sector workers over pension benefits because that does seem to be a huge part of the problem.

MCENTEEYeah, there's negotiations over some of the pensions, but, usually, the pensions, Diane, are legislative business, belonging to the House, the Senate and whomever the employer is -- the governor, for example. And it's important to note that, in Wisconsin, the pension fund is nearly fully funded. And it's really not a problem that Scott Walker let's on that it is. Also, in pension systems, public employees pay more than their fair share to the pension system.

MCENTEEPart of the problem with pensions around the country is that employers -- and whether that's New Jersey and this present governor who talks about pensions all the time, whether it's there or whether it's Texas or wherever, the employers, over a period of time, have not put in their fair share. Whenever they have, or seemingly whenever they have, a budgetary problem, they hold back their pension cost and use that money to take care of their budgetary problem. And, as a result, we do find ourselves in a number of places with pensions that are out of sync -- out of sync, meaning that the employers have not put in their fair share.

REHMHmm. Gerald McEntee, he's president of the American Federation of State, County and Municipal Employees, thank you so much for joining us this morning.

MCENTEEThank you.

REHMAll right. And now we'll open the phones first to Concord, N.H. Good morning, Audi. You're on the air.

AUDIGood morning. Earlier, your speaker said that government employees are making 50 percent more than the private sector does and have better benefits. And while that may be true of some government employees, I don't think it's fair to say that of school teachers. My spouse is a veteran school teacher. She's been teaching inner-city schools for the better part of 15 years, and she has a post-graduate education. And, you know, she's lucky if she can even get a job as a school teacher, but her salary hovers right around $30,000 a year. And every year, the length of the school year grows. So saying that they get paid over the summer is not really that fair anymore because they're teaching all the way into June, and they're starting in August now. And, when she started teaching right after college, that was not true.

AUDIThey're taking away more and more of their vacation days, and they're taking away, you know, benefits. She definitely doesn't get the -- like a 401 (k) contribution. So I just don't see how it's fair to include teachers in that.

REHMAll right. Chris.

EDWARDSYeah, I agree that the wages are not the big problem in -- with state and local employees. It is pensions. I mean, your last guest, I didn't quite understand his data on Wisconsin. A recent study showed that Wisconsin's pension is underfunded or overpromised. It's -- about 32 percent of state GDP is the amount of underfunding or overpromising in Wisconsin benefits. That's a little above average. It's not the worst state. The worst states are Ohio, Illinois, New Jersey, but Wisconsin does have a substantial problem.

EDWARDSI mean, my point here is that, I think, because of this problem, state managers need the maximum amount of flexibility to make adjustments. And, again, states like Virginia are extremely well-run. Pew found that Virginia is one of the best-run states in the country. Fiscally, it has no collective bargaining for city, county, state workers at all. It has union peace. So I think that states should look at states as a model, like Virginia and North Carolina, that don't have unionization in public sector.

REHMChris -- pardon me -- Ron Blackwell.

BLACKWELLYes. I think Chris and I have a number of different views on this empirically, both with Wisconsin and nationally. I think we could agree that if you adjust for education and experience levels, public sector workers are not paid any more than private sector workers. And that includes, the way I look at it, compensation -- pensions included. But, also, Gerry didn't mention -- Gerry McEntee didn't mention that, you know, these are not exorbitantly paid people. Your guest, Audi, just mentioned what a teacher gets paid in Wisconsin. But, you know, the typical pension for an ASME member after a lifetime of public service is about $19,000 a year. That's not an exorbitant pension to expect to have to live on, having devoted your life to public service for a career.

BLACKWELLNow, it's -- the decrepit state of pensions, in general, in this country has left a lot of private sector people without even that, and they're -- perhaps there's some resentment of that. But I don't think it's too much to ask in the richest country in the history of the world that would be able to afford the people who teach our children, that they'll be able to retire on more than $20,000 a year.

REHMLet's go to Sturgis, Mich. Good morning, Irv (sp?).

IRVGood morning. I would like to comment a little bit. You know, public sector employees, I am strongly in support of their fight to retain their collective bargaining rights. And when they speak of, perhaps, them doing a little better than people in the private sector, it's only because, over the last 30 years, working men and women in this country have been taking a terrible hit. For 38 years, I was in the private sector, in the automotive industry, a member of the UAW, and I was able to raise my family in a dignified manner.

IRVI think everyone in this country should be able to do that. You know, the people that have replaced me in the workplace at American Axle & Manufacturing in Three Rivers are the working poor now. They start at $10 an hour. Now, we need to protect collective bargaining in this country, and we need to start taxing the wealthy. They can afford it. They won't even feel it. This gentleman just talked about a $19,000 pension for teachers. Can you live on that? It's very hard to.

REHMChris.

EDWARDSWell, I mean, we've seen what happens when unions demand too much on the private sector. Unions are going the way of the dinosaurs in the private sector in the United States because they make companies too uncompetitive. And so, in the public sector, the problem is you have monopoly government services, you get monopoly unions on top of that, and these states are going to price themselves out. And the ultimate burden lands on taxpayers. Again, there's many states that do not have unions in the public sector, and they're very well-run in general. So we don't need unions in the public sector.

REHMOkay. Let's look at this from the perspective of what Ben Manski had to say, that what the governor did shortly after he came into office was to grant these huge tax breaks for corporations. Had he not done so, would this hammer have come down on public employees, Chris?

EDWARDSI mean, one of the great ironies here is that in the global economy we live in, corporate taxes, the federal corporate tax, the state corporate tax land on workers. If Wisconsin increased taxes in their corporations, corporations would leave the state. There would be less investment in Wisconsin, and, ultimately, workers in Wisconsin would have lower wages. Corporate taxes land on the productivity of industry. Lower productivity means lower wages in the global economy.

REHMHere's an e-mail from Scott in Guin who says, "Looks to me like the unions have already destroyed American manufacturing, put the U.S. auto industry on life support, sold out on the quality of public education and driven the states to near bankruptcy." What do you think, Ron?

BLACKWELLWe -- even if it were true that unions operate the way Chris is suggesting they do, that they're double monopoly power, we simply don't have the power, especially in the private sector, to make U.S. business noncompetitive. U.S. business is noncompetitive because of many things, but it's not because of unions. The problem in the auto industry that was just discussed was not because of the UAW contract. The background here in the private sector is that real wages have not increased. And your caller from UAW mentioned this. In 35 years, productivity has soared two-thirds higher than that.

BLACKWELLThere's plenty of money out there, but it's not showing up in the pockets of working people. And they'll put everybody in the family to work to try to stay in their living standards. They borrowed enormous amounts of money and against their house, which has now been destroyed, and now the resulting deficits of this crisis are being visited on those very people who were the victims of this crisis.

REHMLet's go now to Indianapolis. Good morning, Tom.

TOMHi. Thank you. Well, I just wanted to respond to some things that Gov. Daniels said. Calling the government workers (unintelligible) elites of America is the most preposterous thing I've heard. It's -- I have two very close friends, both teachers, have been teaching over 20 years apiece, leaders in their departments. And they get more and more work every year from the top down and have less time to do real teaching in their classes, and they feel totally under attack. And there's legislation in our state that is going after the teachers and the unions, and they've been down at the state house protesting.

TOMThey're both Republicans, and they're -- they feel completely under attack after 20 years of service. They're some of the best teachers in any schools, and they can't -- and they're not appreciated. And then, at the same time, their Republican Congress in our state -- both Houses are controlled by the Republicans -- are giving -- now giving public monies from public education funds to private charter schools and taking more of the money out of the public school system. And my...

REHMChris.

EDWARDSWell, you know, this is -- the reality in the private sector where I work is that you have to compete. You got to go in every day and work hard. And there's many other people who would want to take your job in the public sector. And it isn't elite in that extreme high job security -- federal, state local governments -- and that is worth something. So they can talk about -- I don't believe that teachers generally are overpaid. But they do have this extreme high job security that people in the private sector don't have.

EDWARDSAnd, as we've discussed, most -- almost all full-time state local workers -- there's about 18 million of them -- they get defined benefit pension plans, a guaranteed pension. In the private sector, those -- they don't have those anymore. I mean, you have 401 (k) plans, and people contribute. In Wisconsin, government workers should, at least, contribute to their pension plans.

REHMHere is an e-mail from Colleen in Dallas, Texas. "Please advise your listeners that all the states do not have public employee unions." Chris has already said that. She says, "I am a retired Texas public employee. I had had no increase in my retirement pension since 2001. But my health insurance premium has multiplied. My Medicare deduction has more than doubled. My Social Security has not increased enough to cover the Medicare deduction." Ron?

BLACKWELLWell, that's the problem. I mean, Chris keep saying it's a privilege to be in the public sector versus the private sector. But the point here is that we have had a 35-year decline of living standards in this country, and that includes both wages, job security, but also the security of retirement.

REHMHow much job security do teachers actually have?

BLACKWELLI think there's more security because there's a -- you know, public laws in most states and at the federal level. You can't hire and fire people at will as you can in most private employers, but that's not necessarily a good thing.

REHMRon Blackwell. He is chief economist for the AFL-CIO. And you're listening to "The Diane Rehm Show." Let's go now to Las Vegas, Nev. Good morning, James.

JAMESGood morning. 5 USC 7101, Congress has already declared that the right employees to organize, bargain collectively and participate through labor organizations safeguards the public interest, contributes to the effective conduct of public business and facilitates and encourages amicable settlements agreements. And then, point two, eliminating collective bargaining doesn't balance any budget. And the third point is the elimination of collective bargaining is essentially a permanent solution to what is a short-term problem. A short-term deficit problem can be predicted in the short term, but you don't need this long-term solution to fix it.

REHMChris.

EDWARDSI don't know what code section he was referring to there. But, you know, in the private sector, collective bargaining goes back to the 1935 Wagner Act. But public sector workers were not included in the collective bargaining law of 1935. As Gov. Daniels pointed out, Franklin Delano Roosevelt did not believe in unions in the public sector. And the general understanding, up until the '60s, is that there should be no unions in the public sector because it gives a privileged position to insiders in the government.

REHMHow do you respond?

BLACKWELLI've already said that I believe it's a fundamental human right. Whether or not it's recognized in the law, whether or not Franklin Delano Roosevelt supported it in the 1930s, it was a victory of the Civil Rights Movement, interestingly, and the labor movement in the 1960s. And it started in Wisconsin, which makes it so ironic. It's in Wisconsin that the challenge to the fundamental human rights of working people of Wisconsin is taking place there.

REHMAnd we have an e-mail from Barry in Wisconsin who says, "The unions were not the ones who gambled pension funds on Wall Street..."

BLACKWELLThat's right.

REHM"...or gave tax breaks to the top 2 percent of corporations. Those who destroyed the economy have the wealth to fix it within increased taxes, but they frame the deficits as if spending is entirely to blame." Chris.

EDWARDSWell, if you look at total state local budgets, a decade ago, state and local governments spent about 14 percent of GDP. Today, they spend 15 percent of GDP, a little more despite two recessions. I agree that state and local management is -- has been often to blame with the pension funding problems. CalPERS in California, for example, has been very irresponsible in how they've managed pension funds, so it's not just the unions' fault.

REHMAnd, Ron, last word.

BLACKWELLListen, there's three dimensions to this thing. One is the collective bargaining issue. That's just money. We can solve that. We've already promised we would. The other is the fundamental challenge on the rights of workers to organize and bargain collectively. That's an existential fight, and it will go on a long time and be very bitter. And the third thing, which I think is most important here, is politics.

REHMRon Blackwell, chief economist for the AFL-CIO. Chris Edwards, director of tax policies for KATO Institute. Thank you both so much.

EDWARDSThanks, Diane.

BLACKWELLThank you, Diane.

REHMAnd thanks for listening, all. I'm Diane Rehm.

ANNOUNCER"The Diane Rehm Show" is produced by Sandra Pinkard, Nancy Robertson, Susan Nabors, Denise Couture and Monique Nazareth. The engineer is Erin Stamper. Dorie Anisman answers the phones. Visit drshow.org for audio archives, transcripts, podcasts and CD sales.