Thursday, January 19, 2012

Another post on Unions

Erik Loomis is distressed by a piece in the Atlantic asking about the plastic surgery benefit for teachers in Buffalo, New York. Erik focuses on the fact that the teachers union is willing to give up the benefit if a new contract settlement can be reached and that there are many legitimate reasons to have reconstructive surgery available (e.g. a child who had serious facial damage after a car accident).

Jordan Weissmann, the author of the Atlantic article, focuses on the salaries of the teachers (mean of $52K) and the deadlock on contract negotiations. In some ways, I think everyone is missing the big picture. Teachers are professionals who work for a contract. We do not micromanage the compensation packages of hedge fund managers, either. It is true that teachers are paid directly by the government. But the carried interest exemption (which sets tax rates at 15%) is just as much of a decision to spend money.

After all, selectively taxing one group less is the same as a subsidy.

Put this another way, we could pay teachers less if we made their salaries exempt from income tax. Now this does not mean that specific benefits can't be renegotiated. Nor do I want to deny the reality of increasing health care costs (which are a problem everywhere in the United States right now) which can make benefits that were once reasonable seem excessive. But is it really constructive to focus on whether the teacher's health care plan is correctly designed as a matter of public policy. Or should be be looking at the long term drivers of malaise in our society.

Of course, looking at the long term drivers of malaise means facing up to our low tax rates (guarenteed to be a painful discussion) and dealing with the rate of growth in medical costs.

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