Monday, February 21, 2011

Krugman Explains the Wisconsin Power Game (Then calls for the unions to grab the power)

In today's NYT, Paul Krugman does an excellent job of detailing the power game going on between the unions and the Wisconsin governor:
For what’s happening in Wisconsin isn’t about the state budget, despite Mr. Walker’s pretense that he’s just trying to be fiscally responsible. It is, instead, about power. What Mr. Walker and his backers are trying to do is to make Wisconsin — and eventually, America — less of a functioning democracy and more of a third-world-style oligarchy...In principle, every American citizen has an equal say in our political process. In practice, of course, some of us are more equal than others. Billionaires can field armies of lobbyists; they can finance think tanks that put the desired spin on policy issues; they can funnel cash to politicians with sympathetic views
 Indeed, Krugman gets this part right.

As for the oligarchs involved, it's the Koch brothers. Mother Jones reports:
According to Wisconsin campaign finance filings, Walker's gubernatorial campaign received $43,000 from the Koch Industries PAC during the 2010 election. That donation was his campaign's second-highest, behind $43,125 in contributions from housing and realtor groups in Wisconsin. The Koch's PAC also helped Walker via a familiar and much-used political maneuver designed to allow donors to skirt campaign finance limits. The PAC gave $1 million to the Republican Governors Association, which in turn spent $65,000 on independent expenditures to support Walker. The RGA also spent a whopping $3.4 million on TV ads and mailers attacking Walker's opponent, Milwaukee Mayor Tom Barrett. Walker ended up beating Barrett by 5 points. The Koch money, no doubt, helped greatly.
It's not entirely clear how the defeat of unions helps the Kochs, but it certainly looks like a benefit for the Koch Organization, and their far ranging operations, rather than a libertarian principled move. A libertarian move would be more focused on ending government involvement in education, not simply taking away the union cards of public school teachers. So Krugman is correct when he points out the power grab here, but then Krugman incredibly puts on his union t-shirt and calls for the unions to grab the power:
Given this reality, it’s important to have institutions that can act as counterweights to the power of big money. And unions are among the most important of these institutions... So will the attack on unions succeed? I don’t know. But anyone who cares about retaining government of the people by the people should hope that it doesn’t.
The problem with Krugman's thinking here is that he sees the power center as something that must continue to exist and he wants the unions to control it instead of the Kochs. It's a scary thought when oligarchs, the Kochs or others, get to control a power center, but it is just as scary for unions to control the power. In both cases, they will operate in their narrow self-interest and not ours.

The most logical move to neutralize these power seekers is to eliminate the power center themselves. In the case of education, education should be left in the hands of the free market, with no government role at all (not even vouchers). Calling for one power group to take control versus another is still a case of choosing a dictator, rather than freedom. The free market option would eliminate the dictator and allow education to flourish the way the cell phone and personal computer industries do today, with aggressive competition, falling prices and a thousand more options than could ever develop out of a bureaucracy. Krugman is right in fearing a power grab by the Kochs, but he should also fear a power grab by the unions. The Kochs are framing their battle as a battle about unions and not about liberty and that is a tragedy.

It may help them as oligarchs, but it certainly won't help those of us who have to deal with government education "standards" imposed on us, our children and our grandchildren. It's time to say no to the Kochs and the unions. Change is in the air across the globe, let's at least get the change right in our own backyard. No power centers for unions or the Kochs!

UPDATE: Whoa Baby!!

Rotrybomb identifies what may be a huge benefit for the Koch Brothers in the Governor Walker's "Budget Repair Bill":  No-Bid Energy Assets Firesales. Huh, just by coincidence the Koch Brothers are the largest private controllers of energy in the world.

Here are the details from Rotrybomb (viaHuffPo):

Have you heard about 16.896?

The fight in Wisconsin is over Governor Walker’s 144-page Budget Repair Bill. The parts everyone is focusing on have to do with the right to collectively bargain being stripped from public sector unions (except for the unions that supported Walker running for Governor). Focusing on this misses a large part of what the bill would do. Check out this language, from the same bill (my bold):

16.896 Sale or contractual operation of state−owned heating, cooling, and power plants. (1) Notwithstanding ss. 13.48 (14) (am) and 16.705 (1), the department may sell any state−owned heating, cooling, and power plant or may contract with a private entity for the operation of any such plant, with or without solicitation of bids, for any amount that the department determines to be in the best interest of the state. Notwithstanding ss. 196.49 and 196.80, no approval or certification of the public service commission is necessary for a public utility to purchase, or contract for the operation of, such a plant, and any such purchase is considered to be in the public interest and to comply with the criteria for certification of a project under s. 196.49 (3) (b).

The bill would allow for the selling of state-owned heating/cooling/power plants without bids and without concern for the legally-defined public interest. This excellent catch is from Ed at
....It’s important to think of this battle as a larger one over the role of the state. The attempt to break labor is part of the same continuous motion as saying that the crony, corporatist selling of state utilities to the Koch brothers and other energy interests is the new “public interest.”
As I state above, I doubt the breaking up of unions isn't in the interest of the Kochs, but this new find in the budget "repair" bill, makes it clear that this isn't about the promotion of free markets, though it is packaged that way. It really is about the special interest edge. In this case it provides for energy buyers, such as the Kochs, to grab assets without having to actually bid against others for them.  This isn't a play coming from the books of  Mises, Hayek and Rothbrad. It's a play coming out of the playbook of the Russian oligarchs who used the confusion of the collapse of the Soviet Union, under the guise of privatization, to grab as much of the wealth of Russia as they could before anyone noticed what was going on.


  1. The ultimate sagging mattressFebruary 21, 2011 at 11:50 PM

    I sympathize with anarcho-capital ideology more than any other political ideology, but often times the "sour grapes" mentality of certain libertarian websites, such as and, with their cadres of "evildoers" and "power elite", is a little much.

    From my time reading, I know that the Koch brothers are the great devil incarnate. So, I am sure that they would like to buy certain of Wisconsin's assets below market value. However, in this case, the conspiracy seems ridiculous.

    The premise of this argument is that the Kochs persuaded the Governor to create a distraction so that the particular provision discussed above could be implemented without debate.

    Mr Wenzel: why try to insert this provision into one of the most highly publicized and contraversial pieces of state law in history? Why not in any other piece of legislation that WON'T be constantly scrutinized by media outlets, pundits, and bloggers around the world?

    It has been well established that the Kochs are the boogeyman, but sometimes when you look under the bed, there is nothing there. Use that frontal lobe man!

  2. Thing is, as nefarious as the Kochs may be, the utility/energy issue mentioned is a separate issue. While it would be great if all public sector unions were broken, and even better if the state quit education altogether, hey, I'll settle for the teachers' union getting broken right now, and I don't care who is helping to do it.

  3. Poor journalism - no smoking gun, only an author's personal bias - a bias approaching an axe-to-grind.

    Headline should be reworded to "Capitalist Hating Bloggers Don't Need facts to See a Conspiracy in Everything"

  4. Critical find, yes. Why was it buried in this most controversial legislation one commenter asks... because the disdain the powers that be have for the public is so high and the union drama is plenty enough to distract most of us. This nugget won't get played out in the mainstream, it's too complicated, because it's not about "busting up unions".

    the critical part of this bill text is:

    "for any amount that the department determines to be in the best interest of the state."

    so who gets to determine the best interest of the "state"? a corruptible "department" who determines what's in the best interest of the state... and the state is defined by those who benefit from coercion as what's best for me and my mine, not the plebes who we extract taxes and wealth from in order to maintain our positions.

    bigger issue here is that the state should not own any power plants, at least not any power plants that provide and sell power to the people.

    If this is only power plants that supply power, heat/cooling to the government buildings and operations, then it is a different animal.

    Meanwhile, I've yet to see if the legislation in question includes removing the state from being the middle man on collecting the union dues from workers' paychecks and paying one lump sum to the union bosses. I was told that that was the big stick behind removing "collective bargaining" and it makes sense to me. The union bosses are fearing for their standards of living, because if the state does not forcibly take the dues, the rank and file workers will slowly cease paying their dues.

    I know a president of a regional government employee union federation. I asked him a couple weeks ago if the compensation plans for their members included any measurement of merit. He answered immediately, "No."

    I agree with the author of this article, elimination of education controlled by the state would create an even freer, more prosperous more innovative market and world.

    Sadly, I'd take this compromise to start that ball rolling. Hopefully there are enough honorable legislators in the WI state house who will ferret out any of these potentially nefarious measures buried within. (Ha.)

  5. There are no "free market" forces in industries where there is no alternative, or only one customer. Only one customer and everyone must be a customer are the same thing. Free markets exist, but not in utilities, or even the professions. Once you guys think about pricing power, competition driving low prices and the alternatives available to the consumer you clearly see these market forces that keep the free market free, innovative and competitive don't exist in certain markets.

    But, what's funny is that most "libertarians" are professors or other professionals who don't recognize that they are utter hypocrites as they count on limited markets for their incomes. This makes them as hypocritical as the Koch's (who have many businesses where there is but one customer, the gov't) To allow "free market" forces to overtake utilities is the worst form of socialism.

  6. The reason why you include additional controversial stuff in controversial bills is that once you have everyone fighting about a small part of the bill the rest of the bill will often pass even if the part everyone is fighting about doesn't pass. I got the impression Bloomberg did a similar thing in New York - he promoted the london style tax on cars in Manhattan. He knew everyone would hate it - but even if it got killed it allowed him to pass his pro-development plans. Everyone was so busy fighting for and against the new toll no one really paid attention to the other things he was up to - namely encouraging real estate development (by politically connected people, but it is better than no development.)

    Given how many government owned enterprises are run it will probably be better for the budget to sell the power plants and then tax the new owners.

  7. I agree with the general tone here, Mr Wenzel. I am sorry that some have to dig this deep to impune the motives of the "oligarchs". One can sit on the sidelines and dream of the libertarian utopia or one can commit resources to the battle as it is being played out. What if Koch industries does get these resources at less than market price? They will then be responsible for the production going forward at the market rate. This is a big conspiracy? This is a Russian Oligarchy? Give me a break, Bob!

  8. "what's funny is that most "libertarians" are professors or other professionals who don't recognize that they are utter hypocrites as they count on limited markets for their incomes."

    A hypocrite is someone who understands that and then continues to advocate that system. That is NOT the case with libertarians. We can't save the world.

  9. I feel like I need to point out what happened in my home state of California when similar legislation passed (this was years ago, forgive me if I'm hazy on any details) - an energy 'deregulation' bill forced the local utilities to sell their power plants to 'wholesalers,' which at the time apparently meant Enron. The utilities were forced by law to buy power at the wholesale market price and resell it to consumers at the state-capped retail price.

    Predictably, Enron used its monopoly position - over customers that were legally bound to buy from them at a price of their choosing - to pull in huge amounts of cash. The state's price control commission didn't allow these price hikes to be passed on to consumers. This led to rolling blackouts across the state and the bankruptcy and subsequent taxpayer bailout of all three major CA utilities.

    I also remember reading that this was actually when Enron convinced their accountants to start letting them play games - they were cooking their books to HIDE the huge profits they were making, for fear of the CA government figuring out their scheme, I'm assuming.

    It's not a good idea for the state to own power plants, but it's at least as bad for them to sell them all at below-market rates to their favorite cronies and allow them to monopolize the market, which no doubt has huge barriers to entry due to state regulation.

    I'm surprised you can get this kind of return on an investment of $43k in a political campaign. That legislation is probably worth millions to the Kochs, if they indeed get to buy those facilities for below-market prices without competing bids. Walker should have squeezed more money out of them.

  10. I stand shoulder to shoulder with other libertarians on many occasions when the "Kochtopus" is in the wrong, e.g. when they run interference with Ron Paul in his efforts to audit, investigate, and eventually abolish the Federal Reserve, when they cozied up to the horrid National Security State after 9-11 with its drive toward war, repression, and fascism, and even their ignorant and purblind rejection of Misesian economics and its GENUINELY free market conclusions and policy recommendations!

    Even broken clocks will tell the correct time twice in a 24-hour period!

    The goal of free market provision of government-provided services won't be enhanced by the growth of 'public employee" unions. These unions have all of the political privileges of regular unions, such as the right to strike, and to intimidate workers and passersby who disagree (so-called "scabs") with them, along with the fact that the 'workers' here are tax-eaters who benefit from a protected monopoly, where the possibility of competition and innovation, so important everywhere else, is BANNED BY STATUTE! These unions, their membership, and their leadership, is totally tax-funded. and any "gains" that they obtain is at taxpayer's expense. Taxpayers, in most states, not to say the Federal government, are already worse off than most government employees!

    Here, the Koch family is RIGHT! We can always take them to task for their inconsistant--often deeply flawed--support for the free market elsewhere later!

    Additionally, if possible, the leadership and spokemen for unions, especially tax-feeder unions (Public Employee Unions) are even MORE socialistic than neocons, if possible! Dealing with one adversary at a time is easier than two! Defund and decertify the bureau(c)rats Unions as soon as possible!

    David K. Meller

  11. I fail to see this straw man conspiracy theory that others here see (certainly not to attribute that to the author). We can't know the motivation of whoever slipped that no-bid verbiage into the bill. All we know is that it is there, and Koch et. al. would benefit from it, at the expense of the taxpayers. I don't see the good of that.

    As to the teacher unions, they should be broken up. Time for teachers to earn their keep in the competitive world like the rest of us. Unions per se aren't bad, but unions in bed with government are every bit as bad as corporations in bed with government.

  12. I agree with other commenters that this is a lot of boogeyman-ing even for Wenzel. Breaking up the teachers' unions = good.

    Meanwhile it is quite disingenuous to act like what the Kochs appear to be doing here is some great act of deception. The fact that people have actually had a chance to read and discuss the bill already makes it a better deal than Obamacare, the Patriot Act or QE1 & 2. Secondly I find it actually HILARIOUS that Wenzel, the uber-libertarian, doesn't seem to know if he favors privatization or not. Especially when his main objection is that said privatization is not vetted by some "Greater Good Public Bureaucracy Panel". Absurd.

    Nobody (including teachers) needs to have it explained to them why we need a healthy energy market. State sponsored, Union controlled schools are another matter. When it comes to trading the latter for the former, I just don't see Wenzel's objection. You have to be realistic about the whole of the situation. The Kochs are not the KGB. They're not even Nancy Pelosi. Sure their motives are probably less than altruistic, but what is the alternative? At the end of the day, I'd take the reality this bill puts forward (private energy / weakened teachers union) over the current and tragically flawed reality (strong teachers union / public utility monopoly). Guess what? SO would every Libertarian. Wenzel is looking too hard for the Boogeyman where there isn't one...

  13. The Koch Corp recently opened an office in Madison, WI. Read about it here:

  14. The author is clueless. Krugman is an idiot. I live in Wisconsin; I know more about the situation than these two bozos will ever know. The state is not just broke--it is $3.6 billion in the hole. The tooth fairy is not coming to bail us out. The public sector unions are nothing more than the fundraising arm of the Dimbocrat party, the politians of which in turn feed more and more benefits to the unions--at taxpayer expense. Taxpayers who make less than those public service union members. The workers don't need the unions for basic protection--we have the strongest civil service protections in the nation which predate the unions. The current system is nothing more than a scam defrauding the public.

  15. Wenzel's point is that there is NO OTHER EXPLANATION for why the asset sale provisions are buried in the bill. And selling off assets to keep government afloat isn't privatization - it's cannibalism.