If you look at the structure of our government and compare it with how unions are structured you see one fundamental similarity. The government and the unions do not target a bottom line. Both of these organizations have nothing to rein in their spending in the case of government and nothing to rein in their demands in the case of the unions. This oversight by these organizations places them on an eventual clash with the reality of fiscal sanity.
We have seen the unions that have bankrupted the companies they have infiltrated by making demands for wages and benefits that eventually became unaffordable. We are seeing that phenomena played out in the state of Wisconsin. Likewise the government has reached a point where it too cannot just spend with impunity as it has done in the past. The reality of living off of borrowed money has appeared as the fact that creditors that don’t get paid don’t continue to loan money. When the source of loans dries up there is no longer an alternative for the government to acquire money. The illusion that the government can always tax the citizens reaches a point of diminishing returns not only by the unavailability and the affordability but also by political unpopularity. This in the world of finance is bankruptcy whether the government wants to declare it or not.
The unions who go to the table with demands that affect the bottom line of the organization they work for to the extent they make the company less profitable or the government without sufficient revenue to operate are going to eventually cut their own throat. Unions should go to the table with a plan to increase profitability which would be in both parties interest. Instead they assume that will be taken care of by management and they will get the rewards of increased profits by making further increased demands for more wages and benefits. This “little red hen” mentality sounds good to apathetic union members who simply let the union leadership demand all they can without considering the long term consequences. This is the government’s approach also. Spend and expand government until it eventually becomes unaffordable.
This has been going on and will continue as long as people are not willing to recognize that living within one’s means is a constant for all humanity. Most individuals realize this in their personal financial life but when they fall under the spell of a politician or a union promoter they blank out that the same principles apply whether it is an organization or an individual. An organization that has a bottom line based on a profit expectation has a benchmark to calculate how they are doing in their operation. They can see if their costs are rising and revenues being reduced. Organizations without this benchmark simply operate until the reality of bankruptcy hits them in the face. By then it is too late.
All such organizations that don’t have a benchmark depend on those that do. Union members pay dues from the money they receive for profit making companies. Those union members working for government are receiving money from the government which receives its money from profit making companies. The profit making companies survive on profits and the unions and the government ignore this requirement focusing on how much they can acquire from them. As they eat away at these profits without adding value they simply reduce the competitive position of the companies they are feeding on.
Union members live by contracts but they don’t enter into a union with a contract that will clarify how the union will not bleed the company to the extent it will go bankrupt and eliminate the union and the union members jobs.
It is so obvious now that government spending is not controlled by the people spending the money. The politicians are willing to spend whatever if their constituents vote them in office. This is irresponsible. The politicians could pass laws that limit their ability to spend. In fact the debt limit could be that mechanism if it were honored but a debt limit that is extended indefinitely is not a debt limit.
As long as these two organizations , unions and governments, continue to ignore the value of bottom line calculations they will continue to fail. There is no other alternative to failure when ignoring the bottom line. All individuals realize this almost intuitively. Some try to pretend it doesn’t matter but they still end up bankrupt. So too will those who organize and politicize without recognizing the truths they rely on in their personal financial lives. Playing a game to see how long you can get away with faking reality is a fool’s approach that is predictable and extremely unpleasant.Tags: government Profits Unions