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Is the most powerful teachers union in America overreaching?

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As election-night parties go, the mood was bleak. On March 19th primary-election voters in Chicago were asked to vote on a ballot measure that would have raised the transfer tax on properties worth over $1m so as to generate money to pay for homelessness relief. The measure was backed by the city’s entire progressive establishment. Its opponents, mostly from the real-estate industry, did not even bother to organise a rival event. And yet by 9pm on election night, “No” was leading by around eight percentage points. “Let’s just pretend,” said Myron Byrd, from the Chicago Coalition for the Homeless, an activist group, mournfully, before he belted out a song he had wanted to perform to celebrate victory. The party ended with chants of “we will not give up”, long after most attendees gave up and left.

The defeat of the “Bring Chicago Home” measure was crushing for Chicago’s mayor, Brandon Johnson, who had heavily promoted it. But it is perhaps an even bigger defeat for his former employer, the Chicago Teachers Union (ctu), which put $400,000 and the organising work of its 28,000 members into getting a Yes vote. In the past decade or so, the union has become one of the most powerful in the country by adopting a model of radical left-wing political organising. From 2022 to the end of last year it put $2.3m into Mr Johnson’s campaign fund. Its support helped elevate Mr Johnson, previously an unknown county commissioner, into office. This year it hopes to reap the spoils—the teachers’ contract is up for renewal. But is the union overreaching?

The ctu’s transformation began over a decade ago, when Rahm Emanuel was mayor. On coming into office and discovering a huge hole in the teachers’ pension scheme, Mr Emanuel cancelled a pay rise and took a hardline approach to negotiation. In 2012 incensed teachers went on strike for the first time in 25 years. In 2013 he then began a deeply controversial programme to close 50 of the city’s public schools, further invigorating the union’s organising efforts. After another strike in 2019, by last year it had developed the confidence to help push out Mr Emanuel’s successor, Lori Lightfoot.

With Mr Johnson in office, the ctu is in an enviable position. Instead of dealing with somebody like Ms Lightfoot or Mr Emanuel, this year teachers will negotiate with their own union’s former lobbyist. They expect a payoff. In early March the Illinois Policy Institute (IPI), a right-leaning think-tank, leaked the union’s early negotiating proposals. Among the suggestions were that teachers ought to get “cost of living” pay increases of 9% a year, subsidised housing, more generous pensions, and health insurance with smaller copays. The union also wants every school in the city to be guaranteed a librarian and more staff of all sorts to be hired. “They can demand almost anything under the sun,” says Austin Berg, of the IPI.

Johnson’s choice

The union sees this as only what it is due. At its head is Stacy Davis Gates, a former history teacher who says she was radicalised by school closures. Ms Davis Gates takes a no-compromise approach to politics. In a speech to bigwigs at the City Club on March 5th she told journalists wondering about how the district would pay for her union’s proposals to “stop asking that question”. She also discussed the toll it took on her mental health to have it revealed she sends her teenage son to a private Catholic school, rather than a public one. At the end of the speech she finally offered a figure for the cost of her proposals: “$50bn and three cents”.

The trouble is there is no more money. This year the budget amounts to $29,000 per pupil. Such spending is possible only thanks to a huge slug of federal covid-relief funding. By 2026 the school district projects it will have a deficit of $691m even before the costs of a new contract. It cannot raise its property tax any faster. A state bailout is unlikely, says Hal Woods of Kids First Chicago, a charity. That leaves only the equally cash-strapped city. Even some once sympathetic to the ctu are nervous. “They are trying to solve the bad policy decisions of the past two or three decades by just throwing money at it,” says Stephanie Farmer, an academic at Roosevelt University. “It makes me very disappointed.”

What Chicago’s schools actually need is reform. As things are, even large sums of money do not go especially far. One of the biggest problems is that there are simply too many schools. Over the past two decades enrolment has shrunk by over a quarter, even as new charter schools opened. Over a third of the city’s schools are operating at below 50% capacity. A few high schools have less than 10% of the number of students they were built for. Oversized schools cost huge sums to run even as they have to skimp on services (like librarians). Closing them would be fiercely unpopular, but the ctu’s solution in essence amounts to staffing them all as though they are full.

In the negotiations Mr Johnson has a choice. If he simply pays up, he will have to starve the rest of the city’s services to pay for it. The alternative is defying those who put him into office. And yet in a way, the results of the Bring Chicago Home ballot measure could make that easier. In the mayoral race last year, when asked about how he would negotiate with the teachers, Mr Johnson replied, “who better to deliver bad news to friends than a friend?” That becomes a lot easier if your friend suddenly seems a lot less popular.

Stay on top of American politics with The US in brief, our daily newsletter with fast analysis of the most important electoral stories, and Checks and Balance, a weekly note from our Lexington columnist that examines the state of American democracy and the issues that matter to voters.

Economics

Germany’s election will usher in new leadership — but might not change its economy

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Production at the VW plant in Emden.

Sina Schuldt | Picture Alliance | Getty Images

The struggling German economy has been a major talking point among critics of Chancellor Olaf Scholz’ government during the latest election campaign — but analysts warn a new leadership might not turn these tides.

As voters prepare to head to the polls, it is now all but certain that Germany will soon have a new chancellor. The Christian Democratic Union’s Friedrich Merz is the firm favorite.

Merz has not shied away from blasting Scholz’s economic policies and from linking them to the lackluster state of Europe’s largest economy. He argues that a government under his leadership would give the economy the boost it needs.

Experts speaking to CNBC were less sure.

“There is a high risk that Germany will get a refurbished economic model after the elections, but not a brand new model that makes the competition jealous,” Carsten Brzeski, global head of macro at ING, told CNBC.

The CDU/CSU economic agenda

The CDU, which on a federal level ties up with regional sister party the Christian Social Union, is running on a “typical economic conservative program,” Brzeski said.

It includes income and corporate tax cuts, fewer subsidies and less bureaucracy, changes to social benefits, deregulation, support for innovation, start-ups and artificial intelligence and boosting investment among other policies, according to CDU/CSU campaigners.

“The weak parts of the positions are that the CDU/CSU is not very precise on how it wants to increase investments in infrastructure, digitalization and education. The intention is there, but the details are not,” Brzeski said, noting that the union appears to be aiming to revive Germany’s economic model without fully overhauling it.

“It is still a reform program which pretends that change can happen without pain,” he said.

Geraldine Dany-Knedlik, head of forecasting at research institute DIW Berlin, noted that the CDU is also looking to reach gross domestic product growth of around 2% again through its fiscal and economic program called “Agenda 2030.”

But reaching such levels of economic expansion in Germany “seems unrealistic,” not just temporarily, but also in the long run, she told CNBC.

Germany’s GDP declined in both 2023 and 2024. Recent quarterly growth readings have also been teetering on the verge of a technical recession, which has so far been narrowly avoided. The German economy shrank by 0.2% in the fourth quarter, compared with the previous three-month stretch, according to the latest reading.

Europe’s largest economy faces pressure in key industries like the auto sector, issues with infrastructure like the country’s rail network and a housebuilding crisis.

Dany-Knedlik also flagged the so-called debt brake, a long-standing fiscal rule that is enshrined in Germany’s constitution, which limits the size of the structural budget deficit and how much debt the government can take on.

Whether or not the clause should be overhauled has been a big part of the fiscal debate ahead of the election. While the CDU ideally does not want to change the debt brake, Merz has said that he may be open to some reform.

“To increase growth prospects substantially without increasing debt also seems rather unlikely,” DIW’s Dany-Knedlik said, adding that, if public investments were to rise within the limits of the debt brake, significant tax increases would be unavoidable.

“Taking into account that a 2 Percent growth target is to be reached within a 4 year legislation period, the Agenda 2030 in combination with conservatives attitude towards the debt break to me reads more of a wish list than a straight forward economic growth program,” she said.

Change in German government will deliver economic success, says CEO of German employers association

Franziska Palmas, senior Europe economist at Capital Economics, sees some benefits to the plans of the CDU-CSU union, saying they would likely “be positive” for the economy, but warning that the resulting boost would be small.

“Tax cuts would support consumer spending and private investment, but weak sentiment means consumers may save a significant share of their additional after-tax income and firms may be reluctant to invest,” she told CNBC.  

Palmas nevertheless pointed out that not everyone would come away a winner from the new policies. Income tax cuts would benefit middle- and higher-income households more than those with a lower income, who would also be affected by potential reductions of social benefits.

Coalition talks ahead

Following the Sunday election, the CDU/CSU will almost certainly be left to find a coalition partner to form a majority government, with the Social Democratic Party or the Green party emerging as the likeliest candidates.

The parties will need to broker a coalition agreement outlining their joint goals, including on the economy — which could prove to be a difficult undertaking, Capital Economics’ Palmas said.

“The CDU and the SPD and Greens have significantly different economic policy positions,” she said, pointing to discrepancies over taxes and regulation. While the CDU/CSU want to reduce both items, the SPD and Greens seek to raise taxes and oppose deregulation in at least some areas, Palmas explained.

The group is nevertheless likely to hold the power in any potential negotiations as it will likely have their choice between partnering with the SPD or Greens.

“Accordingly, we suspect that the coalition agreement will include most of the CDU’s main economic proposals,” she said.

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