Greg Mankiw points to an article in the Economist about what unions want from Obama, and what he has and hasn’t given them. Here is one interesting fact:

But [Obama’s] biggest favour has been green, foldable and borrowed. For example, he encourages the use of “Project Labour Agreements” on big federal construction projects, whereby contractors must recruit through a union hiring hall. Such agreements inflate costs by 12-18%…


Per hour worked, state and local government workers enjoy 34% higher wages and 70% more benefits than their private-sector counterparts

As the Economist notes, and critics often complain, this means that we get less schools, roads, and other public services for our money.

I am interested in grand bargains between pragmatic moderate progressives, like Matt Yglesias and Ezra Klein, and pragmatic moderate libertarians, like Tyler Cowen.  I think that a liberalization of public services aimed at getting the most for our money in exchange for greater and more widely distributed actual wage subsidies could be one of these bargains.

My question is this: how much (and what mix) of an increase in the earned income tax credit, food stamps, and other progressive income subsidies would it take for moderate progressives to sign off on a complete liberalization of government services? I’m talking repeal of Davis-Bacon, federal right-to-work law for all public sector employment, all federal education dollars contingent on removal of strict charter schools limitations, and a complete ban on all “made in America” or local sourcing requirement provisions for all programs receiving any federal subsidies (that means you, Amtrak!).

I’ve only half thought through both the carrots and the sticks for progressives here, so I’m not wedded to this list. I’m just curious if there is a set of policies that generally accomplishes a wider more fairly distributed welfare program in exchange for public sector liberalization.  Would progressives be interested at all?