The union protests in Wisconsin are an interesting sight to see. While the eventual result of what happens in Wisconsin has little effect on our daily lives, it is symbolic of what is to come. There are a lot of states in financial trouble and government pensions are near the top of the list of expenses.
First, it is important to point out the libertarian position in all of this. Libertarians believe in the separation of school and state. People should not be forced to go to school or send their kids to school. In addition, people should not be forced to fund schools, whether they have kids or not.
As far as unions, libertarians believe that people should be free to associate with others. If a bunch of employees want to get together to negotiate with their employer, that should be their right to do so. At the same time, it should be the employer's right to fire anyone they want.
So basically, in a libertarian world, while unions would not be outlawed, they probably wouldn't exist without the support of government. In addition, while I am not against a bunch of people pooling their money together and running "government schools", in a libertarian world, government schools probably wouldn't exist because money would have to be collected voluntarily.
For this debate, let's accept the fact that there are government schools and teachers. If the government is going to provide pensions for government school teachers, it should be a defined contribution plan. In other words, they should have the equivalent of a 401k. If you are going to force taxpayers to pay for teacher pensions, then it should at least be limited to current taxpayers. Governments should not be making promises based on the ability of future taxpayers.
This whole thing in Wisconsin will be repeated in states all over. During the boom times, taxpayers did not fight the government pensions and salaries. Now that the middle class is struggling, people are getting tired of the parasites. Government salaries and benefits are now far higher on average than other workers. People are starting to revolt and this is just the beginning.
There will continue to be fights all over the place. The government workers and unions will win some fights, but I think they will lose in the long-run. The average Joe outnumbers the government employees and the average Joe is starting to wake up.
Eventually this will move to a federal level. Most of this will happen in local and state governments first because they can not run huge deficits. They are more limited in their spending, whereas the federal government has the Federal Reserve to buy its debt (print money). Even this is limited by the threat of hyperinflation, but Washington DC can kick the can down the road for a bit longer.