Liberty Defined: 50 Essential Issues That Affect Our Freedom (35 page)

Many will complain that China (or others) uses “slave” labor and for that reason we shouldn’t allow their products to compete with ours. But that is hardly accurate. Chinese production uses low-cost labor for sure, but they’re jobs that working-class Chinese eagerly seek; they are never forced to work as slaves. All they have to do is compare their current standard of living to the standard of living they had just a few years ago under communism. What many here don’t want to admit is that much of our labor is priced artificially higher as a consequence of minimum wage laws, unemployment benefits, and compulsory unions, while prices are pushed higher as a consequence of excessive regulations, taxation, and government-caused inflation.

Protectionist measures don’t solve the problems; they only protect the status quo that keeps us from being competitive in many industries.

U
nions came into being in a significant way during the industrial revolution but gained a major foothold in American economic life during the Depression of the 1930s. The National Labor Relations Act of 1935 was, until that time, the most important labor law passed in the United States. It established minimum wages and maximum hours of work and many government regulations on all businesses and labor agreements.

This act, also known as the Wagner Act, passed for the purpose of helping labor, significantly contributed to the deepening and prolongation of the Depression. When an economy corrects from a Federal Reserve–generated bubble and malinvestment, all parties involved must retrench, eliminate the mistakes, and cancel out the errors made during the boom phase of the cycle.

My first exposure to union power came as a young person after World War II. My dad ran a small retail dairy business back when milk was delivered daily to customers’ homes. The maximum number of trucks we ever had was about twenty.
Our drivers were nonunion, treated well by my dad, and never agitated to join a union. The fact that we were nonunion allowed my four brothers and me the flexibility to fill in as summer and weekend relief drivers for vacations time and days off—a job that helped us all pay for our college education. A union contract would have never allowed this. Our drivers’ wages were commensurate with union wages, and even then they received medical benefits. At that time, before government-managed care took over, true medical insurance was reasonably priced.

Even with this good relationship with our drivers, regional strikes by union truck drivers affected our business as well. During the first strike that I became aware of, my dad pulled all his trucks off the road. I couldn’t understand it and thought my dad might be sympathetic, so I quizzed him on this.

He quickly explained to me that the threat of union violence against us was significant if our trucks delivered milk during the strike. He explained that our trucks could easily be damaged and in some cases turned over and destroyed by union strikers.

Union power, gained by legislation, even without physical violence, is still violence. The laborer gains legal force over the employer. Economically, in the long run, labor loses. Whether it was featherbedding in the railroads or union intimidation for milk-truck drivers or car workers, the eventual result is the loss of jobs. It continues until this day.

Today, of course, no one has the service of having their milk delivered to their house, nor do we have any private railroad companies running passenger trains. All this has come about as a consequence of labor laws intended to protect workers’
interests. In fact, the laws do the opposite. If only it were so easy to help the working class. Just dictate wages and everyone will be financially better off. Unfortunately, this leads to disastrous results, whether it’s the prolonging of the economic mess as it did in the 1930s or the tragic results in American industry that we’re witnessing today.

What good is it to mandate a $75 per hour wage if there are no jobs available at that price? What good is a minimum wage of $7.50 if it significantly contributes to overall unemployment?

The reaction to the economic argument explaining the shortcoming of labor unions and minimum wage laws is that it’s heartless and unfair not to force “fairness” on the ruthless capitalists. But true compassion should be directed toward the defense of a free market that has provided the greatest abundance and the best distribution of wealth of any economic system known throughout history.

Once power is given to government to set wages higher than the market rate, it also has the power to fix wages at lower rates as Nixon did in 1971 with wage and price controls. Roosevelt and Truman did the same thing. They claimed it was in the country’s best interest due to the war effort. Think of the absurdity: for ten years during the Great Depression, the government tried to raise wages, and then, when the war came, the government forcibly lowered wages. The whole endeavor is crazy and dangerous. In a free society, setting wage standards is not ever a prerogative of the government in times of war or peace.

Working people should always have a right to voluntarily organize and negotiate with business owners. It’s the use of
force or privileges that militant unions demand from government that distorts the true cost of labor. Compulsory unionism, protected by law by a majority vote, violates the principle of protecting minority rights. Making workers pay dues to be represented by an organization they disagree with is hardly fair or just. Coercing businesses to accept contracts with unions at the risk of being closed down is not a voluntary agreement. Workers who are willing to work at a lower than union wage are subject to violence by militant union workers.

In a free society unions would not be banned but the employer would only deal with unions voluntarily. In a truly free society there may well develop competing unions (in highly specialized skill areas) to vie for contracts and argue their case for productivity and safety habits. If they prove their case, workers’ wages would be maximized for economic reasons. What many people don’t even realize is that in a free market economy, labor becomes scarce and the businessman must seek the best workers by offering higher wages.

Even before the current economic crisis, starting in 2008 in certain areas, labor was scarce, which was a great incentive for illegal aliens to come here for construction jobs that were going begging. They were, for the most part, making more than minimum wage but less than the union wage.

It was not infrequent in my congressional district for farmers, builders, fishermen, hospital administrators, and others to come to my office asking for help to increase the number of work visas to help solve their labor shortages. Many also complained about illegal immigrants being a financial burden on the taxpayers by getting free education and medical care in our emergency rooms.

It is true that illegal aliens place an economic burden on the American taxpayer, but it’s doubtful that legal or illegal immigration is the cause of unemployment for American citizens. With the recession, illegal immigration is down because the demand for labor is down. Immigrants weren’t undercutting American workers’ salaries; jobs went begging because American citizens either didn’t want or need the jobs badly enough to take the ones that were offered.

Jobs are always available, even in weak economies—it’s just that many refuse to take them because wages are seen as being too low. And when compared to what one can get from unemployment benefits or welfare, the incentive to take a job is significantly diminished.

Once labor gets special protection by labor law, we entrench the principle of government interference. This prepares the way for wage control, and the government can also declare wages to be too high. It also invites controls like antitrust, and restriction on campaign participation by both labor and business. If union dues were obtained strictly by voluntary means, this would not be a problem. Unionized workers, getting special favor from federal laws, should never be allowed to hold the taxpayer hostage with threats of a strike or interfering in the election process or lobbying for legislation designed to perpetuate the overpaid and excessive bureaucracy.

There are, I’m sure, many who support labor unions who would disagree with these points. What they don’t understand is that once special privileges are granted for one group, others will compete for political influence as well, to benefit themselves. In this case, big business will have the funds to influence a pliable system with cash outlays for all forms of corporate
welfare benefits: special loans, grants, contracts, easy money, financing the military-industrial complex, special tax benefits. In the end, the money talks and the principle of intervention endorsed by the pro-union workers is used to a greater extent to subsidize and aid businesses over labor. It would be best to have a government that would cater to neither group.

In a free society, neither business nor labor gets special benefits from the government; not giving benefits to either equalizes the process, which then would be a benefit to labor. The best way for labor to gain more economic clout is for the free market to thrive and good workers to become a premium, creating a higher demand and higher wages.

It’s generally thought that big labor and big business are always at loggerheads, but this is not so. When large corporations, especially those in the military-industrial complex, are artificially subsidized, permitting huge profits, it provides an opportunity for unions to maximize their wages. In instances like this, the unions and businesses frequently work together to obtain obscene contracts from the government. These companies rarely go bankrupt, and if in trouble get bailed out. Even before the recent crisis, corporations like Lockheed and others were taken care of by Congress, with pressure on the Republicans coming from the corporations and on the Democrats by the unions.

The recent bailout of General Motors was a lot messier, but I’m sure there were some who thought the best answer would have been for General Motors to get some military contracts to manufacture tanks or other government vehicles. This was one of the things done in 1979 to bail out Chrysler—the first time—with a contract for the army’s M-1 tank.

Interestingly, this Chrysler bailout was one of the first real battles in which I became directly involved in Congress. Even earlier, because Chrysler presented a “need,” the Congress responded by taking the contract from General Motors, to whom it had been awarded. The first great switch was pulled off in 1977 by the Secretary of Defense at that time, Donald Rumsfeld.

Billions of dollars have been spent on the M-1 tank over the years and yet there has never been a need for it for the defense of our country—it was purely a military-industrial complex boondoggle to serve the interests of the demands of big business and big labor and to save Chrysler and at that time to stick it to General Motors. But in the end, General Motors got its bailout too.

Not only was the tank not necessary to defend our country; it’s weapons like this that encourage our military intervention overseas, resulting in grief and blowback tragedies. This type of spending contributes significantly to our bankruptcy and the drain of capital resources away from productive enterprises.

Though the economic planners claim the Chrysler bailout was a great success since Chrysler paid back the loan guarantees, no one tried or could measure the harm caused by the misdirection of resources inherent in the program. Worst of all, it conditioned Americans to accept the notion that, in tough economic times, the role of the U.S. Congress is to bail out corporations by protecting unearned profits and high union wages.

Sadly, the Chrysler bailout of 1979 set up the unimaginable bailouts of today. It was erroneously concluded that spending on military weapons—even those we don’t need—can
help a company or even an entire economy recover from a government-caused downturn. Unbelievably, I hear of talk in Washington that the only way to get out of a deep recession or depression is to get into a war, as FDR did.

Instead of arguing that spending money on bailouts of bankrupt, inefficient companies is helpful, it should be seen as wasteful and something that cannot provide an incentive for the companies to clean up their act. It actually encourages the opposite. Besides, direct loans, guaranteed loans, or cash subsidies always harm some unidentified investor or company that was denied access to credit or may even have been taxed to pay for the bailout of their competitors.

The Chrysler bailout was supported by big government, big business, and big banks and big labor; the little guy was stuck with the bills. No one should be surprised that today it’s not only Chrysler, it’s General Motors, Goldman Sachs, and many others who lined up at the Treasury and Fed and were also bailed out.

After Ronald Reagan took office, in the first budget debate in 1981, a few cuts were made (only) in the previously proposed increases to some domestic welfare programs. Liberal Democrats screamed bloody murder and demanded a sharp cut in the Export-Import Bank, seen as a form of corporate welfare. The amendment to cut passed easily, with greater than 100 votes. It was a big political event and the report of the debate and vote made the front page of the
Washington Post
.

Representatives of Boeing and other big American exporters who lived off export subsidies were quoted as saying that the vote, instead of being devastating to them, gave them an opportunity to “show their clout.” And indeed they did.

The following day, since the final passage of the appropriations bill had not occurred, the same vote was repeated. This time it was defeated easily, with approximately 100 members changing their vote. The unions worked the Democrats, big business lobbied the Republicans, and the Export-Import Bank was protected from any cuts in its budget.