Fat Cats

We’re hearing lots these days about “Fat Cat” bankers bringing down the U.S. financial system. No doubt some of them did contribute to the failure---but many others are in line for blame as well: government regulations and regulators, Fannie Mae and Freddie Mac, and bond credit-rating firms to name a few.

What we don’t hear much about is “Fat Cat” union leaders, who long have caused a huge drag on the economy.

A glance at the economic soundness of right-to-work states compared with forced-union states illustrates the point.

In the early days of the Industrial Age, unions protected workers from corporate abuses. Today in the age of globalization and enlightened corporate governance, unions offer little to workers, as evidenced by the drop of union membership to a low of 7.2 percent in private industry, according to Department of Labor records. President Obama has vowed to reverse this trend.

Even so, the UAW (United Auto Workers), the AFL-CIO (American Federation of Labor/ Congress of Industrial Organizations), the SEIU (Service Employees International Union) and other large unions wield enormous power over the nation’s economy and politics. In the first six months of the Obama administration, SEIU president, Andy Stern, visited the White House 22 times, more than any other person listed on the visitor’s log.

The political influence of unions became painfully apparent during the health care reform bill negotiations when union leaders demanded exemption from a new 40 percent excise tax on the kind of high-cost insurance plans union members own. By threatening to stay home and withhold their votes in the November elections, unions were granted an exemption.

Less well-known are the many carve outs and special exemptions unions were granted earlier in the negotiation process. The longshoremen’s union had already been exempted from the big excise tax. Under the House bill, Secretary of Health & Human Services, Kathleen Sebelius, was granted discretionary authority to regulate health care workers, and union officials were guaranteed seats on the various federal panels charged with recommending health care policy. This could result in forced unionization of doctors and nurses, among many other health care workers. Other forced unionizations mandated in the health care bills are home health-care and day-care providers, many of whom are small business owners. They would be forced into unions under the ruse that some of their clients are receiving government assistance, which therefore makes the health care providers union employees. This policy has already been enacted in several states, including Michigan and California, not strong examples of financial success.

Union leaders also threaten board members of large public corporations by manipulating union pension funds. The fiduciary responsibility of union fund managers is to maximize benefits for retired union members. Instead, union leaders use the funds as leverage against board members of public corporations threatening withdrawal of invested pension funds unless board members adopt the union agenda, often to the detriment of the corporation’s profits.

The administration, including Secretary of Labor Hilda Solis, is supporting the repeal of oversight regulations that require unions to disclose their financial transactions so that members can see how their dues are being spent. In 2007 Congress voted to reduce the budget of the Office of Labor-Management Standards (OLMS), which monitors union compliance with federal law. And it has been reported that President Obama promised to end federal oversight of the Teamsters, imposed in 1992 to eliminate mob influence. Of course, card check and forced arbitration, taking away the secret ballot in union certification voting, are still part of the administration’s future program.

Detroit is a prime example of the destructive power of unions. Over the years the UAW put its demands above the survival of the Big Three automakers. Neither Big Labor nor corporate management had the vision to adjust to changes in the economy and the industry. In 2008/2009 we saw the result of their ineptness. High wages, overly generous health care policies and pension funds, and restrictive work rules finally worked their magic and were largely responsible for the failure of GM and Chrysler. Did the unions learn their lesson? No! The administration rushed in with bailouts, and the UAW was awarded a 39 percent ownership of the restructured GM along with a cash award of $10 billion, to settle an unsecured debt of just $20 billion, while bond holders and nonunion employees received pennies on the dollar.

Apparently the lesson to be learned is that no matter how unreasonable union demands are, if the corporation fails, no problem, the government will ride in on a white horse and rescue the company to save union jobs. Other heavily unionized industries have suffered similar failures, though not as extreme: steel, textiles, and airlines, for example.

My next blog will take on public unions, which are bankrupting many cities and states, not to mention the nation.