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Organized Labor Tries To Regroup

Organized labor, even more than the Democratic Party, took a punch in the gut with yesterday’s election results.

The end of the Democrats’ total dominance on Capitol Hill means labor has little chance of getting legislation passed before 2013. But with a heretofore loyal ally in the White House, unions can still accomplish many of their goals through executive and regulatory action — unless the administration pivots in another direction to prepare for President Obama’s re-election campaign.

The Iowa caucuses are just 14 months away, and the first primaries of 2012 will be right behind. In many places, those primaries will not only determine presidential candidates. They will also select the major party nominees for one-third of the Senate, and, once again, for the entire House of Representatives.

Obama has scheduled a news conference today to discuss the drubbing his party took at the polls. The president, who just yesterday said his agenda is “all at risk,” probably will try to walk a verbal high wire between defending the Democratic record that voters seemed to repudiate, while offering to collaborate with the Republicans.

One phrase we can expect the president to avoid, however, is “elections have consequences.” This is what Obama famously told House Republican Whip Eric Cantor when, on his third day in office, the new president dismissed Cantor’s suggestion of small business tax cuts to help stimulate the economy.

Elections certainly do have consequences. A major consequence of the Democratic takeovers of Congress in 2006 and the White House in 2008 was to give allies of organized labor a nearly free hand in setting the Washington agenda. For the most part, these allies have delivered impressive results.

Unions did not get the legislation they wanted to require employers to recognize unions based only on employee signatures on a “card check,” rather than through an election. But they have gotten nearly everything else they sought, from a hike in the minimum wage to massive stimulus spending to a bailout of two big Detroit-based automakers. Obama’s insistence on letting tax rates rise for upper-income households, while holding the line on taxes for most Americans, reflects organized labor’s priorities.

Labor wanted stimulus money to be directed at saving government jobs and supporting beleaguered industries, especially housing. For the most part, that is exactly what happened.

Social liberals, on the other hand, have made little progress in this period of Democratic control. The current president opposes same-sex marriage, just like his predecessor. His administration continues to defend the military’s “don’t ask, don’t tell” ban on gay members. The federal Defense of Marriage Act is still law. The health care overhaul could not win passage this year until anti-abortion Catholic bishops weighed in on its restrictions on federal funding.

There has been a distinct hierarchy in the Democratic power structure thus far in the Obama years. Labor has been on top, followed by environmental groups, whose regulatory policies have found favor except when in conflict with labor priorities. Causes favored by social liberals have been at the bottom of the to-do list.

So what happens next?

With a lame-duck session of Congress likely to convene around Nov. 15, the obvious issue at hand is the fight over the Bush-era tax cuts that are scheduled to expire on Jan. 1. Obama will probably offer, perhaps as early as today, to temporarily extend the cuts for upper-income taxpayers, while making the cuts permanent for most wage-earners. Republicans most likely will only agree to a two-year extension of today’s income tax rates for everyone. This will keep the tax issue alive for the next election cycle.

What about the estate tax? It expired this year, but is due to snap back in 2011 to its pre-Bush level of 55 percent on estates greater than $1 million. A compromise might put it back at its 2009 benchmarks of 45 percent on estates greater than $3.5 million. But Republicans may hold out for a two-year extension of 2010 law, without an estate tax, as well. This would create a three-year gap in the tax’s implementation, which — to the great dismay of labor — could easily be enough to sink the tax politically forever.

It will take 60 votes to get anything through the Senate. Democrats, who are about to see their numbers slashed, might conceivably try to push through their own tax bill with only a bare Senate majority using reconciliation procedures. But, given the strength of the Republican tide this year and the number of Democrats who hold shaky seats in conservative states that will vote in 2012, I doubt this will happen. Complete gridlock this year will kick the tax issue to the next Congress. There, a bigger Republican bloc will be able to force Obama to sign the tax cut of its choosing, lest the entire electorate pay a sharply higher bill on the 2011 returns we will file during the election season in 2012.

Labor might make one last try to get a card-check bill through the current Congress. Good luck with that. A key vote would belong to Sen. Blanche Lincoln, D-Ark., who has opposed card-check legislation in the past. That was a major reason why organized labor backed a strong challenger in the Democratic primary. Lincoln survived the challenge, but was so badly weakened that she stood virtually no chance in yesrterday’s balloting. It is hard to imagine Lincoln changing her position to give labor what it so badly wants.

Democrats, starting with Obama, will naturally be tempted to move to the political center to counter the Republican surge. This strategy helped Bill Clinton win re-election in 1996 after a GOP sweep two years earlier. Unions face an unpleasant choice: Accept a move by Democrats away from labor’s agenda to try to rebuild the party’s legislative strength, or risk splitting the party with a new set of pro-labor candidates to run in the 2012 primaries against any heretics.

I expect the unions will swallow hard and give Obama the maneuvering room he needs, if he decides to take a more centrist path. Unions are, ultimately, a minority that seeks disproportionate economic and political power. They represent fewer than one out of every 10 private sector workers.

Without majorities in both houses of Congress, labor’s influence largely depends on having a friend in the White House, even if President Obama gets a little less friendly from now on.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book, Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book The High Achiever’s Guide To Wealth.

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