Card Check: Rebutting the Usual Bald-Faced Balderdash

By March 13, 2009Economy, Labor Unions

In his latest Detroit News screed attacking critics of the Employee Free Choice Act, James Hoffa, president of the Teamsters, assumes his readers are historically ignorant. Or rather, stupid. He thinks you’re stupid.

Just recently a spokesman for one of the front groups called Employee Free Choice “a poison pill for our ailing economy.”

Those are the same arguments used by opponents of the Wagner Act. In 1935, Guy Harrington of the National Publisher’s Association said supporting the bill “would permanently close the door to recovery.”

The U.S. economy recovered after the Wagner Act became law in 1935. If the Employee Free Choice Act becomes law, I am quite confident the U.S. economy will return to health.

If you’re going to use a post hoc fallacy, try to get the chronology a little closer.

The Wagner Act passed in 1935. The nation plunged back into the depths of the Depression in 1937, with the consequences well summarized at the Wikipedia, “Recession of 1937“: “Unemployment jumped from 14.3% in 1937 to 19.0% in 1938. In two months, unemployment rose from 5 million to over 9 million, reaching almost 12 million in early 1938. Manufacturing output fell off by 40% from the 1937 peak; it was back to 1934 levels. Producers reduced their expenditures on durable goods, and inventories declined, but personal income was only 15% lower than it had been at the peak in 1937.”

The U.S. economy did return to health after passage of the Wagner Act, but it took World War II to get us there, and only after the war, 1946, did consumer spending and living standards return to pre-Depression levels.

There’s a Hoffa slogan for you: Pass the Employee Free Choice Act, and the economy will be healthy again in 2020!

It’s possible that some workers might gain higher wages and benefits if private sector unionization increases, but it will do nothing to ease unemployment. Raise the cost of labor and employers will hire fewer people. If you’re unemployed, the last thing you should want is passage of the Employee Free Choice Act.

We have evidence from history, including passage of Wagner Act.

From Amity Shlaes in the Wall Street Journal, “The Krugman Recipe for Depression“:

New Dealers raised taxes again and again to fund spending. The New Dealers also insisted on higher wages when businesses could ill afford them. Roosevelt, for example, signed into law first his National Recovery Administration, whose codes forced businesses to pay an above-market minimum wage, and then the Wagner Act, which gave union workers more power.

As a result of such policy, pay for workers in the later 1930s was well above trend. Mr. Ohanian’s research documents this. High wages hurt corporate profits and therefore hiring. The unemployed stayed unemployed. “If you had a job you were all right” — the phrase we all heard as children about the Depression — really does capture the period.

Another Hoffa slogan: Pass the Employee Free Choice Act, if you have a job, you’ll be all right. If not….

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