NCPA - National Center for Policy Analysis


November 5, 2008

Will the recent economic turmoil be remembered by the history books as "the panic of 2008?" If Democrats actually adopt the policies they have advocated on the campaign trail, they will be repeating with eerie precision the mistakes made by both parties that gave us the Great Depression, says Kevin Hassett, director of economic policy studies at the American Enterprise Institute.

Economists generally have concluded that, in addition to woefully misguided Federal Reserve actions, two policy errors worsened and prolonged the Great Depression: the Smoot-Hawley Tariff Act of 1930 and the rapid expansion of unionization and cartelization that followed the National Industrial Recovery Act (NIRA) and the National Labor Relations Act (NLRA).

But perhaps the key negative component was the massive increase in unionization, from 13 percent of the workforce in 1935 to 29 percent in 1939, explains Hassett:

  • Then, greater unionization led to a doubling of the number of strikes and an increase in their effectiveness because new rules let workers use "sit-down" tactics that shut plants; now, if tariffs were mentioned, a trade war could easily ensue.
  • The key labor policy parallel to the 1930s is "card- check" -- union organizers can forgo standard secret ballot procedures when they receive signed union-authorization cards from a majority of employees.
  • Although card-check procedures are legal, current law lets employers reject card-check petitions and require secret- ballot elections instead.

According to the U.S. Chamber of Commerce, coercion attempts by union leaders are numerous when card-check procedures are in place, and include ``threats of termination, deportation, and loss of 401(k) and health benefits for not signing a card; and promises of green cards, termination of supervisors and free turkeys for employees who did sign cards.''

Supporters of card-check are presumably willing to accept the possibility of coercion because they believe the end -- a large increase in unionization -- justifies the means. But if that end is achieved, then it likely will lead to a surge in labor costs and reduction in competitiveness for U.S. companies at just the wrong time.

Should Democrats deliver on these promises, we will have a trade war and a reorganization of the workplace on par with that of the 1930s, predicts Hassett.

Source: Kevin Hassett, "'Panic of 2008' Is Better Than the Alternative: Kevin Hassett," Bloomberg, November 3, 2008.

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