‘Cadillac’ compromise may breathe new life to card check

Matt K. Lewis Senior Contributor
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Recent developments are sending Big Labor scrambling to salvage its goal of increasing union membership. This is an important goal, inasmuch as unions are in serious danger of extinction.

Scott Brown’s stunning victory in the Massachusetts special Senate election—and the message it sent—implies the Employee Free Choice Act, also known as “card check,” can expect tougher opposition in this Congress. But the political reality is that President Obama still owes Big Labor several political paybacks—and those paybacks are now more likely to come through the Executive Branch.

One such repayment might come in the form of an Executive Order to promote project labor agreements (union-favoring contracts) on federal construction projects. (This is currently under a government regulatory review.) The order would make it difficult for non-union contractors to compete for big federal construction jobs.

While such a bold move may seem counterintuitive, with Democrats losing independent voters at an alarming rate, Obama may be forced to do whatever is necessary to salvage what’s left of his base.

This would be consistent with his recent moves. A few weeks ago, for example, Obama helped negotiate a politically unpopular special exemption for union members who have so-called Cadillac health care plans (many of which were negotiated by unions in place of compensation). The deal would postpone their tax for five years, meaning it wouldn’t kick in until 2018. The fact that the public wasn’t supportive of the deal did not deter Obama from making it.

Brett McMahon, a spokesman for Associated Builders and Contractors, recently explained to me that Obama was loath to anger labor, because, “They have a ready-made get-out-the-vote operation that is critically important and can be crucial in swing districts.”

Moreover, while Obama’s efforts to force union-favoring contracts may seem merely like an attempt to pay back a pro-Democratic special interest, there is real reason to believe his efforts are more urgent (and more telling) than most observers realize.

As labor union membership has precipitously declined over recent decades, many unions are ironically facing a similar problem as the auto industry they helped destroy: They are having a hard time keeping promises they made to members during better times.

The Washington Examiner’s Kevin Mooney recently noted that according to the most recent 5,500 reports that unions are required to file with the government, “Eight of the largest unions have underfunded (pension) plans.”
What is more, citing the Pension Benefit Guarantee Corporation, Mooney added: “The average union pension has resources to cover only 62 percent of what is owed to participants and less than one in every 160 workers is covered by a union pension with the required the assets.”

The problem stems from the fact that the average union member today is approximately a decade older than the average non-union member. And as their contributor base of dues-paying members continues to decline, the amount of money unions must pay out continues to increase. Further complicating matters, their pool of investments has lost significant value in the recent decade (this did not begin with the recent economic downturn).

To stem the bleeding, many unions have attempted short-term fixes. For example, in 2008 the Teamsters for a Democratic Union announced that the third largest pension fund in their union is reportedly planning new benefit cuts. Other unions have opted for one-tome “withdrawal” payments for employers who want to get out of a union pension plan.

Diana Furchtgott-Roth with the Hudson Institute (former chief economist at the Department of Labor) recently conducted a study on under-funded union pension plans. She found that among large plans—plans with 100 or more participants—35 percent of non-union plans were fully funded, while just 17 percent of union plans were fully funded.

It looks even worse when real numbers are applied. For example, The Pension Benefit Guaranty Corp., a federal agency, guarantees only up to $12,870. That’s not much to live on for someone who worked ha

But just as many believe the long-term solution to our health care crisis is to enlarge the pool of young contributors, labor leaders believe the long-term solution to their pension crisis is to simply add more young members.

That’s why liberals pushed card check. By eliminating formal structures and obstacles to unionization, such as the secret ballot, union agitators hoped to increase their ability to sign-up more young members to help fund the retirements of retiring members. And more young members paying dues equals a transfer of money to retiring members.

A recent letter sent to House and Senate committees by a collection of union and pension sponsors noted that a, “drop in the value of pension plan assets coupled with the current credit crunch has placed defined benefit plan sponsors in an untenable position.” It went on to urge lawmakers to modify pension plan funding rules to avoid increased unemployment and a slower economic recovery.

But the notion that Democrats might try to sneak card-check into a jobs bill was floated before Brown’s stunning victory. Today, it seems less likely Congressional Democrats would have the moxie to push for card check.

A more likely scenario is that President Obama may attempt accomplish many of Big Labor’s goals, via an Executive Order.

“We’ve seen things we never thought we would see this last year, and constant vigilance is required,” added McMahon.

Matt Lewis is a conservative writer and blogger, based in Alexandria, Va.