President Obama just called for a $500 billion infrastructure plan. “Investing in infrastructure is something members of both political parties have always supported,” he said. But insufficient funding isn’t the only thing holding up repairs. Before Obama throws more money at infrastructure — and speaks on behalf of both parties — he should look at the war surrounding the FAA Reauthorization Act of 2009.
The bill, which should be a routine matter, is being delayed (note the year) by a vicious fight between FedEx on one side, and UPS and the Teamsters on the other. The battle — which has come into the public eye thanks to FedEx’s aggressive campaign to “stop the Brown Bailout” — is a perfect example of how congressional regulations, labor unions, and even corporate headquarters can conspire to distort free enterprise.
The trouble goes back to Calvin Coolidge’s presidency. By 1926, the U.S. had seen decades of bloody labor agitation, and railroads had become crucial to the nation’s infrastructure. These two facts put together created a problem: Striking workers at a single local rail branch could hold the nation hostage by shutting down all thru-traffic. In response, Congress passed the Railway Labor Act (RLA), which forbade rail workers to strike or organize locally (i.e., at individual branches), made unionization difficult, and required that labor disputes be resolved through mediation.
In 1935, Franklin Roosevelt signed the National Labor Relations Act (NLRA), which dramatically limited the actions employers could take against unionization — but Congress and FDR specifically roped rail workers off from the NLRA, preserving the original RLA rules for them. Indeed, the RLA’s strict governance of railroad labor was considered so important that FDR, of all presidents, extended it to the industry that was quickly replacing railways in vitality to the national infrastructure: airlines.
The different standards created by these hoary bills have just now percolated into the nasty “Brown Bailout” conflict. The problem is that FedEx’s labor relations fall mostly under the business-friendly RLA, while UPS’s fall almost entirely under the union-friendly NLRA. The reason is historical. “UPS started out as a trucking company, and FedEx started out as an airline,” explains Jim Berard, spokesman for Rep. Jim Oberstar (D., Minn.), who chairs the House Transportation and Infrastructure Committee.
Even today, 85 percent of FedEx packages travel by air at some point before delivery, while the same percentage of UPS packages travel by truck only. FedEx keeps most of its truckers under the RLA by separating trucks that carry express mail — i.e., ones whose parcels just came off a plane — from pure ground-delivery trucks. This cleverness lets FedEx classify most of its truckers as airline workers (participants in the delivery of air mail), keeping them out of the NLRA’s, and the Teamsters’, grips.
Nonetheless, as Berard says, the two companies are “basically doing the same thing” today and should be treated the same way under the law. Historically, FedEx has agreed: In the 1980s and 1990s, when UPS tried to be reclassified under the RLA, citing its somewhat expanded air operation, FedEx supported the effort, even though it would have made UPS a greater competitive threat.
But the Teamsters and their allies defeated UPS’s effort in Congress. So, some claim, UPS is resorting to a more cynical strategy: If the company can’t restore parity by making itself more competitive, at least it can cripple FedEx — with the Teamsters’ help.
UPS’s weapon is a few paragraphs that Oberstar added to the FAA Reauthorization Act. The legislation is here, and — though it’s hard for anyone not on the Infrastructure Committee to decode — it would essentially place FedEx’s relations with its truckers under the NLRA, giving the Teamsters an entrance and would-be strikers a chance.
Oberstar claims that his provision isn’t for UPS, but for the workers within FedEx’s own ranks. A member of Minnesota’s peculiar Democratic-Farmer-Labor party, he’s a leftist in the old style, some might say a union hack. “He is the son of a labor leader on the Iron Range of Minnesota. He himself worked on the iron-ore mines of Minnesota,” says Berard. “He carries a United Steel Workers card. His father was buried with his union contract in his pocket. You’re damn right he sympathizes with labor.” Berard claims the Oberstar office receives — “on a weekly basis” — calls from FedEx workers who support the legislation.
Oberstar’s labor-populist bona fides and Teamster sympathies are authentic. But Oberstar also — and this is something Berard doesn’t advertise — receives more money from UPS than any other congressman.
On the other side of the Capitol Building and political spectrum, Sens. Bob Corker and Lamar Alexander, both Republicans from Tennessee, have countered Oberstar. Thus far, they’ve prevented the bill’s passage by threatening a filibuster. Corker explains that he’s consistently supported equal treatment for the two companies under the law: “I offered UPS that if they wanted to change things, they could alter the law to compete the way FedEx does. We shouldn’t use legislation to force a company to come under different labor standards which would change their business model. This is a move by unions to take advantage of a law that ultimately will pass.”
Does Corker feel this way because he’s a champion of free enterprise? Partly. But it’s hard not to suspect that FedEx’s headquarters in Memphis might also have something to do with the Tennessee senators’ supererogatory efforts. In fact, it’s hard to find any legislator who’s involved in this debate who doesn’t have an interest on his side.
As the FAA reauthorization remains in limbo, FedEx and UPS are engaged in public-relations warfare. The companies have spent about $13 million total on their advertising and lobbying campaigns, according to UPS spokeswoman Kara Ross.
FedEx’s campaign, Brown Bailout, has a website, a blog, a Facebook account, a Twitter account, and kitschy videos on YouTube. The name is somewhat disingenuous. As Jim Berard says, “They call it the ‘Brown Bailout.’ That’s pure propaganda. We’re not giving money to UPS.”
And while Oberstar claims that the provision originated with FedEx’s own workers, UPS doesn’t exactly hide its enthusiasm. “This is leveling the playing field,” says Ross, the UPS spokeswoman. She calls the legislative status quo an “earmark” for FedEx.
I ask her if UPS would be satisfied with moving in the opposite direction — i.e., getting more of its workers governed under the RLA. “That would be unfair to all other [shipping companies]. It makes sense to move it the other way,” she says, breaking with UPS’s line from the 1990s.
UPS has a point: FedEx does have an unfair, legally buttressed advantage. Fairness, fairness, fairness — this is Oberstar’s, UPS’s, and the Teamsters’ ostensible motive and mantra.
FedEx has a different one: competitiveness. History, says spokesman Maury Lane, demonstrates FedEx’s willingness to compete. During UPS’s efforts to change the ways its labor relations are governed, “we would offer, and many members of Congress would offer, for them to be governed under the RLA, but they’ve been held hostage by the Teamsters,” Lane says. He says it’s absurd to claim that the provision was requested by FedEx’s own workers: “Are people really clamoring for unionization at a company that’s been on Fortune’s best places to work every year it’s been published?”
The economic concerns extend far outside of FedEx. “A disruption like what happened in 1997 would be catastrophic for this stumbling economy. UPS went on strike 15 days, killed 1.5 million businesses, and did $15 billion in economic damage,” Lane says. “[The proposed policy] is a backdoor attempt to destroy reliability, which is the kingmaker of the express service. If you don’t have reliability, people won’t pay for express.” Lane also points to recent examples of anti-competitive behavior destroying industries: “That’s what the Big Three did, and that’s why two out of three are getting wiped out by others.” Lane senses a trend that’s “almost un-American, when the principles of competition are hampered.”
Fairness is confronting competition. In a free market, the two go together. But in today’s bureaucratized capitalism, we’re stuck so deep in red tape and special interests that they are often at odds. And it’s not just government or big labor’s fault; corporations sometimes find that they can profit more through bureaucratic manipulation and rent-seeking than through participating in the free market.
As Senator Corker says, “This is what, in many ways, turns the American people off to Washington. They see a piece of legislation that’s designed to do something, but some powerful member of Congress uses the legislation to accomplish another end, so one business can change the business model under which another operates. It’s why they don’t trust us.”
– Matthew Shaffer is a William F. Buckley Fellow at the National Review Institute.