The American Spectator

This article appears as the cover story of The American Spectator’s September 2007 issue. To subscribe to our monthly print edition, click here.

THE FRANCES PERKINS BUILDING near Judiciary Square is a perfect home for the vast bureaucracy of the U.S. Department of Labor. The long gray rectangular structure is a singular achievement in bland government architecture. The interior hallways look as if they were painted in the 1970s, when the building was completed. The atmosphere is very cozy for bureaucrats, but not terribly inviting to conservatives.

Since January 2001, however, conservatives have been making themselves at home there. Under the leadership of Labor Secretary Elaine Chao, the Department of Labor has become one of Washington’s rare enclaves of common sense. It has also been the source of some of the Bush administration’s most notable domestic policy achievements, something worth thinking about as such success stories become harder to find — and Republicans set out to regain their credibility as a governing party.

Overtime regulations that had been unchanged since 1949 were modernized. Union financial disclosure requirements have been better enforced than at any time since Congress enacted them in 1959. Job training programs have been updated and made more flexible for modern workers. All this has been done while spending 3.4 percent less than in 2001. This year, the department submitted its lowest budget request since fiscal year 1996.

This record is noteworthy for two reasons. The first is that spending restraint and managerial prowess have been conspicuously lacking elsewhere in President Bush’s administration. The second is that we’re talking about the Department of Labor, an agency that mostly regulates work conditions and runs job training programs. As Chao puts it, “This department is one of the most important departments in the federal government because we regulate every single workplace in America.”

Even under Republican presidents, Labor has tended to be a liberal-leaning department that usually serves as a contact between the administration and the AFL-CIO. Past GOP secretaries like Bill Brock, Elizabeth Dole, and Lynn Martin did little to upset this arrangement. The Labor Department was a good Cabinet assignment for moderate Republicans. In the heady days of the 1990s, some conservatives thought it would be easier to abolish than to reform.

CHAO CAME TO THE JOB with a very different approach. She scrapped the AFL-CIO’s informal liaison role and replaced it with an “open door” policy of dealing directly with any union or organization that had a concern. “We wanted to make sure that we advocated for the entire workforce and not just one segment of the workforce,” Chao explains. She wanted to move away from an enforcement strategy that was premised on unending labor-management conflict. And she has tried to inject competition and fiscal conservatism into the department’s bureaucracy.

“Then we took on some hard issues,” Chao says. First on the agenda was reviving the Labor Department’s oversight of organized labor. The Office of Labor Management Standards (OLMS) is to Big Labor what the Securities and Exchange Commission is to Wall Street, except not as well funded — or as well positioned. OLMS isn’t easy to find in the Frances Perkins Building. Requests for directions to its offices are met with uncomprehending stares by department employees.

OLMS is well hidden because its mission hasn’t always been the Labor Department’s biggest priority. The number of audits of large American unions had fallen to zero in both 1998 and 1999. The unions’ annual financial disclosure reports — required by the last major revision of federal labor law, the Landrum-Griffin Act of 1959 — were bereft of meaningful information. A union could bundle tens of millions of dollars together in a single category and just label them “grants,” without any itemization or explanation. Under these circumstances, it was practically impossible for union members to find out how their dues were being spent.

Chao’s team decided to make some changes. They championed a revised L-M2 disclosure form that would require unions with annual receipts of $250,000 or more — about a fifth of national labor organizations — to itemize all spending over $5,000. The Labor Department now publishes the reports on a website that receives almost 2,100 hits a day, leaving dues-paying union members just a few mouse clicks away from seeing where their money is going.

The unions protested that the new regulations would be too burdensome and expensive, citing a price tag greater than $1 billion. But the disclosure requirements labor unions face are lenient compared to those Sarbanes-Oxley imposes on corporations. Unions file reports annually, not quarterly, and they can do so using free software. They don’t have to get an independent certified audit or even follow standard accounting procedures. Today, 93 percent of unions meet their disclosure requirements. The AFL-CIO’s compliance costs under the new regulations totaled just $54,000.

Some union officials might be less worried about red tape than about being caught red-handed. It is now easy to figure out which unions are spending vast sums of money on liberalism (such as the $65 million that flowed from the National Education Association into the coffers of groups like Jesse Jackson’s Rainbow/PUSH Coalition in 2005) and Learjet aircraft (the International Association of Machinists and Aerospace Workers spent $1.8 million keeping theirs aloft in 2006).

More egregious is actual corruption. Over the last six years, OLMS has helped convict more than 770 corrupt union officials. These investigations have also helped union members win back $70 million in dues as court-ordered restitution. That’s why Chao bristles when critics try to affix her with the anti-union label. “It’s not anti-union to protect rank-and-file members, to let them know how their contributions are being used, to [help them] keep their hard-earned money,” the secretary says. “It’s pro-worker, it’s pro-transparency, and it’s pro-accountability.”

CHAO ALSO FOUGHT A THREE-YEAR BATTLE to reform the outdated and confusing white-collar overtime regulations related to a section of the Fair Labor Standards Act of 1949. With job descriptions and duties left unchanged from the early postwar era, both workers and employers were often unsure of who actually qualified for overtime. The only group that benefited from this confusion was trial lawyers. Overtime disputes were beginning to overtake discrimination claims as the biggest source of federal class action lawsuits.

“Every administration since President Jimmy Carter’s had tried to update and modernize these regulations,” Chao remarked in a June speech at the Heritage Foundation. “And they failed.” Her team succeeded, accomplishing a major Bush administration tort reform. The income ceiling for guaranteed overtime benefits was raised from $8,060 to $23,360, with possible eligibility for people earning up to $100,000. The Labor Department claims this move strengthened the overtime protections of over 6 million workers while offering relief to businesses burdened by excessive litigation.