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Rewarding Labor

Elaine Chao's record of competent conservatism.

By 9.24.07

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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.

It wasn't good enough for the AFL-CIO, the 55-union, 10-million worker labor federation that has fought the Labor Department in Congress and in the courts. President John Sweeney accused Chao of telling "half-truths about whether workers are at risk of losing overtime pay." Before the regulations were finalized, national legislative director Bill Samuel told Reuters, "We still think that millions of workers would lose overtime protections, including many earning barely above $22,000." Ted Kennedy agreed that it was an "anti-worker rule" that would force employees to "work longer hours for lower pay."

Kennedy isn't the only politician to take aim at Chao's department. Democratic presidential candidate Barack Obama, in a campaign speech where he promised he would walk a picket line as president, told union activists, "We are watching a Washington that has thrown open its doors to the most anti-union, anti-worker forces we've seen in generations."

Some of Chao's reforms are aimed at the culture of the Labor Department itself. Grant processes have been opened up to competition. The Senior Community Service Employment Program, for example, had been handing out $300 million in national grants to the same handful of organizations every year since 1967. The Labor Department now forces groups to compete for the money, with six new grantees in 2006 alone. For the last two fiscal years, the department has ranked first out of the 18 largest federal agencies in the percentage of dollars awarded competitively.

Instead of having Labor Department bureaucrats pick one-size-fits-all job training opportunities for workers seeking to upgrade their skills, the Bush administration has been experimenting with career advancement accounts. These $3,000 vouchers -- part of a larger American Competitiveness Initiative -- are an effort to introduce flexibility and choice into the process. The AFL-CIO opposes the vouchers.

NOT EVERYTHING HAS BEEN an ideological battle. The Bush Labor Department has set up a record number of health and safety partnerships with labor unions. In 2006, Chao joined many labor leaders in support of the bipartisan Pension Protect Act. Top Labor aides believe they have even won over some skeptics among the department's career personnel. "We're winning hearts and minds in these buildings," says Chao.

Chao is also willing to win hearts and minds in the unions. "I think I'm one of the very few people on this side of the aisle who really understand organized labor," she says. "You learn for one that organized labor is not monolithic and they run the gamut in terms of philosophy. There are some that are willing to work with us and there are others who are so partisan they will not."

Granted, none of this rises to the level of the "revolution" conservatives are promised whenever Republicans get to wield power in Washington for a few years. Making an agency run better is not the same thing as shrinking the federal government. And the Labor Department doesn't command the status of State or the budget of Defense or Health and Human Services. But the right needs to highlight examples of successful conservative governance wherever it can find them.

Conservatives look at Bridges to Nowhere, discretionary spending binges, and Brownie doing a heck of a job and see a Republican Party that is insufficiently ideological. Many independents, however, look at these missteps and think they see conservatism. To them, the GOP is too ideological -- and incompetent at governing.

The Bush Labor Department, by contrast, has kept its budget tight. It was the first -- and so far still the only -- Cabinet agency to earn a "green" rating from the White House for sound management practices in every required area. It meets its Office of Management and Budget spending targets. Chao's fiscal 2008 discretionary budget request represents a 9 percent cut from what Congress authorized last year.

When conservatives run traditionally liberal agencies and cut spending, they are often accused of trying to gut the agency from within. Yet Labor has practiced spending restraint without eviscerating the department's core functions. Since 2001, the Wage and Hour division has recovered record back wages for workers. The Occupational Safety and Health Administration reports that injury and illness rates are down 13 percent. Money recovered for victims of illegal employment discrimination is up 80 percent while the department's efforts to protect health and safety plans has yielded $9.2 billion in money results and 691 criminal indictments.

"[B]y every key measure -- workplace safety and health, back wages recovered, and retirement assets protected -- the Department has achieved record results," Chao beams. "So it is possible to do more with less." That isn't exactly Thomas Jefferson's observation that the government which governs best governs least, but it is a vast improvement over a stagnant big government conservatism that ends up doing less with more.

SO HOW DID THEY DO IT and what could future conservative policymakers learn from this record? Observers argue a lot of the credit should go to Chao herself. "She's a really good thinker and smart woman," says economist Lawrence Kudlow. "The unsung hero of the Bush administration," agrees Heritage Foundation President Edwin Feulner. The Weekly Standard dubbed Chao the "last woman standing" after Donald Rumsfeld's resignation made her the only member of Bush's original Cabinet still serving.

It's true that Chao came to the office with a unique skill set. She arrived in the United States as an immigrant from Taiwan unable to speak a word of English-you can still detect a faint accent in some of her verbal inflections -- and rose to become a Harvard MBA. She has worked at high levels of the private, public, and nonprofit sectors, a path that has taken her from the Reagan White House to the Heritage Foundation ("She's one of my superstars," Feulner says) to the Peace Corps and United Way. Her husband, Mitch McConnell, is the Senate minority leader. But Chao and others close to her put the emphasis on what her former deputy Steven Law calls "the three Ps: principle, people, and persistence." "She was careful to pick people with enthusiasm for their subject matter," Law says. "Senior political appointees had passion, shared the philosophy of the president and the secretary, and were committed to staying around long enough to carry out the mission."

"She has a great team of about 30 people who support the president and believe in what they're trying to accomplish," says Feulner. "Personnel make a difference in policy." So does longevity: Not only is Chao the longest-serving Cabinet officer but most of her senior appointees have stayed at Labor long enough to see their initiatives through. "I know conservatives don't like to stay in the government for very long," Chao says. "I think that longevity's important."

Yet no administration can hold power forever. Conservatives had substantial influence over the Department of Education when William Bennett was Ronald Reagan's man at the helm. This was to a lesser extent true at Jack Kemp's Department of Housing and Urban Development under George H. W. Bush. Both departments went back to business as usual as soon as the Democrats regained power -- and in some cases, sooner. How durable will the reforms at Labor prove?

The Democrat-controlled Congress is already working to roll things back. While otherwise increasing Labor's budget by $935 million -- above what the administration requested -- the House has voted to cut funding for the union overseers at OLMS below last year's level, a rare example of Democratic budget-cutting. The AFL-CIO's associate general counsel defended the move, telling the Hill that OLMS's record was overrated and its union corruption statistics were "cooked." Democrats are also trying to advance "card check" legislation that would end secret ballots for union organizing, despite Chao's opposition.

SUPPORTERS OF THE ADMINISTRATION'S labor policies are nevertheless optimistic. "I have a lot of faith in the American people," says Feulner. "Once the sunlight of accountability and transparency shines, that will be very hard to roll back." Steven Law is more philosophical. "Major changes pursued in the name of ideological principle alone will fall away when new people come into power," he says. "[Chao] pursued changes in the name of what's best for workers."

"People coming into government have a responsibility to be effective," says Chao, arguing that she thinks the results her team has gotten will make it easier to "institutionalize change." And that might be a lesson for other conservatives hoping to rebuild credibility and hold the reins of power. "If conservatives do not come into the federal government, who will?" she asks. "Who is going to take responsibility for shaping the federal government according to our vision for America if we don't?"

When President Bush leaves office, conservatives will be eager to distance themselves from the administration's mistakes. But that shouldn't keep them from emulating its successes. Count Ed Feulner among the conservatives who think that Chao's tenure at Labor is part of the latter category. "When the president hands out his last gold medals," he says, "I do hope she gets one."

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About the Author

W. James Antle III, author of the new book Devouring Freedom: Can Big Government Ever Be Stopped?, is editor of the Daily Caller News Foundation and a senior editor of The American Spectator. You can follow him on Twitter @jimantle.