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An FDR-Size Executive Order for Biden

With one stroke, the new president could revive the labor movement and help repair the post-pandemic economy.

Roberto Schmidt/Getty Images

During his run for office, President-elect Joe Biden let out that he was aspiring to have an “FDR-size presidency.” But now that the dust has settled on the election, the Democrats’ failure to retake the Senate has taken a considerable amount of wind from those sails. Nevertheless, a nation rocked by the economic ravages of the coronavirus pandemic can’t wait for more elections. Biden will have to make the best of what’s at hand. The good news is that those hands are far from empty.

Even with a hostile Senate, there is at least one executive order that could do more to transform the country than single-payer health care or the Green New Deal—indeed, an order that could help pave the way toward those goals. Biden could require as a condition in every federal contract that every supplier of a good or service have a collective bargaining agreementunless there is no such supplier that can perform that contract at a reasonable cost or comparable quality. Such an executive order would do more to revive the labor movement than many a federal lawand it wouldn’t require Mitch McConnell’s permission.

Even if the order is drafted as a nudge, instead of an iron-clad requirement, it would be one sizable nudge. In fiscal year 2018, the federal government spent more than $550 billion annually on these contractsabout $195.8 billion by civilian agencies and $358.3 billion by the Department of Defense. That amount climbs every yearand Biden is proposing to spend another $2 trillion over four years for a clean energy infrastructure.

Here is the question: Does the Procurement Act give the president the authority to issue such an executive order, making it a condition of a party to a federal contract to have a collective bargaining agreement in place, or at least giving a preference to such a party?

Some may recall that the Clinton administration tried to bar contractors who replaced striking workers, and a federal court struck it down. But that decision, in Chamber of Commerce of the United States v. Reich, reached by a conservative panel, helps to show the way that an even bolder and more far-reaching Biden-era executive order would be legitimate. In effect, Reich says, it’s all a matter of giving the right reason.

What might be the right reason?

In Reich, the Clinton administration tried to put into an executive order a change that the AFL-CIO wanted to effect in labor law: a ban on hiring permanent replacements for striking union workers. At the time, the United Auto Workers was fighting to stay alive at Caterpillar, and there were other life-or-death strikes in the auto, steel, and rubber industries.

The Clinton executive order that the federal court struck down in Reich did nothing more than impose the strict ban that the AFL-CIO tried but failed to get in Congress: It barred, outright, absolutely, any contractor that exercised the right to put in place permanent replacements.

The Clinton administration defended the suit primarily on the argument that the Chamber of Commerce had no right to sue the president himself, either under the Administrative Procedure Act or otherwise. That is to say, its argument was simply that the federal court had no jurisdiction. There was little attempt to claim the order would promote efficiency or cost savings for the purpose of the Procurement Act. The U.S. Court of Appeals for the District of Columbia held that in issuing the executive order to deny a right under labor law to fire strikers, the president was acting not in a “proprietary” capacity but in a “regulatory” capacity. That is, the president was not acting in the role of a customer, to achieve any cost saving or benefit to the government itself. In addition, the Clinton order was in conflict or at least “in tension” with the National Labor Relations Act, or NLRA, itself, which had been found to have an implied right to fire strikers.

In other words, there are two reasons the Clinton order went down: There was no cost saving or benefit to the federal government, or “nexus” to cost or efficiency, and it was in conflict with the NLRA by taking away a “right” to fire striking workers. In that respect, the Court held that the order was at odds with the purpose of the NLRA, and that such an order could not “alter the delicate balance of bargaining and economic power that the NLRA establishes.”

Still, the Court of Appeals in Reich said that it would be “deferential” to any claim of a “nexus” between a condition in an executive order like this and a legitimate objective under the Procurement Act, be it “efficiency” or “cost saving.”

Here’s how a Biden executive order—even more far-reaching than Clinton’s—could meet the test laid down in Reich: by citing Section 1 of the NLRA itself, the legislative findings made by Congress in 1935, during the last FDR-size presidency. As set out in Section 1 of the NLRA, the promotion of collective bargaining leads to “efficiency” and “safety” in the “instruments of commerce,” that is, private sector companies of the United States; and that is a legislative finding, still in the U.S. Code. Additionally, Section 1 finds that collective bargaining will lead to increased purchasing power for workers. Furthermore, it will prevent “wage competition” as a way of doing business (the NLRA is intended to ensure or promote “wage stabilization”) and end the destructive competition between U.S. businesses by reducing the wages of their workers.

Section 1 also makes it clear that collective bargaining has been deemed by Congress a way of growing the economyand by doing so, it would increase the federal tax revenue. Raising purchasing power also has the effect of increasing aggregate demand overall, which means the federal government does not have to use fiscal policy and go into debt to do so. That public policy would be of immense economic benefit to the federal government.

The key to this Biden executive order, then, is entirely set out in Section 1 of the NLRA itself. Section 1 might be unfamiliar to labor lawyers and federal courts now, but it was arguably the key section of the NLRA in 1935put in to preserve the law from judicial challenge. The law was declared to be constitutional by the Supreme Court in the 5 to 4 decision in NLRB v. Jones and Laughlin Steel Corp. The salient point is this: Congress wanted to make clear that in this case, collective bargaining was an instrument of macroeconomic policyindeed, it was the chief instrument for getting the country out of the Depression. It was a statement that businesses should not compete by cutting wages and engaging in wage competitionand that’s precisely what a collective bargaining agreement prevents.

Section 1 also speaks to the matter of efficiency. It says that the denial of the right to organize and the refusal of employers to accept collective bargaining leads not just to strikes but other forms of “strife or unrest,” that might impair “the efficiency, safety or operation of the instrumentalities of commerce”that is, of business organizations. The absence of collective bargaining also impairs the economy in that it “tends to aggravate business depressions, by depressing wage rates and the purchasing power of wage earners in industry and by preventing the stabilization of competitive wage rates and working conditions within and between industries.”

This Congressional statement of public policy, still unchanged, necessarily carries over to the procurement by the federal government of its goods and servicesin particular, the public policy of avoiding “wage competition” between suppliers and the importance of “wage stabilization” and not competing on the basis of wages and benefits. Necessarily, the later-enacted Procurement Act must be read in light of this Congressional declaration of discouraging such destructive “wage competition” and its promotion of collective bargaining for the purpose of wage stabilization.

Since Congress has claimed collective bargaining as an instrument of macroeconomic policy, the Biden administration should be allowed to make use of this alternative form of stimulusespecially if a Republican controlled Senate tries to deny a federal stimulus to him as it did to Obama.

In recent years, fiscal policy and monetary policy have become less effective in stimulating aggregate demand. Even fiscal policy, or the deficit spending favored by the left, has at least the indirect effect of promoting a plutocracy. The government is still transferring money from the middle class to the creditor class, increasing inequality, and destabilizing the economy and its own share of tax revenue. It is just a fact that during the command economy of World War II, the government used its power as the biggest single consumer to push collective bargaining. And it did so because of a belief held then, and held by more economists now, that collective bargaining is a primary, if less conventional instrument of managing the economy. We need wage policy or collective bargaining, as economists like Larry Summers and others have argued, as a less conventional instrument of managing the economy.

A separate question is whether the Biden administration would have the capacity institutionally to get agencies to comply with the executive order. The way to do so is to set up a form of appeal, by unions or competitors, when a contract is given to a non-union supplier when there is no good cause or alternative union-friendly supplier available to provide a comparably priced good or service.

The unchallenged premise in the Reich decision is that the NLRA is indifferent to collective bargaining. To the contrary, the NLRA says it is the emphatic public policy of the United Statesand a crucial economic policy as well.

We can never get to single-payer health care or a Green New Deal without more solidarity in the culture. We can never get to a European-style welfare state and lower inequality without a European-style labor movement. For that matter, we cannot get to a Canada-type state either without a Canadian-type labor movement. Revival of a labor movement all by itself would go a long way towards a post-Trump reconstruction. The Biden administration should dust off Section 1 and adopt it for our own time as the public policy of the day. After all, not a single syllable of it has been changed over the years, even by the Taft Hartley Act, and it still ought to be the law of the land today.