Manipulating the Markets

Howie Klein has been all over the Employee Free Choice Act today as it begins debate in the Congress. He highlights all the Democrats who were co-sponsors of the same bill in 2007 and 2008 but not now, and then he offers a plausible reason why, in a guest post by Dennis Shulman, the blind rabbi who ran for Congress in 2008 in New Jersey, and was essentially offered what amounts to a bribe by contributors in an attempt to get him to not support the pro-labor bill. They really messed with the wrong guy:

My support for EFCA, in a way, was more than forty years in the making. When I was fifteen years old, going blind, and working to help support my family, I worked for minimum wage after school and during the summers in a factory that hired disabled workers. As a high school student, 85 cents an hour was not bad in 1966. But, as I assembled the toy parts hour after hour, I was surrounded by men and women in their thirties and forties and fifties, some of them veterans, some of them with families, also making 85 cents an hour [...]

Over the years, that experience in that factory in Worcester, Mass., never left me. Especially in these times of economic crisis, if we are going to have a nation in which the middle class family is to be strong, then we have to have a nation that gives organized labor a level playing field. If we are going to have working families that have the buying power to keep our economy growing, then we have to support labor. If we are going to have a nation which honors hard work, then we are going to have to give labor the opportunity to freely choose organization [...]

Too many times during the last year, at campaign fund raisers, people who had large interests in manufacturing would approach me to “discuss” my position on the Employee Free Choice Act. Although my factory experience from the 1960’s outweighed the pressure exerted in 2008 every time, the campaign system favors manufacturers with money to contribute to the candidate. Let us hope as EFCA is being discussed and voted on in Congress this week that our representatives vote for what is right and fair and in the best interest of our nation, and not for what is personally lucrative.

Read between the lines and you get a picture of manufacturing interests conditioning their support for Shulman based on his position on Employee Free Choice. That's their right, of course. But it's startling to see the banking industry working in concert to actually damage stocks in a play to get Congress to back down.

Citigroup Inc. lowered its rating on Wal-Mart Stores Inc. to hold from buy on Tuesday, citing concern that legislation intended to make it easier for employees to unionize would raise the retail giant's labor costs and hurt its competitiveness.

Deborah Weinswig, a Citigroup analyst, cut her price target on the Bentonville, Ark.-based retailer to $48 from $53.

Wal-Mart (WMT) shares rose 2.4% to $48.65 in early afternoon trading, in line with the broader markets. Still, its percentage gain was one of the smallest among components of the Dow Jones Industrial Average.

The proposed Employee Free Choice Act, a top priority for unions this year, was formally introduced Tuesday by Sen. Tom Harkin, D-Iowa., and Rep. George Miller, D-Calif.

Wal-Mart has a comfortable enough position in the marketplace - their sales are actually up - that they could handle a stock jolt. But they could also show that jolt to people like Blanche Lincoln and Mark Pryor and Vic Snyder, Arkansas Democrats who supported Employee Free Choice in the past but would be presented with information that it would lead to a hit to the bottom line of the main employer and political player in their state.

The Citigroup report is bad analysis, by the way. Shocking, I know, that someone at Citi would make a bad decision. As much as Wal-Mart having to pay reasonable wages and benefits would cut into their profits, the increase in overall wages as a result of unionization would bolster purchasing power for precisely the kind of people who shop at Wal-Mart. It's just a fact that unions help workers achieve higher wages, and that the wage stagnation at the middle class and below has been crushing America in the past decade. If Wal-Mart and employers like them could spend two seconds looking past their own immediate self-interest, they would recognize that a strong middle class with good union jobs would lift everybody throughout the economy. And all the Employee Free Choice Act would do is to ensure fairness in the unionization process, by punishing employers who fired or intimidated workers and giving the power back to workers to decide how to organize themselves.