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These journals, of course, reach not only the 16 million-plus union members, but it is not inappropriate to say that this really represents a market of about 30 million people during the course of a Presidential cycle, which means approximately 18 months, maybe 2 years. And the way the Republicans are caricatured, they are the dragons whom the good guys, the knights of the round table, the Democrats, are out to subdue.

In addition to the printed material, of course, the unions do have websites. But in all other respects, we will see they_are_really Luddites. They don't look forward, they look backward. But I want to deal with that later.

So the in-kind contributions are an extension of the cash contributions which are compelled. They are compelled, too.

Now, what is the value of union publications to the Democratic Party? The unions could compute and tell us what they spend on the publication, its production, its distribution and the like, but that is only a fraction of the real cost. You have to ask yourself what economists ask themselves. What is the alternative? The alternative for the Democratic Party or the Democrat Party to produce this kind, to obtain this kind of an audience and repeatedly, incessantly subject the reader to the virtues of the Democrat or Democratic Party and the villainy of the Republican Party, is of enormous value.

The other issue I am going to deal with in terms of in-kind contributions are labor services. Now, by that I mean the services which are available to assist the election of Democratic candidates and the pursuance of Democratic Party platforms by either the employees of unions or union members.

Now, no one knows, including Mr. Gold, and no one in the AFLCIO, no one in the Labor Department knows how many people are employed by the unions in this country. The academics who-you can go to an industrial relations library and find enormous numbers of volumes about all kinds of aspects of labor relations, but there are very few, if any, on union administration and management. So we don't know how many union people are involved, but we do know this-and I picked this up some of this from the Bureau of National Affairs' Daily Labor Report back in the 1996 campaign when the unions-the AFL-CIO's political leader stated that there were thousands-that was the word, "thousands"-I don't know how many thousands, but that was their word-of people from the unions working on behalf of the political side that they supported.

Now, what is the total value of this whole array of in-kind contributions? This is impossible to evaluate in an accounting way. Therefore, one has to use ideas and theories and estimates to come up with what the value of that is. They are surely worth a lot of money, and my conclusion is that we can estimate the value of these in-kind contributions by using something borrowed from economics called the investment multiplier. It is a product of the genius of John Maynard Keynes in the 1930s. And I conclude—and, by the way, I have provided the committee a graph of the results of that. I don't know that it has been reproduced, but it illustrates a demand-supply relationship between what the unions want and the services they expect to obtain from the Democratic Party.

I have concluded that the multiplier is 3; that is, using known political action committee contributions of the unions filed with the Federal Election Commission-and there is more beyond that, which I just ignored. Just taking that directly, the multiplier effect means that unions' in kind services are worth at least $300 million. Now, you may ask, Are unions capable of supporting this kind of magnitude of in-kind contributions? Well, in 1995, by reports other than my own, but who built on my work on union finance, two professors at the University of Pittsburgh's Katz School of Business, concluded that unions received in 1995 $12.7 billion-billion-in income and owned assets in excess of $10 billion. And these are underestimates. They are underestimates because their work is dependent upon the reports of the U.S. Department of Labor, and the Department of Labor reports do not cover very important unions in the public sector, adding just from two of these unions, both of them teacher unions, the income that is not reported, would raise that income to $13 billion-close to $14 billion. Currently, based on the membership we have of unions and my estimate of the average union dues per year, $800, the unions are receiving in dues at least $13 billion annually.

There is more I could say about union finance, and I want to deal with it if I get a chance later, but to turn quickly the questions, can unions support this degree of financial and degree of non-financial support? People have a misconception of who the union movement or what the union movement is. It is not he AFL-CIO on 815 16th Street, N.W. It consists of 45,000 local unions, over 2,000 intermediate bodies, and there are about 150 national, international, and what I will call regional bodies. Of course, the bulk of the important ones are those which are affiliated with the AFL-CIO except for the National Education Association, which is independent of the Federation.

Now, we have heard a great deal

The CHAIRMAN. Professor, if you could sort of move toward conclusion.

Mr. TROY. All right. So we have heard a great-so the unions have the structure to deliver. That is the point I want to make.

What about the input of the members? We have heard about democratic procedures, and the union leadership-John Sweeney frequently refers to the fact they have made surveys of their membership asking them if they support this or that. I have yet to seeand I would ask the committee members and anyone else around here, including Mr. Gold, have you ever seen the results of any of those surveys, how they were done, margins of error, that sort of thing?

Now, I am winding up. Please let me complete it.

The CHAIRMAN. Okay.

Mr. TROY. What do unions want? What are these services I am depicting in this graph? At the top of the list is no paycheck protection, no free trade, more public spending, especially for teachers.

And I conclude on the basis of their programs that they are really Luddites. They look backward, not forward.

And my conclusion with respect to policy is I am in favor of a free political market. Our country and other countries have finally found out that their economies benefit from a free economic mar

ket. I don't see why a free political market is not suitable for us and that this has to be done after paycheck protection. The meaning of a free political market means that there should be full, complete, and timely disclosure, including unions, obviously, contributions, cash contributions, and their in-kind, which, of course, we will never know directly from them as to what they are woth. You will never get that out of the union movement or out of the figures that are reported to the Labor Department. Those forms there can be described basically for our purposes as useless.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Troy follows:]

PREPARED STATEMENT OF LEO TROY, PROFESSOR OF ECONOMICS, RUTGERS
UNIVERSITY, NEWARK, NJ

1. Personal Information.

For nearly one-half century I have focused my research on unions, collective bargaining and labor markets. The results of my work have been published in all the major journals of industrial relations and by the National Bureau of Economic Research. These have dealt with major aspects of unionism including union finance, union philosophies and the differences between public and private sector labor in the U.S. and Canada. I pioneered the study of union finance, union philosophies, the distinction between public and private labor organization, and the development of union statistics by state and region. My statistical data have been republished by the U.S. Bureau of the Census. I have also written several books on these matters, the most recent (in 1999) is Beyond Unions and Collective Bargaining, published by M.E. Sharpe. My next book is titled, The Twilight of Unionism. Newspapers including the Wall Street Journal have published my op ed articles, and in November, 1999, Forbes Magazine did a feature article on me and my work. A Lexis-Nexis search reports more than 500 "hits" reflecting the number of times I have been contacted and interviewed by the news media across the country. In addition, I have appeared on television and have done numerous radio interviews. I have also testified before Congressman Thomas' House Committee on Oversight in 1996. A year later I also testified before Senator Thompson's Senate Committee on Campaign Finance Reform.

2. Unions' Political Contributions and Endorsements in Presidential Election Cycle Years.

Unions' cash political contributions have been reported and commented on by many others; I will deal with them only as these affect the larger and almost universally ignored political contributions by unions, their in kind political contributions. Since these are generated from compelled dues and fees, in kind contributions are also compelled speech and they exceed unions' cash expenditures. I concentrate on the presidential cycle election of 1995-96, the latest available, and regard the results as applicable to the current election cycle.

By in kind contributions, I mean any services and publications paid for by unions or provided by volunteer labor services on behalf of political candidates and a political party. Virtually all of these are expended on behalf of candidates of the Democrat Party. Examples of in kind contributions are as follows: labor services to promote the election of candidates; the services of union members who volunteer their time for campaign activities; union officials and staff who spend time on campaign activities and organize volunteers, whether or not they receive their regular pay; provision of data and telephone banks on voters; registering voters, voter tracking and polling, getting out the vote, including services to transport voters to the polls; subsidizing delegates or alternates to national political conventions; exchanging research and strategy decisions with the Democrat Party; direct mail to members comparing candidates voting profiles, which almost universally caricature Republican candidates the villains; and providing platforms for public personalities sympathetic to the Democrat Party to make speeches endorsing Democrats.

Extremely valuable services which unions provide the Democrat Party are political operatives whose salaries are paid by the unions. The two teachers unions, the National Education Association and the American Federation of Teachers are reported to field more political operatives than the combined number of the Republican and Democrat Parties. (Myron Lieberman in a communication to me, April

2000). This is particularly significant because these are professional operatives and activists, not volunteers who may be amateurs.

The most valuable in kind services provided by unions to the Democrats are the unions journals and newspapers. These are mailed out to some 16 million members of unions, implying a minimum household audience of 30 million potential consumers of the unions' political point of view. These publications are issued mainly by the national and international unions (parent organizations), but also by many local and intermediate unions. In addition, many unions maintain websites to transmit the official union line.

The union media is biased in favor of the Democrat Party. In fact, the political views are so biased that it is no exaggeration to characterize the union media as a one-party press. The membership funds the union media from its dues and agency shop fees. Since these monies are collected almost entirely under compelled arrangements, the union or agency shop and the check-off, members and those represented by the unions are compelled to pay for political programs and candidates which they may not support, and in very many instances do not endorse.

The managers, the leadership, of unions contend that the political views expressed in the organizations media reflect the attitudes of a majority of its members, based on membership surveys. If this is so, why aren't the surveys' results, the timing of the surveys, the methods including sampling techniques and margins of error publicly disclosed? To date I am unaware of any such disclosure. In fact, in interviews I have done with reporters, I have urged them to inquire into this issue, but without avail. Most important, if these surveys are correct, why do individual members contribute so little to political campaigns, as will be reported below. Union managements' disregard, if not contempt for the views of substantial proportions of their membership, is especially egregious given the established fact that so many actually vote Republican. Indeed, it is a virtual certainty that Ronald Reagan received a majority of private sector union members' votes in 1984, and probably close to that in 1980. To a very great extent, the term blue collar Democrat of that era really meant and means to this day, blue collar unionists in the private economy. In 1996, Bob Dole won about one-third of all union households (meaning private and public combined), implying that perhaps 40 percent of more of the private sector workers probably voted for him. My estimate derives from the proportions of private and public membership to the total union population, and the widely recognized fact that most organized public employees vote Democrat. Unfortunately, pollsters from both political parties ignore the fundamental differences between private and public sector unionists and do not report on this schism in the union movement. Although public sector unionists vote more for Democrats than private sector unionists, a poll of the membership of the National Education Association (NEA), the largest union in America, with a membership of 2.4 million, reported about 30 percent of its members regarded themselves as Republicans and another 30 percent considered themselves to be independents. If so, this means that a minority is committed Democrats, by the NEA's leadership devotes nearly all its resources from compelled dues and fees to supporting Democrats.

The counter argument to the compelled union members' payments to support causes and candidates they oppose is that corporations also make political contributions which some shareholders may oppose. However, this comparison is invalid: Any shareholder, who objects to company policies of any kind, can sell his (her) shares at any time. And they have done so frequently as demonstrated by actions taken to show disapproval of apartheid, environmental practices and health (tobacco) and safety practices of the corporation. In contrast, the worker covered by a union shop agreement is compelled to resign his (her) membership to seek reimbursement of that share of dues which the union spent for political purposes. This is a high price to pay for a union member. It is a high price because it must take into account those union benefits financed out of dues (many of the old line AFL skilled unions continue to have these benefits) which would then be forfeited or denied. The price must also take into account that the same union and its officers will continue to represent the objector in grievance bargaining and bargaining in general, and though nominally required to do so fairly, one must reckon with the world as is, not as thought to be. Moreover, the objector runs the risk of the disapproval of fellow workers for opting out and being "sent to Coventry." To be sent to Coventry can be more than ostracism; it is often also means threats, intimidation and harassment. On the other hand, the shareholder may even make a wise investment change, so it is evident that equating the union member working under a union shop and shareholder who object to what their institution is doing in political matters is not comparable.

3. The Value of the Unions' In Kind Political Contributions.

Estimating the value of unions' in kind contributions is difficult because detailed figures are not available and many figures are classified by unions and by the Labor Department which conceal their political objectives. The Labor Departments financial forms which most unions must file are useless for measuring political spending because of the nature of the financial categories. If corporations used comparable forms in their financial reports, stock exchanges would not list them and the IRS would reject them. Even if the Labor Department forms were amended in an effort. to elicit the relevant political information, unions would hide these expenditures in a labyrinth of other categories.

The key to the valuation of the unions' in kind contributions is my concept of the political multiplier. It is the analogue of the Keynesian investment multiplier in economic theory, a concept which has been established for more than six decades. Conceptually, the political multiplier postulates that a cash political contribution will generate a multiple dollar value of in kind political contributions. (See above for a definition and listing of major in kind contributions).

The cash expenditures used in this analysis are the Federal Elections Commission's reports that in 1995-96, unions' PAC disbursements totaled $100 million. (The actual figure was $99,769,350). The political multiplier, estimated to be 3, therefore probably produced in kind additional contributions worth $300 million. Hence, in the 1995-96 presidential_cycle, the total value of unions' political contributions - nearly all of which went to Democrats - was worth $400 million!

The multiplier, a number without units, is derived as follows: - mpc Here, the acronym, mpc, means the unions' marginal propensity to consume (demand) additional political services of the Democrat Party associated with unions' cash expenditures for political purposes. Put another way, the unions' mpc for Democrat political services asks, what proportion of each additional dollar of the unions' additional income will the unions spend on in kind political services? Assuming, the midpoint between 1 (all additional income) or zero, no additional income will be spent on in kind services, one-half (.5— of each additional dollar of income would be spent on in kind political purposes. The multiplier would then be 2. [1/(1-.5)=2], and therefore that unions' in kind political contributions would equal $200 million in the presidential cycle of 1995-96. Together with their cash contributions of $100 million, this would bring the total to $300 million.

However, based on experience in the Beck (private sector; (CWA v. Beck 487 US 935, 1988) and the Abood (public sector; Abood v. The Detroit Board of Education 431 U.S. 209, 1977) cases, a political multiplier of one-half is clearly too small. Judicial decisions concluded in the Beck case that unions spent less than 20 percent of their income on collective bargaining, and even less in the Abood case. The remainder, the bulk of unions' income was allocated to other purposes, included political expenditures. The exact share going to political purposes is not known. However, given the often stated and forceful intention of the unions' management to implement their political objectives, and the range of possibilities opened up by the Beck and Abood cases, it is reasonable to estimate that the unions' political multiplier would be larger than 2. I estimate it to be 3. This means that the unions' marginal propensity to demand (spend) about two-thirds of each dollar of additional income, or .67, for political purposes. [1/(1-.67)=3]. Therefore, the unions' in kind political contribution had a value of $300 million in 1995-96. Since total unions cash expenditures are likely to be no less than the previous presidential cycle year, the political multiplier should be about the same, or perhaps slightly larger. Figure 1 illustrates the political multiplier; the services of the Democrat Party referred to in Figure 1 are discussed in the Appendix.

To critics who challenge my estimate of the unions' political multiplier, I call attention to additional millions of dollars in unions' cash contributions which I could justifiably have included in the base (the multiplicand) which is multiplied to derive the in kind total. Thus, in the 1995-96 election cycle year, unions spent $50 million on categories of political expenditures other than PAC spending. (Masters and Jones, Table 4, Journal of Labor Research, 1999, vol. XX, No. 3, p. 311).

Beyond these is the remarkable 1995 financial arrangement between the AFL CIO and Household International: In exchange for the right to issue an AFL-CIO emblazoned credit card, Household agreed to pay the Federation $75 million a year for 5 years for a total of $375 million. Should $50 million be added to the unions' political spending and thereby enlarge the value of their in kind contributions? To date I a/m unaware of any public accounting of those funds-to what purposes they were put, and most importantly, the apparent absence of any accounting to the members using the credit card responsible for generating these payments to the AFL-CIO.

4. Can the Union Movement Sustain $400 Million of Political Expenditures?

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