NLRB v. Boeing Is An Abuse of Power

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WASHINGTON--Some people think that the most important issues in Washington are how to reduce spending and whether we will cut the deficit. Those are indeed serious issues. But, in my opinion, they are dwarfed by the abuse of power by some federal regulatory agencies. They are curbing job growth in America and favoring our competitors overseas.

Take the National Labor Relations Board, a small, independent agency whose chief mission is to adjudicate disputes between employers and labor unions. Its acting general counsel, Lafe Solomon-nominated by President Obama in January, but not yet confirmed by the Senate-wants to stop the Boeing Corporation from using its new aircraft manufacturing plant in South Carolina. Construction began in November 2009 and is almost complete.

If the Labor Board finds for the International Association of Machinists and Aerospace Workers, higher unemployment will be a permanent facet of the American economy because more manufacturing plants will be located overseas. Firms will be less likely to build plants in America if the unconfirmed acting general counsel of an obscure regulatory agency can rule that their use is illegal.

Mr. Solomon has charged that Boeing's decision to build a new plant in South Carolina-to expand production of its Dreamliner 787-was made in retaliation for strikes at its Everett, Washington plant. Mr. Solomon's charge was brought after a complaint from the IAM, which represents Boeing employees in Washington State.

The acting general counsel's complaint is that Boeing was transferring a second 787 Dreamliner production line of 3 planes per month from Washington to a non-union site in North Charleston, and that this was being done to punish workers who had gone on strike.

But no transfer occurred. Boeing has a backlog of 850 planes. Seven planes a month are being built in Everett; three per month would be built in North Charleston. As demand for the Dreamliner increased, Boeing had to open a second production line someplace. It explored Washington State and other locations, and decided that costs would be lower and production more reliable elsewhere.

If Boeing is penalized from locating where costs are lowest and production most reliable, then many other companies will be charged.

The NLRB wants Boeing to build all its Dreamliners in Washington State.

Mr. Solomon wrote in his complaint and notice of hearing, "the Acting General Counsel seeks an Order requiring Respondent to have the Unit operate its second line of 787 Dreamliner aircraft assembly production in the State of Washington, utilizing supply lines maintained by the Unit in the Seattle, Washington, and Portland, Oregon, area facilities."

Connie Kelliher, spokesman for the International Association of Machinists and Aerospace Workers District Lodge 751, told me on Wednesday that Boeing is breaking the law by threatening the workers and trying to chill negotiations. "You threaten the workers for federal protected activity, and it's against the law in all 50 states," she said.

Ms. Kelliher denied that the Everett plant was running at capacity, and said Boeing had added surge capacity that it plans to remove after the South Carolina plant is fully operational.

All agree that Boeing has not closed its plant in Everett, nor has it laid off any workers. At issue is whether it has the right to open a new plant elsewhere for any reason, such as lower costs of production and geographic diversity.

South Carolina Governor Nikki Haley believes that Boeing has every right to expand to another state. She told me on Tuesday, "This is a direct assault on everything we know America to be. I will stand with any governor who is dealing with this issue."

If the NLRB upholds the acting general counsel's complaint, American and foreign companies will be discouraged not just from expanding in other states, but from doing any business in America. Flexibility to move operations will be sharply curtailed.

With a ruling against Boeing, companies would have to do due diligence not just on the likelihood of strikes, but the possibility that strikes would preclude future expansion in other states.

The biggest losers would be the unemployed in states that require workers to be union members if unions win representational elections. Ohio and Michigan, with unemployment rates of 10 percent, and California, with a rate of 12 percent, will have a far more difficult time attracting plants. Their unemployment rates will stay high. New plant and investment is far more likely to come to right-to-work states.

My sister-in-law, Margaret Harrell, lives in the Charleston area, and I asked her what she thought about efforts to make Boeing move out. She told me, "I'm trying to think of words to say, and I can't think of anything bad enough."

Margaret explained that the Boeing has set up classes for potential workers at the local state college, Trident Tech, increasing employment in an area where well-paying jobs are scarce.

The biggest winners are our foreign competitors. If Boeing had decided to produce more Dreamliners in Mexico or China, it would not have encountered such problems.

Boeing's hearing responding to the allegations will begin in mid-June, in Seattle, before an agency administrative law judge. Appeals could last up to two years and will cost millions of dollars in litigation-funds that could have been used to produce more airliners and hire more workers.

Three Republican senators, South Carolina's Jim DeMint and Lindsey Graham, and Tennessee's Lamar Alexander, are introducing legislation this week that would, if enacted, prevent the NLRB from ordering employers to relocate jobs from one state to another. An aide to Mr. DeMint told me that the bill makes it clear that companies should not be afraid to locate in any state.

Congress has to decide how to lower our deficits and curb out-of-control spending. But the Treasury can't collect individual tax revenue if workers are unemployed and jobs flow overseas. The attack on Boeing harms America's economy through our workers.

Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is senior fellow and director of Economics21 at the Manhattan Institute. Follow her on Twitter: @FurchtgottRoth.   

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