It's the rules stupid

Posted: Dec 12, 2002 12:00 AM
It needs to be stressed, especially in moments of high confusion, what the rules are for a dynamic economy. These rules tend to fritter down under political pressure, but they are latently there, and the city of New York and United Airlines have both run into them.

The rules are, basically, that overhead costs have to be met by income. And that monopoly leverage over necessary public facilities is forbidden by law.

UAL sought, as so many commercial enterprises have done when in trouble, intervention by the government in order to circumvent the rule. UAL's petition was for a federally backed guarantee for a loan of $1.8 billion. The government said no. Government doesn't always say no. It said yes to Harley-Davidson nine years ago, and to Chrysler, and of course most recently to the steelworkers. But the government did the correct thing with UAL, which means that the company has to cope with market forces. That means, for the most part, the cost of machinists, pilots and flight attendants.

In New York City, the new mayor, Michael Bloomberg, is providing the histrionic diversions expected of occupants of that theatrically prominent office in the theatrical capital of the republic. He speaks almost lasciviously about how to cope with a strike by the transit workers union; how by sharing space in your car or truck you can demonstrate that you too are involved in mankind. He speaks darkly about the ravages of a strike on everything people care about, an estimated $100 million per day in cost to the city's economy, a blight on Christmas shopping, and twice the normal time for the movement of ambulances and police cars.

The mayor would be free to go to work in a police car or helicopter. With perhaps memories of Mayor John Lindsay walking dramatically to work through unshoveled snow, Mr. Bloomberg says he will purchase a 10-speed bicycle to go to City Hall. It is not obvious where en route the 10th gear can be engaged, since it is unimaginable that the road ahead should ever be so clear as to make this possible. Perhaps he will have police cars stop the traffic until his bicycle reaches, at least, the fifth gear.

That there is no right to strike against the public interest was a rule endorsed by Grover Cleveland and Franklin Delano Roosevelt. And that rule is enacted in the Taylor Law of New York, which flatly prohibits exactly the thing that the Transport Workers Union is proposing to do.

There is surprisingly little mention of it, though Mr. Bloomberg has hinted at penalties he might reach for if sufficiently provoked. Mayor Rudolph Giuliani set out to fine individual perpetrators $25,000 per day, then doubling the fine every day after. But the action needs to come primarily from Albany, where Gov. George Pataki hides out, managing to say practically nothing about the union, contending now with the Metropolitan Transportation Authority, whose most prominent members made substantial contributions to the Pataki campaign. The result is continuing speculation about the application of the rules.

It should be simply apparent that UAL, in Chapter 11, has to travel toward recovery, or into Chapter 7, which means auctioning its assets and folding into history. The relevant unions, pre-bankruptcy, offered to trim $5.2 billion in expenses, which suggests there was that much fat there to be trimmed. What's easy is to eliminate flight services to low-passenger sites, though it is not easy at all to be left to live in a community that suddenly finds itself isolated from modern travel. Mechanics can threaten to work on other companies' planes, but the pilots and the flight attendants are not situated to bargain weightily.

It comes down to this: The rule about overhead and income can't be skirted indefinitely, and only bargaining under the pressure of the free market can keep United Airlines aloft.

In New York, one waits for hard action by the governor. Tough stuff, on the order of contempt charges and fines and jail for those who break the law and affect the lives, habits and property of the entire community. The head man of the Transport Workers Union a generation ago liked to go to the last minute (usually, New Year's Eve) in order to maximize public pressure.

Bloomberg and Pataki are recently elected and re-elected officials in the state of New York, and the city waits to hear from them the words: This strike will not happen. There is a rule here, and we intend to observe it. Then tell their constituents what they will do, in skywriting.