Wall Street History

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Wall Street History

06/11/2004

Reagan and PATCO

When Ronald Reagan took the oath of office in January 1981, he
put forward in his inaugural address that government was not the
solution to the nation''s difficulties, it was the major cause. But
while the nation was clamoring for a change in tone, in light of
the depressing Carter years, it was still unclear just what kind of
leader Reagan would be.

Then on March 30, just two months into his presidency, Reagan
was shot by John Hinckley. The president''s brave handling of
the near fatal assassination attempt helped enhance his standing
among the people. Following a series of congressional victories,
his image would soar even further that summer.

The American aviation system employed some 17,000 air traffic
controllers, organized under the Professional Air Traffic
Controllers Organization (PATCO). The members were upset
that the wage increase they had been offered was below what
they sought. They also argued that the stress of the job
demanded a shorter workweek and earlier retirement options on
top of the extra cash. Some of their grievances were legitimate,
such as the plea for a more modernized air traffic control system.
And, since earlier in the century the American people had a
sympathetic ear when it came to union matters - after all, at one
time over 60% of workers in this country were part of organized
labor - it was assumed by PATCO that they would win over the
peoples’ support.

When one thinks of the job of an air traffic controller, certainly
the issue of stress is at the top of shared concerns. Just one
mistake in judgment could cause the death of hundreds of
passengers. In this respect the work of a controller was unlike
any other.

And so it was that on August 3, 1981, 13,000 of the 17,000
controllers went on strike. In the immediate aftermath of the
strike announcement, there was bedlam in the entire U.S.
transportation network. Management scrambled to fill the slots
(controlling air traffic themselves, in most cases) and the airlines
were able to operate at only 70% capacity. But if PATCO
thought they were going to have their way with President Reagan
because he would be too concerned about the financial impact a
prolonged strike could have on the American economy, well,
they were about to find out otherwise.

PATCO''s members were in total defiance of federal law as there
was a ban on strikes by government employees. In fact, each
PATCO member had taken an oath not to strike when they were
first hired. It was Reagan time.

Reagan''s hero had always been Calvin Coolidge. Both believed
in the virtues of hard work, frugality, and obligation to duty.
Once, as governor of Massachusetts, Coolidge had turned
the National Guard loose on a strike by Boston''s policemen.
[This one action had basically earned him the vice presidential
slot on the 1920 ticket.] Coolidge and Reagan felt that once you
took oaths, you were held to them. So Reagan acted quickly.

Ironically, PATCO had supported the president in the 1980
campaign. But, as Reagan biographer Dinesh D''Souza wrote,
“(while) political calculation might dictate that a new president
should work out an amicable settlement rather than alienate a
powerful union that supported him and risk paralyzing the
country''s civil aviation system,” Reagan didn''t buy that
argument.

In his meetings with advisers, Reagan quoted Coolidge, "There is
no right to strike against the public safety by anybody, anywhere,
any time." With the backing of transportation secretary Drew
Lewis, Reagan gave the controllers 48 hours to return to work.
48 hours later most of them were fired. Reagan observed in his
memoirs that his action “convinced people who might have
thought otherwise that I meant what I said.” Just as importantly,
on a far bigger stage, Reagan''s decision also helped show the
Soviets that he was a decisive, no-nonsense leader.

PATCO''s leader, Robert Poli, still thought that he could shut
down the nation''s airports and that the administration would
have to give in to the union’s demands. But instead, the
government scrambled to hire more controllers (many from the
military) and the disruption to air traffic proved to be brief. And
amazingly, the American people stood with Reagan in large
numbers. It wasn''t too long before air traffic was back to normal;
fears of disaster having been unwarranted.

But on the second thought, just imagine what would have
happened had one accident occurred during this time. The blood
would have been on many hands, including Ronald Reagan’s.

As D''Souza (a Reagan aide at the time) notes, the president
adopted this stern course of action without consulting any polls.
Yet, much to the surprise of many on his staff (who were often
incredulous at some of his actions), the American people
supported him because they were convinced that principle
mattered, especially in the face of threats and intimidation. By
this one incident, which set the tone for the whole presidency,
“Reagan proved that the right thing to do can also be politically
advantageous.”

It took two years to fully train the new controllers, but we all
survived, disruptions were few and PATCO was dead. The
American labor movement had suffered its worst defeat in
decades and the balance of power in labor disputes shifted
towards management. Reagan''s image as a courageous leader
was burnished.

Sources:

"American Heritage: The Presidents," Michael Beschloss
"The Presidents," edited by Henry Graff
"The American Century," Harold Evans
"Ronald Reagan," Dinesh D''Souza

Footnotes: In light of the death of Ronald Reagan, commentator
George Will had the following thoughts on the president’s
handling of the PATCO situation.

“(Now), more than two astonishing decades on, it is reasonable
to conclude that Reagan’s fracas with the controllers had huge
economic consequences, domestic and foreign. It altered basic
attitudes about relations between business and labor in ways that
quickly redounded to the benefit of the nation, and not least the
benefit of American workers. It produced a cultural shift, a new
sense of what can be appropriate in business management:
layoffs can be justifiable even when a company is profitable, if
the layoffs will improve productivity and profitability .

“Reagan’s action against the air-traffic controllers came on the
eve of the explosive growth of information technologies, and
some astute people, including Alan Greenspan, believe that
Reagan’s action facilitated that growth.”

[Source: Newsweek]

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Finally, I first did the PATCO piece about 3 years ago and a
few months later received an e-mail from Robert Poli’s son.
Needless to say, he was none too pleased. Mr. Poli asserted that
the PATCO “strike had nothing to do with (his father) and
everything to do with the safety of the passengers and of the
careers of the air traffic controllers.”

Poli''s son continued: “Let’s set the facts straight. During the
period the American people were sick of unions after a long
baseball strike and the weather from August through December
was near perfect for the entire country. The military controllers
were not properly trained yet were given the responsibility to
control 10,000 lives per controller per day. Who was putting
who at risk?”

Mr. Poli then went on to heavily criticize the Reagan presidency
in general, so I imagine he isn’t lining up to praise the president
this week. That’s alright. It’s a free country.

Wall Street History will return June 17 I’ll get around to the
story of Levittown, as promised.

Brian Trumbore

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