Wall Street History

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Wall Street History

02/02/2001

Ronald Reagan and PATCO

In honor of Ronald Reagan''s 90th birthday, I thought I''d do a
story on his handling of the air traffic controllers union back in
1981, just months after he took office. While this isn''t a
standard Wall Street history piece, it certainly was a historic
moment in the annals of labor unions and Reagan set the tone for
a generation of management / labor issues, the vast majority of
which were settled peaceably and for the good of the U.S.
economy.

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),
and it was assumed by PATCO that they would win over the people''s
support.

And 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. And 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 just 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 naively thought that he could
shut down the nation''s airports and that the administration would
have to give in to their 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,
himself.

As D''Souza notes (he was a Reagan aide at the time), 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

Brian Trumbore

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