May 1, 2010


For public servant and former Bush cabinet member Elaine Chao, the best cure for what ails us is jobs, jobs and more good paying jobs.

Elaine L. Chao is one of the most remarkably successful and compellingly thoughtful women that you probably can’t quite place. Which says a lot about her approach to government service, and an equal amount about what we have come to expect from the federal government.

In a Washington, D.C., infected with raging egos and overdosed with steroidal political testosterone, Chao’s focus, in multiple federal and private executive positions, has been a determination to do her job as well as she possibly can. To do otherwise would be to bring discredit to herself, her family and others who, like her, are immigrants who want to do their part to help build their adoptive nation. Nothing in Chao’s career has been about self-aggrandizement. Everything has been about learning, understanding and lubricating the intricate mechanism that can be government at its best.

“My family has always believed in America’s promise of opportunity,” says Chao, who is now a distinguished fellow at The Heritage Foundation, a conservative think tank based in Washington. “As a young banker with Citicorp, I saw that we could conclude a private sector transaction in just a few hours and yet it took months, a roomful of documents, and scores of government lawyers to conclude a transaction involving the government. I couldn’t understand the slow and bureaucratic pace of government and wondered whether there could be a more efficient nexus between the private and public sectors.”

That wondering led to a rich and varied career in the public, private and nonprofit sectors, starting as an international banker for Citicorp in the early 1980s and a first government job, as a White House Fellow, in 1983. She returned to banking, for BankAmerica Capital Markets, before returning to public service in 1986 as deputy administrator of the Federal Maritime Administration, successfully working out billions of dollars of problem loans from a government loan guarantee program.

In 1988, Chao was named to chair the Federal Maritime Commission. The next year, she was appointed deputy secretary of the U.S. Department of Transportation, the No. 2 position, and in 1991, she became director of the Peace Corps, leading that agency to establish programs in the Baltic nations, Russia and other former nations of the one-time Communist bloc.

Chao became president of the then-troubled United Way of America late in 1992. She was hired to restore that organization’s stability and reputation after her predecessor, William Aramony, was convicted of fraud, conspiracy and money laundering for using United Way money to pay for luxury items. She married a U.S. senator from Kentucky, Mitch McConnell, in 1993; he is now the Senate minority leader.

But of course, that’s not all. Chao was named secretary of labor for President George W. Bush and assumed her duties in 2001. She became the longest-serving secretary of labor since World War II and was the only member of the original Bush cabinet to serve all eight years of his two terms. During her tenure, the department began to enforce the four-decade-old Labor-Management Reporting and Disclosure Act (LMRDA), which required labor organizations to file annual financial reports so that rank-and-file union members could see how their dues were spent. The department also began to enforce that part of the law which required union officials to disclose self-dealing and possible conflicts of interest between their personal financial interests and their union duties.

Forward talked with Secretary Chao at the Heritage Foundation’s offices.

From where did your concept of good government arise?
I’m an immigrant, and I have a special appreciation for the opportunities offered by this country. As a White House Fellow in President Ronald Reagan’s administration, I came into contact with his philosophy about the proper role of government, which struck me as being full of common sense. President Reagan laid out four basic principles in his first State of the Union address. He advocated elimination of burdensome regulations which hindered the growth of the economy and the creation of jobs; limits on government spending with continuing efforts to combat waste and fraud; tax cuts to stimulate the economy; and peace through strength.

My family and I came to America seeking better opportunities. My father came first, and it took him three long years before he was able to bring us to America (from Taiwan in 1961). Our initial years were very difficult. Yet, we took pride in our self-reliance and independence armed only with the most valuable of assets: hope. America is the beacon of opportunity in the world because our government protects the institutions that promote opportunity in our country.

You’ve held many jobs in government since you were a White House fellow. Has your understanding of government work changed during that time?
Government service, especially non-career government service, which means you are not a civil servant, requires certain skill sets. A lot of people, when they come into the government as administration appointees, don’t quite fully appreciate the skills that are required to be effective in a huge bureaucracy in which you have a relatively short tenure. The average tenure of a non-career appointee is about 18 to 24 months.

Business people may sometimes think that they can act in a rather unilateral fashion. But to be effective and to maintain the momentum for any kind of initiative in the public sector requires a multilateral outreach effort with many groups inside and outside of government. This is why I encourage people to participate in public service, to contribute a few years to serve in government at any level. It enriches the government, it enriches the individual and his or her understanding of the complex array of forces that impact the public policy-making process.

What was your approach at the Department of Labor?
Under our administration, we believed that the U.S. Department of Labor looks after the interests of the entire work force, not only the 7.2% that are unionized and employed in the private sector.

We believed that the department can be a powerful catalyst in worker training, economic development and job creation. Our mission was to help build a skilled work force able to compete in the 21st century global economy. We believed in protecting workers through enforcement of safety laws, leveraging our financial resources by targeting bad actors, increasing education and outreach to workers and employers, and helping workers and employers to comply with the law. This is the best way to protect workers. The strong health and safety records of the last eight years attest to the effectiveness of this strategic approach.

The Department of Labor is a major regulatory agency. Through its regulations, it has a major impact on the vibrancy of our economy and job creation. It’s important to remember that two-thirds of the jobs that are created in our economy are created by small businesses. The government should not make it more difficult for individuals, mom-and-pop ventures and entrepreneurs to start new businesses, grow and hire more workers.

That attitude has not been continued in the current administration.
Under this administration, the Department of Labor seems to have become the Department of Organized Labor. Organized labor is a very, very strong pillar of support for the Democratic Party. They provide the foot soldiers that can be pivotal in some elections, and they provide a tremendous amount of financial resources. Over the years, organized labor has been losing clout and influence as seen in its declining membership, except in two institutions that carry enormous weight in our country, the media and Congress. Labor will claim they’re losing membership because of harassment and unfair labor practices by employers. But the record does not bear that out.

So organized labor and their allies are trying to rewrite the basic ground rules for organizing by introducing the misnamed Employee Free Choice Act, or “card check,” which would make it easier to organize by doing away with the private ballot election. This bill deserves to be defeated. The right of workers to private ballot elections to determine if they want to join a union is a basic American right.

There is obvious preferential treatment for labor unions now. For example, during the recent health care debate, there were glaring examples of favoritism to unions to carve out taxation of their gold-plated, Cadillac health care plans. The money in the stimulus package has gone primarily to support government jobs, many of them union jobs. The government has wound up owning automobile companies. Organized labor’s access is tremendous. The head of one union was able to visit the White House 77 times within a three-month period. And there are many, many other regulations that are in the pipeline besides those that have already popped out, throughout the government, under this administration that favor the union agenda.

Does this include the disclosure laws?
There is no other law within the Department of Labor that is not fully enforced except the Landrum-Griffin Act, or more formally the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA). The LMRDA primarily promotes union democracy and financial integrity in private sector labor unions through standards for union officer elections, union trusteeships and safeguards for union assets. Additionally, the LMRDA promotes labor union and labor-management transparency through reporting and disclosure requirements for labor unions and their officials. Democrats and organized labor are very harsh and demanding when it comes to laws that apply to corporate governance, yet when it comes to transparency for themselves, full compliance is lacking. It’s the right of every rank-and-file member to be able to know how their hard-earned dues are being spent by their unions.

For many years, the disclosure provisions of the Landrum-Griffith Act were not fully enforced. There was only a 50% compliance rate among unions, even after the department gave them three years to file their reports. The reports that were filed were sometimes submitted in sloppy chicken scratches that didn’t provide much information. For example, one of the handwritten forms submitted to the department reported $3.9 million in sundry expenses, no other explanation. Another reported $62 million in loans and grants to affiliated organizations, with no further substantiation or vouchers provided.

In 2001, the department began to enforce the law requiring that labor leaders file annual conflict-of-interest forms, another area of little or no compliance. The office that is in charge of overseeing the labor unions saw cuts in its budget and staffing of more than 40% in the 1990s. Audits of labor organizations fell from 1,000 a year to fewer than 220 a year in 2000. Yet, of the 220 audits conducted, there were on average 11 criminal convictions a month. So that means more than 50% of these audits led to criminal indictments.

Complying fully with the Administrative Procedures Act, it took the previous administration several years to update the regulations requiring full disclosure by unions. This administration is circumventing the intent of the law by delaying the effective date, just to give one example. In one regulation, the administration posted a 10-day notice and comment period when it is usual to have at least 60 to 90 days for notice. Individuals can find more information about the reports filed by unions on a web site for that purpose, www.unionreports.gov.

What approach should the department use when it comes to work force development and training?
Work force development and training is about helping dislocated and unemployed workers find new and hopefully better-paying jobs and career paths. This is not an issue of dearth of resources. It is a question of how to use federal resources effectively to help unemployed and dislocated workers. The majority of the discretionary budget of the labor department is for worker training. Out of a budget of approximately $11.5 billion, about $7.5 billion to $9.5 billion are devoted to worker training. There are also many worker training programs dispersed throughout the federal government in many different agencies: Education, HUD, HHS, Defense, and EPA, just to name a few. It’s a question of tapping all these training resources dispersed throughout the federal, state and local governments in a more effective and coordinated fashion to truly benefit workers.

An unemployed or dislocated worker, who is already in a very vulnerable period in their lifetime, faces a dizzying array of options for training and assistance. It is very confusing to try to understand how to access all these government assistance and training programs. A worker almost needs a Ph.D. to figure out what programs are available and how to access them.

America’s competitive advantage lies in the higher skilled jobs. To have those jobs, we need to emphasize more education and better training. We need to focus on ensuring that our educational and worker training systems help workers acquire the education foundation and skills needed to access better- paying jobs in high growth industries—that’s the way to compete in a worldwide economy.

In the last administration, much needed reforms were introduced numerous times to consolidate, streamline and make more effective existing worker training programs for the benefit of the unemployed and dislocated workers. Unfortunately, Congress did not pass these proposals due to entrenched special interest groups. But, we have started the debate.

The new administration’s approach is to pour more money into the existing (system), without implementing needed changes. There’s no pressure to make needed improvements. The ones who suffer are the unemployed and dislocated workers.

How would you characterize the administration’s view of the department when it comes to its role in economic development?
This administration views itself as a social service agency rather than a catalyst for economic growth and development and job creation. There is ample evidence that just handing out social services does not encourage employment. The focal point becomes providing social service benefits rather than emphasizing employment. The goal needs to be employment, jobs.

If the department thinks of itself as a social service agency, it does not promote increased incentives for employment. The consequences are that even in this tough job environment, employers are looking for skilled workers and report that they can’t find enough skilled workers.

Does the government permit enough skilled workers to immigrate to the United States?
Ideally, we should cultivate our own skilled workers with the people who already live within our borders. But to the extent that we can’t do that, we should have a program that allows skilled workers access to the American dream. Someone once said that we should attach a visa to every foreign student’s diploma when they graduate. In this era of globalization, the scarcity of skilled workers is a real and continuing problem.

Now that you are out of government, what’s your opinion of the extreme polarization that we now see in Washington and elsewhere around the country?
America is a robust democracy, and I believe we can disagree without being disagreeable. People who are concerned about the direction of their government, be it local, state, or federal, have the right and opportunity to participate and voice their concerns. That’s the beauty of America.

When I was in government, I never got involved in politics. By that, I mean I deemed myself as being a public servant, and as such, we tried to do what we believed was best for the country in terms of jobs and creating more opportunities for people. For example, when we talk about health care and the uninsured, the best way to provide insurance was to make sure that people have jobs. When people lose their jobs, they lose their health care and their ability to pay for their health coverage.

I believe the rate of job creation is low now because of the anti-business sentiments of this administration. Employers are not hiring because of tremendous uncertainty about the future. They don’t know how much taxes will increase or how much the regulatory burden will increase. They don’t know if inflation will rise, or if the deficit will have a deleterious effect on the economy. We need policymakers in Washington to come together in a nonpartisan spirit, immediately, and foster an environment favorable to private sector job creation.

For immigrants like myself who came to America because it was the land of hope and opportunity, the policies of higher taxes, more regulations, larger government presence in our lives and more entitlement programs threaten to reduce the opportunities that have characterized America for generations. I think the direction of our government is very troubling. But I remain hopeful for our country because of my enduring faith in Americans—who remain the most industrious, innovative and accomplished people on Earth. We will endure and eventually again prosper as a nation, despite Washington.