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Giving the Economy What it Doesn't Deserve
Illinois Review ^ | November 19, 2012 A.D. | John F. Di Leo

Posted on 11/19/2012 12:48:57 PM PST by jfd1776

It is said that people get the government they deserve.

As the election of 2012 proves, this is woefully inaccurate in politics, because even if those who consciously voted for the destructive Democratic Party do deserve it, those who wisely voted against it certainly do not.

The same saying is often said of the economy, particularly when something disastrous happens – a large-scale layoff, a manufacturer fleeing burdensome taxes or regulations for the welcoming shores of China or India, a company collapsing under the weight of an unreasonable union.

But there too, the saying is inaccurate. Even if some deserve what they get - certainly a fool who would rather shut his employer down than accept a one-year eight-percent pay cut in the interest of their vaunted "shared sacrifice" deserves to be unemployed - his fellow employees do not deserve it at all! It is nothing less than sheer evil for some employees to choose to put their own employer out of business, pulling their neighbors unwittingly into unemployment along with them. Only the mentality of a union shop steward or Democrat Party hack could think such an act justifiable.


Hostess Brands can be summarized as a company that produces two kinds of products: normal breads and silly extravagances. The silly extravagances have been vilified by the nutrition police for decades; jokes abound about the little cellophane-wrapped calorie-and-cavity bombs known as Twinkies, Ho Hos and Ding Dongs.

So the company has suffered for years, in bankruptcy twice in a decade, still teetering on the brink. It was a sputtering firm that needed just one last stroke to kill it; the Bakers' union delivered that final stroke.

The modern Left sheds no tears for Hostess or its employees. They say that Hostess overpaid their executives (perhaps they did). They say the products it makes are frivolous and unnecessary (perhaps some are). The Left believes, after all, in guilt by association; how can they feel sorry for a truck driver, baker, salesman or clerk involved in such an evil trade as the Twinkie? If these employees were decent people, they would have left Hostess years ago, in the opinion of the Left. There is no pity in Democrat corners for these now-unemployed former employees.

The bankruptcy court had worked with the management to save the company; that's how bankruptcy works. They had a plan - just 8% in pay cuts for the first year should do it, with a planned ramp up back, starting with raises in the second year. The Teamsters accepted the deal gladly; other employees found it reasonable as well. But the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union struck.

Even though many crossed the picket lines to work, even though the company begged this union to be reasonable - to apply the popular theme of "shared sacrifice" so key to the rhetoric of the modern Left today - that union furiously said No, condemning 18,500 people to the ranks of the unemployed.

This leaves some 33 manufacturing plants to be closed for good. The world of Hostess - a 2.5 billion dollar conglomerate - also includes 565 distribution centers, 570 bakery outlet stores, and 5550 delivery routes. Some few may come back, as popular brands are sold to investors, but the vast majority are now history. Well done, bakers' union.

At a time when jobs are plentiful - in a booming, growth-oriented economy enjoying the excitement of full employment - this might not be such a horror. But to consciously deliver the death stroke to their own employer, as the bakers union did this month, is a textbook case of the immorality of the worst of the union mentality.

The generous heart wants to think of the honorable Teamsters, who saw reality and remained reasonable throughout the process, but the bakers' union is the one that will be remembered, for their obstinacy and cult-like obedience to their union leadership. Much like the followers of Jim Jones at Jonestown, during that last boom period of union extremism, they drank the drink offered to them, and committed economic suicide with every vote.


At first glance, those wounded to the quick by the bakers union's destructive choice are the 18,500 Hostess employees, both union and non-union, both those who consciously chose this end (and therefore may indeed deserve it) and those who did not choose it (and therefore most certainly do not deserve this economic pain).

To a lesser extent, we also feel sorry for those who might now be deprived of their Sno Balls and Ho Hos, though the lack of an ability to indulge such cravings pales in comparison to families upended by unnecessary unemployment.

But there are other effects, much more important, in many ways, because of the wonderful interdependence of the American economy. Consider:


Let's think about those 33 plants, 565 DCs and 570 outlet stores. These all used and paid for electricity, heating oil or natural gas, water and sewer, garbage and recycling pickup. The need for these services will go down as these businesses are shuttered.

With fewer customers to buy these services, these utilities too will lose employees. Oh, this won't be on the same scale as the 18,500 number directly out of work at Hostess, but they add up. The nation will have a few fewer garbage truck drivers, the metropolitan water districts and power utilities will have a bit less revenue, as a result. And maybe not just a bit, either. These facilities use a lot of energy; they play a significant role in the profit margins of our utilities. If your pension plan has any investments in utilities, the closure of Hostess just hit those investments too.


What else does a local business fund in its community? The schools, the police and fire departments, the city and town halls, the county courts. How? Through their property and sales taxes. An outlet store in a strip mall pays a little, a distribution center much more. And a manufacturing plant? A great deal indeed. The local and state governments of our nation have just lost a regular contributor to their bottom line as well, as the end of sales becomes an end to sales taxes, as the end of use becomes at least an interruption in property taxes on over a thousand properties.

Oh sure, these properties will be snapped up by someone else; they'll go back into use some day, and start paying taxes again. But it won't be soon. And in this economy, it's likely to be a very long while indeed; the bigger the property, the harder it is to attract a tenant.

Think of the other taxes, the state and federal taxes that Hostess contributed to the economy. Even if the unions thought their members were underpaid - maybe they were - at least they were getting a paycheck for a day's work, a paycheck that enabled them to be net contributors to the local and federal economy. They paid a little in state and federal income taxes; they paid sales taxes when they shopped. The employees paid about seven percent of their incomes in Social Security and Medicare taxes, and their employer matched it dollar for dollar (in fact, employers more than match it nowadays, with the two point "payroll tax cut" that we employees enjoy but that employers do not). As all these contributions drop, the nation suffers another massive loss of tax revenue. Income tax collections go down, Social Security revenues go down, Medicare collections go down. The rest of us have more of a tax burden - the rest of us have more state and national debt to shoulder - all because of the bakers union's murder of Hostess.


Hostess paid for the health insurance of many of their employees. Perhaps not all - but many; probably the vast majority. The loss of Hostess as a customer will hurt the insurance companies who enjoyed this sizable client. The loss of Hostess as an employer will leave the employees scrambling for some other kind of health insurance. With Obamacare on the horizon, these employees have fewer options (Obamacare is killing many of the inexpensive stopgap insurance plans formerly on the market). Obamacare both mandates that insurance be more comprehensive and therefore more expensive, it removes the option of living without it. This poorly-thought-out program, rushed and rammed through Congress for political, not economic, reasons, is now making it that much harder to be unemployed in America, even as it makes it more likely that the ranks of the unemployed will grow.


Hostess was a $2.5 billion dollar conglomerate, which means that hundreds of millions of that figure, were spent on purchased materials. You can't make bread or rolls without flour and yeast; you can't make Twinkies without flour, sugars and shortenings. The agricultural sector has just lost a major customer; there will be tens of millions of dollars less spent on wheat and corn syrup and corn oil next year, thanks to the shortsighted bakers union and their thoughtless strike vote. If you have a pension plan or 401K, and there's a penny invested in Hostess' vendors - from the agricultural to the utilities, from the plastic industry that makes their tons of cellophane wrappers to the paper industry that makes their hundreds of tons of cardboard boxes - then your investment - your own retirement fund - has just taken one more serious hit.


The many vendors who have served Hostess, both big and small, have lost one of their biggest clients. Paperboard and printing salesmen will lose their jobs, advertising agencies and TV stations will lose commercial revenue and suffer, because this giant of a customer will no longer have a product to package in a stack of boxes; will no longer have a product to advertise. Caterers handled department meetings; local restaurants hosted sales lunches and dinners. Dry cleaners pressed the suits of people who no longer have meetings to go to, leaving them without need of the dry cleaners' services.

Landscapers managed the lawns around Hostess offices; paving companies sealed the blacktop parking lots of their DCs and plants every year. The property owners will need fewer guards to guard an empty building than they needed to guard a full one. From groundskeepers to blacktop sealers, from security guards to restaurant and hotel staffs nearby, the closure of a conglomerate has a ripple effect that hurts the community well beyond the direct employees of the shuttered firm.


And all this is before we even consider Hostess' customers, the grocery stores and convenience stores, gas stations and vending machines, for whom a pair of Twinkies or Ding Dongs was an impulse buy at the checkout line, not something you'd buy every day or every trip, but a wonderful and rare periodic escape to the innocence of childhood for the shopper, and a high-margin extra to help push these razor thin margin businesses into the black. What the nutrition nazis will never understand is that Hostess snacks - and the thousands of other luxury providers like them - are in fact the things that make our economy work.

If all we bought were necessities - if all we purchased were the critical staples of food, clothing and shelter that we need to live on - our standard of living would be abominable. The American experiment has been a wonderful economy in which unnecessary spending - from the eighty-cent snack cake to the eighty thousand dollar car - is the major creator of wealth, enabling people of every background to rise above their humble origins to enjoy the greatest standard of living in human history. It's not the basics - flour and eggs, cotton and wool - that have worked this miracle; it's the luxuries. It's a system in which thousands can labor to manufacture a Escalade SUV, or a Hickey Freeman suit, or a pair of Allen Edmonds shoes or a Hostess snack cakes.

All luxuries have their detractors, but it is the luxuries that really matter the most in our economy. The Left will never understand how, or why. They don't understand how wealth is created, only how currency is printed. They don't understand how some jobs are worth more or less than other jobs, only how to scream when employment slights are imagined. They don't understand how to build up, only how to destroy.

This is the tragedy of the Hostess story, as it is the tragedy of so many other companies, driven from these shores or out of business entirely, over the long years of trade union dominance. The right of an employee to quit his job should certainly be protected, in a land that rose up in the 17th and 18th centuries to replace the feudal bounds of the Old World. But there is no such right for a disgruntled employee to sink his employer, his fellow employees, his community and his country. The ability of unions to hold their employers in thrall, leaving them with no choice other than between a slow collapse and an immediate one, must soon be ended, or we will have no employers left to be thus tyrannized.

copyright 2012 John F. Di Leo

John F. Di Leo is a Chicago-based international trade compliance lecturer. A spokesman for the Illinois Small Businessmen's Association and the Illinois Right To Work Committee in the 1980s, he served as Milwaukee County's Republican Party Chairman in the mid-1990s, and has now been a recovering politician for over fifteen years.

Permission is hereby granted to forward freely, provided it is uncut and the byline and IR URL are included. Follow John F. Di Leo on Facebook or LinkedIn, or on Twitter at @johnfdileo.

TOPICS: Business/Economy; Government; Miscellaneous; Politics
KEYWORDS: bakers; hostess; twinkies; unions

1 posted on 11/19/2012 12:49:01 PM PST by jfd1776
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To: jfd1776
"This is the tragedy of the Hostess story, as it is the tragedy of so many other companies, driven from these shores or out of business entirely, over the long years of trade union dominance. The right of an employee to quit his job should certainly be protected, in a land that rose up in the 17th and 18th centuries to replace the feudal bounds of the Old World. But there is no such right for a disgruntled employee to sink his employer, his fellow employees, his community and his country." - John F. DeLio

Thank you for a common sense analysis. This whole sordid tale of how union bosses, with their accumulations of powerful voting blocks, and tyrants posing as benevolent politicians, have combined to use coercive power to destroy American manufacturing industries, is one that should be told and retold in simple terms so that "the People" can understand who is responsible for America's decling.

The same combination of coercive powers, dedicated to a so-called "progressive" agenda, through the teachers' unions, has robbed generations of American youth of an education in the ideas of freedom, opportunity, and prosperity as well.

2 posted on 11/19/2012 1:10:04 PM PST by loveliberty2
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To: loveliberty2

Ooops! Sorry for the misspelling - De Lio, of course.

3 posted on 11/19/2012 1:13:25 PM PST by loveliberty2
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To: jfd1776
Obamacare is killing many of the inexpensive stopgap insurance plans formerly on the market

* And the Policies Students could buy at College
* And HSA's will be made cost prohibitive as they conform to the "Qualified Plan"
* And all the waivers of said inexpensive plans will eventually go away and many will be dumped into Obamacare.
* Add to this the Sibilius Mandate forced upon Catholics and you have...

The total abrogation of Contract Law which also occurred with the GM Bankruptcy, the lineage is frightening and no one but Freepers and critically thinking people get it...

4 posted on 11/19/2012 1:49:26 PM PST by taildragger (( Tighten the 5 point harness and brace for Impact Freepers, ya know it's coming..... ))
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To: taildragger

Absolutely right, Taildragger. I didn’t go into detail on the evils of obamacare here, but you’re right... one could even add dozens more. The damage that obamacare will cause is immeasurable.

And thanks, loveliberty2, though the name is actually “Di Leo”... we Italians spell funny, I know... stranger still, we pronounce the “i” like an “e” and we pronounce the “e” like an “a”....

I think it’s to make it harder for other ethnicities to steal our recipes...

5 posted on 11/19/2012 2:01:18 PM PST by jfd1776
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