Former labor secretary on railway negotiations: 'We cannot afford a work stoppage right now'

Tom Perez, Former Labor Secretary & American Bridge 21st Century Co-Chair, joins Yahoo Finance Live to discuss the outlook on negotiations between railway union workers, the impact of the Fed's interest rate hikes, the White House's messaging ahead of midterm elections, and inflation.

Video Transcript

- A rail strike that could cripple the US economy is once again a possibility after a second union voted down the proposed contract. And the strike could happen as soon as next month unless all 12 rail unions vote in favor or Congress steps in. Here to talk a little bit more about this and the labor market at large, we want to bring in Tom Perez, American Bridge, a 21st Century Co-Chair and Former Labor Secretary under President Obama.

Secretary, it's great to see you. So let's start with the rail strike, because that's really front and center today. Clearly, stakes are very high right now. The possible strike coming at a time when the economy is already slowing. It seems like a pretty attractive possible agreement here. 24% wage hike.

Yet, that doesn't seem to be enough. I guess from your position as former Labor Secretary, what do you think needs to happen in order for these two sides to reach an agreement?

TOM PEREZ: I think they'll get there. And by way of history, I remember when the West coast ports in 2015 were on the verge of strike and President Obama dispatched me out there and there were a lot of predictions of gloom and doom and we were able to reach an agreement. And when you have so many different unions involved, it's always a challenging process. But I have confidence that they'll get through because there's a real win-win opportunity. Really win-win-win-- win for the workers, win for business, and win for consumers.

And I think there's an acute appreciation that we cannot afford a work stoppage right now. And so I think they will get there. And again, I've been involved in these dynamics. And it's always darkest before the dawn. And I think they'll get there.

- Indeed. And you mentioned the dock workers, they are currently working without a deal. A strike is possible there as well. And Amazon is trying to unionize. And Starbucks is trying to unionize. Is this just the tip of the iceberg and a result of this tight labor market?

TOM PEREZ: Well, workers have leverage. And I think that's good. And they're using that leverage. And you see a lot more activity in unionization, whether it's at Starbucks stores or Amazon facilities. I think that's a good thing. And I think you will continue to see workers flex muscle.

And you look at the public opinion data. The public opinion of labor unions is at its highest mark in decades. People understand that unions helped bring us the weekend and unions have helped bring us shared prosperity. And so you're going to continue to see this across the country.

I think it's a good development. And I think unions, management, business, consumers can all succeed together. And that's what we have to do, make sure that workers who are toiling every single day get their fair share of the pie.

- Speaking of workers, the labor market, I want to bring up a letter that Senator Sherrod Brown recently sent to Fed Chair Jay Powell. He sent it earlier this week coming ahead of the Fed's meeting next week. And in that letter, he wrote "For working Americans who already feel the crush of inflation, job losses will make it much worse. We can't risk the livelihoods of millions of Americans who can't afford it."

So of course, this brings front and center the debate about what the Fed should be doing. Are they at risk of overshooting? I guess now do you think it's time for the Fed to pause? Or what do you think the Fed should be doing at the next meeting?

TOM PEREZ: Right. I hope they don't overcompensate. And when people ask about inflation, inflation is real. I feel it. You feel it. At the same time, remember where we were. I remember when I was labor secretary. And what we saw in 2009 was the stimulus bill wasn't enough. And when I got to the Labor Department, we had millions of long-term unemployed.

Folks, many of whom are 50 and above, less than a college degree who'd been out of work for a year and a half. And you know what? They were in big trouble. We didn't have to deal with this time because we had a robust stimulus plan. Did it contribute to some of the inflation? Possibly.

But I will tell you, I lost a lot of sleep over the millions of Americans who had lost their job for a year or two years. And frankly, we're hard pressed to get it back. We don't have that problem. We don't want to create that problem by overcompensating. So I hope the Fed will take that into account in their next meeting.

- But Mr. Secretary, Democrats were fiercely critical of President Trump for criticizing the Fed when he would raise rates. Why is it OK for Sherrod Brown and John Hickenlooper to do the same thing?

TOM PEREZ: Well, I think they're simply addressing a concern that a lot of people have right now, which is that if the Fed takes action, which results in a recession, people are going to lose their jobs.

- But doesn't that jeopardize the independence of the Fed?

TOM PEREZ: The Fed is going to do what the Fed does. But the Fed doesn't operate in a vacuum. And I look at Senator Brown's letter as simply a plea for them, as they make decisions that they're going to be making, to understand the doctrine of unintended consequences. I don't see that as exercising undue influence. He's not saying if you do this, we are going to do x. He's just saying, please remember, please look at history, please don't overcompensate.

- Yeah, and I think it is raising some eyebrows, obviously, given the time of the fact that we are only two weeks-- less than two weeks until the midterms. So speaking of midterm, Secretary, I want to get your thoughts just on the messaging that we've heard from the White House. Because today could be, once again, focusing on the economy. And over the last several months, I think the feeling out there is that the messaging from the White House has been very mixed.

I guess, first off, what do you think the messaging should be or needs to be over the next two weeks?

TOM PEREZ: We have your back. We climbed out of this pandemic. We've created 10 million jobs under Joe Biden. We had the quickest recovery from the pandemic in US history. We see manufacturing moving at a wonderful clip.

Look at the investment in the CHIPS Act-- a company in New York announcing a multibillion investment. We're bringing down the cost of prescription drugs. We are working on the issues that matter most to you and we are protecting a woman's right to choose. These are the pocketbook issues. These are the issues that people are thinking about.

And that's why in a normal midterm environment, you know, we'd be prepared to get shellacked. But this is the most fluid environment I've ever seen. And it's fluid because we have put points on the board, we have been fighting on the right side of issues for people. And we've got to make sure that voters understand that as they head to the polls.

- But the singular issue that you hear in poll after poll after poll that matters to Americans most is inflation. And it is still out of control. And that's why, or part of the reason why, this NBC poll found that Americans trust Republicans on the economy 20% more than Democrats. So will that message from President Biden sell?

TOM PEREZ: Well, we're going to continue to make sure that people know the facts. I mean, the Republican response to today's challenge is let's cut Medicare and let's cut Social Security. Those aren't my words. Those are things that Republicans like Ron Johnson have proposed. I don't think that's going to help people in any way, shape, or form.

And so we're now at the stage of this campaign. It's about turnout. I mean, we have an election after election. We could go over Wisconsin, Georgia, Pennsylvania, et cetera. We've got all these elections that are razor thin.

And I think at the end of the day, we are going to surprise so many people because we saw in those five special elections post-Dobbs Democrats doing well. And not just in blue areas, but in places like Kansas. And so this is a turnout election. And that's what Democrats are doing and they're doing it well.

You see the early vote numbers. The number of states are frankly eye popping. I think Georgia is going to exceed their 2020 early vote numbers. And so it's going to be razor thin. We're swimming upstream against historic tides in midterm elections. But notwithstanding that, we're very much in the ballgame because we have put points on the board. And the President deserves a lot of credit for what he has done.

- We'll see the outcome in just 12 days from today. Secretary Perez, always great to have you. Thanks so much for joining us.

TOM PEREZ: My pleasure. Have a wonderful day.