I felt that their fears and concerns were legitimate. Deregulation would put pressure on their wages, complicate their ability to organize, and threaten the drivers’ jobs. In fact, their fears were not only reasonable, but they became a reality. Their loss was the consumers’ gain in lower rates to haul the massive amount of goods across the country. But this was the cruel trade-off between the pressures on their well-paid union workforce and lower prices through more freedom for new firms to compete on routes for the benefit of consumers and shippers.
The companies were equally opposed to ending the protective cocoon they had spun for themselves over the years with the help of the ICC. Representatives of the major trucking firms grouped in the American Trucking Association defended what they called their “collective ratemaking,” which they felt was the heart of their ICC regulation, and did not see themselves as being in a competitive business at all. At a meeting with me, they got to the guts of the matter by declaring they were a quasi-public utility, providing safe and stable service to communities large and small.50 So we faced a phalanx of opposition from both sides, with one exception: the Minority Trucking Association, representing black-owned firms that were systematically frozen out of entering new markets by ICC restrictions. I appreciated their support, but I knew their voice would be drowned out by the big carriers and the Teamsters.51
Sheltered from competition by a 1948 law enacted over President Truman’s veto giving the trucking industry a special immunity from the antitrust laws, the companies could set prices among themselves through rate bureaus, unlike almost any other industry in the country. The companies and their unions posted about five thousand fixed point-to-point rates for different cargos with the ICC every day. We decided that changing the law would work only if the ICC removed this straitjacket and permitted new firms to offer competitive prices, otherwise the firms would simply raise rates and not even post them daily.
After a great deal of interagency disagreement and discussion with the Senate and House, Carter, in June 1979, sent Congress a powerful presidential message seeking legislation freeing this crucial segment of the economy from an “unbelievably mindless scheme of unnecessary government interference [that] contributes to three of the nation’s most pressing problems—inflation, excessive government regulation, and the shortage of energy.” He enumerated these barriers: The ICC and not the trucking company decides which cities a carrier can serve along with the detailed commodities it may haul; whether its truck must come back empty or not; and whether the driver can take the most direct route, saving time, money, and fuel. The president advanced a vivid example: I-25 directly connects the 440 miles between Denver and Albuquerque, but Garrett Freight Lines was permitted by the ICC to haul freight between the two cities only by way of Salt Lake City, a distance of 730 miles.52
The proposed legislation would immediately remove these restrictions and artificial routes, end the industry’s antitrust exemption, and abolish the rigged rate bureaus as “price-fixing [which] is normally a felony.” We estimated that the current regulatory system cost consumers about $5 billion a year, and that the eight largest trucking companies averaged an annual return of almost 29 percent on their investments. In addition, scarce ICC operating certificates were bought and sold for enormous sums.
To encourage support from members of Congress representing small communities, we proposed that the ICC be directed to improve service to them. We also added interstate buses to the mix, which is why Greyhound is a very different company today and cheap buses ply the interstates between some major cities. As with airline deregulation, Senator Kennedy was an indispensable ally, shielding us from any attacks by Democrats in Congress that we were antiunion.53
Removing the restrictions seemed eminently sensible, but that did not stop the large truckers and the Teamsters from exerting all their force in Congress, where we had a long, hard slog against powerful legislators trying to undercut sections of our program. But we got an unexpected break when Howard Cannon, the Senate Commerce Committee chairman, was investigated by a federal grand jury in Chicago for a year for allegedly taking a campaign contribution from the Teamsters, in return for sponsoring a weaker trucking deregulation bill. Although the Justice Department ultimately decided not to charge him (I submitted an affidavit on his behalf, based on what I knew of his activity), Roy Williams, then the Teamsters’ president, and Allen Dorfman, a Chicago insurance executive who was close to both the union and to organized crime, were caught on tape admitting that they had tried to bribe the senator and were convicted. I believe the investigation encouraged Cannon to support the tougher deregulation bill being promoted by Carter and Kennedy.
Carter stood firm, and anyone who doubts his determined nature need only look at how relentlessly he pushed trucking deregulation in the face of implacable opposition.54 There was much blood on the floor, but the Motor Carrier Reform and Regulation Act of 1980 gave him most of the reforms he sought.
The benefits of trucking deregulation are staggering and flow throughout the economy at every level; they have been counted in numerous government and academic studies. Ending the backhaul rule reduced empty miles by 75 percent among full-load truckers. A 1988 study by the Federal Trade Commission showed that between 1977 and 1982, average interstate rates for trucks carrying full loads fell by 25 percent, despite fuel prices more than doubling during the second oil shock.
A Brookings study demonstrated that by lowering barriers to the entry of new firms, the number of low-cost, nonunion regional carriers more than doubled, with annual benefits to shippers estimated at more than $18 billion.55 The most pervasive benefit to the economy is the reduction in the costs of holding inventories because of more flexible and quicker delivery times, from 14 percent of GDP in 1981 to 10.8 percent in 1987, an annual saving estimated by the Transportation Department at $38 billion to $56 billion. Another major factor is the growth of piggybacking truck trailers on railroads, which increased by 70 percent from 1981 to 1986.56
Arguments by the unions and trucking companies that small communities would be ill served and safety compromised have not been borne out. An Interstate Commerce Commission study found that shipping service to small communities actually improved after the 1980 deregulation, and numerous studies found a decrease in trucking accidents and an increase in highway safety.57
The Federal Trade Commission found that, far from losing jobs, deregulation sharply increased the number of jobs in the trucking industry, because of the ease of entry of new firms—from 1.368 million workers in 1980 to 1.767 million in 1987, a 29 percent rise.58
But one negative prediction has been borne out. With the entry of less expensive, nonunion carriers, the biggest loser was indeed the Teamsters, just as they feared. Deregulation made it easier for nonunion workers to obtain jobs and sharply reduced the pay advantage of unionized workers in the trucking industry compared with workers in other industries. The percentage of unionized truckers fell from about 60 to only 28 percent during the first five years of the new law. Their pay fell an average of 10 percent relative to the wages of workers in the general economy. We frankly did not foresee at the time how disruptive deregulation in the trucking industry would be. I wonder if the quintessential liberal Ted Kennedy, who was strongly prolabor, would have been as enthusiastic about trucking deregulation if he had known its impact on unionized workers in the industry.
But I do not believe deregulation alone can be held responsible. While trucking and railroads are not subject to the same foreign competition as U.S. airlines and manufacturers, globalization and foreign competition have put downward pressure on wages in general, particularly for less skilled workers. Unionized workers in the transportation industry could not have been shielded indefinitely from these pressures. The political implications of this have been lasting. Historically Democratic blue-collar workers became Reagan Republicans in the 1980 election against Carter, and many also moved to become supporters of Donald Trump in 2016. But trucking deregulation, l
ike rail and airline deregulation, has stood the test of time and bipartisan scrutiny and led to general price reductions for consumer packaged goods.59
THE BEGINNING OF THE SHIFT FROM MA BELL TO MICROSOFT
Finally, Carter laid the foundations for the telecommunications revolution that began with the dismantling of the telephone monopoly and is still under way in the worldwide digital revolution disrupting all manufacturing and commerce. The industry was just entering a breathtaking technological revolution that caught the interest and the deep commitment of the engineer that lived inside the thirty-ninth president of the United States. He wanted to harness it for the consumer as well as the innovator by removing the regulatory barriers to new technologies, and he made that clear even before he reached the White House.60 While time expired on his efforts, they nevertheless led the way to freeing electronics for competition and innovation. His first step was the appointment of Charles Ferris as chairman of the Federal Communications Commission.
Ferris was the staff director of the Congressional Democratic Policy Committee and a shrewd lawyer with the politics of his native Boston in his genes. Formed by a Jesuit education at Boston College and its law school, he had the ability to master complex material, and when he met with Carter in the Oval Office, the liberal Irish Catholic and the Southern Baptist found they had much in common, including service in the U.S. Navy and an engineering background.61 More to the point, Ferris was the first FCC chairman appointed without having been first cleared by the three major broadcasting networks and their voice, Sol Taishoff, the editor of Broadcasting magazine. When Taishoff inquired about his credentials for the job, Ferris tartly replied that he had watched television and used a telephone since he was four years old.62 Carter sent Ferris a letter on April 11, 1978, emphasizing his support for Ferris’s actions to promote competition in all areas of communication.63 He quickly promoted competition among the nationwide radio networks by loosening regulations on local FM stations and then took another huge step by removing the barriers stifling the growth of cable television.
Ted Turner was the pioneer in bouncing ground-based local cable signals off satellites that relayed them to other cable systems across the country, audaciously creating the national (and later international) cable news network CNN, which broadcast around the clock and evaded the complex allocation of time slots and coverage areas that had been enforced by the FCC on behalf of the broadcast networks to protect their national franchises. Ferris swept away these restrictions in 1978. Shortly afterward a senior network executive visited Steve Simmons of my Domestic Policy Staff, pounded on his desk, and shouted: “Cable will destroy broadcasting; it must be stopped. Otherwise, the public will wind up paying for the World Series!”64 Even as devoted sports fans, we nevertheless backed Ferris to the hilt. Midway in his tenure, and with the president’s blessing, I sent my own letter to Ferris in June of 1979 to let him know Carter fully supported him, and that he was “contributing substantially to the President’s program of eliminating needless regulation and promoting competition.”65
Ferris was also instrumental in the erosion of the American Telephone and Telegraph Company’s (AT&T) long-distance monopoly, which was tied to its own set of transcontinental wires. This premise was first upended in the 1960s by a revolution in microwave communications that passed multiple signals from amplifying tower to tower across the country. Technology meanwhile was increasingly moving toward a convergence of computers and communications, first through computerized switching equipment and then through the movement of information itself, for example in the Electronic Funds Transfer system that instantly moved money among the nation’s banks.
The FCC maintained an increasingly artificial barrier between AT&T and IBM. The phone company was not permitted to offer computer and data processing services, while IBM was an unregulated corporation and barred from competing in regulated phone lines. Ferris ended this distinction in 1979 through what he felt was one of the most important decisions in modern telecommunications when he permitted AT&T to offer information and data services in competition with IBM as long as Ma Bell did so through completely separate subsidiaries.
This was the essential step in changing AT&T from a regulated monopoly to a competitive corporation, and remains the framework for the explosion in telecommunications services by putting the two titans in a competitive battle. AT&T began to phase out its IBM computers, but more significantly it argued for legislation that would have subjected IBM to regulation on all its equipment and services. We let this self-interested bill die without entering into an unnecessary battle with the phone company and its powerful union.66
A second giant step for competition was even more contentious: bringing competition with Ma Bell in long-distance telephone service itself for the first time since AT&T was founded in 1919. One of its most powerful defenses was its control of most access to local phone networks. In a series of antitrust suits dating back to 1947, the Justice Department had tried to limit the company’s monopoly power. Gradually a series of consent decrees started prying open long-distance access, the first in 1956, and the last in 1978, which opened the way to competition by MCI with Ferris’s support.
But as in other fields, there were limits to what the executive branch and its independent agencies could accomplish without legislation. Representative Lionel Van Deerlin, a California Democrat who chaired the House Subcommittee on Communications, introduced a bill to reform the 1934 Communications Act by opening up the industry to competition. Carter supported it with another presidential message in September 1979, parts of which read then like science fiction but today seem commonplace. Carter described how the new technology was making it possible “to hold meetings, transmit messages, do research, bank, shop and receive a widening variety of information and entertainment—all through electronics.” These breakthroughs invalidated the conventional wisdom that telecommunications service was a natural monopoly and led to the core of his message: “Consumers are the final beneficiaries of competition, through lower prices and wider choices.”67
So close to the presidential campaign, we were in no position to push complex legislation. AT&T introduced its own bill that would only have entrenched its dominant position. With a million employees in nearly every congressional district, the company mobilized a letter-writing campaign that killed any chance for legislative reform under Carter. The president and Van Deerlin were both defeated for reelection in 1980, and Ferris left the FCC. But the battle against the telephone monopoly finally was won in 1982 when AT&T was broken up into seven separate regional operating companies by Judge Harold Greene, a former Justice Department civil rights attorney hearing his first major case on the federal bench, to which he had been nominated by Jimmy Carter.
NADER, CARTER, AND CONSUMERISM
One of the great ironies of the Carter presidency is that although the consumer movement had its greatest friend in the Oval Office, past or present, that was precisely when its decline began. Carter did not invent the modern consumer movement, but he elevated its agenda to the presidential level and attempted to write the consumer interest into law with significant success. In the United States, consumer protection dates from the pure food and drug laws at the start of the twentieth century, to the financial protections of the New Deal in the 1930s, and then to a third wave of automobile and consumer safety laws associated with Ralph Nader.
What is not generally realized is how closely Carter allied himself with Nader and his movement—and how the movement crested, as corporate advocates painted safety, environmental, and financial regulation as onerous to business and damaging to economic growth.
Ralph Nader is a tall, stoop-shouldered, intense, brilliant man from a Lebanese family, for whom smiling and compromise are equally difficult. But it is hard to think of any American not in public office who had a more profound and positive impact in the second half of the twentieth century. He went to college at Princeton, but early on he was deeply affected by the loss of fellow stu
dents in automobile crashes. He did not own a car and hitchhiked everywhere, often with truck drivers who came upon a crash before the police. There he saw “the way the vehicle folded up, crushed people and steering columns, and the fires.”68 At Harvard Law School he wrote a paper on manufacturers’ legal liability and reviewed lawsuits against General Motors, more than a hundred involving spins and rollovers of its compact Chevrolet Corvair (my first car). Then he went to the U.S. Patent Office and found that GM had eliminated some engineering stabilizers to save money in producing their sporty Corvairs. The research animated his 1965 best-seller, Unsafe at Any Speed, with the Corvair in chapter 1 and a plea for auto safety laws as an overriding theme. In 1966 Congress passed auto safety legislation mandating safety belts and stronger windshields and establishing the National Highway Traffic Safety Administration.
This stunning achievement attracted complaints about other unsafe products such as flammable fabrics. Nader realized he could no longer handle them himself, so he gathered about a hundred young lawyers and founded the Center for the Study of Responsive Law to review unsafe products. It was funded by GM’s $465,000 settlement of his lawsuit for invading his privacy by putting detectives on his tail. Then he founded Public Citizen, a separate group that could lobby directly, and his consumer movement mushroomed to some 150,000 members at its height. “Nader’s Raiders,” as they became known, published books and papers on targets ranging from the Bureau of Reclamation to the Food and Drug Administration. He also developed the concept of “regulatory capture,” in which one federal agency after another became the defender of the industry it was supposed to oversee for the benefit of the public.
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