Hostess Bankrupcy: Time to Repeal Our Coercive, Job Killing Union Laws

The demise of Hostess and Twinkies is not a national emergency, but it is certainly sad when a major business goes under and thousands of people lose their jobs.

If federal and state policymakers want to play a useful role here, they should study why Hostess couldn’t make a go of it. Were there tax or regulatory factors that stood in the way of the company earning a decent rate of return?

Unions were an important factor that pushed up the firm’s costs and reduced its operational efficiency. The policy reform here is obvious for people who appreciate market economics: repeal America’s coercive union laws. If policymakers don’t kill so-called collective bargaining, these rules will keep on killing companies.

Sugar apparently played a role in the demise of Hostess, as discussed in this excellent CSM article. Food manufacturers that use a lot of sugar are at a competitive disadvantage in the United States because federal import barriers on sugar substantially push up prices for that production input.

Perhaps taxes played a role as well. Income taxes may not have been a big factor if Hostess wasn’t earning profits in recent years. However, I suspect as a manufacturing firm, the company payed substantial property taxes. In this study, I discuss the anti-investment effects of state/local property taxes on U.S. businesses.

Some Democrats and Republicans may use Hostess as a political football, and some politicians will probably want to bail out the company. A more constructive response would be to find out what governments are doing that makes it so hard for some manufacturing firms to survive in this country.

This article originally appeared on the Cato Institute's Cato@Liberty blog.

How likely are you to make Mic your go-to news source?

Chris Edwards

Chris Edwards is the director of tax policy studies at Cato and editor of www.DownsizingGovernment.org. He is a top expert on federal and state tax and budget issues. Before joining Cato, Edwards was a senior economist on the congressional Joint Economic Committee, a manager with PricewaterhouseCoopers, and an economist with the Tax Foundation. Edwards has testified to Congress on fiscal issues many times, and his articles on tax and budget policies have appeared in the Washington Post, Wall Street Journal, and other major newspapers. He is the author of Downsizing the Federal Government and co-author of Global Tax Revolution. Edwards holds a B.A. and M.A. in economics, and he was a member of the Fiscal Future Commission of the National Academy of Sciences.

MORE FROM

Hillary Clinton says Republicans will be the "death party" if they pass health care bill

Hillary Clinton spoke out against the Republican's proposed bill on Twitter.

It's time to redefine the clitoris, according to sex education experts

"Words matter. They shape and mold our ideas and beliefs about our purpose, our bodies, our self-worth and our place in the world around us."

Al-Jazeera becomes a target amid Qatar diplomatic crisis

Gulf states are demanding the broadcaster be shut down.

5 blocks of London apartments to be evacuated over potentially flammable cladding

800 North London apartments will be evacuated following a fire inspection that turned up evidence that the buildings could be unsafe.

Tomi Lahren wants to rally women to her side after criticizing feminists and "pro-choicers"

"My view on abortion is not black-and-white," Lahren said.

These 5 states are drafting laws to limit protests on college campuses

The legislation is intended to protect free speech on campus.

Hillary Clinton says Republicans will be the "death party" if they pass health care bill

Hillary Clinton spoke out against the Republican's proposed bill on Twitter.

It's time to redefine the clitoris, according to sex education experts

"Words matter. They shape and mold our ideas and beliefs about our purpose, our bodies, our self-worth and our place in the world around us."

Al-Jazeera becomes a target amid Qatar diplomatic crisis

Gulf states are demanding the broadcaster be shut down.

5 blocks of London apartments to be evacuated over potentially flammable cladding

800 North London apartments will be evacuated following a fire inspection that turned up evidence that the buildings could be unsafe.

Tomi Lahren wants to rally women to her side after criticizing feminists and "pro-choicers"

"My view on abortion is not black-and-white," Lahren said.

These 5 states are drafting laws to limit protests on college campuses

The legislation is intended to protect free speech on campus.