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Contract with America

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The Contract with America was the conservative action of more than 300 Republican Congressional candidates who signed it. Led by the Speaker of the House Newt Gingrich, the contract was presented at a September 27, 1994 press conference.The following is a proposal, as well as the actual contract that was presented by Republican Members of the House of Representatives.The Contract with America is rooted in three core principles:Accountability. The government is too big and spends too much, and Congress and unelected bureaucrats have become so entrenched to be unresponsive to the public they are supposed to serve. The GOP contract restores accountability to government.Responsibility. Bigger government and more federal programs usurp personal responsibility from families and individuals. The GOP contract restores a proper balance between government and personal responsibility.Opportunity. The American Dream is out of the reach of too many families because of burdensome government regulations and harsh tax laws. The GOP contract restores the American dream.The Contract

As Republican Members of the House of Representatives and as citizens seeking to join that body we propose not just to change its policies, but even more important, to restore the bonds of trust between the people and their elected representatives. That is why, in this era of official evasion and posturing, we offer instead a detailed agenda for national renewal, a written commitment with no fine print. This year's election offers the chance, after four decades of one-party control, to bring to the House a new majority that will transform the way Congress works. That historic change would be the end of government that is too big, too intrusive, and too easy with the public's money. It can be the beginning of a Congress that respects the values and shares the faith of the American family. Like Lincoln, our first Republican president, we intend to act "with firmness in the right, as God gives us to see the right." To restore accountability to Congress. To end its cycle of scandal and disgrace. To make us all proud again of the way free people govern themselves.

On the first day of the 104th Congress, the new Republican majority will immediately pass the following major reforms, aimed at restoring the faith and trust of the American people in their government:First: Require all laws that apply to the rest of the country also apply equally to the Congress.Second: Select a major, independent auditing firm to conduct a comprehensive audit of Congress for waste, fraud or abuse.Third: Cut the number of House committees, and cut committee staff by one-third.Fourth: Limit the terms of all committee chairs.Fifth: Ban the casting of proxy votes in committee.Sixth: Require committee meetings to be open to the public.Seventh: Require a three-fifths majority vote to pass a tax increase.Eighth: Guarantee an honest accounting of our Federal Budget by implementing zero base-line budgeting.Thereafter, within the first 100 days of the 104th Con gress, we shall bring to the House Floor the following bills, each to be given full and open debate, each to be given a clear and fair vote and each to be immediately available this day for public inspection and scrutiny.1. The Fiscal Responsibility ActA balanced budget/tax limitation amendment and a legislative line-item veto to restore fiscal responsibility to an out-of-control Congress, requiring them to live under the same budget constraints as families and businesses.2. The Taking Back Our Streets ActAn anti-crime package including stronger truth-in-sentencing, "good faith" exclusionary rule exemptions, effective death penalty provisions, and cuts in social spending from this summer's "crime" bill to fund prison construction and additional law enforcement to keep people secure in their neighborhoods and kids safe in their schools.3. The Personal Responsibility ActDiscourage illegitimacy and teen pregnancy by prohibiting welfare to minor mothers and denying increased AFDC for additional children while on welfare, cut spending for welfare programs, and enact a tough two-years-and-out provision with work requirements to promote individual responsibility.4. The Family Reinforcement ActChild support enforcement, tax incentives for adoption, strengthening rights of parents in their children's education, stronger child pornography laws, and an elderly dependent care tax credit to reinforce the central role of families in American society.5. The American Dream Restoration ActA S500 per child tax credit, begin repeal of the marriage tax penalty, and creation of American Dream Savings Accounts to provide middle class tax relief.6. The National Security Restoration ActNo U.S. troops under U.N. command and restoration of the essential parts of our national security funding to strengthen our national defense and maintain our credibility around the world.7. The Senior Citizens’ Fairness ActRaise the Social Security earnings limit which currently forces seniors out of the work force, repeal the 1993 tax hikes on Social Security benefits and provide tax incentives for private long-term care insurance to let Older Americans keep more of what they have earned over the years.8. The Job Creation and Wage Enhancement ActSmall business incentives, capital gains cut and indexation, neutral cost recovery, risk assessment/cost-benefit analysis, strengthening the Regulatory Flexibility Act and unfunded mandate reform to create jobs and raise worker wages.9. The Common Sense Legal Reform Act"Loser pays" laws, reasonable limits on punitive damages and reform of product liability laws to stem the endless tide of litigation.10. The Citizen Legislature ActA first-ever vote on term limits to replace career politicians with citizen legislators.Further, we will instruct the House Budget Committee to report to the floor and we will work to enact additional budget savings, beyond the budget cuts specifically included in the legislation described above, to ensure that the Federal budget deficit will be less than it would have been without the enactment of these bills.-Newt Gingrich, et al.


The Contract with America was introduced six weeks before the 1994 Congressional election it was signed by all but two of the Republican members of the House of Representatives, and all of the party's non-incumbent Republican candidates for that body. It laid out the plans of the Republicans in a very specific way the Contract was revolutionary in its commitment to specific actions. It was the first time that a Congressional election had been run on such a national level. The Contract represented a triumph of Newt Gingrich and the American conservative movement.

The pollster Frank Luntz was a pollster with the Contract with America, and his career blossomed after his work with Gingrich.


The Contract with America: Implementing New Ideas in the U.S.

Decades from now, historians quite likely will reflect back upon the Contract With America as one of the most significant developments in the political history of the United States. As Newt Gingrich, the first Republican Speaker of the House of Representatives in 40 years, has written: "there is no comparable congressional document in our two-hundred-year history."

Never before had so detailed a document become such an integral part of a congressional election campaign never had so many innovative ideas been drafted into legislation so quickly and never in the previous six decades had so much legislation been passed by the House of Representatives in less than 100 days after the newly elected Members of Congress took office. As the chief political columnist for The New York Times, R. W. Apple, wrote in a front page news analysis: "Perhaps not since the start of the New Deal [in 1932], to which many of the programs now under attack can trace their origins, has Congress moved with such speed on so many fronts."

The revolutionary character of the change represented by the Contract went beyond the U.S. House of Representatives. Not only did the 367 Republican candidates for the House of Representatives who signed the document run election campaigns based on its provisions, but many of the campaigns for the U.S. Senate, as well as state and local government races, also pivoted around the fundamental questions concerning the role of government in society as reflected in the Contract. In short, the Contract may come to symbolize the most profound change in the American political landscape in the last half century and, in many respects, determine the character of American government well into the 21st century.

The Contract and the Conservatives

There has been a consistent growth of the role of the central government in the United States, or what you might call statism. This expansion of the government was never effectively challenged from the development of Franklin Roosevelt's New Deal beginning in 1933 until the 1960s. Only after the defeat of Richard Nixon in the presidential campaign of 1960 did conservatives in America begin to vigorously challenge the growth of the state at that time, conservatives won control of the Republican Party. From this position, the conservatives developed fundamental criticisms of statist liberal policies which culminated in the nomination of Barry Goldwater for President in 1964. Although Senator Goldwater was badly defeated in that election, both the conservative ideals he championed and the cadre of workers he enlisted became the basis of the modern conservative political movement in the United States.

Fortuitously, Senator Goldwater remained active in American politics through his final re-election to the United States Senate in 1980, the same year the second great transformation of American politics took place with the election of Ronald Reagan as President. It was then that conservatives learned two lessons about the role of the Presidency. On the one hand, the President can have a profound international impact through his policies, as reflected in the winning of the Cold War and, later, the war in the Persian Gulf. On the other hand, in the most fundamental area of the size and scope of government activities, the President could lead, but a Congress controlled by the opposition did not have to follow. Thus, liberal Congressmen often effectively thwarted President Reagan's actions. As they often noted, the President is only in office for four or at most eight years, whereas Congressmen remained in office often for decades, as did the huge staff support system they developed. This "permanent staff" eventually reached over 20,000 personnel on Capitol Hill.

Thus, the third leg of the conservative revolution in post-World War II America is represented by the Contract With America and the election of a clear conservative majority in the U.S. House of Representatives. This can become the defining moment in the transformation of the responsibility for government in the United States away from the central government and back to state and local governments or to the private sector, to families and individuals.

The changes being debated in America now can provide useful lessons and insights to democratic societies throughout the world dealing with social and economic problems similar to those confronting the United States.

In many respects, the changes are already profound. The Contract With America led to much more than a change of parties in the United States, leading instead to fundamental philosophical questions being raised about government in ways not contemplated for 60 years.

Perhaps the best way to address various aspects of the Contract With America, the ideas in and behind the Contract and its relation to the size and scope of government activities, is to answer three basic questions:

  • Why was it done?
  • How was it done?
  • What has become of the Contract and the ideas it embodied?

Despite both the ascendancy of conservatives in the Republican Party and the election of Ronald Reagan as President, it became obvious that only a substantial change in the U.S. Congress could lead to the revolutionary transformation of America sought by conservatives for decades.

Many conservatives who came into Congress in the 1980 election and thereafter shared a much more dynamic vision of the role of conservatives in the Congress than did their predecessors. And among them, Congressman Gingrich consistently articulated his principal goal as the creation of a Republican majority in the House and the adoption of a very wide-ranging reform agenda.

In order to draw the attention of the public to the House of Representatives in the 1994 election, the Contract With America was created. The Contract provided the mechanism to move from vague political rhetoric to creating a specific political program. Through such a program, one could clearly delineate to the general public the contrasting philosophies of government the 1994 election offered the electorate.

The Contract's lineage can be traced back to the 1980 election campaign when most of the Republican candidates for federal office similarly stood on the steps of the Capitol in early October of that year and promised to support tax cuts, a strong national defense, and reductions in federal spending. While the Republicans gained 33 seats in the House that year, the Democrats nonetheless maintained their majority, and only the first two of three agenda items were initially adopted but several years later, even the tax cuts and defense spending increases were abandoned. Federal spending continued out of control throughout the 1980s.

The ideas in the Contract emerged from extensive interaction between the new, more aggressive conservative Congressmen and the emergence of an extensive network of conservative think tanks, such as The Heritage Foundation. In 1980, Heritage and other conservative think tanks initially focused attention on changing the government through a change in the executive branch, as reflected in our monumental study Mandate for Leadership.

But after 1980, the attention of conservatives increasingly focused on the Congress. Heritage, for example, published a study in cooperation with the Claremont Institute in California on The Imperial Congress: Crisis in the Separation of Powers, which was published in 1988. Five years later, a successor study from Heritage came out entitled The Ruling Class: Inside the Imperial Congress 2.3 million copies of the later volume reached a wide audience. Both volumes drew attention to institutional problems within the Congress that were eventually addressed in the Contract With America.

And finally, Heritage developed a useful handbook, Issues '94, that provided specific legislative and policy recommendations for conservative candidates for Congress many of these recommendations worked their way into detailed provisions of the Contract With America. In this manner, an extensive philosophical groundwork formed the intellectual foundation for the Contract With America when it formally appeared in the fall of 1994. Sound ideas thus became anchored into concrete policy recommendations.

The Contract itself emerged publicly with the staging of the mass signing of the Contract on the steps of the U.S. Capitol by 367 candidates for office on September 27, 1994. On that day, all of these candidates publicly pledged: "If we break this Contract, throw us out." The Republicans who were already Members of the House of Representatives organized themselves into 11 working groups that eventually drafted ten bills that made up the Contract.

The items in the Contract were carefully selected in terms of issues that were of fundamental policy importance but also were "doable," that could be accomplished rather quickly because of the broad support they engendered. Extensive public opinion polling revealed that at least 60 percent of Americans supported all ten of the specific items in the Contract. By dealing initially with popular items, such as the Congress being governed by the same rules as all Americans, and broad philosophical concepts, such as balancing the federal budget, the Contract engendered popular momentum that could eventually lead to confronting more contentious issues, such as environmental regulations and Medicare and Medicaid reforms.

Politically, the Contract found a particularly receptive audience in the elections in the fall of 1994 because of a combined disenchantment with the existing Congress and the widespread view of a lack of leadership being provided by President Bill Clinton in the White House. The Clinton campaign in 1992 had generated the expectation of great changes being made to deal with domestic problems. Moreover, the fact that Democrats in 1993 controlled both branches of the Congress together with the White House seemed to create the means for changes to take place by breaking the so-called partisan gridlock in Washington. But the failure to make substantive policy changes in 1993 and 1994 clearly facilitated the political changes in November 1994. Thus, the concept of the Contract found a particularly receptive audience.

What has become of the ideas embodied in the Contract?

One of the revolutionary elements of the Contract is the fact that it actually was implemented as promised. Profound disillusionment within the American political system centered on the perception that politicians make promises only to be elected and then promptly abandon their pledges once safely ensconced in office. Thus, the first and most innovative idea reflected in the Contract required politicians to take their own promises seriously and actually implement them.

The idea of the first 100 days repeated, in a Republican Congress, what had been done by the most successful Democratic President in American history in 1933, Franklin D. Roosevelt vigorously launched the New Deal in his first 100 days in office. The key difference between 1994 and 1932 was that Republicans only controlled the Congress while a Democrat, President Clinton, still remained in the White House. This has clearly limited both the speed and scope of changes.

The ten items in the Contract were all acted upon in the first 100 days of the new Congress, which is what the signatories had pledged. Nine of the ten items in the Contract passed the House: Only the constitutional amendment on term limits (which required a two-thirds vote) was defeated. Out of a total of 302 roll call votes on issues related to the Contract With America, the conservatives prevailed on 299 of them. A balanced budget amendment passed in the House by a 300-123 margin but was subsequently defeated as it fell one vote short of the two-thirds needed for passage in the U.S. Senate. The overall margin by which the items in the Contract were passed averaged about 70 percent despite the fact that the Republicans only held a 12-seat margin over the Democrats (52-48 percent, the smallest House majority margin in 40 years). Given the notorious lack of party discipline in the American Congress, the passage by a large majority of nearly all of the items in the Contract was a remarkable achievement.

The ten specific bills which made up the Contract contained numerous provisions addressing a wide range of issues. Other elements of the Contract dealt with fundamental institutional political reforms. Outlined here are a few of these ideas and their status today.

Institutional Reform: Making Congress More Democratic

Most dramatically, the new Congress immediately implemented long-sought reforms within the House of Representatives. In this one area where the new Republican majority had full authority, they effectively exercised it by dramatically changing the nature of the House of Representatives itself during their first day in office they passed nine major reforms.

First, they made all the laws that applied to the rest of the country apply to Congress itself this indicated that Congressmen should be treated like other citizens and not remain a privileged elite, often immune from the consequences of the very laws they imposed on the rest of the country.

The House drastically cut by one-third the number of committees and similarly reduced committee staff personnel by one-third. In short, the lesson was that cutting back the size of government should begin in one's own House and thus establish a useful precedent for the rest of the federal government.

The House also provided for an independent audit of the finances of the House itself. This eventually led to a report by Price Waterhouse that found 2,200 instances of double payments for travel expenses, 700 retroactive pay hikes despite a rule against this, and, in general, accounting practices so out-of-date that the auditors could not be sure of the actual numbers they were working with.

Fundamental institutional change also arose in the Citizen Legislature Act provision of the Contract With America, which sought to limit the amount of time a Member of Congress could serve in one body to 12 years. This measure thus sought to limit the role of career politicians in Washington. But the measure required amending the Constitution and failed to achieve the two-thirds constitutional margin necessary. Term limits nonetheless remains a very popular issue, passed by many state legislatures and Republicans promise that it will be the first item voted on if they retain control of the House after the 1996 elections.

Controlling the Growth of Government: The Fiscal Responsibility Act

A key ingredient, both explicit and implicit, in the Contract is a fundamental change in the character of government in the United States. The very first item in the Contract With America sought "to restore fiscal responsibility to an out-of-control Congress, requiring them to live under the same budget constraints as families and businesses." The key components of this act were a line-item veto and balanced budget/tax limitation amendment. The line-item veto would allow the President to strike specific spending provisions in bills without having to veto the entire bill, and thus eliminate unnecessary spending. This provision passed both the House and Senate in slightly different forms, and President Clinton promises to sign it into law. On the other hand, the balanced budget amendment, which required a two-thirds vote to change the Constitution, was defeated. Even though not succeeding in passing the amendment itself, the House did pass a balanced budget resolution, which in the short term would have the same effect. Thus, the concept of balancing the budget has remained a central theme in the U.S. Congress the means of achieving this could only come from a drastic reduction in the size and scope of the federal government.

The effort to eliminate unnecessary federal government programs has proven to be one of the biggest challenges facing the new Congress. Initial enthusiasm about eliminating unjustifiable federal programs, such as subsidies to the arts and humanities as well as public television and radio, generated fierce and well-organized opposition by the special-interest groups who benefit from the programs. Thus, instead of immediately eliminating them, the Congress only voted to phase them out over several years. What this means in Washington is that the battle is renewed each year.

The key lesson for anyone wanting to scale back the size of government is that it is best to eliminate a program immediately, as that engenders just as much opposition as reducing funding for a program. Only when a program is totally eliminated is the battle over that program won in contrast, incremental reduction simply means revisiting the issue every year.

The example of the Reagan Presidency is instructive. Only 12 of 94 programs the Reagan Administration proposed to eliminate actually ended, and 10 of those were in Mr. Reagan's first term. Attempting to simply cut back programs ultimately failed. For example, the Small Business Administration (what we now call a welfare program for very few businesses) was cut back from $2 billion in 1980 to $85 million in 1989, but by the end of the Bush Administration in 1993, the program rose back to $975 million, and it is now once again a target of the new Congress.

Efforts to eliminate entire Cabinet-level departments of the government also have proved difficult. Conservatives have long sought to pursue a policy of "rollback" in dealing with proliferating government departments. The prime candidates on the list of government departments conservatives seek to eliminate are the Departments of Commerce, Education, Energy, and Housing and Urban Development. But at present, only the Commerce Department seems vulnerable. Another congressional initiative that has sought to consolidate the United States Information Agency, the Arms Control and Disarmament Agency, and the Agency for International Development into the State Department prospectively would save $3 billion over the next four years. The combination of disenchantment with the size of the central government and growing budgetary constraints in Congress has created real momentum to seriously reduce the size and scope of central government activities in America.

Welfare Reform: The Personal Responsibility Act

One of the key ingredients in the initial Contract With America has led to one of the most contentious debates in Washington: reforming the welfare state. The Personal Responsibility Act in the Contract included prohibiting welfare going to mothers under the age of 18, halting the increase of benefits for mothers each time they had additional illegitimate children, and cutting welfare spending. In 1965, President Lyndon Johnson declared a so-called War on Poverty but 30 years later, after spending an estimated $5.4 trillion on welfare programs, it seems that poverty is winning the war. Thirty years of central government welfare programs seem only to have worsened the situation. The key problem, as my colleague at The Heritage Foundation, Robert Rector, has pointed out, is that "the welfare programs present a 'moral hazard' -- a strong tendency to increase the behaviors which are rewarded by welfare benefits." Specifically, "when welfare benefits are tied, directly or indirectly, to such behaviors as low work effort, divorce, and illegitimacy, welfare strongly promotes an increase in those behaviors." This only creates an ever-escalating cycle of more spending.

The Personal Responsibility Act of the Contract sought to fundamentally revamp the role of the state in welfare policy by developing policies to reduce teenage pregnancies and illegitimate births by prohibiting aid to mothers under 18 who give birth out of wedlock and requiring them to name the fathers of their children, who would be held accountable for their actions. Such women would be required to live at home to receive any aid and would not get housing subsidies to set up their own apartments. The Act also required that aid be cut off if recipients did not work.

The federal government provides 72 percent ($234.3 billion) of all welfare benefits, compared to 28 percent ($90 billion) by the states. This has led the Congress to set certain general standards and criteria that recipients of aid must meet to receive benefits. But beyond some general restrictions, the key reform of welfare consists of attempting to decentralize the program to the 50 states and thereby stimulate numerous creative approaches to dealing with social problems.

This reflected the general conservative philosophical view in the Contract. As Speaker Gingrich writes in his book To Renew America: "We must replace our centralized, micro-managed, Washington-based bureaucracy with a dramatically decentralized system more appropriate to a continent-wide country. 'Closer is better' would be the rule of thumb for our decision making less power in Washington and more back home, our consistent theme."

Unleashing the American Economy: The Job Creation and Wage Enhancement Act

This Act attempted to reverse the increasingly debilitating role of the federal government in the American economy. One of its major provisions that has passed both the House and Senate ended so-called unfunded mandates which require states and local communities to impose various regulations but do not provide them the money to carry them out. In this manner, Congress passed allegedly beneficial laws that were cost-free, at least to the federal government. But such laws had enormous destructive power on states, local communities, and businesses. It was estimated by the Congressional Budget Office that such regulations cost state and local government from $8.9 billion to $12.7 billion between 1983 and 1990 and that the costs were growing. Similarly, the federal government often imposed costly regulations on businesses that stifled economic expansion by companies.

The Job Creation and Wage Enhancement Act included a variety of tax law changes and reforms in federal bureaucratic procedures that would enhance private property rights and economic liberty. Specifically, it provided for a 50 percent capital gains rate cut, allowed small businesses to deduct the first $25,000 worth of investment each year, reduced paperwork burdens on business by at least five percent, and required federal agencies to assess the risks and cost of each new regulation being imposed. Finally, the Contract provided for a Citizens Bill of Rights for anyone subject to investigation or inspection by a federal agency.

Non-statist Approaches to Social Problems: The Family Reinforcement Act

This Act similarly sought to refocus attention on the family and away from the government as the source of solutions to social problems. Thus, the Act reinforced child support orders issued by courts requiring absent fathers to financially support their children and provided both a refundable tax credit of up to $5,000 for families adopting a child and another tax credit of $500 for families caring for a dependent elderly parent or grandparent. Rather than emphasize institutionally provided state care, this Act sought to get orphaned children into homes and encourage family care of relatives. Similarly, another element of the tax provisions of the Contract provided a $500-per-child tax credit, which would mean that a family of four earning $28,000 would have their tax burden cut by one-third.

Other provisions provided incentives for saving money to be used for college education or buying a home and for ending a tax benefit for couples who live together but do not get married. For example, a couple earning $40,000 each will pay only $6,633 each in taxes if filing returns separately but on a joint return, their combined taxes will rise by $1,285 to $14,541, or about a 10 percent tax penalty for being legally married.

These proposals, as well as others, rested upon a fundamental philosophical principle, as stated in the book version of the Contract With America: "The American family is at the very heart of our society. After forty years of putting others first [we] will put families first. It is through the family that we learn values like responsibility, morality, commitment and faith."

Other Items in the Contract

The remaining items in the Contract deal less with the role and nature of the state than with confronting specific legal and security issues. This includes dealing with the growing threat of crime in America, reforming the legal system, and improving the security of the country. They reflect the broad scope of the Contract but go beyond the scope of this lecture.

The ideas espoused in the Contract With America represented the culmination of 30 years of creative conservative thinking dealing with the basic social and economic problems of modern America. The ideas provided the background for the widest range of legislative initiatives, certainly since the 1930s, and possibly at any time in American political history. The fundamental principle involves re-examining the role of the government in society.

Central government attempts to solve many problems have only made them worse thus, the Contract With America represents specific practical steps that can be taken in a wide range of government activities to roll them back. Ultimately, the government should cease many of its activities but what is necessary now is a realistic transitional mechanism to achieve that goal. The Contract With America provides precisely the kind of formula that can accomplish that objective.


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Review

“An indispensable guide.” —George F. Will

“A talented reporter with a keen sense of history, Major Garrett convincingly argues that in 1994, when Republicans ended forty years of Democratic control of the House of Representatives, a new kind of conservative changed the dynamics of Congress and then the trajectory of American politics. This book is an indispensable guide to the transformed political terrain that continues to shape what Republicans want to do and what Democrats can do.”—George F. Will, Pulitzer Prize–winning columnist

“Major Garrett covered the events leading up to the Contract with America and the historic achievements that followed as aggressively as anyone in Washington. Now he has produced the most historically accurate account of the Republican Revolution, placing the reader in the middle of the action. He obliterates the Left’s attempts to explain away its policy failures by reporting how implementation of the Contract changed Washington politics and policy to the benefit of the country.” —Newt Gingrich, former Speaker of the House

“Major Garrett brings the Republican Revolution vividly back to life in this highly informed account of not only how it came about but also how its consequences reverberate to this day. A must-read for anyone interested in what is indeed the enduring revolution of our time.” —Charles Krauthammer, Pulitzer Prize–winning columnist

“Until I read The Enduring Revolution I thought I had lived and understood the Contract with America from start to finish. But this book is full of revelations even for those of us who thought we knew all about it. Most important, Major Garrett has explained the enduring legacy of the Contract.” —Dick Armey, former House Majority Leader

“A revelation. Major Garrett, one of America’s best reporters, has produced a truly honorable and significant study, based on smart analysis and rock-solid research.” —Douglas Brinkley, director of the Eisenhower Center for American Studies, University of New Orleans

“A veteran and fair-minded Washington reporter, Major Garrett presents a provocative and important thesis: the 1994 congressional elections and the Contract with America fundamentally reshaped U.S. politics and marked a cultural and political revolution that reverberates today. Whether one agrees or not with his argument, Garrett offers a valuable behind-the-scenes look at critical and dramatic events that helped define the divisive politics of twenty-first-century America.” —David Corn, Washington editor of The Nation

“This book is a revelation. The political establishment needs to read it, but that may be too much to hope for. Too bad for them. They will be missing a terrific read. The inside story of the government shutdown of 1995 alone is worth the price of the book.” —Brit Hume, host of the Fox News Channel’s Special Report with Brit Hume

The Enduring Revolution shows how the Contract with America has reverberated through our politics ever since 1994, shaping how Democrats as well as Republicans approach issues ranging from taxes to missile defense. It is also a crackling good read.” —Michael Barone, coauthor of The Almanac of American Politics

From the Inside Flap

To most observers - including many conservatives - the so-called Republican Revolution of 1994 was anything but revolutionary, and the Contract with America that propelled the GOP into power was just a gimmick.

But in The Enduring Revolution, Fox News national reporter Major Garrett turns this conventional wisdom on its head, revealing how the Contract with America and the Republican Revolution have changed our lives in startling ways. The Republicans have fundamentally altered our approach to taxes, national defense, terrorism, welfare, entitlements, health care, education, abortion, gun control, and crime, among other issues. Quite simply, America is a vastly different place after the Contract than it was before it.

If you think the 2004 elections re?ected a political realignment in this country, think again. That realignment occured a decade earlier the Republicans' victory in 1994 made George W. Bush's election and reelection possible.

Based on exclusive interviews with more than fifty key players from both sides of the aisle, and complete with more than thirty pages of crucial, previously unpublished confidential documents, The Enduring Revolution offers the dramatic behind-the-scenes story of how the Contract with America came into being and how this one document has defined American politics for a decade. Garrett's exhaustive research and remarkable access enable him to tell a story that will surprise even the most seasoned political observers.

In The Enduring Revolution, you'll learn:

*How George W. Bush and John Kerry built much of their 2004 presidential campaigns around the Contract with America

*How conservatives angered by the recent growth of the federal government have overlooked critical Republican victories on spending

*How Bill Clinton's supposed great achievements, welfare reform and a balanced budget, resulted directly from the Contract with America - and actually reflected his weakness as a leader

*How the Republican majority made the 2003 Iraq invasion possible years before our military campaign began

*How our intelligence community's problems in the War on Terror would have been much worse had there been no Republican Revolution

Undeniably, Republican leaders from Newt Gingrich to Dennis Hastert have made critical mistakes - and Garrett provides the inside story on how and why those failures occurred. But he also reveals how the usual focus on setbacks ignores the jaw-dropping changes the Contract with America has produced.

The Enduring Revolution is a stunning reassessment of a crucial but misunderstood episode in our political history.

About the Author

Excerpt. © Reprinted by permission. All rights reserved.

The 104th Congress, of 1995󈟌, was the most important Congress of the twentieth century. Quite possibly it was the most important Congress in American history.

Most Americans don’t think much about Congress. And it’s not just the general public. Historians love to rank presidents, but they never rank Congresses. Why? Because Congress typically doesn’t matter. That is, Congress typically doesn’t matter as much as the president with whom it interacts—the leader who can set the nation’s agenda even if he can’t pass the laws. Whereas the president is an individual with a clear vision and often with the ability to rally Americans behind that vision, Congress is a hulking, plodding legislative body. Congress is not generally responsible for new, provocative ideas rather, it is where such ideas go to be watered down by endless compromises and attached to other costly programs by politicians eager to impress their constituents.

That is how it normally works, anyway. Even when Congress has had big clashes with presidents, it has almost always been when Congress has resisted bold new ideas or resented efforts to uproot or challenge protected industries or orthodoxies. In 1832, Congress resisted Andrew Jackson’s effort to kill the National Bank. In 1903, Congress resisted Theodore Roosevelt’s attempts to tame the trusts. In 1919, Congress dealt a crushing blow to Woodrow Wilson’s League of Nations by refusing to ratify the Treaty of Versailles. A series of Congresses used political intimidation to prevent Presidents Truman, Eisenhower, and Kennedy from proposing civil rights legislation.

But the Congress sworn in in January 1995 was anything but typical. In fact, this new Congress was hailed as bringing a “revolution” to American politics. Part of it, of course, was that for the first time in four decades the Republicans had taken control of Congress. And in truth, the Democrats’ dominion over the House of Representatives extended back much further than to 1954, the election in which the Democrats regained the numerical advantage in the House they had lost in 1952. Democrats had really seized the levers of government in 1930, at the dawn of the Great Depression, and spent more than six decades consolidating that power—through the New Deal, Truman’s Fair Deal, the civil rights era, the Great Society, and the large, liberal, and activist Watergate class of 1974 that redefined Democratic congressional power for the next twenty years. The Democratic Party controlled the House of Representatives for sixty of the sixty-four years between 1930 and 1994, and the Senate for fifty-four of those sixty-four years. The Republican Congress elected in 1952, on Dwight D. Eisenhower’s coattails, was, in essence, an accidental majority—the Democrats regained power in the next election. The same could be said for the Republican majority that was elected in 1946: Republicans offered no coherent political alternative to President Truman’s efforts to expand the New Deal, which allowed Truman to run for reelection in 1948 against the “Do Nothing” Republican Congress. Divorced from an agenda and a political plan to consolidate gains, the Republican majority disappeared as quickly as it had appeared. (So uncertain of their majority status were House Republicans in 1946 and 1952 that GOP leaders kept the offices they held while in the minority, ceding the larger and more ornately decorated real estate to their Democratic betters.)

Yet something more was happening in the 1994 election. This time the Republicans would not quickly cede the ground they had taken, as they had after 1946 and 1952. Here was a different breed of Republican. The Republicans of the 104th Congress were first and foremost about ideas. Ideas drove the politics. Ideas drove the reforms. Ideas drove the agenda. Ideas drove President Clinton away from the leftist congressional barons who had hijacked the centrist agenda he campaigned on in 1992 and turned it (at times with far too much Clintonian complicity) into an unrecognizable hash of tax increases, pork-barrel stimulus spending, nationalized health care, costly and timid welfare reform, drastic defense cuts, and no middle-class tax cut—for even while Clinton publicly demonized the new Republican majority for his short-term political benefit, he was adapting to the new center-right political terrain defined by the 1994 election, and defined by the Republicans’ ideas. Ultimately, the Republicans’ ideas profoundly reshaped our nation—and continue to shape it to this day.

These ideas were codified in the Contract with America, which Republicans publicly unveiled at a September 1994 event on the West Front of the U.S. Capitol. Many Americans remember the ceremony on the Capitol steps, as 337 Republicans who either were in the House already or were campaigning to win seats gathered to sign the Contract. But the Contract was not designed just for that one-day press event. It offered a detailed, comprehensive agenda touching everything from internal congressional reform to national defense, welfare to economic growth, term limits to balancing the budget, crime control to tort reform.

The Contract started with a unified set of principles for which these 337 Republicans stood: individual liberty, economic opportunity, limited government, personal responsibility, and security at home and abroad. From these principles arose a two-part agenda: The first part laid out eight “major reforms” that were “aimed at restoring the faith and trust of the American people in their government.” These reforms applied to the management of Congress for instance, the Republicans called for changing the rules in Congress so lawmakers had to live under all major federal regulations, cutting the number of House committees and the size of committee staffs, and requiring a three-fifths majority vote to pass a tax increase. The second part, a ten-point legislative agenda, was even more important. As this book will reveal, it was the result of intense intraparty debate, and the culmination of years of work on the part of numerous Republicans both inside and outside of Congress. And to show their commitment to the agenda, the Republicans vowed that if they took the majority, they would vote on all ten planks of the Contract within the first hundred days of taking power. “If we break this contract, throw us out. We mean it.”

In the ten planks, the Republicans called for:

1.A balanced-budget amendment and a legislative line-item veto to restore fiscal responsibility to Congress

2.A strong anti-crime bill that expanded the death penalty and required longer jail sentences for felons

3.A “personal responsibility act” that would reform welfare by forcing able-bodied recipients off public assistance after two years and reduce welfare spending

4.A “family reinforcement act” that would, among other things, provide tax incentives for adoption and establish an elderly dependent-care tax credit

5.A $500-per-child tax credit, a reduction of taxes on married couples, and the creation of tax-free savings accounts available to help families cover the cost of college tuition, first-time home purchases, or medical expenses

6.A strong national security defense bill that would protect defense spending from further cuts, eliminate any possible United Nations command of U.S. troops, and call for the swift development and deployment of a national ballistic missile defense system

7.Allowing seniors to earn more without losing Social Security benefits

8.Eliminating federal unfunded mandates (that is, federal laws that require states or communities to take particular actions but do not provide the funds necessary for the actions) and passing other reforms to create new jobs and increase wages, such as reducing the capital gains tax and providing incentives for small businesses

9.Reducing damages awarded in civil cases and making other “commonsense legal reforms”

10.Term limits on senators and congressman

The legislative language behind each and every plank of the Contract with America was already written before the Contract was unveiled—pages and pages of legislation, in fact. This may sound like a minor matter, but actually it is the most significant part of the story. The Contract was much more than an easy-to-read political manifesto. To be sure, the ten planks were reduced for public consumption to catchy, focus-group-tested phrases, much as other campaign manifestos are constructed. But Contract task forces produced a complete bill for each plank, one that voters could scrutinize before the election. It was an arduous process persuading lawmakers who had never been in the majority to stop thinking about issues from the perspective of Republicans playing off Democratic proposals and start thinking of bills they wanted to become law. Operating as the minority party, Republicans created a political agenda they believed would give them real legislative power. By painstakingly turning “issues” into legislative documents, the Republican authors of the Contract made it impossible for their agenda to disappear after Election Day 1994, as so many election-year manifestos do. With tax cuts, welfare reform, defense spending, ballistic missile defense, prison and crime reforms, and the line-item veto, Republicans changed the country through the power of ideas and the unshakable desire to implement them. Unlike any other political document in American history, the Contract lived a more important life after the last ballot was counted than it did before the first vote was cast.

Two other Congresses of the twentieth century can claim the mantle “historic”—the first New Deal Congr.


60c. Republicans vs. Democrats


Cartoonist Steve Sack satirized Newt Gingrich's thirst for popular approval of his impeachment plans in the Minneapolis Star-Tribune.

It seemed like Bill Clinton had everything going for him. He defeated an incumbent President and became the first Democrat to win the White House since Jimmy Carter defeated Gerald Ford. He had a Democratic House and a Democratic Senate to work with him.

One of the first major initiatives he began was health care reform. Many Americans were concerned about spiraling medical costs. Medicare did not cover prescription drugs and only paid a portion of health care costs. Over 20 million Americans had no health insurance whatsoever. Clinton assembled a task force to study the problem and assigned his wife Hillary to head the committee. She became the most politically active first lady since Eleanor Roosevelt.

Eventually Clinton presented a plan to limit costs and insure each American citizen to the Congress. Powerful interest groups representing doctors and insurance companies opposed Clinton. Many in the Congress thought the program too costly. Conservatives compared the plan to socialized medicine. Despite a "friendly" Democratic Congress, the Clintons' proposal was defeated.


Hillary Clinton's stoic stand-by-her-man attitude during the mounting drama of the Clinton-Lewinsky scandal proved a factor in her husband's popular support throughout the ordeal.

When the midterm Congressional elections took place in 1994, the Republicans thought they had a chance to capture at least one house. Led by Representative Newt Gingrich , Republicans in the Congress signed a Contract with America. The contract was simply a list of ten promises each signatory pledged to pursue if the Republicans won. The stratagem worked brilliantly. The Senate votes narrowly awarded a Republican majority. More astonishing were the results in the House.

The Democrats had controlled the House of Representatives since 1954. Many Republicans had gotten used to acting like an opposition party. When the votes were counted, Republicans outscored Democrats in House seats 230-205. Gingrich was rewarded for his efforts by being named Speaker of the House.

But Bill Clinton was a political survivor. Even though voter turnout was low, Clinton accepted the Republican victory and pledged to work with the House leadership. Gingrich and his cohorts took a tough stand with the President. Unless Clinton agreed to accept deep cuts in social spending programs in 1995, they threatened to shut down the government and appropriate no funds. It was a classic standoff &mdash Clinton versus Gingrich.


Linda Tripp and Monica Lewinsky were the center targets of the media storm that raged during the events leading up to President Clinton's impeachment.

When neither party would blink, a partial shutdown of government services took place. The American public often decides the victors of such battles. Polls showed strong support for the President. Many Americans saw the Gingrich Republicans as mean-spirited zealots who wanted to end funds for school lunches. Clinton slowly saw his approval ratings rise. By the time he ran for a second term in 1996, the economy was booming and the huge budget deficit had been controlled. Voters rewarded Clinton by re-electing him over the Republican candidate Robert Dole .

In January 1998, a scandal that nearly ended Clinton's Presidency unfolded in the press. It was reported that Clinton engaged in a sexual relationship with a White House intern named Monica Lewinsky during his first term. Although Clinton originally denied the charges, overwhelming evidence was presented that Clinton and Lewinsky engaged in repeated sexual contact, even in the Oval Office.

Republicans were outraged. An independent counsel named Kenneth Starr was appointed to gather evidence against Clinton. As the summer ended, Clinton admitted that many of the reports were true and that he was ashamed of his behavior. The House Judiciary Committee drew up articles of impeachment on four counts including abuse of power and obstruction of justice. Across the nation, Americans debated whether or not Clinton's misbehavior constituted an impeachable offense.


During President Clinton's Impeachment trial, the Senate rejected Article I that dealt with whether the President perjured himself before the Grand Jury, and split evenly on Article II, Clinton's alleged obstruction of justice.

The House decided that two articles of impeachment were in order, and in December 1998, Clinton joined Andrew Johnson as the only Presidents to be impeached. In such proceedings, the Senate has the final word and acts as a judge and jury. Two-thirds of the Senators must vote guilty to remove a President from office. Clinton survived this final vote to impeach which unfolded along party lines.

As the year 2000 approached, partisan politics were as toxic as ever. Republicans claimed that they fixed the economy and Clinton got the credit. Regardless of who gets the credit or blame, the 1990s were a decade of very steady economic growth. The crippling budget deficits of the 1980s were finally brought under control, and Americans enjoyed low inflation, low unemployment, low interest rates and a booming stock market. Even the bad blood between the two parties could not change that.


Restoring the American Social Contract

While the term "social contract" has not been wide­ly used in America, the idea of some mutual obligation between society and the individuals that comprise it is deep-seated in the American view of society. It is true that America, more than almost any other country, is based on the idea that individuals should have the freedom to pursue their individual goals and use their talents for advancement. Nonetheless, the idea of America also is one of a society that involves both membership rights and obligations for its members.

This American version of the European idea of social contract envisions reciprocal obligations.

  • The obligation as a society is to assure individuals that nobody will suffer unreasonable hardship because of factors beyond their control. While other societies have interpreted this obligation as a justification for extensive government protec­tions and programs, in America we have tradition­ally based this obligation on the extensive network of civil society institutions, including family, church, and neighborhood association.
  • The obligation of individuals who are helped by the wider society is to use that assistance respon­sibly and to try to return to independence and self-sufficiency.

In the 1930s, the civil society-based social contract was supplemented significantly with a financial com­mitment by the federal government in the form of Social Security, a social insurance program that linked financial obligations in the form of payroll taxes to a set of financial benefits paid primarily during retirement. In the 1960s, of course, this financial social insur­ance system was again supplemented with Medicare.

Undermining the Social Contract
Concern about the nature and operation of today's social contract has grown in recent decades. This is because three broad developments began to conflict with the traditional American notion of a social contract.

First, we temporarily abandoned the two-way nature of mutual obligation in the case of our most basic anti-poverty programs. In the 1950s and 1960s, the notion of "welfare rights" took hold, including the notion that financial assistance to the poor should be a one-way obligation. We saw the results of that in growing welfare rolls, long-term dependence on poverty programs, and perverse incentives that exacerbated family collapse and intergenerational poverty. Fortunately, the work requirements and limits on the duration of welfare that were put into law in 1996 helped us to begin to put the welfare system back on track.

Second, the growing sense that employers should play a central role in providing protection against ill health and retirement costs-a sense encouraged by tax laws and regulations-has led to employer decisions becoming an increasingly critical element of the social contract. However, it has become clear that employers do not have the same "community of interest" with their employ­ees that other civil society institutions have with their members.

Owners and employees do not typically have a shared interest and vision of the sort found, for example, among the members of a church or union. Moreover, there is not the same long-term connec­tion between the place of employment and a family that occurs between an individual and other institu­tions. Thus, it has become clear that, as a proxy for the wider society and its obligations, employers are a less appropriate partner to the contract.

We see the results of this today in our increasing concern about employment-based health coverage. We worry that critical decisions over choice of plan and availability of care are not in the hands of fam­ilies and that employer decisions do not necessarily reflect the interests of those families.
We have experienced similar worries for many years about the pensions system. Although the financial security of worker pensions is entwined with the financial condition of the employer, the financial interest of the company often conflicts with the financial security of the worker. When a firm gets into trouble, not only are the jobs of work­ers jeopardized, but their long-term financial secu­rity is at risk. One needs only to think of the Enron collapse to appreciate why putting all of one's eggs in the employer basket has been such a folly.

Third, we have begun to see the internal weak­nesses and perverse incentives in the American form of social insurance. As pay-as-you-go social insurance systems mature in every country, they face a classic problem as the society ages: The out­lays needed to pay for the promised benefits force the system into structural imbalance and huge unfunded obligations.

In America, this trend has been exacerbated by our political system, in which interest-group pres­sures have led to a widening disconnect between the revenue base for the programs and the increas­ingly generous benefits promised by Congress. Worse still, programs like Social Security and, in particular, Medicare have steadily come to be viewed as a system of generous benefits to the mid­dle and upper-income classes rather than as a basic system of protection against uncertainty and need.

For these reasons, our social insurance programs have slowly created a massive and immoral shift of wealth and obligation from today's middle class to future generations. Medicare alone now has a $32 trillion unfunded obligation-a tab that is being passed to our children and grandchildren. Medicare and Social Security together now constitute an unsecured "mortgage" of $170,000 placed in the crib of every newborn American.

Needed: A Return to First Principles
If we are to restore the American idea of the social contract, we need to return to the basic prin­ciples of mutual obligation within a framework that is financially responsible and just. This will involve at least four steps.

First, we must gradually transform our existing social insurance programs into "true insurance." This means that we should begin to restrict the availability of benefits in Social Security and Medi­care to those who really need assistance while strengthening the benefits for those who find the existing assistance to be insufficient.

This step would return these programs to the basic principles of the American idea of the social contract, in which we all contribute as members of society to the protection of ourselves as individuals through social programs and the assistance is limit­ed to what is needed to enable a person to return to independence. Today, Social Security and Medicare violate that basic principle.

Second, we need to decide as a nation how much of our resources we are willing to contribute to such programs, given America's economic resources and the other goals of our society. Today we do not do that. Major entitlement programs, such as Medicare and Social Security, are open-ended, one-way com­mitments in which an individual can legally claim benefits. They will be paid by society whether or not the individual needs them and without regard to the financial burden on future generations. These enti­tlements automatically preempt resources for other needs, such as education or defense.

We need instead a budget process that encourag­es lawmakers to set priorities and make rational decisions between competing priorities. To do that, we would have to make a number of changes in the laws governing the budget process. For example, Members of Congress today vote on a budget with­out being forced to consider any information about the long-term unfunded obligations that may occur as a result of their decisions and without having to vote explicitly on raising those obligations. That needs to be changed, with Members of Congress forced to vote up or down to authorize any increase in total unfunded obligations.

More broadly, we need to end the special status of entitlement programs that allows them to pre­empt all other needs, replacing open-ended obliga­tions with fixed budgets. To be sure, it is appropriate to establish long-term budgets for pro­grams designed to protect individuals, just as many other industrialized countries do, but these budgets must be real and limited and established in the con­text of other goals. And if spending begins to exceed the budget, then the budget will be adjusted-in competition with other regular budget goals-as benefits must be curbed and refocused.

Third, we need to stimulate greater individual responsibility by encouraging more private savings and insurance among middle- and upper-income individuals. For the most part, these individuals should not be relying on social programs except for unpredictable circumstances so severe that we would not ordinarily expect an individual to have saved or insured sufficiently.

Fourth, it is time to envision a different role for employers. A strong and effective social contract requires the society or subgroup of society within which the mutual obligation rests to have a common interest as the basis of mutual support. But the place of employment typically does not exhibit these char­acteristics, so we should empower individuals and families to link the security and provision of health and financial protections to the civil society institu­tions with which they identify most closely.

Individuals and families typically turn to trusted agents to guide them in making complicated and important decisions. They choose realtors to help them buy a house, a broker to manage their invest­ments, or a college counselor to help them pick a college for their child. In each case, individuals need to be able to pick the agent with whom they feel most comfortable in entrusting these decisions.

Employers, however, increasingly are not ideal agents, given the often clashing interests of employer and employee. They are not a subset of the wider soci­ety that can be a good partner in the social culture.

On the other hand, the place of employment is a very practical location for the financial transactions associated with health insurance, retirement sav­ings, and other elements of the financial social con­tract. Payroll deductions, savings plans, and premium payments can be accomplished very easily at the place of work. So a distinction should be made in the future between the employer's role as a clearinghouse or facilitator for transactions in the social contract and the employer's role as the deci­sion-maker or sponsor.

In the future, therefore, it would make sense to retain some of these practical features associated with the employer while enabling the individual or family to choose other civil society institutions as the vehicle for mutual obligation. For instance, a family might obtain its health insurance through a group formed by a consortium of churches, which includes the family's own place of worship, or through the union the family has been a member of for many years.

But to enable this to happen, we must remove the barriers that stand in its way. In the case of health insurance, the tax code is the biggest culprit and requires structural reform to enable families to choose other agents and enroll in non-employ­ment-based insurance and savings plans without today's tax penalties. It is important, in other words, to change the tax code to make it neutral between different civil society institutions, including employers, as options for individuals and families to coalesce in obtaining mutual support.

Conclusion
These four steps are among the important actions needed to restore the American social con­tract to its original principles as a bargain between society and the individual. Refashioned in this way, our American-style social contract would be based more solidly on institutions that individuals value as integral parts of their lives, with the government dimension appropriately limited, sustainable, and more just to future generations.


Real and significant change

The takeaways from the 1994 GOP victory about what works and what doesn’t in campaign politics are important. But it’s what Republicans did with the victory that matters more as we reflect on the contract’s 25th anniversary. For Republicans after the election, the contract gave them the means to deliver a record of accomplishments that were real and significant and showed the value of conservative economic principles.

In their first two years, Republicans slowed the expansion of government and Clinton in his 1996 State of the Union famously acknowledged, “The era of big government is over.” It was a remarkable moment for Gingrich and his caucus, leaving many in the press to comment that Clinton sounded more like a Republican.

This achievement was shortly followed by welfare reform. Then in 1997, Republicans pushed through tax cuts that reflected many of the principles laid out by another conservative thinker, Jack Kemp. Not surprisingly, critics said it would increase the deficit by $400 billion over ten years.

But the tax cuts didn’t push the country into bankruptcy. To the contrary, in 1998, the budget was balanced for the first time since 1969 and stayed in balance through 2001. In fact, the country actually ran a surplus of $236 billion in 2000.

On top of that, economic growth was 4 percent or higher from 1997 through 2000, an extraordinary four consecutive years, and unemployment rates, which had been above 7 percent at the beginning of the decade, fell to under 5 percent in 1997. By the end of 2000, the rate was under 4 percent. For three consecutive years, 1997 through 1999, the economy produced more than 3 million jobs each year, a record that still stands.

The policy accomplishments of the Republican-controlled 104th Congress were remarkable. Convincing the Democratic president to get on board with a center-right Republican approach to economic growth produced one the most robust economic periods in American history.


Employment contracts in the United States: What are the advantages and disadvantages?

The first article in our mini-series for foreign companies on U.S. employment law provides a general overview of U.S. law and why employment contracts can be an effective tool to define the relationship between a company and certain employees

The default position in the U.S.

The value of certainty

An employment contract, like other contracts, creates what every business person wants - certainty, comments Alan Kaplan of Chicago, Illinois law firm Masuda Funai, a member of Alliott Group's Global Mobility Services Group. Under American law, parties in a relationship may create their own rules to govern a specific business relationship, as long as certain requirements are fulfilled.

Taking a flexible stance

However, employment contracts are not for every employment situation. Depending on the job, the type of legal relationship and the needs of the parties, the absence of a contract may serve a company better than a contract itself.

You may also be interested to read.

Employment contracts: Important considerations

Important considerations include the advantages and disadvantages of employment contracts, how a contract is formed, the various types of contracts, types of legal relationships, which may be entered into, and some commonly used contract provisions, which companies may include if the decision is made to enter into an employment contract.

The U.S. - A more complex environment for employers and employees

Advantages and disadvantages of employment contracts under U.S. law

In most business situations, the need for a written contract to define the rights and obligations of each party in a legal relationship is imperative. Contracts create certainty. The parties may easily determine the consequences of their actions or inactions by consulting the contract.

What is 'employment at will'?

As a result of this type of relationship, either the company or the employee may end the relationship at any time, for any reason or for no reason at all, and without advance notice to the other party.

The exceptions that provide protection for employees

The only exceptions to the “at will” relationship are those created by statute or courts. For example, the United States Congress has enacted statutes protecting definable groups of employees. Companies may not discriminate between employees based upon their race, color, religion, national origin, gender, pregnancy, age or disability. Many states have also enacted similar laws and some state statutes protect against discrimination based upon such characteristics as marital and family status, sexual orientation, height and weight. In addition, the Federal Fair Labor Standards Act sets forth rules on minimum wages and the payment of overtime pay to certain employees. Many states have statutes and regulations on the time for payment of wages, vacation pay, bonuses, commissions as well as hours of work and breaks.

Courts have also created exceptions. For example, courts have ruled that “public policy” protects certain employees from retaliation. If a state provides workers’ compensation insurance for injuries at work, a company may be prohibited from terminating an employee who has made or might make a workers’ compensation claim.

With these exceptions, employees have some protection and companies must carefully make employment decisions. Therefore, a written contract providing more protections may not be necessary. However, companies and employees may need an employment contract for certain types of employees. These include executives, employees engaged in highly sensitive or technical positions and sales persons. When determining whether to enter into an employment contract, employers must consider the advantages and disadvantages.

The advantages of an employment contract

Freedom: By using different contract provisions, the parties may tailor the relationship to meet the company’s and employee’s objectives

Clarity: With a written contract, both parties to the contract are more clearly aware of both their respective rights and obligations

Limited duration: The duration of the employment relationship may be established so that each party may make future preparations. In the absence of an employment contract, the employment is “at will.”

Increased morale: Employee morale can be enhanced due to the sense of security created by the employment contract

Non-competition: Companies may include restrictive covenants to protect its interests during and after employment from competition and solicitation of its other employees and customers

Dispute resolution: Contracts may include methods of dispute resolution, including arbitration, which may be more inexpensive than litigation in a court.

Protection for ideas: Companies may include provisions, which protect any intellectual property rights during and after the time of the employment. For example, the contract may provide that any inventions created by the employee are the company’s sole property when the employment terminates.

Choice of law: Because American employment law is based on state law and because each of the fifty states have different laws, a provision in the contract which specifies the state’s law which will be applied adds more certainty to the rights and obligations of the parties involved in the employment relationship.

The disadvantages of an employment contract

Lost flexibility: Upon execution of the contract, the company may lose the flexibility it had to change the terms of the employment relationship or to terminate the employee at will

Paperwork: Administrative burdens are created upon execution of the contract, such as requiring the company to keep track of renewal dates and complying with notice requirements. The company‘s failure to exercise certain rights may result in the inadvertent renewal or extension of a contract

Lost incentives: The sense of security that the employment contract creates in an employee’s mind may affect his performance by decreasing motivation to do good work

Adverse interpretation: If a dispute arises over a contract provision, a court or arbitrator may interpret the contract differently then intended by the parties.

Increased damages: If a company is found to have breached an employment contract, the employee may be awarded the full contract value, which could be greater than the amount to which an at-will employee would be entitled.

Get advice on employment contracts

The above article provides only a general overview of American law - one 'American' law does not exist. For employment law advice specific to Chicago, Illinois, please contact in the first instance Alan Kaplan at Masuda Funai.


A Brief History: American Still Has No Joint Contract With Its Mechanics and Rampers After Five Years

The rhetoric has ramped up dramatically, and the lengthy contract negotiation between American and both its mechanics and fleet service workers (aka rampers) has now spilled over into the public eye. American has sued for an injunction to prevent the mechanics from orchestrating what it says is a slowdown. (You can read the filing for yourself and decide if you agree.) And the unions are vocally lambasting the airline. If you haven’t seen this video of American President Robert Isom getting an earful from the TWU President John Samuelsen, then take a look. It will sum up the current state of affairs between union leadership and management. It’s not good.

Whether there is a slowdown or not is a sideshow. Sure, it’s the main point if you’re an impacted traveler, but I’m talking about this from a business perspective. It’s a symptom of the broader issue that American and its mechanics/rampers still have no joint contract more than five years after the merger was completed. Why is that? What are the issues? Welcome to the first of a two-part story looking at this in greater detail.

Today I’m going to focus on a look back at the last 5+ years to see how we got here. Then tomorrow we’ll look at the sticking points.

A Negotiation Deferred

Before the merger, you had US Airways mechanics represented by the IAM with American mechanics represented by the TWU. In May 2013, after the merger had been announced but before it was completed, the two unions decided to come together to jointly represent the mechanics as The TWU-IAM Association, commonly referred to solely as “The Association.” The Association was truly just two unions coming together to negotiate a joint contract. Even the head of The Association would rotate between the two unions every two years, but the pre-merger workforces would each remain members of separate unions.

I can’t speak to why they thought it was better to do this than to choose one union to jointly-represent them, and neither can TWU President John Samuelsen. When we spoke for this piece, he told me he didn’t know why the previous union leadership decided to move forward that way. He wasn’t involved in that decision.

Almost immediately after settling on this way forward, the Teamsters tried to take advantage and win a representation fight against the IAM at US Airways. That was a significant and annoying distraction. By the time the merger was completed in December, the representation fight had been resolved (the IAM won, obviously), but it certainly further delayed negotiation preparation.

That was hardly the only issue. The US Airways group had been working under an amendable contract for three years, and they wanted that to be settled before any joint negotiations were to begin. As the IAM District 141 President noted:

As long as this management team refuses to settle a fair contract, approximately 32,000 employees will remain separated and the merger’s synergies will not be realized.

That negotiation spilled into 2014 when it was finally resolved. A new agreement was voted in during July of that year, so then they could finally focus on a joint agreement, right? No, because The Association still wasn’t recognized as the bargaining agent.

In August of that year, The Association filed the request to have the airlines recognized as a single carrier. That would lead to the National Mediation Board (NMB) certifying The Association as the bargaining agent, but it didn’t come through until April 2015. Then the two unions went through a reconciliation process between the two contracts, and they prepared themselves to negotiate. Negotiations finally began on December 3, 2015, two years to the day after the merger was completed. That’s really when the clock should be started it’s been more like 3+ years instead of 5+ years.

The Raise That Shouldn’t Have Been

Negotiations continued into 2016, and there was no resolution. But you may recall that back in mid-2016, American management decided it wanted to give workers raises outside of their contracts so they could benefit from the company’s success even if they couldn’t come to a full contract agreement. In August, it was announced that The Association members would get raises of 22 to 24 percent on average (the small delta depending upon which side you believe) beginning in November 2016. In exchange, the unions agreed to let legacy US Airways employees work on American aircraft and legacy American employees work on US Airways aircraft. This was a minor trade for the unions to get such large raises, but it has come back to haunt the company to this day.

With higher wages in place, it took the pressure off getting a deal done. Sure, there are many issues beyond wages, but that was one big issue that could have kept the heat on getting to a deal. Further, the union was able to twist this minor giveback allowing crews to work on the other legacy airline’s aircraft as a trade for the wage increase when it was not even close to an even exchange. Instead of pushing things along, they started going backwards.

Changing Tactics

By the summer of 2017, things still weren’t going anywhere, so American tried a different approach. Instead of negotiating point by point, it put out a comprehensive proposal that it wanted The Association to evaluate. This did not go over well, as you can see in this post where it calls the proposal “garbage.”

At the end of summer 2017, American CEO Doug Parker made his fateful proclamation that American would never lose money again. Even though his point was to suggest that the industry had changed and investors should recognize that, this statement was, to be kind, ill-advised. It became a rallying cry for The Association. It emboldened them further, and they break this quote out regularly as a reason that the airline should be able to give their members what they want.

Since then, there has been some movement but nothing significant enough to really move the needle. The company has improved its offer, including, as I understand it, higher wages in light of Southwest’s new contract and more job protections. But the union leadership is clearly not satisfied and isn’t even close to allowing a vote by the membership.

The National Mediation Board was brought in to, well, mediate, late last year. The last session ended in April without an agreement. There may be more sessions in the future, but nothing is scheduled. This appears to be a stalemate at this point, and that might explain why you see more heated rhetoric and discussion of a slowdown. John told me that he “absolutely, totally believes [American] to be our enemy.” Is it bluster in the face of negotiation? Of course. It’s getting pretty vicious and that’s not helpful.

Tomorrow I’ll dive into what the issues are that seem to be preventing a joint contract from being agreed upon.


Social Contract for Everyone

As with many philosophical ideas behind the political theory, the social contract has inspired various forms and interpretations and has been evoked by many different groups throughout American history.

Revolutionary-era Americans favored social contract theory over the British Tory concepts of patriarchal government and looked to the social contract as support for the rebellion. During the antebellum and Civil War periods, social contract theory was used by all sides. Enslavers used it to support states' rights and succession, Whig party moderates upheld the social contract as a symbol of continuity in government, and abolitionists found support in Locke's theories of natural rights.

More recently, historians also have linked social contract theories to pivotal social movements such as those for Native American rights, civil rights, immigration reform, and women's rights.


Watch the video: Gingrichs Contract with America: The Power of Conservative Ideas (November 2022).

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