Sept. 6 (Bloomberg) -- This should be a renaissance for the American labor movement.

Unions played a big role in electing Democratic President Barack Obama last year and supported more winning members of Congress than at any time in ages.

Moreover, labor should offer an antidote to corporate greed and malfeasance. A sound economic expansion requires “benefits that are more broadly shared,” says top White House economic adviser Larry Summers, and that requires “a healthy and well- functioning trade union movement.”

Yet on this weekend devoted to American labor, the optimism of only a few months ago is fraying. Important legislative initiatives seem stalled and schisms persist among leading unions.

“Labor should not be written off,” says Kate Bronfenbrenner, director of labor and education research at Cornell University, “but labor has been hard hit by the economy, by a well-organized business opposition and by its own mistakes.”

Labor did see a small increase in membership last year, reversing a long decline. Still, only about 12.4 percent of American workers belong to unions, including 7.6 percent of private industry employees, about half the level of a quarter- century ago. The hopes for gains in organizing by more aggressive groups like the Service Employees International Union and the International Brotherhood of Teamsters have been partially thwarted by economic dislocations.

Town-Hall Uproar

The overhaul of the health-care system, a top organized- labor priority for decades, is in perilous shape in Congress. Especially grating to some union officials was the outpouring of opposition during the August recess; by contrast, not many union workers, at least ones who support the health-care revamp, showed up at the town-hall meetings held nationwide.

Labor leaders insist it’s not their members out there protesting and say the resistance is mostly political: “It’s organized by the right-wing elements in this country,” charges Teamsters President James Hoffa. “The people out there screaming and yelling, do you think these people voted for Obama? Those are basically people that are challenging his right to be president.”

Perhaps. Yet more than a few Democratic elected officials in Washington say that suggests all the passion is with the health-care reform opponents and not with their union backers.

Public Option Split

And while labor leaders share the same goal, there are differences over how to get there. Hoffa says establishing a government-run entity to compete with private health insurers isn’t crucial for good legislation; Richard Trumka, likely the next president of the AFL-CIO, the main labor federation, says a bill without that so-called public option would be “useless.”

Labor’s other priority, a measure making it easier to organize workers, which unions say is necessary after years of Republican administrative decisions favoring business, is also encountering resistance in the Senate, even from some Democrats. It remains to be seen whether sometime later this year a compromise can be crafted acceptable to unions and those wavering Democrats, as Senate Majority Leader Harry Reid vows.

If labor fails on the so-called Employee Free Choice Act it would be a huge blow and likely produce internal and political recriminations.

Recalcitrant Democrats will pay a price in the next election, officials warn. “Those people out there that say they’re Democrats,” says Hoffa, “and see our ideas and can’t back us on something that’s so basic as this, we’re certainly scoring and looking at it” as a “litmus test.”

Union Breakup

Some analysts wonder whether labor can be effective on both legislative and political matters when it is divided. Four years ago, seven unions, including the Service Employees, the Teamsters and the United Food and Commercial Workers, broke from the AFL-CIO, which they said wasn’t aggressive enough in organizing and on other matters. They formed the “Change to Win” coalition.

There are moves to get these factions back together so labor can present a more united front. Former Michigan Congressman David Bonior has been tapped to try to reconcile some issues; it’s a tough task.

Originally, it was thought unity might occur after the current AFL-CIO president, John Sweeney, stepped down. Sweeney and Andy Stern, head of the Service Employees, are enemies. The federation, however, has tapped Trumka, former head of the mine workers, to succeed Sweeney this month; his relations with Hoffa and some other Change to Win leaders are also bad.

Discord Within

A few of the Change to Win unions, most importantly the United Food and Commercial Workers, might rejoin the old federation, and Change to Win is full of its own discord. But leaders like Stern and Hoffa say they have no intention of joining forces with their old adversaries.

“They’re going to fail if they keep this fight going,” Professor Bronfenbrenner says.

Even some top AFL-CIO officials worry that she’s right. “Labor unity would get us out of our comfort zone, which we can ill-afford right now,” says the president of one major AFL-CIO union, who requested anonymity because of the friction.

Labor ultimately has to rely on the White House. The Obama administration has made some important administrative decisions, such as favoring federal contracts for firms that are unionized and making key appointments to the Labor Department and regulatory bodies that are far more labor- friendly than were the Republicans.

Unhappy With Obama

There are tensions, too. Unions wish the administration would push harder on the Employee Free Choice Act; Obama aides say health care comes first. And labor leaders are unhappy over what they see as the White House’s coziness with Wall Street and the president’s refusal to adopt a protectionist agenda.

There are Democratic politicians including Bonior and White House Chief of Staff Rahm Emanuel, once chairman of the House Democratic campaign committee, who could serve as a bridge over disagreements.

However, the most cohesive influence with all elements of labor -- indeed, unions’ leading political ally for decades -- and with other Democrats was the recently deceased Senator Edward M. Kennedy.

(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)

To contact the writer of this column: Albert R. Hunt in Washington at ahunt1@bloomberg.net.

Last Updated: September 6, 2009 00:01 EDT