(FORTUNE Magazine) – In Washington, at least, organized labor is back. The AFL-CIO almost single-handedly defeated fast-track trade legislation last year, won an increase in the minimum wage the year before, and, overall, has won new respect (and instilled considerable fear) among the political classes by unleashing millions of dollars at election season. In FORTUNE's first annual survey of interest-group clout in the capital--the Power 25 (Dec. 8, 1997)--the AFL-CIO ranked a formidable No. 3.

But now business interests are coalescing around a devilish payback that has a strong chance of stopping labor cold. The so-called Paycheck Protection Act would require unions to get permission from each member before using a penny of his or her dues--which typically amount to $20 to $60 per month--for political purposes. The effect would be momentous: the end of labor as political kingmaker.

The evidence is already in. After a version of the measure passed in Washington State in 1992, the number of members in the state employee union who opted to devote part of their dues to political action dropped from 40,000 to 82. Similar declines are expected anywhere it passes. That could be soon in California, which is set to vote on a ballot initiative June 2. And at least 16 other states are either slated for November referendums or likely to see bills coming from GOP-controlled legislatures. The U.S. Congress debated its own bill last month, though pro-labor Democrats went on to kill it in the Senate.

It will be hard for labor to hold back the tide. Polls have shown that more than 70% of voters favor the proposal. Advocates ask, "If corporate executives have to volunteer their donations to the company political-action committee, why not union folks?" The cause is even more compelling, they add, given that the AFL-CIO supports Democrats almost exclusively, while about a third of unionists are Republicans. And besides, who wouldn't choose to give himself a raise by keeping the portion of dues (up to 20%) that goes to uses other than organizing and collective bargaining?

Still, the AFL-CIO won't go down quietly. It complains that groups such as the Christian Coalition, the Sierra Club, and the National Rifle Association use a slice of their dues for political work but won't be touched by the act. (Of course many of these were intended to be lobbying groups, and unlike unions, no one is forced to join them.) Labor also points out that corporations spend millions from their treasuries on politics every year without asking shareholders'--or profit-sharing employees'--permission. So in California it is staging a gigantic PR campaign to deride supporters of the act as right-wing extremists determined to hurt "working families," not just by throttling unions but by gutting Medicare and Social Security.

In fact, the effort is pretty mainstream. (California governor Pete Wilson is leading the charge there.) But the drive is intensely partisan, a direct result of the $35 million the AFL-CIO spent in so-called soft money to help elect Democrats in 1996. No one challenges the unions' right to raise "hard money" PAC funds from individual members. It's the piles of unrestricted soft money the GOP wants to stop--at least when it comes from labor. With the Paycheck Protection Act, it might well succeed.

--Jeffrey H. Birnbaum