Stop Paying the Rich and Uphold Workers’ Rights
Time for a New Direction for the Economy
The brutal attacks on Boeing workers and on the workers and people of Detroit bring to the fore the lack of power and control that workers have over their own affairs, over matters that affect them directly. The massive destruction of manufacturing that has occurred in Detroit, alongside the massive pay-the-rich schemes, including the federal bail out of GM were not decided by the workers. The bankruptcy now being imposed, with its stealing of pensions and fire-sale of public assets is also out of their control. Similarly the attacks by Boeing on Seattle workers, and now their efforts to bribe state-level governments across the country for handouts, show the lack of control over matters that impact the workers and their cities.
As resistance continues to develop, this lack of power and control over workers’ own affairs must be addressed and changed through organized actions with analysis. The working class movement must gain political power to deprive the global monopolies and their political representatives of the power to attack the working class and the security and well-being of all.
Boeing’s demand for concessions and Detroit’s Emergency Manager’s demand for concessions are based on the capital-centered view that productive assets, workers and the production process itself are costs. This is harmful to the modern socialized economy. Within the backward capital-centered outlook, destruction of productive assets and production itself — as has occurred in auto — becomes a virtue. This destruction includes that of the central role of the human factor. Workers are viewed as costs, which must be reduced. With this mindset, the focus becomes the lowering of costs not solving the problems of a socialized economy. The result of not moving forward is recurring problems and crises, which the monopoly owners respond to with more demands to lower costs, and more demands for public funds, as Detroit and Boeing both show. With this retrogressive approach, the working class suffers and the well-being and security all is put in jeopardy.
The working class has the social responsibility to bring its own outlook and thinking to political economy. It must strengthen its organization and voice in the community and take up politics as a central preoccupation. No other force is going to defend workers and fight for their well-being, security and rights. No other social force has the capacity to defend the socialized economy from the imperialist gangsters like Boeing and Bank of America.
Through their own organizations and media, the working class movement needs to mobilize itself and public opinion to look at the world with a modern viewpoint and definitions and fight for a new direction for the economy. The working class needs control over those things that affect their lives of which the economy and politics are central. The working class needs the organizational ability and power to deprive U.S. finance capitalists of the power to control and ruin the lives, economy, security and well-being of workers.
State and federal governments must also be held to account. It is a crime that a giant monopoly like GM is given tens of billions, while the workers of Detroit, who produced the wealth that GM controls, are forced into poverty or driven out of the city in search of work. Federal and state intervention in the economy, including the massive amounts of public dollars handed over to the rich, is serving these private interests. This is not acceptable.
The pro-social program that favors the interests working people is: Stop paying the rich! Increase investments in social programs! Our Security Lies in the Fight for the Rights of All, Abroad and at Home! Claims by the politicians and proposals that suggest yet more attacks on workers, more privatization, more paying of the rich will serve to overcome the crisis must be rejected.
A new pro-social direction for the economy is required to resolve the crisis in a manner which favors the people, not the rich. A new direction for political affairs that contributes to empowering the people while depriving the monopoly owners of their power and control is also needed to open the path to progress.
Boeing Demands More Public Dollars with Blackmail of Jobs
Boeing, the giant military monopoly, has instigated a competition among states to see which one will hand over more public dollars to this highly profitable monopoly. Boeing is the aerospace and military industry’s largest monopoly with its highest profits. With a $319 billion backlog of orders — about 3,700 planes —the monopoly is set for years to come. Last year, Boeing secured $6.3 billion in what the monopolies call profits, meaning they secured even more in the wealth produced by the workers but which the monopolies label as “costs.”
The Seattle area has historically been home to Boeing’s main workforce. With a 100-year history in the Puget Sound region, Boeing remains the area’s largest employer, with more than 80,000 workers — far larger than the 40,000 who work for Microsoft, for example, and far more than any other state.
Boeing workers have a fighting tradition and have fought hard for the living standards they have secured over the years. They are anchors of Seattle communities and integral to their stability. As an example of their stand to defend their communities and their future, Boeing workers defeated recent efforts to impose major concessions in wages, benefits and working conditions (see p.1).
Washington State on the other hand is doing its best to pay even more to Boeing, using tax breaks and other pay-the-rich schemes. Washington already agreed to a record almost $9 billion in handouts to Boeing. The $9 billion measure would extend aerospace tax breaks set to expire in 2024 through 2040 and enact additional incentives for building airplane factories — on the condition that Boeing site its 777X wing fabrication and final assembly in Washington State. When the workers voted down Boeing’s demands for concessions, the monopoly then demanded even more from the state and that it join in calling for the workers to accept concessions.
In addition, Boeing announced it was going “shopping” in other states, looking for cheaper labor and more handouts to produce its newest line of passenger jets, the 777X. Boeing has called Utah, California, South Carolina, Texas, Missouri, and at least seven other states demanding that they quickly submit proposals as to how much in public dollars they would give Boeing. The Governor in Missouri, for example, called the state legislature back to session to consider $150 million in tax breaks and other handouts like free training at community colleges, infrastructure, and more.
It is the responsibility of governments to defend the interests of the people. Instead these state governments are scrambling to hand over public dollars to Boeing, to serve its private monopoly interests. And they are doing so while also cutting social services and wages and benefits of state public workers, claiming “no money.” The governments are taking these actions in the name of jobs, even while Boeing refuses to guarantee anyone anything. It has a history of securing concessions and tax breaks in one location and then moving jobs elsewhere anyway.
The situation makes clear that the current governments are facilitating efforts by the monopolies to secure more and more of the public treasury while also forcing down the living standards of the workers. They are intervening in the economy against the interests of the workers and the public more generally. The state governments, like the economy, are headed in the wrong direction, one that is anti-worker and anti-public.
Conditions are showing that there is a need for a new direction for the economy and political affairs, where these governments acting as servants to the private monopolies are replaced by the workers themselves, acting to defend the public interest. Just as Boeing workers said no to concessions, to defend the rights of workers in all these states the stand to take is Stop Paying the Rich! Defend the Rights of Working People!
Judge Rules Against Detroit Workers,
On December 3 federal Judge Steven Rhodes ruled that the City of Detroit can proceed with bankruptcy, including cutting pensions. Detroit’s Emergency Manager, Kevin Orr, who controls governance and budgets of the city, said he will definitely cut pensions. According to reports, workers could be forced to accept receiving only 16 cents on the dollar. The pensions involve about 21,000 retired workers and another 9000 active workers. The various unions opposing the bankruptcy immediately filed appeals, but the bankruptcy will proceed during the appeals.
Detroit’s workers have repeatedly faced attacks on their living standards, through repeated attacks on public sector workers and the massive lay offs in the auto industry — even while GM got billions in federal funds (see page 12). Public sector workers already were forced to take a 10 percent pay cut, health benefit cuts and a 40 percent cut in pensions for new workers, and now face more. The 2012 concessions represented about $160 million annually. Many public sector workers, like firefighters, are not eligible for Social Security so their pensions are all they have in retirement.
The city’s residents were also among the hardest hit by the massive foreclosures imposed by the financiers as they secured untold billions. The unemployment and foreclosures together robbed the city of much needed revenue. In addition, while the state and emergency manager continue using public dollars to impose various pay-the-rich schemes, the state also cut funding to Detroit by $66 million between 2011-2012 and continues to do so.
The bankruptcy ruling also means public assets, such as water and sewer services, the island park Belle Isle, and the Detroit Institute of the Arts and all its collection, can be sold at what will no doubt be fire-sale prices. Water, sewer and garbage will likely not only be sold off but privatized as well, meaning residents will face increases in costs and decreases in service.
Constitution No Protection
The unions had argued in court that Michigan’s Constitution protects pensions. It reads: “The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof and shall not be diminished or impaired thereby.” The judge ruled that even though the Emergency Manager did not bargain in good faith with the union, the bankruptcy could proceed. He said federal bankruptcy court trumps the state constitution and that pensions could be cut.
This is a significant precedent in regards to public workers and their pensions, considered by the financiers as major “gold mines” to be seized. More than 20 states nationwide have similar constitutional guarantees and they too will now look to bankruptcy as a possible way to eliminate pension obligations. Illinois passed a law the same day the judge ruled, targeting pensions (see below). A recent law in Rhode Island specifies that in a city bankruptcy, financiers must be paid first, before pensioners.
Workers are taking the just stand that pensions belong to them by right and a country as wealthy as the U.S. has no business forcing their retirees into poverty. Governments have the responsibility to protect the workers, not come up with yet more pay-the-rich schemes, which is what bankruptcy is. The ruling by the bankruptcy judge confirmed that bankruptcy is a scheme to steal wealth — like pensions and wages, that belong to the workers by right — and hand it over to the financiers. As well, the financial “advisors,” like Ernst and Young and Jones Day are reaping tens of millions telling Detroit how to go bankrupt!
Detroit, and Michigan workers more generally are known for their high level of organization and their long traditions of struggle, including the many sit-downs organized to form unions like the UAW. Detroit is also mainly African American, a section of the class that has long been in the forefront of struggle. The attack on Detroit is testing ground, for the rich, to try and crush resistance among the workers and impose governance with no responsibility to society.
The state legislature passed a “right to be slave” labor law in December of 2012. It passed a second “emergency manager” law — the first had been defeated in a statewide referendum — two days later. Both are attacks on the rights of workers and on elected governance, with the emergency managers appointed by the governor and given sweeping powers to eliminate contracts, attack pensions, sell public assets, and more.
The Detroit bankruptcy takes this further, openly saying the state constitution has no authority. And while Detroit’s bankruptcy is government-made, with federal and state governments refusing aid and financiers once again getting paid first while workers face more attacks, giant monopoly General Motors was given massive public funds. In fact Michigan leads all other states in handouts to the rich, with the auto monopolies top of the list.
The Detroit-based auto monopolies brought in more than $12 billion in profits last year and are on course to exceed that mark in 2013. They achieved this in large part because of wage and benefit cuts imposed on the workers under Obama’s 2009 pay-the-auto-monopolies scheme. This reality, and GM’s responsibility to the city that is in large part responsible for its existence, was not addressed in the judge’s ruling.
Similarly, in his oral summary of his ruling, Rhodes completely ignored evidence presented that Emergency Manager Orr falsified the financial position of Detroit and inflated pension liability figures to provide a pretext for the bankruptcy filing. While admitting that Orr had not negotiated with retirees, unions and other creditors “in good faith,” Rhodes nevertheless concluded that the bankruptcy could go forward.
Rhodes also did not address the massive debt payments Detroit has made and the alternative to cancel these debts rather than cutting pensions. Almost 40 cents of every tax dollar collected went to paying down debt, and even more may be needed with the bankruptcy and other deals now planned.
Illinois Legislature Passes Bill Slashing Pensions
In related news, on December 3, just after the federal judge ruled Detroit could declare bankruptcy and slash public pensions, the Illinois legislature passed a bill to cut public pensions. Illinois lawmakers voted to sharply reduce the pensions of active and retired state and university employees and teachers. They did so despite broad public opposition, including demonstrations and tens of thousands of phone calls and legislative office visits by public workers.
The bill serves to grab $100 billion, taken directly from public workers who fought for these pensions. The measure also raises the retirement age, up to an additional five years for many state workers. It reduces the size of cost-of-living increases for retirees and even skips some years for an increase that is supposed to be annual. Using the Michigan example, where the federal judge ruled pensions are not protected by state constitutions, the Illinois lawmakers also passed a bill that violates that state’s constitution. They expect the courts will also side with them.
Detroit Bankruptcy Judge Declares Exclusive
Detroit firefighters and other city workers shouted out “This is war” in protests in July, after U.S. Bankruptcy Judge Steven Rhodes declared exclusive federal jurisdiction over actions related to their pensions and all matters connected to Detroit’s historic bankruptcy case, both present and future. The bankruptcy filing is the largest in the history of the U.S.
Judge Rhodes’ sweeping order is significant particularly because it takes the issues out of Michigan’s state courts. The Michigan Constitution has strong provisions protecting public retiree pensions, whereas there are no such protections under federal statutes.
“It was argued today that perhaps the exclusive grant of jurisdiction to the Bankruptcy Court in Chapter 9 is unconstitutional,” Rhodes said during his ruling. “I find nothing in the 10th amendment or the more ambiguous concept of federalism to support that. In all of the other recent Chapter 9 cases, the Bankruptcy Court determined eligibility. This is entirely consistent with the bankruptcy and supremacy clauses of the Constitution. There is nothing in Title 28 jurisdictional provisions that suggests that Congress intended for state courts to have jurisdiction.”
The 10th Amendment to the U.S. Constitution says, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.”
His ruling as finalized reads in part, “Pursuant to section 105(a) of the Bankruptcy Code, the Chapter 9 Stay hereby is extended to apply in all respects (to the extent not otherwise applicable) to the State Entities (defined as the Governor, the State Treasurer and the members of the Loan Board, collectively with the State Treasurer and the Governor, and together with each entity’s staff, agents and representatives), the Non-Officer Employees and the City Agents and Representatives.
“For the avoidance of doubt, each of the Prepetition Lawsuits hereby is stayed, pursuant to section 105(a) of the Bankruptcy Code, pending further order of this Court.
“This order is entered without prejudice to the right of any creditor to file a motion for relief from the stay imposed by this order using the procedures of and under the standards of 11 U.S.C. § 362(d)-(g).”
Judge Rhodes Grants Jones Day Motions
Judge Rhodes’ sweeping order completely granted “stay” and “extended stay” motions by the City of Detroit, as represented by Emergency Manager Kevyn Orr and the megalith, ultraconservative Jones Day law firm. Jones Day was hired after mass opposition from Detroit residents who said it represents most of the city’s corporate creditors in other matters. [Note that Kevyn Orr was part of Jones Day before becoming emergency manager — VOR Ed.]
Jones Day has a team of five in town handling the bankruptcy and debt re-structuing, including its Managing Partner [i.e. CEO] Stephen Brogan. Attorney Heather Lennox argued their case July 24.
Lennox, of their Cleveland office, according to the law firm’s website, is “a restructuring partner, has counseled manufacturing clients in various industries through bankruptcies involving significant changes (both negotiated and court-imposed) to collective bargaining agreements, retiree benefits, and pensions affecting various unions.”
National Attack On Pension Rights
Attorney Jerome Goldberg of the Moratorium NOW! pointed out the national implications of Judge Rhodes’ order.
“Detroit is now in the forefront of what amounts to a national attack on the working class and pensions across the country orchestrated by the ruling class and banks who caused this crisis,” he said, speaking outside Rhodes’ court July 24.
“Twenty-four other states have constitutional protections of public pension benefits,” Goldberg explained. “Michigan’s law is among the best. If it is eviscerated here, this will be a signal to the other states. The real secured debts are the pensions, secured by the workers who sacrificed higher pay for them. The city’s debts to the banks must be cancelled. They have committed predatory lending both to homeowners resulting in massive foreclosures that have devastated Detroit, and to the city and other municipalities, out of greed for profits.”
GM Bailout Proves U.S. State Serves Narrow Private Interests
The U.S. Treasury announced on November 21 that all remaining U.S. government-owned General Motors’ stock would be sold by the end of this year. The sale will complete the U.S. government bailout of GM, which began in 2009 with $50 billion of public funds channeled to GM from the U.S. Treasury. Another $10.6 billion from the public treasuries of Canada and Ontario. In return for the $60 billion, the three governments received new GM stock. The final sale of all U.S. Treasury-held GM shares on the New York Stock Exchange will fall around $10 billion short of its share of the bailout.
The bailout of GM was part of the Troubled Asset Relief Program (TARP) created by the U.S. Congress during the economic crisis in the fall of 2008.
New GM’s IPO
The U.S. Treasury received 912 million shares in exchange for the $50 billion bailout. In November of 2010, the Treasury organized an initial public offering (IPO) on the New York Stock Exchange where it sold 412 million of its GM shares for $33 per share totaling $13.596 billion. The Obama administration gave many of the same enterprises, which had been accused or charged with financial malpractice leading to the 2008 crisis, the richly rewarded task to organize the GM IPO and have first access to purchase the stock. The usual suspects selected were Morgan Stanley, J.P. Morgan, Bank of America, Citicorp, Goldman Sachs, Barclays Capital, Credit Suisse and Deutsche Bank. These same financiers are now involved in reaping rewards from Detroit’s bankruptcy.
The IPO turned over the company to private interests at a nominal price and with little debt. The most crucial aspect however is that the new GM no longer held any social responsibility for contracted health care obligations to more than 340,000 GM retirees and their spouses. Obama had blackmailed autoworkers into accepting this concession with a threat of no bailout and complete collapse and loss of livelihoods if workers did not agree. Also, autoworkers had to accept a two-tier wage and benefits regime, which reduced wages to $14 for new hires and liquidated the defined-benefit pension plan. No alternative to a capital-centered bailout and workers’ concessions was discussed or allowed to enter the public consciousness.
At the time, President Obama said the restructuring of GM would, “require the United Auto Workers to make further cuts in compensation and retiree health care benefits — painful sacrifices on top of all that they have already done.” The conception that workers should accept concessions to ensure future prosperity and that public resources be made available to private interests is deeply engrained in the capital-centered view, which must be challenged. The practice of paying-the-rich and demanding -concessions from workers solves no economic problem. It concentrates wealth and power in fewer hands and impoverishes wider and wider sections of the working class generating greater insecurity. The fundamental problem of a socialized economy captured in the hands of competing private interests is left unresolved.
After the IPO, the remaining 500 million GM shares held by the U.S. treasury would have had to reach a price of around $73 per share to return the $50 billion in whole. However, during the current stock market bubble affecting mostly tech stocks, the new GM stock has only climbed to $38. At the time of the November 21 announcement of final liquidation of all stock by the year’s end, the U.S. Treasury still held 31.1 million shares and said its total shortfall on the bailout would indeed be around $10 billion.
Discussion Around the GM Bailout
Timothy Massad, the U.S. Treasury’s Assistant Secretary for Financial Stability said that exiting the GM investment “is consistent with our dual goals of winding down TARP as soon as practicable and protecting taxpayer interests.”
“Had we not acted to support the automotive industry, the cost to the country would have been substantial — in terms of lost jobs, lost tax revenue, reduced economic production and other consequences,” said U.S. Deputy Assistant Treasury Secretary Tim Bowler.
U.S. economic analysts and owners of GM stock were elated with the U.S. Treasury announcement. One of the restraints of government stock ownership was a prohibition on GM paying a dividend.
“The first step will probably be a dividend,” said Michelle Krebs, an analyst at auto researcher Edmunds.com. “That will be a significant move toward normalcy as they become a truly publicly traded company. They’ll also be able to pay executives more money, which has been a constant complaint.”
“The new freedom could allow GM’s management to return capital to shareholders in early 2014,” wrote Joseph Amaturo, an analyst at New York-based Buckingham Research Group, in a note to clients. “An 80 cents-a-share annual dividend is a possibility, which would be a payout of $1.2 billion a year.”
“This board understands our shareholders are in here to get a decent return on their money,” GM CEO Dan Akerson told analysts on an October conference call. “We understand what we’re here for and one of them is to return money to our shareholders. And that will be a continuing theme not only this quarter, but the next year and the year after.”
“If GM doesn’t move quickly to return money to shareholders, either through a dividend or a share repurchase, the automaker may face activist investors trying to force the action,” said Harry J. Wilson, founder of restructuring adviser Maeva Group LLC in Westchester, New York. Wilson was a member of the Obama auto task force that helped restructure GM.
“Our goal was never to make a profit,” said an anonymous U.S. Treasury official quoted in the mass media. “It was to save the U.S. auto industry.”
The Necessity for a New Direction for the Economy
The lowered claims of current and retired U.S. autoworkers on the value they produce and stronger vehicle sales since the crisis have resulted in a GM cash balance of $32 billion as of this past September. To save the U.S. auto industry until its next collapse is equated with serving the narrow private interests of finance capital. Not one executive, expert or government official suggested using GM’s $32 billion cash balance to make whole the autoworker pension funds, which are currently underfunded by $27 billion. Nor did they mention recognizing the rights of current and retired autoworkers and eliminating the two-tier wage system and bringing all wages up to an acceptable U.S. standard. Nor did they insist on restoring the lost health care benefits for retirees. Nor did they say that at the very least the new GM should return all public money given to it in both the U.S. and Canada.
The refusal of executives, experts and government officials to use the GM cash surplus in the public interest and to uphold the rights of workers proves that state intervention in the economy is not to solve problems in the broad public interest and find a new direction for the economy that extricates it from recurring destructive crises. On the contrary, state intervention in the economy is to serve narrow private interests and above all else preserve the capitalist status quo and class privilege. They also deny that TARP and other continuing measures to pay-the-rich such as quantitative easing pouring money into the big financial enterprises, and the financing of one overseas war after another have bankrupted the U.S. government and starved social programs and public services of necessary investment funds.
The U.S. Treasury announcement to sell all its remaining GM stock gives the working class much to think about and discuss. Exposure of state monopoly capitalism and its use of political power to attack the working class and extort concessions to benefit the monopolies and its use of public funds to serve narrow private interests reveal the necessity for a pro-social alternative and a new direction for the economy and political affairs. The working class itself is responsible for charting a way forward for socialized humanity guided by its own human-centered agenda to guarantee the rights of the working class and the well-being of all, and to uphold in practice the broad public interest and the general interests of society.