Week In Review
A Weekly Column by Bill Onasch
August 3, 2008
It’s the Stupid Economy
There were some eye-popping quarterly profit reports prominent in the headlines this past week. Exxon set another record with 11.68 billion dollars profit over the last three months and the rest of Big Oil was not far behind. On the other hand, General Motors lost 15.5 billion over the same period.
But much bigger numbers were buried deep in financial journals and blogs. For example, the national debt. When Bush took over from Clinton that sum stood at 5.7 trillion. Right now it’s at 9.5 trillion. The bipartisan housing bill just passed by congress, and signed by the President, authorizes a new debt ceiling of 10,615,000,000,000 dollars. As we’ve said before, a trillion here, a trillion there, pretty soon you’re talking real money.
It may not stop there. Housing faces its biggest crisis since the Great Depression of the 1930s. The new law launches a government initiative to refinance “troubled mortgages.” We should be clear: this is not a program aimed at saving homeowners houses. It is a plan to soften the impact of bank losses due to greedy but foolish lending policies during the housing bubble. As Paul Krugman noted in the New York Times, it is “implicit government guarantee that profits are privatized but losses are socialized.”
Half of the 12 trillion in U.S. residential mortgage debt is held, or guaranteed by the privately owned–but publicly backed--Fannie Mae and Freddie Mac. The twin giants have been extended an initial 300 billion line of credit. If that’s not enough the tax payers will have to come up with more–maybe a lot more.
Even workers with mortgages more conventional than the subprime scams will have trouble meeting their monthly payments if they lose their jobs, or have their work hours reduced. Plenty of both is occurring. The 5.7 percent national unemployment rate (5.9 in Kansas City) means 8.8 million are officially unemployed–up 1.6 million from a year ago. The number working part-time because their boss cut back on hours, or part-time work is all they can find, numbers 5.7 million–up 1.4 million from last year. And there are 1.6 million more long term jobless, who get downgraded from unemployed to “discouraged,” than there were at this time last year.
Even traditionally more secure employment in the public sector is taking major hits. Big layoffs and hours reductions were recently announced by municipal governments in Chicago, Detroit, Kansas City, to name just a few. The governor of California is trying to slash both state jobs and wages through executive order.
Fresh statistics on the wage and benefit front are just as grim. Employer labor costs have risen 3.1 percent over the past year. But the Consumer Price Index–revised a few years ago to grossly understate the impact of runaway food and fuel prices–rose five percent over the same period. It appears we are entering a phase known as stagflation, where prices get out of control even as the economy stagnates or contracts.
Stagflation is what made Jimmy Carter a one-term President. I vividly remember sitting across the negotiating table from bosses at Litton Microwave in 1979 while inflation was running at 13 percent. They told us they would love to give us the raise we deserved but President Carter had declared that wage and price increases should not exceed 7 percent. We were forced in to one of hundreds of bitter strikes during that period.
In Carter’s day many unions fared better because they had Cost of Living Adjustment (COLA) clauses in their contract. While COLA didn’t instantly or fully protect against inflation it made a big difference. COLA was a major factor in making auto workers the highest paid in manufacturing. But today COLA has mostly been either surrendered by unions or diverted to maintaining benefits rather than wages.
In 1992, a little known ex-governor of Arkansas defeated an incumbent President on the theme “it’s the economy, stupid.” Subsequent developments indicate such judgments of the elder Bush’s IQ were misplaced. A suggested more accurate reformulation is “it’s the stupid economy.”
McCain and Obama are bright fellows, surrounded by phalanx of some of the best and brightest economists. Yet they are if anything more clueless and timid than the current President’s dad was sixteen years ago. Aaron Bass, writing in the July Socialist Action, sums it up well,
“As the multiple and increasingly mutually reinforcing crises...escalate, neither individual actors, however foresighted or altruistic, nor the system as a whole can stop themselves from continuing to plunge ever deeper into pursuit of a dwindling pot of profits.”
In any case, it is not our job to make the system prosper. Our task is to defend the living standards and health of the working class and the environment that we live in. The program adopted at the Labor Party founding convention codified some key demands that apply more than ever today:
* First and foremost everyone, both in the private and public sectors, needs a guarantee of a right to a job at a living wage — one that pays above poverty-level wages and is indexed to inflation. We want this right written directly into the U.S. Constitution.
* Define the normal work week to 32 hours without loss of pay or benefits.
* Require twenty days paid vacation for all workers in addition to the federal holidays.
* Single-payer health insurance, publicly administered and funded.
* All workers with jobs endangered by steps taken to protect the environment are to be made whole and to receive full income and benefits as they make the difficult transition to alternative work. The cost of this Just Transition Income Support program will be paid for by taxes on corporate polluters.
You won’t hear McCain or Obama approving any of these messages in their TV ads. To defend ourselves in a stupid economy we have to show we’re smart enough to build a party of our own.
* A Tale Of
Kip Sullivan does a good job in the current issue of Labor Notes analyzing why most unions–including many on record supporting single-payer–have endorsed Obama’s health care “reform”guaranteeing a continuing role for the insurance robber barons. The same issue carries a story by Sandy Eaton exposing the “universal health care” scam in Massachusetts.
* A Day
Without Smog Is Like A Day Without Vitamin C
Among the factories closed by Chinese officials in a less than completely successful effort to clean up smog before the start of Olympic games were plants manufacturing eighty percent of the world’s ascorbic acid–used in making synthetic Vitamin C and as a supplement in a host of food and beverage products. The only major source still available is a Dutch owned plant in Scotland.
Hospital Bosses Challenge ‘New’ Union
Ten years ago 1,400 nursing assistants, transporters, and housekeepers at Stanford Hospital voted to be represented by SEIU Local 715. That is one of the locals that became merged in to SEIU’s giant United Healthcare Workers local. Now the bosses question whether they have any obligation to bargain with this “new,” unrecognized union. When Sally Lieber, the second highest official in the California Assembly, showed up at the hospital--wearing a union t-shirt--to deliver a letter protesting the employer’s stalling tactic she was denied entrance by security guards.
* No Flip
In This Flop
In our last column we congratulated the Teamsters for reversing their long held advocacy of drilling for oil offshore and in ANWR. This week we have to report that yesterday Senator Obama announced a shift in his stance on offshore oil drilling is a necessary compromise with Republicans to gain their support for his “broader goals of energy independence.” He now backs the bipartisan “Gang of Ten” in the Senate calling for offshore drilling in the Gulf of Mexico and off the Atlantic seaboard. The “broader goals” he sees ahead are having 85 percent of cars operating on non-petroleum-based fuels–mainly corn based ethanol–within twenty years and seven billion dollars in aid to the American auto industry for producing “ultra-efficient” vehicles.
From time to time readers send me stories and suggestions for material in this column. I try to use all of them–though perhaps not immediately. Because I am a staff of one I sometimes get behind in acknowledging and replying to correspondence. I appreciate and encourage all communication and ask your patience and understanding of any tardy responses.
Keep up on the latest with our Daily Labor News Digest, updated by 7AM Central, Monday-Friday.
That’s all for this week.
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