the Voice of
The Communist League of Revolutionary Workers–Internationalist
“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx
the Voice of
The Communist League of Revolutionary Workers–Internationalist
“The emancipation of the working class will only be achieved by the working class itself.”
— Karl Marx
Apr 18, 2009
Since the economic crisis began, the Bush administration and then the Obama administration have handed trillions of dollars over to the banks, financial companies and big corporations in one bailout or another. Never mind that these very same companies had brought on the crisis. Never mind that in their maddening drive for profit, these companies went on record-setting speculative binges, blowing up ever larger financial bubbles, which had already sucked up the hard-earned wealth created by the working masses.
Both the Republican and Democratic administrations said the same thing: the bailouts for big business were vitally necessary to slow and stop the economic plunge. The bailouts were said to be needed to restore the economy and rescue the broader population from the possibility of an even worse depression than the Great Depression of the 1930s, that is, mass unemployment, soup kitchens and the present day version of Hoovervilles.
Trillions of dollars later, the economic plunge is still going deeper and deeper. As for the trillions of taxpayers dollars, they now serve as a very nice cushion of profits for the bourgeoisie and financial titans, letting them better weather the crisis that they themselves brought on.
The situation for the working population is something else entirely. The government is doing nothing to protect working people from all the scourges let loose by the crisis: the housing crisis, the jobs crisis, the cuts in pay and benefits. The politicians are even slashing the government safety net, the supposed last resort to protect people from destitution and the worst misery, exactly when it is needed most ... claiming the growing budget deficit leaves them no choice. In fact, the politicians are extracting as much money as they can from all the social and safety net programs in order to hand that over to the bourgeoisie as well!
The bosses and the Democratic and Republican politicians are carrying out a combined attack on the working population.
One of the most devastating attacks has been against jobs, with 5.1 million jobs cut since the recession began in December 2007. Moreover, the pace of job cuts is accelerating, averaging 650,000 per month since October 2008.
As usual, companies in the goods-producing industries, including manufacturing and construction, carried out the heaviest layoffs, decimating more than 14% of their workforce, or more than two million jobs. Companies in the service sector also cut jobs—by close to 3%, the worst job cuts this sector has suffered in more than half a century. The financial sector cut 233,000 jobs, a new record.
Even the kinds of jobs that traditionally had been a fall-back for those out of work—retail, restaurants, customer service, temping—are growing scarce. The trade industries—retail, wholesale, transportation and warehousing—cut more than a million jobs. Retailers carried out the largest job cuts since the government began collecting data in 1939. The temp-help industry eliminated 840,000 jobs, also a record.
Finally, formerly secure jobs—in the post office, health care industry and state and local government agencies—are also facing the ax.
Of course, each individual employer’s brutal job cuts reinforced the fall in overall demand for products and services, thus leading employers to cut still more jobs, creating the kind of vicious cycle that turns a recession into a depression.
One indication of just how bad the job situation has become: for the first time since the wars in Afghanistan and Iraq turned into bloody quagmires over six years ago, military recruiters are having no trouble exceeding their quotas.
Another indication: big agribusiness is reporting for the first time that it is also having no trouble recruiting labor. Millions of immigrant workers, who had started working in this country as migrant farm labor, had been able to find somewhat better pay and conditions in construction, restaurants and manufacturing. Now that many of those jobs are gone, many immigrants are being forced back into the fields, under the same old awful pay and conditions.
The lack of jobs is also forcing immigrants to return to their home country, despite the fact that impoverishment there, which had pushed them to come here in the first place, has only gotten worse.
Top U.S. officials are forced to admit that unemployment is bad. Typical is this March 9 comment by Christina Romer, who heads Obama’s Council of Economic Advisors: "Unemployment in the United States has reached 8.1% [in February]—a terrible number that signifies a devastating tragedy for millions of American families. But, at its worst, unemployment in the 1930s reached nearly 25%."
Certainly, unemployment is not as bad as the worst of the Great Depression. It hasn’t reached the levels of 1933. But it might already have reached 1930 or 1931 levels, the depression’s earlier phase.
February’s official 8.1% rate of unemployment (by March it had reached 8.5%) cited by Romer is incomplete and deceptive. The government even recognizes this, since the U.S. Bureau of Labor Statistics also produces a broader measure of joblessness, which includes part of the people who have given up looking but still want a job, and those working part-time unwillingly and who want full-time work. According to that measure, unemployment and underemployment came to 16%, or 25 million workers, as of the end of March. Of course, this much higher official measure of unemployment gets much less publicity.
But actual unemployment is worse still. If the rate of unemployment were calculated the way it was before the Clinton administration "revised" the statistics to stop counting millions of unemployed, the rate would be even higher. A few economists, like John Williams of Shadow Government Statistics, apply the earlier government criteria and estimate the broad jobless rate to have reached 20% in March, or one in five workers.
Moreover, there are whole sectors of the labor force cut from jobs that have never shown up in government statistics. These include people who took early retirement or went out on disability only because their employer forced them out. Others now work for themselves, but gain little or no income, often as part of the underground economy. There are also the 2.3 million people (one percent of the adult population) who, at any one time, are rotting in prisons and jails in this country, by far the highest rate of imprisonment in the world. Finally, warehousing the jobless in the military—which today includes almost 1.5 million people—also hides the real extent of unemployment.
So, tens of millions of people, able and wanting to work, are excluded from the labor force in one way or another; yet they do not appear anywhere in the official statistics. As far as the government is concerned, they are invisible—hiding the true extent of the human tragedy and waste of economic potential.
Growing joblessness is one of the consequences of company efforts to cut labor costs, that is, force fewer workers to do ever more work.
With the advent of the economic crisis, still profitable companies slashed jobs in anticipation of a fall in business. Overall, U.S. businesses cut jobs much faster than the economy was shrinking. As a result, worker productivity leaped by 3.2% in the last quarter of 2008 and it was up 2.8% for the entire year. "That’s strong in an expanding economy. In a severe recession it’s practically a miracle," commented the Wall Street Journal (February 5).
Increased productivity in the teeth of such a severe economic contraction is almost unheard of. Falling production and service cuts, enormous excess capacity, workplace closings and the shift of production and distribution—all these disruptions produce inefficiencies that traditionally result in lower productivity during recessions. The increase in productivity in the current recession could only have been imposed through a ruthless attack on the labor force.
Companies already had been squeezing more work out of fewer workers for a long time. In the manufacturing sector from 1973 to 1995, the average annual increase in productivity in manufacturing was 2.7%, a high rate. But it went higher still—4.1% annually, a phenomenal rate, between 1995-2007. "As a result, productivity in manufacturing has risen by about one-third since 2000," according to a U.S. Congressional Budget Office report published in December 2008. In the service sector, productivity also increased, although not as dramatically. Once the crisis hit, the corporate job cutting machine went into overdrive. While the bosses throw millions out of work today, the bosses are pushing those left on the job to work harder and harder still.
With the threat of mass layoffs hanging over workers’ heads, employers now feel able to cut wages outright. In a national survey released at the end of January, almost half of 245 large employers told Watson Wyatt, the human resources firm, they had frozen or cut wages. Some of the biggest companies—including FedEx, Hewlett Packard, Motorola, YCL Trucking, the New York Times and Boston Globe—have imposed across-the-board wage cuts.
Today, the most high profile wage cuts are being forced on the 160,000 auto workers who still work for GM, Chrysler and Ford. Over the last two years, the auto companies had already pushed wage cuts through two-tier, in which new hires were brought in at half the wages and benefits of current workers. Now, with the strong backing of the Bush and Obama administrations, the auto companies are trying to force the rest of the auto work force to accept lower wages also. Auto workers’ wages used to be the highest among industrial workers. Now those wages are being pushed down to levels similar to those of the service workforce.
Companies have also been carrying out less visible wage cuts, through the elimination of paid holidays and vacation time, the reduction in break time, changes in overtime and premium pay rules, the elimination of COLA. Other companies—including Dell Computer, the Nevada casinos, Honda Auto, Cisco Systems and the Seattle Times—have imposed unpaid furloughs, voluntary and involuntary.
Unpaid furloughs are not new at the governmental level. The state of Michigan introduced them many years ago. But in the last several months, myriad government entities across the country have introduced them, starting with the largest of them, the state of California. There are also reports of county governments—from Ventura County in southern California to Nassau County on Long Island, New York—imposing unpaid furloughs. Government employers are also cutting paid holidays, vacations, break time, etc.
Workers’ wages had already been sliding for decades. According to the U.S. Labor Department, workers’ average real hourly wage in the private sector was nine percent lower in 2008 than the peak hit 35 years before, in 1973. By holding wage increases down, companies let inflation gradually erode workers’ purchasing power.
This erosion was much worse than what the official statistics indicate, since it is generally recognized that the government’s inflation statistics purposely and consistently underestimate the real rate of inflation. Billionaire bond manager Bill Gross calls the false inflation statistics "a con job." Bloomberg News columnist John Wasik describes it as "a testament to the art of economic spin." And Kevin Phillips, the political and economic commentator, estimates that the falsification of official inflation statistics has reached the point that the federal government "saves’ 250 billion dollars per year through reduced COLA payments to Social Security and federal pension recipients.
So even those better off workers with better cost of living allowances in their contracts are still robbed of their purchasing power through hidden inflation.
The big difference in the current situation is that, for the first time since the Great Depression, companies are openly cutting wages on a wide scale.
Companies are also axing the rest of the pay package, including retirement benefits.
Already by 2006, before the crisis struck, a majority of the work force, 57%, had no pension coverage at all. Another 30% had 401(k)"s, the kinds of pension programs that companies had used to replace traditional pensions, and only 13% had traditional pensions with guaranteed monthly benefits,
The 401(k)"s—which employers had used as the excuse to get out of their responsibility for guaranteeing pension benefits—were always highly suspect. The money that workers put into the 401(k)"s was always controlled by the employers, who selected the Wall Street companies, mutual fund families and insurance companies that handled the money, limiting employees’ investment options to costly, under-performing funds. At a Congressional hearing in February, one critic called the mutual fund industry "the biggest skimming operation in history." Putting brokerages in charge of managing the 401(k)"s is like assigning the fox to guard the hen house.
By 2007, on average, the value of what had been invested in the 401(k)"s represented about $45,000 per worker, only enough for a year or two of retirement. By the end of 2008, a good share of this was gone. First, part of the savings flow stopped when some of the biggest U.S. companies, including Eastman Kodak, Motorola, FedEx, General Motors and Ford, suspended matching payments for some or all of their workers. Even AARP did it. The stock market crash then erased about 50% of the 401(k)"s value, an estimated one trillion dollars. Finally, many workers, desperate for cash, "borrowed" money from their accounts and paid stiff penalties to boot.
The traditional pension funds also took a big hit when the financial markets imploded, losing about half a trillion dollars last year. They are now funded at only 75% of their government-mandated level. Of course, employers never put aside enough money to fulfill their promises. To make up for part of the short fall, companies threw pension money into the stock market, corporate bonds, private equity funds, hedge funds and real estate development. The bursting of financial bubbles revealed the real condition of the pension funds.
Sometimes losses in investments hid financial maneuvers. GM’s pension fund, for example, which suffered an 11.3 billion dollar investment loss, actually decreased by 32.4 billion dollars. In other words, GM took out 21 billion dollars in one way or another.
Some of the biggest companies in the country have used bankruptcy to throw their pension plans over to the Pension Benefit Guaranty Corporation, in the process cutting benefits for current retirees, as well as closing off new contributions to pensions for existing workers. Some of the most important companies in the country have gone this route since 2000, including United Air Lines, Delta Air Lines, Bethlehem Steel, US Airways, LTV Steel, National Steel, TWA, Weirton Steel and Kaiser Aluminum. Other companies, like Verizon and IBM, have locked new employees out of existing pension plans.
Public pension funds for those who work in government are worse. According to the Pension Rights Center, state and local governments set aside only 20% of what is needed to fund their promises to retirees. Very speculative investments are often used to make up part of the difference. Government officials claim that in a pinch, the tax base will make up the rest of the difference and pay the promised benefits. Of course, now that those investments have crashed, while government deficits are skyrocketing, state and local entities are crying "broke," tearing up their promises to retirees and cutting benefits outright. For example, the state of Wisconsin said that beginning in May nearly 150,000 retirees will face at least a 2.1% decrease in benefits.
Four million more workers lost employer-based health care coverage in the past year. That comes to 10,959 people losing health insurance every day. Needless to say, when laid off workers get a new job, chances are it will not come with medical benefits or, at best, with reduced benefits.
Before the crisis, the U.S. health care system was already a complete disaster. The U.S. is the only industrialized country with an employer-based health care system. In 2007, close to 50 million people at any one time were without any health coverage, including one in five working adults. Over the two years 2006-2007, 87 million people were without any health coverage at one point or another, which often meant that, when they got a new job, they were not covered for pre-existing conditions, even if they got new insurance. Those who had kept some kind of employer-paid health care coverage were still stuck with ballooning out-of-pocket expenses. In just premiums alone, costs to employees more than doubled in ten years time, hitting $3,354 on average in 2008—not counting deductibles and co-pays which have gone up even faster.
What is perhaps most striking today is the open move to eliminate retiree health benefits from pension packages. The auto companies cut this benefit from most of their white collar retirees, and schemes like the special VEBA to fund benefits were nothing but a disguised way to do the same thing to union workers. States and cities are discussing similar cuts. Some have already imposed it for those hired in recent years.
The excuse given for all these cuts as well as increases paid by employees is always, of course, "soaring medical costs."
But "soaring medical costs’ are driven by soaring profits for different corporate sectors, for which health care has become an increasingly important source of profits: insurance companies, pharmaceuticals, hospitals and the providers of medical services. Insurance companies, for example, now take close to 30 cents of every health care dollar off the top. Much of this money is absorbed by an enormous bureaucracy that seeks ways to reduce the amount of health care that people get, so that the insurance companies can keep more of the money for themselves.
The Obama stimulus plan contains a temporary subsidy of 65% of the cost of COBRA for laid off workers. Given the brutally high cost of COBRA benefits, very few of the unemployed can come up with the hundreds of dollars per month they have to pay with the subsidy. Thus it will help only the tiny minority of laid-off employees with that kind of money, and even then, for only a few months, since the subsidy runs out at the end of the year.
Once workers lose their jobs, they have little to fall back on. Close to two-thirds of the "officially" unemployed are not eligible for benefits—the worst record of any recession in the post World War II period.
The few who do get unemployment benefits are typically covered for just 35% of their lost wages, according to the Department of Labor. In 2007, the average weekly benefit for the entire country was $262, or almost 10% less than the weekly equivalent of the poverty level for a family of three set by the U.S. Census Bureau. And those benefits are taxed! Currently, federal and state taxes reduce the value of benefits by an average of 11%.
Over the years, the politicians had reduced workers’ unemployment benefits, as the states cut the taxes businesses paid to fund unemployment insurance. A 2001 study for the National Employment Law Project (NELP) found that tax cuts and reduced tax rates took over 47 billion dollars out of unemployment insurance funds between 1994 and 2000. Even in the early months of the recession, several states—including Texas, South Dakota and Hawaii—continued to cut their business unemployment taxes. The state of Oregon cut unemployment taxes in March 2009.
Many of the state unemployment funds have already run out of cash. At the end of 2008, eight states’ unemployment funds were insolvent (California, Michigan, Kentucky, New York, North Carolina, South Carolina and Ohio) and borrowing from the federal government to keep their funds running. NELP found that the funds of a majority of states face the real possibility of running out of cash some time in 2009.
With an estimated 700,000 unemployed workers expected to exhaust their benefits by the end of the year, Congress has enacted an emergency extension of benefits in states with high official unemployment rates. But these measures are temporary and insignificant compared to the actual scale of the unemployment, especially considering that close to two-thirds of those who lose their jobs still are not eligible for any benefits at all.
What’s left after unemployment benefits run out? For women with children, there is welfare. Yet, even though unemployment has been increasing in record numbers, there has been no increase in the welfare rolls. A study by the New York Times, published on February 1, found that 18 states have, in fact, cut their welfare rolls in the last year. Nationally, the actual number of people receiving cash assistance remained at or near the lowest level in more than 40 years. Even more shocking, in Michigan, which has the highest unemployment rate in the country, the government cut its welfare rolls by 13% in 2008! Rhode Island, which has the second highest rate, cut its rolls by 17%!
These cuts are the consequence of the 1996 welfare "reform" carried out under the Clinton administration, whose vicious provisions are being exposed completely today for the first time. This "reform" transformed a program that had been, since the Depression, an "entitlement"—that is, if you qualified, you were enrolled—into a "temporary emergency" support system with a five year lifetime limit. Over the years, more than three-quarters of the women and children once registered have been tossed off the welfare rolls.
Welfare had been very flawed. But for growing millions of women and their children, even that flawed safety net is now gone.
Medicaid, that is, government-provided health care for the poorest layers of the population, including the working poor, is also being cut back. Right after the November election, the Bush administration—with the silent assent of the Democratic Congress and the incoming Obama administration—issued rules allowing states, for the first time, to charge co-payments for treatments or doctors’ visits paid by Medicaid. Experience shows that even a $5 or $7 co-pay will keep someone already destitute from getting vital care. The state of California immediately rushed to take advantage, slashing benefits.
Health professionals have reacted in horror to the cuts in Medicaid and public health. "The scale of this is unprecedented," said AARP vice president Elaine Ryan. "We know that people will die as a result of this downturn," said Dr. Andrew P. Wilper, a physician who last year published a study of the terrible health consequences for uninsured adults.
The fact that nearly 35 million people qualify today for food stamps, one in 10 Americans, with the number more than doubling since 2000, is an indication of how poverty has grown. It should be added that food stamps cover a much smaller proportion of a family’s nutrition needs than they did before the Clinton administration "reformed" this program in 1996.
At the end of February, President Obama sponsored a conference to come up with a plan to trim the "deficit"—which focused on cutting ... what else but Social Security, the one government fund that consistently runs a surplus and is projected to do so for the foreseeable future, as well as Medicare benefits. Social Security contains the largest amount of government money not yet overtly tapped. Clearly, the intention is to tap into it more directly than the government has been doing so far to cover its deficits.
This is not a new goal. From Reagan to Clinton to George W. Bush in 2005, presidents have tried to cut Social Security. But when they tried to carry it off, they ran into an electoral backlash, making the slashing of Social Security "the third rail of American politics."
However, even if these presidents didn’t cut Social Security openly, they still managed to cut it repeatedly—just covertly, by regularly "revising" the way the official consumer price increase (CPI) was calculated. By understating the rate of inflation, they reduced the amount Social Security that would have paid in cost-of-living adjustments (COLA). According to estimates made by the economist, John Williams, who runs the Shadow Statistics web site, those changes have cut the real value of Social Security checks by more than half since the 1970s. Whatever the actual difference, manipulation of inflation statistics means that Social Security covers a much smaller share of living expenses today than it did four decades ago. The average Social Security benefit for current retirees now stands at $13,864 a year—less than what a federal minimum-wage worker earns in a full year.
Social Security is the only source of income for a large majority of the elderly. With this reduction in its real value, more of the elderly have been forced to seek work. Those 55 and over were the only part of the work force that, in the ruins of a collapsing job market, actually increased their employment numbers in 2008—by 880,000—out of necessity, not choice! Seniors, including some of the very old, are competing with teenagers for McDonald’s jobs.
The horrible inflation in medical costs has also driven down the value of Medicare benefits. By 2006, out-of-pocket health care spending accounted for 14.1% of all expenditures for Medicare households, the biggest expense after housing. And, one in four Medicare households devotes more than one-quarter of total household expenditures to health care. Medicare is a huge government program that funnels hundreds of billions of dollars to some of the most profitable companies in the country, providing vast sums to all the different parts of the corporate health care sector, from the insurance companies that are paid to administer the plans, to the pharmaceutical companies to the hospitals and medical practices—to the detriment of Medicare recipients.
The fact that the Obama administration is now taking aim at Social Security and Medicare as a way to pay for the Bush-Obama bailout of the banks boils down to this: starving the elderly to bail out the bankers.
Those bankers are taking the money and running. While big banks are collecting billions of dollars in taxpayer bailout money, they are also getting what amounts to a second crack at consumers by raising credit rates and their markups to record territory.
JP Morgan Chase, the second-largest card issuer and recipient of 25 billion dollars in bailout money, jacked up the top rate it charges customers who are deemed "risky" for some reason. It’s new top rate: prime plus has been upped to 26.99%, capped at 29.99%. Citibank, which received 50 billion dollars and 2.3 billion dollars from AIG, charges a top rate of 29.99%. Bank of America, recipient of 45 billion dollars, plus 12 billion from AIG, charges up to 27.99%. Even average interest rates for regular credit-card accounts are approaching record margins. This despite the fact that the Federal Reserve has repeatedly slashed interest rates, cutting borrowing costs for banks to zero. At the same time, it has provided bailout money to all the big banks.
Thus, banks and credit card companies are enriching themselves. As ordinary people’s real income fell while their bills mounted, banks and credit card companies showered them with offers for dozens of credit cards, especially since 2000—cards which turned out to carry usurious fees and interest rates, payday loans, rent-to-own schemes, 6-year car notes, and on and on—corporate financial schemes straight out of Madoff’s Ponzi play book. At the same time, the banks engineered through Congress a revision of bankruptcy law making it much harder for people to get out from underneath their debts.
Financial companies buried and crushed U.S. households under mountains of debt, which soared from about 90% of personal sector disposable income in 1995 to 103% in 2000, and to 140% in 2006. By 2007, the household debt services (interest and principal payments on debt) had risen to 14% of disposable income, the highest on record, with a significant share of households paying as much as 20%.
Mortgage debt is even more crushing. The gigantic financial sector had combined with big construction companies and landlords in a speculative free-for-all that forced up housing prices, while pushing people to take ever more expensive mortgages and other financial schemes—obscenely profitable for the banks—just to have a place to live.
The collapse in house prices has left people owing more on their mortgages than the value of their home. Some have had little choice but to drop their keys in the mail, "jingle mail." Add to that all the people who have lost their jobs, or who are forced to work for much less money, and the housing crisis continues to mushroom.
People are being driven from their homes in ever growing numbers. Just last year, more than 2.3 million homeowners faced foreclosure proceedings, an 81% increase from 2007, and 860,000 properties were actually repossessed by lenders, more than double the level of 2007, according to the Mortgage Bankers Association. The situation is getting worse. In the first two months of 2009, the foreclosure rate increased by another 30%.
The first victims of the housing crisis were the millions who had been stuck with predatory loans—like sub-prime, Alt-A"s, and option ARM"s. They are now being joined by increasing numbers of households with traditional mortgages. In February, completed foreclosure sales of homes purchased with prime loans jumped by 86%.
Almost invisible in all the news coverage has been the fact that one-third of those who have been kicked out of their lodging are renters of apartments in buildings where the landowner has been foreclosed on. These renters had paid their landlords every month. But that didn’t stop them from being thrown in the street. Even elected sheriffs in Chicago, Illinois and Flint, Michigan refused to carrying out some of these evictions.
Working class neighborhoods are being decimated by the growing number of vacant homes, and everything this means ... crime, vermin, disease.
The homeless population is growing. Today, even the government admits that there are nearly a million people (842,000) homeless on any given day. Tent cities are sprouting up on city outskirts and on skid rows around the country. In some of the hardest hit cities, like Detroit, the homeless population is upwards of one or two percent of the population, often squatting in buildings and homes made vacant by the mortgage crisis.
Millions more are not officially homeless, but they are being forced to double up or live in illegal garages, divided up apartments and houses. Countless others live out of recreation vehicles and campers parked in friends’ or families’ driveways, or move from one side street or parking lot to another.
Meanwhile, soup kitchens and food pantries are reporting that they are constantly running out of food, sometimes only one week into the month, because of the crush of families, young and old, seeking some form of sustenance.
Millions are faced with homelessness in a country in which one out of nine homes and apartments is left vacant. It’s symbolic of both capitalism’s stupendous waste, as well as the degree to which capitalism has been grinding up the population.
The capitalist class, protecting its own profits, makes the population pay for the crisis—by taking workers’ jobs, cutting workers’ pay and benefits, while the politicians gut the remnants of the social safety net, and forcing ever more people out of their homes. This not only causes ever greater poverty and misery. It also reinforces the vicious downward spiral. For as demand drops, to preserve their profits, the capitalists cut jobs and pay still further. The same goes for foreclosures—they feed on themselves.
Thus, just as the hunger for ever greater profits had led to the wild speculative bubbles that then burst and brought the crisis on, today the same insane profit drive spreads and deepens the crisis like a plague.
All the justifications spouted by the politicians and corporate executives—how short term sacrifices will supposedly pay off in the end, that they are for the workers’ own good—are outright lies.
The working class has every right to resist. It is a question of survival.