Weekly Audit: Banks Get Big Bucks, Consumers Get Bupkis
by Lindsay Beyerstein, Media Consortium blogger
Last week, the Federal Reserve announced a plan to buy an additional $600 billion worth of Treasury bonds in an attempt to stimulate the economy. On Democracy Now!, economist Michael Hudson argues that the $600 billion T-bill buy will help Wall Street at the expense of ordinary Americans.
The Rand Paul campaign was really proud of the $2500 their campaign received from the National Right to Work for Less Committee. Of course there is a very good reason for that. The National Right to Work Committee is an extremist group and as we all have seen Rand Paul is an especially extremist candidate. He opposes the right of Americans to have and maintain a middle-class and falls into the most helpless realm of corporate apology and welfare condoned by his new mentor, Mitch McConnell. The difference is, Rand Paul was undisciplined enough to tell you how Republicans really feel about you.
The debate over measures to fix America's broken labor laws took a back seat during the long debate on health care. Now that the focus has shifted to efforts to stimulate economic growth and job creation, it's time to put workers' rights front and center.
I wrote a few diaries several months ago about a Democratic newcomer in Kentucky politics when John Waltz announced his run here, here, and here. While I very much liked what Waltz was saying, I wondered about his ability to mount a race as a newcomer and in Kentucky's Fourth Congressional District. However, as this race is progressing John Waltz is proving to be an extremely viable candidate as well as being a real fighting Democrat. Now, Waltz's campaign is picking up steam and with our help could mount a real challenge to put Republicans on defense this fall in at least one previously secure district.
"If a majority of workers want a union, they should get a union. It's that simple. We need to stand up to the business lobby and pass the Employee Free Choice Act. That's why I've been fighting for it in the Senate and that's why I'll make it the law of the land when I'm president of the United States." --Barack Obama
Nobody is making it the law of the land. Nobody is fighting for it. The Employee Free Choice Act (EFCA) has drifted down to the bottom of the AFL-CIO's website, buried beneath good economic proposals which, however, do nothing to build a labor movement. EFCA is not to be found anywhere on the front page of Change to Win's website at all. The media's not smearing EFCA with U.S. Chamber of Commerce lies anymore. Congress and the White House are silent. Any escalation of pressure on senators from union members has never materialized, the polite letter-writing campaigns having drifted away rather than ramping up into pickets or sit-ins.
Sen. Tom Harkin, D-Iowa, told The Progressive Populist Thursday that there will be 60 votes to bring a health care reform package to the floor for Senate debate this fall. Harkin, the new chairman of the Senate Health, Education, Labor and Pensions Committee, said in an interview that there will be the necessary 51 votes to pass the full bill with a public option included.
Low-wage workers are struggling to navigate the current recession. A new study conducted by a team of academics reveals that the majority of workers at the bottom of the economic ladder have been shorted on their paychecks as recently as last week. But the compensation crisis looks very different on Wall Street, where excessive pay tied to risky activities helped set the economy on its crash course. Despite the resulting deep recession, pay for high-level U.S. financiers remains over-the-top, even as low wage workers struggle to navigate the downturn.
The U.S. has made a few gestures toward scaling back executive compensation for banks that it bailed out under the Troubled Asset Relief Program, but the rules have amounted to little more than window-dressing, according to a paper published last week by the Institute for Policy Studies. The paper's authors, Sarah Anderson and Sam Pizzigati, found that ten of the 20 largest bailout banks have reported stock option compensation for 2009, and the top five executives at those companies have scored a full $90 million so far this year. That's just through stock options. The number gets even more obscene if you include bonuses, salary and other payouts.
As Anderson and Pizzigati explain in a companion piece published in AlterNet, bank executives collected huge bonuses based on the profits from subprime loans during the housing bubble. Since subprime mortgages were more expensive than traditional loans, profits were high-until borrowers stopped being able to pay back their predatory, unaffordable debt. Suddenly the banks were all busted, but the executives had already made a killing.
Katrina vanden Huevel emphasizes in The Nation that the U.S. government doesn't even try to tax this kind of income, much less regulate its connection to risk-taking. Billions of dollars in tax revenue are lost each year as financiers hide payouts in offshore tax havens, while on-the-books income from financial activities are taxed at arbitrarily low rates. Capital gains like stock price increases, for instance, are taxed at just 15%, while income from an ordinary paycheck is taxed at 35% for the wealthiest individuals.
While the U.S. dallies on executive pay, key leaders in Europe are moving to rein in risky compensation practices in the financial sector, as detailed in this video report over at The Real News. President Barack Obama will meet with U.K. Prime Minister Gordon Brown, French President Nicholas Sarkozy, German Chancellor Angela Merkel and other leaders of the G-20 in Pittsburgh later this month, and financial regulatory reform will be at the top of the agenda.
For ordinary workers, there are few positive signs in the current economy. The Washington Monthly's Steve Benen dissects the latest batch of unemployment numbers from the Labor Department. The good news is that the overall pace of layoffs seems to be abating. The bad news? The U.S. still lost a whopping 216,000 jobs in August. And broader measures of workplace woe are even worse. The unemployment rate does not include discouraged workers who have stopped looking for a job, and it doesn't include those who want to work full-time but have to settle for part-time employment. That statistic actually declined slightly in July, giving some economists cause for optimism. But the metric soared again in August, reaching the highest level on record.
And unemployment is not the only problem workers face. Both Tim Fernholz of The American Prospect and Elizabeth Palmberg of Sojourners highlight a New York Times story by labor reporter Steven Greenhouse, which details how low-wage workers are routinely cheated by their employers. According to a recent study, a full 68% of these workers report having experienced an illegal workplace abuse in the past week, such as being denied overtime pay or being required to work for less than minimum wage. On average, workers lost 15% of their weekly income as a result of this exploitation.
We have good laws to protect workers, but they just aren't being enforced. Companies have successfully intimidated their employees into not reporting blatantly illegal pay practices. The best way to resolve this situation is to expand unionization and give workers a stronger voice in the workplace, making it safe to speak out against abuses. And the best way to expand unionization is to enact the Employee Free Choice Act, which lowers barriers to creating a union. But the legislative process has been delayed by a smear campaign organized by executives and managers claiming that unions, and not corporate elites, are the actual source of workplace coercion.
"It ought to make your blood boil-especially as people decry union thugs 'intimidating' people into joining unions when that doesn't happen and most workers want to join a union," Fernholz writes.
The U.S. needs to get its economic priorities in order. We should be protecting low-wage workers from executive excess, not the other way around. President Obama will have an opportunity to coordinate that effort globally at the G-20 summit later this month. Let's hope he doesn't squander it.
On the occasion of Labor Day, I wanted to share some of my own brief thoughts on the labor movement.
I grew up in a union household in suburban Buffalo. My parents are both career-long members of United University Professions, which represents about 34,000 faculty and staff across all of the 29 State University of New York (SUNY) schools. It's a part of the American Federation of Teachers. Growing up, that meant I was a little luckier than other kids. It meant very good health insurance, and procedures like my juvenile kidney surgery were fully covered; my trip to the emergency room was covered when I fell running around a shoe store and cut my ear open; my replacement tooth when I tried to ride a bike over a basketball (bad idea) was also nearly fully paid for. I also got both glasses and contact lenses per year growing up because both my parents were on the vision plan negotiated by UUP.
When I finished undergrad, I planned to attend graduate school, but I didn't have a job at that point in time. I wouldn't have any health insurance. My mom told me that as long as I took a certain minimum number of credit hours in grad school, UUP would cover me up until I turned 25. Kaiser Family Foundation just released a study showing the highest percentage of the uninsured were people in that exact age range- 19 to 24 year olds who are either in college or just graduated and had no job or employer-provided coverage. I still have friends on their own a year or two behind me, out of college, without health insurance. I was lucky UUP was there for me.
I remember one day being worried my my dad would be fired for a misunderstanding with his boss. He had been working at Buffalo State College for years already. He didn't commit any gross incompetent violation or anything- they just didn't get see eye to eye on something. I asked him, a little worried, if he would be fired, and he responded "I'm tenured and union. I have representation for things like this." And so he did. There are a lot of places where longtime employees like him would be fired on the spot for just looking at the boss the wrong way, but he had someone to speak up for him.
I got involved in the labor movement at a very young age, when Gov. Pataki took office in 1995 and UUP's contract was up. He promptly proposed a three-year deal with annual raises of exactly 0%, 0%, and 1%, respectively, over the three years. He also pushed to make New York a right-to-fire state. I remember picketing with signs outside Rockwell Hall, one of the flagship buildings of my parents' college. We eventually beat him and got a much better deal. He later refused to negotiate a contract at all, but because my parents are public employees, they were required to work. So we had "working without a new contract" buttons made up to wear and continued the pressure.
UUP also fought back when my mom's job was at risk. She works at the Educational Opportunity Program, known as EOP, or HEOP in private schools. The program accepts underprivileged students who don't quite meet the academic standards for acceptance, but are accepted with the requirement to accept academic counseling my mom and her colleagues provide. They come from schools with 45 kids in a classroom and no textbooks and gangs in inner-city Buffalo, and would normally not go to college at all, but because of EOP, they go and enter the workforce with a good degree. Pataki and the Senate Republicans had been cutting EOP for years and then finally zeroed it out of the budget for the entire SUNY system altogether. My mom would have literally lost her job. But UUP fought back and, with Assembly Speaker Sheldon Silver's help, got most of the cuts restored.
I recently read that in a new Gallup survey that just 48% of Americans in a new survey approve of labor unions- an all-time low. 51% of those surveyed say unions "mostly hurt the economy", up from 36% in 2006. But still an overwhelming majority (66%) say unions mostly help the workers in them. I'm sure that's for reasons such as those I laid out above. People get that part of it. Our challenge as a movement is to convince people that unions lift people up, in terms of wages, health care, fewer accidents on the job, and that is good for productivity and the economy as a whole. I was lucky enough to be in a union household, and for those who need it, we face a challenge of not just organizing problems (which is one reason the Employee Free Choice Act is so important) but in out-messaging our opponents.
The U.S. economy may finally be bottoming out. But if the worst is really behind us, we are likely facing a painful period of "growth" that looks very much like the present. Without increasing unionization and mitigating racial inequality, our economic progress will prove as hollow as it is slow. While the economy may improve in a dry, statistical sense, the foundation for a productive economy has been decimated over the past three decades.
The economy has shown some encouraging signs of strength lately. Home prices have actually increased and the pace of layoffs slackened quite a bit in July. But that data doesn't signify a strong recovery, as Andrew Leonard notes in a pair of blog posts for Salon. Even in areas where there is some good news-housing and the job market-there is plenty of contradictory bad news. First, mortgage delinquencies are at an all-time high, and the souring loans are not just subprime. Even people with relatively affordable mortgages have problems paying when they lose their jobs, and with the unemployment rate at 9.4%, a lot of people are losing their jobs.
What's worse, Leonard notes, new claims for unemployment benefits escalated in August, suggesting that last month's job market improvements may have been a fluke. And while home prices may be ticking up slightly, they have been abysmal for the past two years. Since many households accumulated debt based on higher home values, the overall ratio of consumer debt to household net worth is perilously high.
Household net worth is a crucial statistic and is often overlooked by a focus on day-to-day measurements of worker well-being, like wage growth. While wages matter for paying the rent and buying groceries, our long-term economic security is defined not by what we make each week, but by the value of the things we own. In a piece for The American Prospect, economists Derrick Hamilton and William Darity Jr. detail the massive racial disparities in household net worth in the U.S. While the median white family has roughly $90,000 to its name, the median Latino family has just $8,000, while the median Black family has only $6,000.
Centuries of discrimination have resulted in today's inequality, but Hamilton and Darity propose a simple, straightforward solution: The government should establish savings accounts for children born into poor families, and fund it with a relatively small amount of money. Children will not be able to access the accounts until they turn 18, but over the years, interest will accrue on the accounts to the point where children should have between $50,000 and $60,000 by the time they can withdraw funds. Since so many people of color are born into households with relatively low net-worth, establishing a policy to use government money to boost the wealth of those born without it would have the effect of promoting racial economic equality.
But we also have to worry about jobs. President Barack Obama's economic stimulus package has succeeded in creating or saving hundreds of thousands of jobs since going into effect earlier this year, but it is important to focus not only on creating jobs, but on creating good jobs. As Laura Flanders of GritTV emphasizes in a roundtable discussion with key academics and labor representatives, our increasingly hostile attitude towards unions has created major barriers to a sustainable economic recovery.
The legislation critical to ending this intimidation is known as the Employee Free Choice Act, one of the most important bills presented to Congress in decades, although it has been overshadowed by the debates surrounding health care reform and financial regulatory overhaul. Flanders' panelists include Kate Bronfenbrenner, a Columbia University Professor who wrote a recent paper for the Economic Policy Institute examining 1,000 attempts to establish unions all over the country, and found that employer opposition to unionization is more aggressive than ever. A full 30 million workers want to be part of an organized union, but only 70,000 workers successfully organize each year.
"It's always been hard to organize, but employers now have made it harder than ever. They've literally have said to workers that, 'If you try to organize, we will go after you in every way possible,'" Bronfenbrenner said. "They threaten workers, they harass them, one in every three employers fire workers for union activity . . . . There literally is a war on workers who try to organize."
Another panelist, Mark Winston Griffith, Director of the Drum Major Institute, notes that the decline of unionization has weakened the economy. In the 1950s, when one-third of all U.S. workers belonged to a union, the potential foundation for the economy was strong. Workers were well-paid and had excellent job security, which created a strong source of demand. With less than 8% of U.S. workers unionized today, our economic demand is fueled by household debt, which has left families struggling for financial security and has injected a heavy dose of instability into the entire economy.
Writing for The Nation, Sarah Jaffe details the difficulties faced by a group of security officers in Philadelphia trying to unionize under current labor laws.
But while the workers who form the foundation of our economy are gasping for air, the elite have almost never had it better. A recent study found income inequality to be deeper than any period since World War I, and this absurdity plays out in public policy. While workers struggle to get a fair shake from their employers, executives and managers evade taxes through elaborate international financial deception. Swiss banking giant UBS recently agreed to turn over the names of thousands of its clients who allegedly used the company's banking operations to skip out on the bill for Uncle Sam.
UBS has been caught with its hand in nearly every cookie jar labeled "bank scandal" over the past two years, from the subprime mortgage crisis to phony securities peddling to diamond smuggling. But as Robert Scheer explains at Truthdig, former senator and deregulation hawk Phil Gramm (R-Texas), has been an executive at the firm while the company has been destroying its reputation. Gramm helped pass some two key anti-regulation bills later years of the Clinton administration, and was unabashed about jumping to UBS immediately after leaving office. Scheer notes that the public knows almost nothing about Gramm's role at the company, including any potential involvement in its laundry list of scandals.
Real economic progress in the U.S. is impossible without a stronger base of unionized workers. But it's just as important to invest in our future by giving the children of poor families an even economic playing field.
"Without access to lawyers, the law doesn't apply to you." - Ian Millhiser
I've flown business class a couple times, it was nice.
You get to board the plane early, have a comfortable seat, enjoy free drinks. Nice. And it's fine, they pay extra for that. The airlines make a reasonable calculation about how much they're owed for providing those services and they get compensated.
Yet when it comes to dealing with the rest of society, their workers, customers and government, business interests always want to dispute the bill for services rendered. If the law says otherwise, heck, they can get Congress to write laws they like better.
They can also directly write their own laws. And by laws, I mean contracts. Privately drawn up agreements that will be enforced by the courts or an arbitrator whose judgments are considered binding by the courts.
President Barack Obama is scheduled to unveil his agenda for revamping financial regulation later this week. As the economy struggles though a recession created by the banking industry, it's crucial that Obama and his advisers craft a set of rules ensuring that the financial sector strengthens our economy instead of destroying it.
The misleading attacks by Big Business on the Employee Free Choice Act now are aimed at the provision that would guarantee that workers can get a fair first contract. Their scare tactics are not only misleading, they're hypocritical.
Right now, workers lack a legal means to ensure they get a fair first contract. Recent research shows that even after workers successfully win a union and the ability to bargain, they're too often blocked from getting a fair first contract. Fifty-two percent of workers don't have a contract a full year after the election, and 37 percent don't have a first contract two years after the election. For too many workers, the promise of the freedom to bargain is out of reach because the law doesn't offer them any help.
The Employee Free Choice Act provides a process to help first-time bargainers to reach an agreement, through mediation and, for issues the parties are unable to resolve on their own, arbitration. The reason we need first-contract arbitration is to create an incentive for companies to bargain voluntarily with their workers.
Ask Shannon Hilt, who's seen our broken system for forming unions firsthand, and she'll tell you that there's no question: Workers need the Employee Free Choice Act.
Hilt spent three years as a field examiner for the National Labor Relations Board (NLRB), overseeing the elections process and investigating unfair practices. She says the system we have now, one in which companies, not workers, have all the power, isn't free, it isn't fair and doesn't protect workers.
Writing in the Boulder, Colo., Daily Camera, Hilt explains how her years of experience as an NLRB field examiner have convinced her that we need fundamental labor law reform that gives workers, not their bosses, the ability to decide how they form a union and bargain.
Today, a coalition of Philadelphia-area rabbis and rabbinical students will meet with Pennsylvania Sen. Arlen Specter to make the case for the Employee Free Choice Act.
Dozens of Pennsylvania rabbis and rabbinical students signed an open letter in support of Employee Free Choice, organized by the Philadelphia Jewish Labor Committee (JLC), and will deliver it today to Specter. Specter is a key vote in the fight for workers'; freedom to form unions and bargain-a fight that these rabbis know is critical to our economy and to basic fairness.
The meeting and letter are part of a larger outreach effort by the JLC to promote workers' freedom to form unions and bargain. These values, say a growing coalition of rabbis, are a key part of the Jewish tradition of supporting the dignity of workers and the strength of communities.
The banking lobby still holds enough sway inside the Beltway to torpedo sensible consumer protection rules, even after releasing a flood of predatory mortgages that kicked off the current economic crisis. On issues ranging from payday loans to subprime mortgages, the banking industry continues to successfully defend itself against new regulations that would protect the consumer. As if that weren't outrage enough, the finance lobby has also joined other corporate interest groups to fund misinformation campaigns that smear unions and block wage growth.
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