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The Myth of the Fiscal Crisis

by Richard Mellor Friday, May. 27, 2005 at 6:46 AM
aactivist@igc.org

The first step that must be taken if we are to reverse the cuts and prevent the destruction of the New Deal’s gains is to understand in our own minds that there is no fiscal crisis.

Richard Mellor

Retired Member

AFSCME Local 444, Oakland CA

“Last year, we stopped the bleeding. This year, we must begin to heal the patient.”

Arnold Schwarzenegger

As working people we know what it means when employers and big business politicians start talking about healing patients. It means we have to make more concessions at work and suffer more cuts in public services as citizens. The May 25th rallies in Sacramento and Los Angeles against the Governor’s assault on public employee’s pensions, nurse to patient ratio’s and other attacks follows months of opposition led by the California Nurses Association, Teachers, and other public employee Unions.

As public sector workers resist the attacks on our pensions, our private sector comrades at United Airlines are being savaged by their employer. Over the past two years, United Airlines workers have given back billion in concessions and are facing further cuts including pensions. A judge recently allowed the company to shift its pension obligations to the U.S. taxpayer. The general trend in both the public and private sectors is to shift from defined benefit to defined contribution plans and in order to accomplish this, the employers will attempt to weaken workers’ united opposition by creating a two-tier pension system.

Schwarzenegger has temporarily backed down due to pressure from CNA and public sector Unions, but this is a temporary lull.

“Pensions have become a competitive liability,” wrote the big business journal Business Week. The steel industry has already shifted .5 billion in pension obligations to the U.S. taxpayer and the Airline maneuver will add further strain to the overburdened Pension Benefit Guaranty Corp (PBGC), the government agency that is the insurer of last resort. The public sector is feeling the “competitive” pressure as our private sector brothers and sisters have their benefits and pensions slashed. Between 1984 and 2004, company defined benefit pension plans declined by 75%. Alongside this is the Bush administration’s attack on social security; as with pensions, these secure state benefits are to be replaced by individual accounts dependent on market forces.

Public transit from Chicago to San Francisco is also on the chopping block after years of cutbacks due to what Democrats and Republicans call, “Fiscal Restraints”. In fact, politicians from both major parties do not disagree on the basics, that we have to cut back, they simply disagree on the details, how much and which section of the working class will suffer most. If public sector unions and community organizations apply the most pressure then the private sector will suffer most, if the youth are better organized, then the seniors will suffer most.

Both Parties Want Cuts

Prior to the California recall election that put Arnold Schwarzenegger in the Governor’s mansion, former Governor, Gray Davis had directed his agencies to recommend how he could cut 20% out of the billion in general government spending through “layoffs, outsourcing and other measures” (BW 10-27-03). His support for worker and immigrant issues fluctuated relative to his hold on the governor’s seat. Alberto Torrico, the Democratic Chairman of the California State Assembly Pension Committee doesn’t offer much hope. “I’m not against pension reform”, he tells Business Week, “But there are things that we can do to reduce costs, like cracking down on un-necessary disability payments.” Like all big business politicians and the employers’ they represent, Torrico looks to the worker as the culprit, the worker as the thief, the worker that rips of the pension system by making fraudulent claims. They look to workers and our communities for funds.

Mountains of Cash

The first step that must be taken if we are to reverse the cuts and prevent the destruction of the New Deal’s gains is to understand in our own minds that there is no fiscal crisis. The best sources for confirmation of this are the big business journals themselves. An editorial in the Financial Times pointed out recently, “USA Inc. is awash with cash”. Big business itself is concerned about the estimated trillion that individuals have stashed away in offshore accounts avoiding some 0bn in annual taxes. Profit margins are the best in 30 years and Business Week explains why, “Caterpillar Inc. has instituted a two-tier wage system that pays entry-level workers substantially less than in the past. Caterpillar can hire “supplemental” workers for as little as an hour. If those part-timers become full-time employees they earn an hour, vs. the for previous hires.” And the icing on the cake for profits: “The company also did away with pensions for new employees instead offering 401 K plans.” BW 5-23-05.



Mobilizing for What?

The mass rallies held in Sacramento and Los Angeles to protest Schwarzenegger’s attacks on pensions are a positive step. However, the top Union officials will be using these mobilizations to help their Democratic allies in to office. The Republicans, through Schwarzenegger, are trying to limit what the unions can spend on political campaigns, including donations to politicians (read: Democrats). As much as an attack on labor, this is a sharp attack on the Democrats too, since the labor movement is an important source of campaign funding for them and an even more important supplier of bodies for precinct walking and phone banking during elections. This writer’s union, AFSCME, provided 40,000 volunteers for Walter Mondale’s presidential bid. This, more than anything else, was at the core of this rally.

Schwarzenegger has broken the gentlemen's agreement that exists between the Democrats and Republicans on how best to exploit the power of organized labor. This corporate strategy ensures that the labor movement remains a political pressure group tied to the Democrats as opposed to a powerful independent political force that can offer an alternative to the corporate agenda.

Relying on the Democrats will not stop the continued erosion of workers rights, benefits and wages. Instead, the May 25th mobilizations should be the first step toward a one-day statewide general strike to protest the attacks on all workers as well as cuts in social services. Demands for increased social spending, free health care and education, affordable housing and jobs for all; these should be the themes of a one-day work stoppage. An independent political alternative, a workers party, can also be built out of such a campaign. Organizing this should be the next logical step following this protest in Sacramento. Neither the corporations, nor their bought-and-paid-for politicians will back off because of a few protests. It is real power that matters, including the power to shut down production.

The union leadership is in the position to organize such a shutdown, but we must accept that they are unwilling to do so. They are too stuck on following the wishes of their Democratic “friends” and too stuck on sticking to the letter of their contracts (which the employers violate daily). Therefore, a movement for this has to be built from below. The money is there, the wealth is there; the social resources are there; it is our money; it is wealth we created; it was stolen form us and we have a right to take it back. There is no way of avoiding this fight if we want to reverse course.



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