The Obama Recovery Plan
Save Us from Those Who Would Save Us
By Carl Finamore
We know billions of dollars are going to AIG, banks and auto companies to stabilize basic institutions of the capitalist economy. We know other billions are going to state and local governments to fund programs designed to employ some 4 million workers.
But establishment commentators fail to note that not one penny is actually being spent on increasing the standard of living of American workers.
In fact, the Obama Administration is working overtime to keep a lid on wages. This is the same administration that openly acknowledges U.S. paychecks adjusted for inflation have been flatlining since 1973.
Arguably, the main objective of the government stimulus is to stabilize banks and corporations, not regenerate the living conditions of American workers. In this the liberal Obama Administration is not so far in its thinking from that of its conservative predecessors. Both believe helping out banks and major corporations first is the key to economic revival.
If you want evidence of the profound corporate bias contained in the bailouts, read the fine print in the recent General Motors (GM) Restructuring Plan.
The $13 billion in federal funds handed over to General Motors in December 2008 has stringent provisions requiring the United Auto Workers (UAW) to agree to significant wage and benefit reductions by the end of 2009.
The Treasury Department acknowledges "negotiated changes to the Company’s labor agreements in 2005 and 2007 have reduced total labor cost per vehicle by 26% from 2004 to 2008."
"In addition," the Treasury report continues, "GM and the UAW have agreed to improve competitive work rules, which will also significantly reduce labor costs."
There’s more. The Treasury notes with satisfaction that the UAW recently agreed "to suspend the JOBS program, which provided full income and benefit protection in lieu of layoff for an indefinite period of time."
In the meantime, GM is doing its part. It just cancelled all health benefits for its 100,000 non-union retirees. Not to be outdone, the now very compliant UAW recently agreed to accept diluted GM stock of questionable value for half of the $10 billion owed to secure previously-negotiated union retiree health benefits.
But the government is still not satisfied with these debilitating, life-changing concessions for several hundred thousand active and retired autoworkers. "Further progress will be required to achieve the full targeted savings [of the stimulus plan]," the Treasury insists. "GM plans to report these changes to the U.S. Secretary of Labor who must certify GM’s competitiveness…" [Treasury Dept. website]
This is a completely wrong-headed approach to getting America back to work and re-invigorating collapsed consumer spending. On the contrary, extending substantial wage, medical, and education benefits for the 130 million workers in this country would be the most effective economic stimulus yet proposed.
A Stimulus Plan that Actually Worked
The Servicemen’s Readjustment Act of 1944 or "G.I. Bill" is a success story that should be the model for any genuine stimulus.
Fearing a revival of the Bonus Army March protests of 1932 by millions of returning World War II jobless veterans and forecasting a serious post-war recession, both chambers of Congress actually voted unanimously to fund the most extensive benefits program in the nation’s history.
In fact, concerns about impending social unrest were not unfounded. When the government attempted to extend the wartime "no strike" pledge, it ignited a firestorm of protests. A national strike wave began almost immediately after Emperor Hirohito waved the white flag.
In September 1945, 43,000 petroleum workers and 200,000 coal workers struck. In October, 44,000 lumber workers, 70,000 teamsters, and 40,000 machinists joined them. Then in November 1945, the UAW called its first major strike against GM since the company was unionized in 1937. Nearly 250,000 walked out.
But these incredibly powerful expressions of union power turned out to be only the beginning. In January 1946, 74,000 electrical workers, 300,000 meatpackers, and 750,000 steelworkers went on strike.
A few months later, 350,000 miners went out with the full support of rail workers who together threatened to shut the whole country down.
The memorable year of rolling strikes in 1946 ended with an exclamation point-a 54-hour December general strike in Oakland, California. Picketers controlled traffic in the downtown center of the city. Anyone could leave but entry was permitted only to those with union membership books.
It all began when delivery truck drivers turned off their engines and stopped dead smack in the middle of downtown streets. The truck drivers were responding to attempts to break a retail store strike led by mostly woman clerks.
Shutting the city down was a fitting end to a year of significant acts of solidarity and militancy, actions not seen in more recent decades.
G.I. Bill Funded People
The power of labor was ever present in the aftermath of WW II and returning vets benefited greatly. Each was provided a full year unemployment stipend and a variety of government low-interest home loans and funds for starting small businesses.
At its peak in 1947, about 40 percent of all housing starts in the nation were funded by the government’s loan guarantee. In its first eight years alone, the Veterans Affairs (VA) backed 2,360,603 home loans.
But here’s the critical point. The government provided the funding directly. This was much different from the current housing industry run by profit-gouging banks and unscrupulous mortgage brokers-the same characters now receiving bailout billions to remain in business.
This is a strong argument for the government to step in and once again provide home loans on a massive scale, replacing the discredited and untrustworthy private lenders.
It’s also worth noting that over half of the nearly 16 million eligible veterans used the G.I. Bill’s generous education funding for tuition, books, and living expenses from 1945 to 1956. This included 2,230,000 in college, 3,480,000 in other schools, 1,400,000 in on-job training, and 690,000 in farm training. Total cost of the World War II education program was $14.5 billion. [U.S. Dept. of Veteran Affairs]
The late U.S. labor leader Tony Mazzocchi was both a strong advocate and beneficiary of the G.I. Bill as a WW11 veteran. "That social program," Mazzocchi said, "was in effect at a time when the deficit was four times worse than it is today [in 1997]. The debt exceeded the Gross National Product by 125 percent. But we didn’t worry about the debt and the deficit. We actually borrowed even more money and put it in people’s pockets and reinvigorated the nation. Money was distributed in such a way that everyone was gainfully employed." [Tony Mazzocchi interview by Mark Harris, Z Magazine Feb. 1997.)
Even the government agreed the largest social program in our history was a great success. The U. S. Senate studied the G. I. Bill in 1988 and concluded that it provided the largest return on investment in the public or private sector in the history of this country.
It is also as true now as it was in 1997 when Mazzocchi noted that the country is richer now than in 1946. [Monthly Review]
Indeed, the top one percent of the U.S. population grabbed 28 percent of the rise in national income between 1983 and 2001, 33 percent of the total gain in net worth, and 52 percent of the overall growth in financial worth.
Thus, the challenge facing us is also the same: How to organize that wealth to serve the public good.
One Paycheck, One Family
Lest we forget, during the unprecedented post-WW II "American Century" economic expansion and for several decades thereafter until around 1970, a household’s standard of living was primarily measured by the income of one adult breadwinner.
There was little savings among this Depression-born generation, even less property ownership and no stock market 401 portfolios. The options of excessive borrowing and refinancing a home were also not available.
The growth in standard of living for millions largely depended on a single paycheck earned from one job.
With few other income options, workers were more willing to vigorously defend wages as their primary source of income. As mentioned earlier, unions played an essential role in advancing the standard of living during this period and were powerful collective bargaining agents comprised of millions of supportive members.
The heavy concentration of membership in the industrial belt also substantially increased labor’s leverage. In 1955, for example, most of the 35% of workers in unions represented members strategically centered in the manufacturing sector. There was not yet widespread unionization of teachers, hospital workers, and government workers.
Clearly, those first heady days of the post-WW II era gave a powerful impetus to funding extensive social programs whose aim was to appease mounting dissatisfaction with the status quo.
A Different Reality Today
Unfortunately, few of these pro-working class political factors operate today to influence the direction and focus of the government’s current stimulus plan. Indeed, stale wage rates since 1973 have compelled workers to seek out other alternatives to supplement their sagging paychecks.
Many have eagerly opted for excessive amounts of overtime and even picked up a few hours at a second job. In many households, both spouses work. According to the Bureau of Labor Statistics in 2004, both the husband and wife were employed in 61 percent of married-couple families with children.
Of course, millions in the last decade have also found relief by refinancing homes. Yet, the mountain of credit card debt rose dramatically at the same time. According to the Financial Times, January 2009 recorded the largest number of credit card delinquencies in history with $18.1 billion in penalty fees going to credit card companies in 2007.
This figure is up more than 50% since 2003 and accounted for approximately half of the industry’s $40.7 billion in profits in 2008. It was yet another very profitable method of gouging working families while keeping consumer spending up.
And yes, these same credit lenders are also receiving billions of bailout funds to remain in business.
Now the bubble has burst. According to some commentators, we’re supposed to believe the fault lies with greedy consumers who supposedly accepted debt they were incapable of paying. But the same corporate elite that has enforced dormant wages since 1973 also designed the extremely profitable, albeit bogus, financial instruments that substituted for an industrial policy that could have led to wage increases and an expanded standard of living based on real income.
Isn’t this another argument for nationalizing the banks under public control?
Work to Eat
Of course, it was a dangerous risk for the capitalist elite in this country to set off a borrowing craze, but their actions were dictated by their intrinsic economic imperative to maximize profits by driving wages down.
And herein lies the dilemma. It is precisely the low wage base of American workers that threatens the success of any recovery plan that must boost consumer spending in order to get the economy moving again.
With credit drying up, unemployment rising, home equity evaporating and mortgage defaults and personal bankruptcies skyrocketing, a single paycheck will again become the main, depleted source of income for most Americans.
Hopefully, it is becoming clearer to American workers that exorbitant credit interest rates and spiraling debt is a poor substitute for a wage increase. But these critical wage and benefit increases won’t come from the current administration’s stimulus plan and they certainly won’t come from employers’ generosity.
Following the example of our parents and grandparents after WW II is a much better bet. The labor movement has to take responsibility for ensuring a recovery plan that benefits the majority. That begins with flexing our social and economic muscles, organizing the unorganized and mass action in the spirit of those working class fighters who are responsible for every social gain the labor movement has ever claimed.
Carl Finamore is former President (ret), Air Transport Employees, Local Lodge 1781, IAMAW.