Robyn E. Blumner

By Robyn E. Blumner,
St. Petersburg Times Columnist

Let’s be frank. There are contracts and then there are contracts. Those retention bonus contracts held by American International Group executives in its financial products division were apparently inviolate. No matter how many smart lawyers Treasury Secretary Tim Geithner consulted, the contracts were bulletproof, and a default could lead to punitive damages.

Then there are the kind of employment contracts that most of the rest of us have. They’re not explicitly spelled out in a sign-on-the-dotted-line kind of way, and there are certainly many fewer zeros, but they are promises made in exchange for one’s labor nonetheless. The difference is that these “contracts” are eminently fluid and disposable.

Here’s the employment contract we all had in mind when joining the work force: Work hard, be loyal and in exchange you can expect job security, steady income gains, health insurance and a dignified retirement.

But those ideas are so nostalgic today as to be naive.  MORE

First Published in the St. Petersburg Times Sunday, March 29, 2009

Leo W. Gerard

By Leo W. Gerard
International President

With college teams lined up in brackets, March Madness reminds me of greyhound racing. It’s not the obvious similarities – all the wagering over both competitions or all the sleek strength on display.

No, it’s that just like broken down greyhounds, injured college players often are tossed aside. Of course, a college can’t euthanize a ball player whose injury renders him unable to resume play or whose grades disqualify him – at least not the way a race track can put down an injured dog.

What universities can do is kill players’ dreams. And they do.

Over the past year, 169 players have “disappeared” from the rosters of the teams in the men’s basketball tournament. The National College Players Association, which is supported by the United Steelworkers, compared the 2007-08 rosters to the current ones and noted the missing players.

Universities advertise themselves all over TV, particularly during college basketball and football games, as places where dreams are made. A National Collegiate Athletic Association policy, however, destroys dreams for many young athletes. It forbids schools to dole out more than one-year scholarships to athletes. This means they disappear from sports rosters and enrollment rolls at the same time.

It’s unfair and unnecessary. A bum knee may keep a kid from playing ball but certainly shouldn’t prevent him from becoming a sportscaster or a civil engineer.

In addition, a second National College Players Association study found that players also suffer because the NCAA prohibits universities from providing athletic scholarships that equal the cost of attendance. That means athletes, often from impoverished backgrounds, are expected to pay out-of-pocket for expenses not covered by what was described to them and their families as “full” scholarships. The study found the average cost to the athletes is $2,763 a year, but it’s as high as $6,000.

The NCAA needs to spend more on scholarships from the $545 million it receives each year from CBS Sports for the right to televise the men’s basketball tournament. The NCAA must end the prohibition on full scholarships, and the scholarships must be awarded for four years. If an athlete drops out, or fails out, that’s one thing, but he should never lose his ability to attend school because a coach doesn’t like him or because he’s injured.

The National College Players Association study that concluded 169 players “disappeared” from the rosters of men’s teams now in the basketball tournament excluded those young men who graduated or got drafted into the National Basketball Association.

Athletes disappear for less positive reasons than finishing school or getting big pro contracts. They no longer qualify to play because grueling athletic schedules and inadequate academic support lead to poor scholastic records. They’re injured, can’t play, and their coaches revoke their scholarships. Coaches take a dislike to them, find promising high school players to replace them and cancel their scholarships.

The loss of the scholarship means not only that there’s no chance of going pro but also, for many students, there’s no chance of finishing college. All dreams are dead.

It’s galling. Until that point, the college used their likeness, their name, their accomplishments to sell tickets and t-shirts. The college coaches raked in million-dollar salaries and the universities and conferences pulled down tens of millions from the television deals and corporate sponsors. But the student is left with nothing.

Even athletes who are lucky enough to remain on the roster until graduation, retaining their year-to-year scholarships as they go, may end their college careers thousands of dollars in debt. The National College Players Association and Ellen J. Staurowsky, a professor of sport management at Ithaca College in New York, calculated the scholarship shortfall costs at Division I universities.  

For the average athlete, who attends five years, the shortfall ads up to $13,800. But what students must pay at some schools is much higher. The steepest is at Indiana University-Purdue University at Indianapolis. There it’s $6,000 a year, for a total of $30,000 over five years.

University of Oklahoma player Courtney Paris snared huge publicity this March Madness season when she swore she’d return her scholarship money – estimated to be worth as much as $100,000 — if the Sooners didn’t win the national basketball championship.

That’s easier for her to say than most players, however. For one thing, it’s expected she’ll go pro, a prize only one percent of all college athletes attain.

In addition, her father, Bubba Paris, a former tackle for the San Francisco 49ers and owner of three Super Bowl rings, might be able to help her pay tuition with less difficulty than the average college athlete’s dad.

The National College Players Association is not asking for pay for play. Its demand is much more basic, and fair: four-year complete scholarships for student athletes. No more deceptive one-year partial deals.

For greyhounds, there’s a rescue and adoption society to give those who are spared a good life after the trials of the track. Student athletes aren’t asking to be “kept.” They just want a fair chance to compete in the classroom.

Robert Borosage

By Robert Borosage
Co-Director Campaign for America’s Future

Will Obama’s transformative budget survive? As his press conference last night illustrated, it runs a serious risk of drowning in a swamp of cant.

The budget is getting strafed by politicians in both parties for its deficits and debt. (the deficit is the annual shortfall between revenue and spending; debt is essentially the accumulation of net deficits over time).

Republicans, having joined Rush Limbaugh in betting that Obama fails, have done most of the ranting. Sen. Judd Gregg, lead Republican on the Senate budget committee, fulminates that if we pass Obama’s budget, “this country will go bankrupt. People will not buy our debt. Our dollar will become devalued.”

Richard Shelby, top Republican on the banking committee, warns Cassandra-like that Obama’s budget will put the country on “the fast road to financial destruction.” Eric Cantor, the hyperbolic House Republican Whip, brings it down to his favored level, railing about wasteful spending like “money that goes to remove pig odor.”

Conservative Democrats are chiming in also. Evan Bayh has formed what must be the twentieth new democratic rump group, arguing that “families and businesses are tightening their belts to make ends meet — and Washington should too.” Kent Conrad, Democratic head of the budget committee, is pushing for deep cuts in spending on domestic programs. “Moderate” Senators are expressing growing opposition to the president’s spending plans. Even the Chinese, America’s biggest creditor, are wringing their hands about US deficits, suggesting perhaps a new international currency might be needed to replace the dollar.

Before this babel completely drowns out reason, a little common sense might be useful.

1. The newfound Republican fiscal probity is worth less than a drunkard’s morning after regret.

For the last decade, they merrily embraced the Dick Cheney dictum that “Reagan taught us that deficits don’t matter. They doubled the national debt when the economy was growing, exactly at the height of the business cycle when they should have moved budgets into balance and reduced debt burdens. Fully $1.4 trillion of the largest annual “Obama” deficit — the $1.8 billion the CBO projects for FY 2009 that ends this October — was bequeathed to him from George Bush; the remainder comes from worsening conditions and the Obama stimulus spending to put people back to work..

Now as the economy verges on a depression, Republicans are indicting Obama for raising spending and deficits. This is like a gambling addict squandering the family fortune in a Las Vegas blowout and then scolding his wife for borrowing money to keep the kids in college. Had Republican leaders any sense of decency, they would just shut up and let adults address the mess they have left.

2. The greater worry in the short-term is that the deficits may be too small, not too large.

We’ve just suffered what Warren Buffett calls an “economic Pearl Harbor.” The accelerating downturn is turning into a global collapse. Consumers are cutting back; businesses laying off workers; exports have plummeted. The Fed has already cut interest rates to near zero. The only thing lifting this economy is deficit spending at the federal level. Senators intoning the comfortable mantras of the last years like Even Bayh can’t seem to grasp that we’re in a big-time trouble. If we took his advice, and cut federal spending and deficits, it would simply contribute to a downturn that is already the worst since the 1930s.

That’s why the high-church of economic conservatism, the International Monetary Fund, is calling on countries across the world to borrow more to stimulate the economy, not less. And that’s why all the talk about deficits in the out years — six, eight, ten years from now — is simply a dangerous distraction. The Congress isn’t passing the budget for a 2019. It is passing one for next year, and it should be spending more, not less, to put people to work and get the economy going. Once the economy recovers, we can act to bring deficits down to a sustainable level.

3. We can afford to take on the debt

Before joining Judd Gregg in rending garments and mumbling darkly about the end of the world, legislators would be well advised to inhale deeply, calm themselves and look around. The Congressional Budget Office predicts budget deficits will total some $9.3 trillion over 10 years (Obama’s budget which is more optimistic about the pace of recovery projects $6.97 billion). That’s a lot of money.

But this is a very big economy at $15 trillion a year and hopefully soon growing again. Bill Gates undoubtedly carries more debt than I or you do. But the burden of that debt — the carrying charges in relation to his income or the debt in relation to his assets — is far less than mine or thine. He can afford to take on more debt.

After years of conservative misrule, the US isn’t in as good shape as Bill Gates, but it isn’t broke either, particularly in comparison to other industrial nations. The current US public debt is about 40% of our annual economic production (GDP). It’s been far higher — reaching as much as 109% of GDP coming out of World War II. Post-war growth brought the burden down to about 25% GDP until Reagan gave us over to the seductive supply-siders and doubled the debt burden to about 49% GDP. Clinton brought it down to 33% and Bush drove it back up to about 40% even though the economy was growing.

Under Obama’s plans, the national debt will rise as a percentage of the economy to about 65-67%. That’s a big change. But the reason countries carry low levels of debt is so they can borrow when trouble comes. And this is the mother of all trouble.

But what is notable about that increase is that it will leave the US carrying only about the same debt burden that Germany, France and Canada were carrying -before they began adding to it in the current economic downturn. According the analysis of the Central Intelligence Agency in 2008, Germany’s public debt was at 65%, France at 66%, and Canada at 64%. The Italians, always somewhat more fiscally dissolute, were at 106%. Sober Japan, coming out of its lost decade, carried a public debt that was182% of its country GDP. 

None of these countries are going bankrupt. The Euro isn’t turning into toilet paper. The Japanese haven’t boarded up the country. We are urging all of these countries to borrow and spend more to help counter the downturn. We can afford the Obama deficits and more if necessary to lift us out of what looks increasingly like a global depression. (And that’s why if the Chinese are looking for a new currency to supplant the dollar, they’ll have to invent it.)

4. The most dangerous deficit is our public investment deficit.

Fact is we can’t really afford to cut the public investments Obama would make in education, new energy, health care and 21st century infrastructure. For too many years, we’ve starved basic investments to pay for adventure abroad or top end tax cuts at home. Now we have a national security imperative to invest in new energy, reduce our dependence on foreign oil and begin to address catastrophic climate change. We can’t compete as a high wage economy in a global economy without providing our children with a world-class pre-K to college (or advanced training) education. We must make the changes needed to provide Americans affordable high quality health care while getting health care costs under control. And we’ve paid the costs everyday of allowing our basic infrastructure to decay — from unsafe water to gridlocked roads to falling bridges to the outmoded electric grid.

Obama’s budget and recovery plans run up deficits to put people back to work while making a down payment on investments vital to our future. His domestic spending plans are, if anything, already too austere, reducing domestic discretionary spending to a lower percentage of the economy than under Reagan or Clinton or the Bushes. He argues correctly that we have to make investments in these areas to move our economy to sustainable growth, and away from the disastrous bubble economy that has now exploded in our faces. It is notable that his Republican critics don’t dispute him on this point. They simply stand firm against any tax increases on the wealthy, while calling for cutting spending to reduce the deficits — without ever offering a budget of their own to let us know exactly what it is they think should be cut.

The lesson? Let’s make certain we spend enough to get this economy going. Once we do that, we must guard against making Roosevelt’s mistake of trying to balance budgets too quickly, driving the economy back into the pits, as he did in 1937. Ignore the hyperventilating about America’s pending bankruptcy. But let’s make certain we stop spending money on pig odor, or whatever it is goofy Eric Cantor is whining about.

Robyn E. Blumner

 By Robyn E. Blumner
St. Petersburg Times Columnist

 In Edna Ferber’s 1925 Pulitzer Prize-winning novel So Big, a cultured woman spends her life doing hard physical labor on a rural Illinois farm so that her son can go to college and land in a fulfilling profession.

But when her son abandons a career in architecture due to its low pay and joins the soulless but lucrative world of bond trading, his mother asks with disappointment and contempt: “What is this you sell in that mahogany office of yours?”

This could be the question for America. What have we been selling for the last 30 years?

We’ve built trillion-dollar enterprises on nothing more than huckstering newer and more esoteric financial products. Ephemera as it turned out. Beyond that we don’t make much anymore.

There are a multitude of reasons for this, including the one that everyone instantly points to: globalization. But as Chicago labor lawyer Thomas Geoghegan writes in the April Harper’s magazine, there is one factor that has rarely been mentioned but looms larger than most of the others: the legalization of usury.

In 1978, a U.S. Supreme Court ruling effectively released banks from state interest rate caps. In Marquette National Bank vs. First of Omaha Service Corp., the court said that Minnesota could not enforce its usury law against a credit card issued by a Nebraska bank. The National Banking Act of 1864, the court said, allowed banks to lend at interest rates set by the state where the bank is chartered, not where the loan is made.

This meant those reasonable state limits of 9 percent or thereabouts went out the window as states repealed and loosened usury laws in order to give their banks competitive advantages. Interest rates on credit cards soon spiked.

As profits for these companies soared there was a corresponding shift in the way capital flowed. Manufacturing with its modest returns was thrown over for the more robust returns of the financial sector. MORE

*************

This column was first published in the St. Petersburg Times on March 19, 2009

David Sirota

By David Sirota
Author of “The Uprising: An Unauthorized Tour of the Populists Revolt”

United Steelworkers President Leo Gerard likes to say that Washington policymakers “treat the people who take a shower after work much differently than they treat the people who shower before they go to work.” In the 21st century Gilded Age, the blue-collar shower-after-work crowd is given the tough, while the white-collar shower-before-work gang gets the love, and never before this week was that doctrine made so clear.

Following news that government-owned American International Group (AIG) devoted $165 million of its $170 billion taxpayer bailout to employee bonuses, the White House insisted nothing could be done to halt the robbery. On ABC’s Sunday chat show, Obama adviser Larry Summers couched his passive-aggressive defense of AIG’s thieves in the saccharine argot of jurisprudence. “We are a country of law – there are contracts (and) the government cannot just abrogate contracts,” he said.

The rhetoric echoed John Adams’ two-century-old fairy tale about an impartial “government of laws, and not of men.” Only now, the reassuring platitudes can’t hide the uncomfortable truth.

Last month, the same government that says it “cannot just abrogate” executives’ bonus contracts used its leverage to cancel unions’ wage contracts. As the Wall Street Journal reported, federal loans to GM and Chrysler were made contingent on those manufacturers shredding their existing labor pacts and “extract(ing) financial concessions from workers.” In other words, our government asks us to believe that it possesses total authority to adjust contracts at car companies it lends to, and yet has zero power to modify contracts at financial firms it owns. This, even though the latter set of covenants might be easily abolished.

According to New York Attorney General Andrew Cuomo, these allegedly inviolate AIG agreements promised bonus money the company didn’t have and were crafted by executives who knew the firm was collapsing, meaning there is a decent chance these pacts could be invalidated under “fraudulent conveyance” statutes. They also might be canceled via force majeure clauses allowing one party to rescind a pact in the event of extraordinary circumstances – like, perhaps, the collapse of the world economy. (Note: Business Week reports that corporations are already citing the recession as reason to invoke such clauses and nix their business-to-business contracts.)

But, then, those legal cases require a government that treats AIG’s shower-before-work employees with the same firmness that it treats the auto industry’s shower-after-work employees, not the government we have – the one that believes “the supreme sanctity of employment contracts applies only to some types of employees but not others,” as Salon.com’s Glenn Greenwald says.

Mind you, this double standard works the other way, too. Congressional Republicans have long supported the laws letting bankruptcy courts annul mortgage contracts for vacation homes. Those statutes help the shower-before-work clique at least retain their beachside villas, no matter how many of their speculative Ponzi schemes go bad. But for those who shower after work, it’s Adams-esque bromides against “absolving borrowers of their personal responsibility,” as the GOP announced it will oppose legislation permitting bankruptcy judges to revise mortgage contracts for primary residences.

Certainly, for all the connotations of fairness inherent in American politics’ “country of law” catchphrases, most of us know that the selective application of legal principles is as old as the Republic. However, lots of us are only now discovering that inequality is so pronounced that the time of day we bathe determines the enforcement and reliability (or lack thereof) of even the most basic contracts. We are just realizing that for all the parroting of America’s second president, we are ruled by a government of men, and not of laws.

David Sirota is a fellow at the Campaign for America’s Future. Find his blog at OpenLeft.com or e-mail him at dsdavidsirota.com.<–>

Sally Kalson

They are manufacturing lies to keep workers from joining unions

By Sally Kalson
Pittsburgh Post-Gazette Columnist

In the annals of big lies, it’s hard to top the tobacco companies’ insistence that smoking (a) did not cause lung cancer and (b) was inexorably linked to America’s rugged individualism.

Then along came the campaign to kill the Employee Free Choice Act, legislation that would make it easier for workers to form unions and harder for companies to intimidate and fire them if they try. The law would reverse decades of impotence on the part of the National Labor Relations Board, which has been reduced to a toothless body that employers barely bother to acknowledge anymore.

The assault against the free choice act rivals the tobacco campaign for sheer chutzpah by insisting that union busting (a) does not erode the middle class and (b) is inexorably linked to business’s deep regard for the sacred “freedom” of American workers. Which might be true if you’re talking about the freedom to be paid less for working more with no health insurance, pension or job security, but otherwise is a real laugh riot. MORE

Sally Kalson is a columnist for the Post-Gazette and a 25-year member and longtime officer of The Newspaper Guild/CWA Local 38061 (skalson@post-gazette.com, 412-263-1610). More articles by this author

QUESTION: Polls show strong support for “Buy American” legislation – which requires that government entities using tax-dollar supported stimulus grants buy domestically-produced products such as steel whenever possible. From your conversations with friends and neighbors, do you think most people really understand why it is so crucial to the American economy right now?

Yes we can Buy American

We think that Americans are currently far more aware of the values of stimulus and buying American products than they have been permitted to be for the past several years.  Because of the trust level in the current administration, driven by continuing efforts by the president to communicate with us, people are willing to make choices in line with what is best for our economy.  Hopefully, this trust we have will extend to believing in Obama’s efforts on behalf of unions too.
Jay and Lucia Weinroth
Big Prairie, Ohio

Little thought of Buy American

We are already very strongly “buying American,” but my sense is that most people have not really thought about it very much.  Local car dealerships are doing strong advertising along these lines, however, so that may pay off.
Bill Prentiss
Orlando, Fla.

Tariff now

In this day of global economy, global stimulus plans, and Uni Global Union, we must, finally, admit Americans are in a GLOBAL COMPETITION for jobs, standard of living and national economic standing. The surrender policy this nation’s corporations and politicians have given this great nation in condemning it to a service economy is a travesty. All great economic powers are based on their MANUFACTURING ability. Due to other nations taking advantage of our corporate policies of off-shoring, union busting and desperate allegiance to higher profit margins, we are in position to become a second tier economy. While other nations devalue their currency, pirate American technology, and use all protectionist measures available to them, our leaders continue to see the global economy as first priority over American security. If no one HERE has a job manufacturing American goods at a livable wage, how do they expect us to be able to

BUY anything other than Wal-Mart Chinese goods on the Chinese wages we’re receiving? I say don’t blame the Unions. Blame political and corporate greed. Give us a level playing field: tariff now.
John Buck
Point Pleasant Borough, N.J.

More Buy American education

People seem to understand the sentiment of buying American made goods, but they fall short in the practice.  I even know of a New York affiliate that distributed Chinese made “union logo” jackets at their December holiday meeting.  “If we bought American we couldn’t distribute them for free to our members,” I was informed by that local’s President.  He seemed only slightly embarrassed as he said this.

Sad, but true.  More ”Buy American” education is necessary.
Kevin Sexton
Flushing, N.Y.

Buy American and protectionism

I’ve been a union man since before I was born (my grandfather was a baker, my grandmother a seamstress, I’m a professor) and I strongly support almost every union initiative and position: except pushing for protectionist, “Buy American” legislation. Protectionism can lead to an uncontrollable retaliatory spiral that will ruin the world’s and America’s economy for years to come. “Buy American” is the wrong approach to a real problem: unfair competition, cheap wages and poor conditions in foreign countries.

The right solution includes:

1) enactment of single-payer national health so that we get guaranteed health and so that American business won’t be saddled with a competitive barrier compared to foreign companies that do not have to pay health care benefits;

2) a militant campaign against environmental and labor standards violations in other countries (not boycotts, but demonstrations at embassies, visits to the countries involved);

3) strong ties with and funding support for unionists in other countries — even symbolic short, large-scale sympathy strikes;

4) leverage our political strength to ensure that NAFTA, WTO etc. really get modified to promote better labor conditions world wide;

5) aggressive unionization here in America of all the industries that they CANNOT ship overseas, and aggressive struggles to raise the wages in those industries and sectors: food service workers, hospital workers, sanitation workers, doormen and janitors, transit workers, etc.;

6) repeal all right-to-work laws, the NYS Taylor Law penalties, etc. here and worldwide.
David Arnow
Brooklyn, N.Y.

Build America

The case has not been made strongly enough yet.  The Obama Administration could help make direct links between people’s basic concerns about the current state of the economy and job loss to a brighter future for every American family based on development of green industry and business built by Americans.    Unfortunately,  most people I know perceive “Buy American”  as strictly a ‘union’ issue which they don’t particularly identify with personally, and don’t understand what is good for unions is good for them.  I would like to see the issue framed as “Build America” instead of “Buy American” so that people might come to understand its importance to every American and to the global economy.   People painfully understand the economy needs to be rebuilt, and are being told to save not buy at this time.   The word “Build” instead of “Buy” better describes immediate needs.

After the last eight years of national trauma, people are skittish about ‘patriotism’ and the “Buy American” slogan may be off-putting.  So, yes, “Build America” first could lead us into a future of “Buy American.”  Also, the case for “Build America” and “Buy American” must be made by leaders outside the trade union movement as well as by our own Blue-Green Alliance.  It’s time for coalition building again.
Beth Omansky
Portland, Ore.

American imbalance

I suspect that most people do not understand that our balance of trade is so far out of balance; they may have heard that China holds around a trillion dollars of our debt, but they do not realize how much more the USA has bought from Chine than it has sold to China.  To a lesser degree, we are out of balance to Europe, Japan, and Korea. If we slow our purchasing of foreign goods, perhaps the balance will tilt back toward a more normal position.
David G. Wagner, MD
Portland, Ore.

American-made frustration

My friends feel very strongly about “Buy American,” but are frustrated because it is not easy to find American-made goods.  I would not know where to go to find American-made shoes or clothing.  Furniture and appliance stores have American, Canadian, and Asian items side by side and it is difficult to know which is which. Food and paper goods are often not labeled.  American-owned car companies purchase parts abroad, and ”foreign” ones purchase U.S. parts.
Judy Ferro
Caldwell, Idaho

Corporations selling out America

The tax structure must be changed. Freightliner closed American plants and went to Mexico. Hershey Chocolates moved to Mexico.  We have to keep the work in USA
Franz  Ortloff
Helena, Mont.

Circumventing Buy American

I think most people are not aware of the importance of Buy American and do not realize foreign countries exploit their workers. I myself think that to import to the extent that our own country has almost no domestic production of items like washers, dryers or structural steel is wrong. Some government contracts require Buy American in their subsidies for say, rail coaches, and they get around this requirement by assembling a small final component in the U.S.
Martin LaCarbonara
Woburn, Mass.

Consumers’ ignorance; manufacturers’ greed

For too long American consumers have made their purchases based on price and neither quality nor country of origin. This, coupled with the greed exhibited by manufactures and our nation’s trade policies has led to the demise of millions of good family wage jobs in the USA.

However, when the question is posed, should taxpayers dollars, meant for job creation, be spent overseas, I think that a vast majority of citizens would answer, “Of course not.”  I also believe that the recovery of our nation’s economy cannot be achieved to a great degree until we return to a nation that manufactures the goods we purchase and not a nation whose economy is based on services.
Harold Abbe
Camas, Wash.

Build American manufacturing

Instead of just passing out free money to the incompetent financial wizards at inept and possibility criminal Wall Street organizations, maybe the U.S. government should build manufacturing plants to make consumer products like refrigerators, washing machines, clothing, TV’s, and eventually all of the consumer goods that we import with that money.  We should impose import taxes high enough on these products so that US-made products are competitive in price with imported goods.  These plants should periodically and/or constantly be for sale based upon competitive bidding, but at a minimum price at least equal to as much as the government investment.  The money passed out to the financial industries does nothing to create jobs or eliminate the problems with the US economy.  Maybe it helps pay for the commissions of the U.S. salesmen of the expensive new French-manufactured private jet airplanes.  The French people making these (Falcon 20-25) airplanes are probably very thankful for Obama’s generosity.
Gerald R. Spencer, P.E.
Houston, Texas 

More solutions

Given that we are thoroughly enmeshed in World Trade, an attempt at nationalism would probably be counter productive.  Other countries would retaliate.

Instead, I should like to suggest the following changes:

1.  Re-write our trade policies to correct the off-set balance of payments.

2.  Make importers legally responsible for the safety of their products.

3.  Reward businesses that create jobs for U.S. workers.

4. Give tax relief for small businesses.
Suzanne Orr
Port Angeles, Wash.

Think past price

I don’t think most Americans think past the price. I admit I personally succumb to the temptation to pay less for imports manufactured with slave labor, although if there’s an American made product for not too much more, I will buy it.

I do make an effort to buy locally-grown food and wood products, as farming and lumber products support my neighbors. Companies like ADM and Cargill need their feet held to the fire with heavy tariffs or outright bans on importation of slave products.

Hopefully, the Obama administration will implement fair-trade mandates on imports, which will make U.S.-made products price-competitive and return our jobs.

Live long and perspire,

Jerry (Steve) Dodge
Springdale, Wash.

Leo W. Gerard

By Leo W. Gerard
International President

AIG Chairman Edward M. Liddy gets the Creep of the Week award for his stunning, overwhelming, dumbfounding display of cluelessness.

Liddy not only awarded $165 million in bonuses to the very AIG employees whose risky speculation in credit default swaps bankrupted the once-great insurance giant, forcing it to beg for $170 billion in taxpayer bailouts, he then claimed he was a helpless victim of retention bonus contracts written before he took over in September. Here’s exactly what he said: “Quite frankly, AIG’s hands are tied.”

No other contender for this week’s Creep prize awarded by the USW sunk close to those depths of obtuseness. And in so many diverse areas! Let’s count the ways:

First, there’s Liddy’s claim that he just can’t squirm out of contracts. Boy, he’d be the first CEO on God’s green earth to be too feeble to break a contract. Think about it: Congress insisted that the Big Three auto companies crack open their contracts with the United Auto Workers to qualify for federal bailout money. Union contracts at all sorts of companies across this country have been broken, bent, re-opened and renegotiated by cooperative labor organizations willing to accept a variety of cuts to preserve employment during an economic crisis caused by the likes of, well, let’s face it, reckless speculators at AIG! But, somehow, Liddy couldn’t find a way to break, bend, re-open or renegotiate contracts with the white collar workers who caused the mess taxpayers are both suffering and cleaning up.

Second, there’s Liddy’s claim that he had to honor the bonus contracts or he’d be sued by his employees. With a straight face, Liddy asserted that the employees in AIG’s Financial Products subsidiary who neglected to account for the possibility of a decline in real estate prices would actually list their names on court documents contending they deserved extra money after bankrupting the company. If Liddy thinks there’s a jury in America that would buy that argument and award the bonuses, I’ve got some credit default swaps I’d like to sell him. It’s clear, in fact, even Liddy doesn’t buy the argument since he’s declined to publicly release the names, though he has given a great deal of information – under duress – to New York Attorney General Andrew M. Cuomo who is working on a lawsuit to recover the bonuses for taxpayers.

Third, there’s Liddy’s failure to understand these simple facts: people who caused a company’s demise don’t get bonuses and neither do employees of companies getting bailouts with federal tax dollars. The average AIG bonus payment was $395,000 – though 51 employees got more than $1 million and the winner of the fattest bonus got $6.4 million. Liddy told Congress he has asked some of the 418 recipients to return half of their bumps. If all 418 complied, the average would decline to a mere $197,500. That may be chump change to a Wall Streeter, but it is a life-saving sum to a middle class worker who has lost his job or can’t pay his mortgage because of Wall Street’s greed and  recklessness. In addition, there’s an important reciprocal issue Liddy failed to understand: the fury he has provoked by paying those bonuses has made the middle class even less willing to invest their tax dollars in any future bailouts that Congress may claim AIG or Wall Street banks desperately need.

Fourth, there’s Liddy’s ability to treat with reverence those who caused the financial meltdown while regarding with disdain those who suffer as a result of it. It was Liddy’s contention that his white collar workers were special. He had to give them the bumps, or they would abandon AIG, refusing to clean up the mess they’d made. That didn’t apply to auto workers, though. No one cared what happened to them. They could be furloughed as a result of Wall Street’s misbehavior — and pay taxes to clean it up as their bonus. But what’s worse is the level of continued boldfaced, outright deception from Liddy and his like. The bumps were crucial for retention, he said, right? Wrong. Cuomo discovered that 11 big time bonus beneficiaries – those who got $1 million or more – had already left AIG.

Fifth, Liddy acted as if the American people didn’t already own 80 percent of his company. Earlier this month, after AIG reported a $61.7 billion quarterly loss, the largest in corporate history, the federal government promised to help prop it up by giving it another $30 billion in taxpayer dollars. The solution here is simple, as the Washington Post pointed out in a story last week. If the feds simply insist on a 100 percent share of the company, which, frankly, the American people deserve for that kind of investment, the bonuses stop.

In addition to Creep of the Week, Liddy gets a special bonus award: Clueless of the Week.

Robert Kuttner

Robert Kuttner
Co-Founder and Co-Editor of The American Prospect

In the past two weeks, political support for the Tim Geithner/Larry Summers approach to solving the banking crisis has been unraveling in Congress, with blistering criticism from legislators of both parties.

The financial danger is that the Treasury will burn through the money approved by Congress without fixing the system. The political danger is that Republicans will posture as the populists, expressing faux-indignation that so much taxpayer money has gone to Wall Street. The overarching risk to Obama’s presidency is that the plan won’t work, and his political capital will evaporate along with the financial capital.

There is a whole other path to repairing the banking system, and a whole other set of experts, equally brilliant and better in touch with financial realities. But their unfiltered views are not reaching the president. This loyal opposition, of which more shortly, is not limited to lefties; it spans the ideological spectrum.

Though the details are numbingly technical (and deliberately mystified both by the investment bankers and their allies at the Treasury), the basics of what’s wrong with the banking system and how to fix it are, at bottom, very simple.

After all, what do banks do? They take in deposits and they put out loans and make other investments.

In the past decade, far too many of the banks’ investments were far too speculative. They lost vast sums, which now exceed the value of their capital. In plain English, they are insolvent.

In a situation like this, a busted banking system can push the whole economy into prolonged depression. We are right on the edge of that condition, and there is little time to lose.

As the president of the Federal Reserve Bank of Kansas City, Thomas Hoenig, explained March 6 in a brilliant speech (PDF) that is being widely circulated on Capitol Hill, “Too Big Has Failed,” to save the banking system we need a public corporation like the Reconstruction Finance Corporation of the 1930s, which at one point held about one-third of all U.S. bank stock, and by the time it wrapped up its affairs it did not cost taxpayers a penny.

A modern RFC would be given the technical competence and manpower to audit just how bad things are. It needs to determine how far underwater is each of the large banks. (The top four hold about 55 percent of all deposits; fix them and you fix the system.)

The public corporation, according to Hoenig, would need to decide which banks to take into receivership, which ones have competent management teams, and which managers need to go.

Once the size of the hole in bank capital is determined — and it will be on the scale of two trillion dollars — the government needs to decide who eats the loss. How much do the taxpayers put in, and how much do the bondholders have to sacrifice?

Owners of bank stocks are not really relevant. They have already lost upwards of 95 percent of their investments. When a bank is taken into receivership, they will lose the rest. But it’s no big deal for the system. Trying to use public money to pump up the value of bank stocks — Geithner’s approach — has it backwards.

Finally, when the banks are restored to solvency, they need to be returned to private ownership.

Hoenig is not exactly a Bolshevik, but he is embracing Roosevelt and the President’s men are not. A well-staffed government corporation, which would take insolvent banks into receivership, is the most effective approach because it gets the job done swiftly and transparently, and with the least unnecessary government subsidy of market middlemen.

Last week, at a hearing of the Joint Economic Committee, Alex Pollock of the conservative American Enterprise Institute commended this strategy, and the Committee’s ranking Republican, Sen. Sam Brownback of Kansas embraced it. For a quick tutorial, the video of the hearing is must-watching.

But the Geithner/Summers strategy is the complete opposite. Geithner hopes to enlist hedge funds and private equity companies to purchase bonds from banks, using loans and loan guarantees from the Treasury and the Federal Reserve, and thereby restart the very system that failed.

This approach gives far too much power and taxpayer subsidy to the least transparent and least regulated parts of the financial system. On Saturday, the Wall Street Journal reported that the announcement of the details of the plan had to be delayed yet again, because two of the biggest firms wanted even sweeter terms before they came to the table.

This latest Geithner scheme to restart the doomsday machine of securitization for newly issued bonds is the fifth do-over since Paulson embarked on this path last October. Geithner’s scheme sidesteps the core problem that stymied Paulson — what about the pre-existing bonds that are clogging bank balance sheets? This huge hole in bank assets is a far bigger challenge than re-starting the engine of new lending, which never entirely quit.

The Geithner/Summers approach is complex, slow, ad hoc, non-transparent, and far too Wall Street oriented. Only now is Geithner getting around to initiating proper audit of the zombie banks he is aiding, under the euphemism, “stress tests.”

As an indication of just how closely Geithner and company are acting on Wall Street’s behalf, consider this tidbit, whose significance the media largely missed: Friday’s Washington Post reported that a man named H. Rodgin Cohen, under consideration for Deputy Treasury Secretary, had become the latest proposed senior appointee to withdraw from consideration. The Post treated the story as part of the continuing saga of unfilled sub-cabinet jobs.

But who is “Rodge” Cohen? Astoundingly, he is a senior lawyer from the firm of Sullivan and Cromwell, and the man who has been negotiating with Geithner on behalf of the large Wall Street banks!

What the hell, if you’re going to act mainly in the interests of the banks, why not bring just their people right into government? The story didn’t give details, but only mentioned that “an issue” had emerged during the vetting process. We can only imagine what kinds of conflict of interest problems the vetting team unearthed.

If you ask the question, how can we get America’s banking system restored to health, the Geithner/Summers approach makes absolutely no sense. But if you ask a different question, it makes perfect sense: how can we pump up the share price of outfits like Citi and Goldman, while we pump in taxpayer and Federal Reserve money and hope for a miracle.

Unfortunately, a miracle is just what it would take for this approach to work.

Unlike Roosevelt’s RFC, the Treasury lacks any institutional capability to do the job properly. As a consequence, it shovels out money first, does audits later, oscillates wildly between being hands off and micro-managing, and tries to wring out purely symbolic sacrifices like making Citi give back its proposed new $43 million executive jet.

On Sunday morning, the talk shows were dominated by the revelation that AIG — on the hook to taxpayers for $175 billion — was paying out bonuses to the very unit in London that caused the catastrophe. The newspaper stories suggested that news of this latest outrage originated with a preemptive leak from the administration.

Larry Summers solemnly declared on the Sunday talk shows that these bonuses were appalling, but that America is a nation of laws where “a contract is a contract.” That’s malarkey. The UAW has been forced to renegotiate contracts as part of the auto bailout.

Summers credited Secretary Geithner for reducing the original proposed bonuses, but if Geithner has the leverage to achieve that reduction, he has the leverage to reduce the bonuses to zero. The government owns 80 percent of AIG.

But the outrage over the AIG bonuses is a sideshow. The larger problem, both financially and politically, is the entire strategy for rescuing the banks.

It would be hard to imagine two administrations seemingly more opposite than the Bush and the Obama presidencies. Yet Geithner’s approach is essentially a continuation of the failed strategy of Bush Treasury Secretary Henry Paulson, Geithner’s former close colleague in Geithner’s prior role as president of the New York Fed.

In defending the AIG bonuses, CEO Edward Liddy actually said that you had to pay bonuses to attract and keep “the best and brightest talent,” in this case the very people who are costing America’s taxpayers $175 billion and counting. Far from receiving bonuses, these people deserve to share a cell with Bernie Madoff.

By the same token, Larry Summers and Tim Geithner are not the only smart people about finance. If President Obama wants a second opinion, he could begin with Paul Volcker, nominally chairman of Obama’s own “Economic Recovery Advisory Board,” which so far is mainly window-dressing. According to my sources, Summers and Geithner seldom talk to Volcker because they don’t like Volcker’s criticisms of their plan.

The president could also consult with several people in the Federal Reserve System who have a different view, and also the FDIC leadership, and the Congressional Oversight Panel that was created by Congress as the precondition for appropriating the TARP money. The panel has the statutory right to get documents from the Treasury. But under Geithner as under Paulson before him, Treasury has been stonewalling. Legislators of both parties are increasingly viewing Geithner as part of the problem.

As the administration continues its coziness with Wall Street and the approach fails to bring zombie banks back to life, populist anger passes to both the Republicans and to media tribunes such as Lou Dobbs. This brand of populism is one part anti-Wall Street, but two parts anti-government and anti-immigrant. It has no strategic coherence as a recovery plan.

The alternative to Lou Dobbs’ brand of populism is of course Franklin Roosevelt’s. But something is really off when Sen. Sam Brownback, the AEI, and the Kansas City Federal Reserve Bank start sounding more like Roosevelt than Barack Obama’s treasury secretary does.

Obama needs to get a second opinion, firsthand.

Robert Kuttner is co-editor of The American Prospect and a senior fellow at Demos. His latest book is “Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.”

Jon Geenen

By Jon Geenen
International vice president

The American business community is pulling together to ensure that workers’ democratic rights in the workplace are preserved. In fact, they are spending millions and millions of dollars on behalf of the workers whose rights they seek to protect. What?

The absurdity of this is obvious. These are the same people who have fought every initiative to increase minimum wage. These are the people who provided unwavering support of NAFTA and other offshoring efforts that have decimated our manufacturing base. These are the people who worked tirelessly to defeat new health and safety regulations and environmental efforts related to cleaner water and air and safer chemicals, not to mention their vehement opposition to health care reform.

The American business community claims there is a travesty associated with the Employee Free Choice Act, and they are right. But the travesty has nothing to do with secret ballots. Like the master illusionist creating an act of prestidigitation, corporate America is undermining democracy, while at the same time pretending to be its biggest defender in the workplace.

The media efforts and the unlimited money provide a glimpse to the general public about how far corporations will go and how much they will spend to prevent workers from organizing a union. To be sure, their “democracy campaign” is a textbook strategy straight out of the union-busters handbook, complete with intensive misinformation campaigns, threats of plant closures, doom and gloom and the ostracizing and isolation of pro-union workers as un-American or out of sync with their peers. This time, rather than doing it to a worker in a plant, they are doing it to the general public.

The corporate-funded campaign attacks EFCA as undemocratic and warns that if passed into law, workers would lose access to a secret ballot election as a way to determine majority status for union representation. There is one problem with that. Workers absolutely would be entitled to a secret ballot election under EFCA.

EFCA would not prohibit or otherwise limit the use of the secret ballot. What it would do is say that the decision for workers about how and whether to form a union is a decision that is left workers – not to their bosses.

These opponents also would have you believe that somehow signing your name on a card to indicate your interest in a union is somehow a new or novel approach to organizing. There is a problem with this, too. That is how it works today and, for the most part, how it has worked since the 1930s. In order for workers to gain collective bargaining rights, workers always have had to demonstrate majority support. Signing cards or providing signatures is the first step in forming a union.

So what really would change with EFCA? Employees alone would decide how to show majority status in a unionization campaign. Why does corporate America really care? Because their ability to “intervene” becomes limited. You see, even though many progressive employers recognize unions by the card check method today, those that don’t know that by demanding a National Labor Relations Board election, they gain 42 precious days to run an anti-union campaign where they can fire, demote, coerce, threaten and intimidate workers with little consequence and effectively block workers’ attempts to (ironically) democratize the workplace. Under EFCA, employees would be more likely to have made that decision before the boss finds out, making the matter a decision for workers and workers alone as the Wagner Act originally envisioned.

Unfortunately, business knows what we all know: that except for the small minority of people who are simply philosophically opposed to unions, the rest of us believe, whether we belong to a union or not, that the right to unionize is a critical component of a democratic society. Democracy does not and cannot exist where strong and independent trade unions do not exist. In our country, the rise and fall of personal rights and liberty have paralleled the rise and fall of the labor movement. Why? Because the labor movement is a unique social movement that lends its voice to all working families, uniting the masses. This is what corporate America fears but doesn’t dare say – because that truly would be undemocratic.

The so-called democracy card is simply a red herring.

This piece was first published in the Milwaukee Journal Sentinel on March 13, 2009