Leo W. Gerard

By Leo W. Gerard
International President

President Bush took to the TV Friday to announce that he wouldn’t walk past the financial crash of America’s Big Three automakers and do nothing to save their lives.

Refusing resuscitation, Bush said, would be irresponsible during the worst economic crisis since the Great Depression.

A week earlier, 31 GOP Senators, mostly from Southern states, voted to avert their eyes and allow American auto companies to die. They opposed $14 billion in federal loans for GM and Chrysler, revealing that their loyalty lies not with America, not even with their own states, but with South Korea and Germany and Japan.

They are Toyota Republicans.

Toyota has non-union manufacturing plants in Alabama, Kentucky, Mississippi and Texas – states whose senators led the GOP quest to slay the Big Three American auto manufacturers – Richard Shelby, R-Ala.; Mitch McConnell, R-Ky, and John Cornyn, R-Tx. Here’s the Republican from Mississippi, Sen. Thad Cochran, explaining why he’d vote against the loans, “Things have changed. It’s not just the Big Three anymore,” he said, pointing out that Nissan and Toyota employ more Mississippians than General Motors, Ford and Chrysler. But, he said, the foreign companies would not share “in the benefits of that automobile bailout program.”

No. But Mississippi did give Nissan and Toyota more than $650 million to entice them to locate in the state. GM, Ford and Chrysler didn’t share in those benefits, Sen. Cochran.

The Toyota Republicans are all for helping the rich with tax breaks and shelters, and they’re all for aiding foreign auto manufacturers with billions worth of tax forgiveness and government-paid infrastructure improvements.

But their disdain for the working class couldn’t be clearer as they organized defeat of loans to the Big Three under this command: “Republicans should stand firm and take their first shot against organized labor.”

They haven’t gotten the message sent out by the electorate in November. Voters rejected politicians prolonging the same old policy of protecting themselves and the rich. The nation’s voters want selfless leaders who will perform in the best interests of the entire country. They want change.

Clearly the allegiance of the 31 Republicans who opposed the loan to save GM and Chrysler is not with the United States of America, which would lose 900,000 jobs if just GM closed, and more than 2.1 million if the Big Three did. Those job losses would occur during the worst economic downturn since the Great Depression. In November, the 11th consecutive month of job losses, another 533,000 people were thrown out of work, swelling the pool of unemployed to 10.3 million. The Toyota Republicans were willing to increase that.

They voted against the interests of their own states as well. Consider what would happen in a few of those Southern States whose senators led the charge against preserving the Big Three. If just GM collapsed, Kentucky would lose 20,000 jobs; Alabama, 21,000; Georgia, 23,000, and Tennessee, 29,400, according to calculations by the Economic Policy Institute.

Sen. Cochran just didn’t think it was right for the U.S. government to aid its auto industry. But apparently he’s fine with foreign governments providing subsidies to the transplant automakers in his state. And, apparently, he’s okay with spending state and federal money to help foreign automakers locate manufacturing plants in the U.S.

Korean and Japanese automakers – including Nissan and Toyota with plants in Cochran’s Mississippi – benefit from manipulation of currencies by their governments, a factor that, according to EPI estimates, reduces their costs by between 10 and 20 percent. In addition, nationalized health care in countries such as Japan and Germany serves as a subsidy.

Also, the Toyota Republican opposed federal money for American companies but supported state and federal money for foreign auto makers estimated at $3.6 billion.
Shelby, for example, got $3 million in federal funds to improve roads near the Hyundai plant in Alabama after the state gave $250 million to the Korean automaker.

Shelby opposed loaning one federal cent to the U.S. automakers, though, telling “Face the Nation” that they should die: “Companies fail every day and others take their place. . . There’s not a bank in this country that would loan a dollar to these companies.”

But for foreign auto companies, his home state of Alabama couldn’t provide enough taxpayer cash – more than three quarters of a billion. In addition to the quarter billion it gave the Korean automaker, it handed another quarter billion to German Daimler for a Mercedes-Benz plant, nearly a quarter billion to Japanese Honda and $29 million to Japanese Toyota.

Similarly, Jim DeMint, another senator who led the Toyota Repubicans’ rebellion against the loans to GM and Chrysler, told the “National Review” recently, “Government should not be in the auto industry.” Yet, his state, South Carolina, got into the auto industry with nearly a quarter billion — $230 million – in gifts to a German auto company – BMW.

The same is true in Kentucky, home of Sen. Mitch McConnell, who said of loans for the Big Three, “Government help is not the only option. It’s not even the best option.” But government help was fine when Kentucky was providing grants for Toyota, which got $371 million from taxpayers since 1986.

It’s clear that the real problem was not a philosophical one. All of these lawmakers were willing to flick free market capitalism out the car window like a cigarette butt if their states could use taxpayer dollars to buy a foreign auto plant. No, what really gags them about the Big Three is that they pay good, middle class wages and benefits as a result of contracts with the United Autoworkers.

Repeatedly, the Toyota Republicans insisted that UAW members bear the brunt of the cost of the bailout. The senators insisted that UAW wages be lowered to match those of non-union auto workers at foreign-owned manufacturers. Toyota Republican Sen. Bob Corker of Tennessee, wrote an amendment to the bailout bill that would have required UAW members to accept pay cuts by a specific date in 2009. When Republicans defeated the bailout, DeMint blamed that on the union, saying, “It sounds like the UAW blew up the deal.”

The Toyota Republicans then conferred the American auto industry to bankruptcy. They said they favored bankruptcy because it would enable the Big Three to break pledges made in labor contracts and promises for health care and pensions made to retirees. The Toyota Republicans want the wages of American workers pulled down. To them, UAW members making an average of $28 an hour, accounting for less than 10 percent of the cost of a car, are earning just too much money.

The Toyota Republicans did not, however, make that claim about the white collar workers on Wall Street who got this country into the financial fiasco that led to the dire circumstances for automakers. And not just for American ones. Domestic car sales declined by 40 percent last month, but Asian producers’ sales dropped too – by 35 percent.

The average salary of white collar, Wall Street employees — workers in “securities, commodity contracts and investments” — is four times that of those laboring in the rest of the economy. Remember, these are the guys who are so smart that they took down Bear Stearns, Fannie Mae, Freddie Mac, Washington Mutual, AIG and Lehman Brothers – in less than a year – and ultimately required $700 billion from taxpayers to bail them out.

The top executives of Wall Street banks receive billions of dollars in year-end bonuses. The New York Times detailed those at Merrill Lynch in a story Dec. 17 entitled “On Wall Street, Bonuses, Not Profits Were Real.” In 2006, the firm gave its top executives between $5 billion and $6 billion in bonuses, which means, for example, a trader earning $180,000 a year got a $5 million bonus.

Merrill’s $7.6 billion earnings that year turned out to be bogus. The company’s losses now have exceeded all of the profits it earned over the previous 20 years. To prevent collapse, it sold itself to Bank of America in September. But then, Bank of America took $15 billion of that $700 billion in bailout money. Despite the gift of taxpayer dollars, the CEO of Bank of American has not publicly announced that he will decline a bonus, and Bank of America plans to tell Merrill Lynch workers the amounts of their bonuses beginning Friday, the New York Times reported Thursday.

When those Toyota Republicans voted in favor of providing $700 billion for Wall Street — including both of Tennessee’s senators, Bob Corker and Lamar Alexander; Kentucky’s Mitch McConnell; Georgia’s Saxby Chambliss and Johnny Isakson; South Carolina’s Lindsey Graham, and Texas’ Kay Bailey Hutchinson and John Cornyn – none asked for high-paid white collar workers to take pay cuts or give up their million dollar bonuses. There was a feeble attempt to limit the pay of chief executives, but that applied only to firms that received federal money under one particular method, and the treasury decided not to hand out the $700 billion that way.

And no lawmaker asked white collar workers or executives who got billions in bonuses based on false profits to return them.

But those Toyota Republicans want middle class, blue collar workers who don’t get year end bonuses, who don’t celebrate with five-figure dinners, to take wage cuts. They want autoworker pensioners to lose the monthly benefits they earned with a lifetime of labor.

And at no time did those Toyota Republicans suggest that they should cut their own salary or top-notch, government-paid health benefits or pensions. Like the reckless speculators on Wall Street, Congress bears responsibility for the crisis condition of the American economy because it deregulated financial markets.

In 2002, during a downturn in Japan, the House of Councillors reduced the pay of Diet lawmakers by 10 percent, and ended the transportation allowance, portrait-painting and  pension given senior lawmakers.

If the Toyota Republicans believe the Japanese way of pay is so great for autoworkers, they should first impose it on themselves.

Leo W. Gerard

 

 

By Leo W. Gerard

International President

From sea to shining sea, America is suffering.

She is, however, afflicted with an avoidable condition she brought on herself, like a hangover. Only this one’s interminable and internationally contagious.

She did it by choosing over the past 30 years to establish an economy that worshiped avarice. That decision has destroyed her financial system and taken down with it much of the world’s.

Now America must decide whether to be swayed by the greedy urging her to continue basing her economy on the destructive policies of deregulation, de-unionization, globalization and privatization or to construct a new financial system focused on industry and profit shared by the workers who produce it.

Over much of the  20^th century, the nation created real wealth by manufacturing – taking raw materials from the ground, using machines, energy and labor to convert them into products and selling those here and overseas. That process, to make steel or tires or washing machines, was the engine of the economy. In 1947, 32 percent of the workforce engaged in it belonged to unions, which meant workers received good wages and benefits. This enabled them to churn real money throughout the economy by buying homes and cars and television sets and sending their children to college. And it enabled them to save 7.5 percent of their earnings.

Then, in the 1980s, a new narrative for the economy emerged. In this story, greed was good. Self-interest was supposed to lead to the best outcomes for business. To accommodate this concept, Government de-regulated and, in fact, passed laws favoring big corporations and the nation’s wealthiest citizens. The idea was that some of the prosperity they created as a result of the abolished protections for workers and the environment would trickle down.

This was the new economy.

This was a scam to move wealth from the middle class to the affluent. And it worked. In 1976, the richest 10 percent in this country possessed 49 percent of the wealth. In 2007, it was 73 percent.

During this time of bowing to corporate demands, the government actually gave multinational corporations tax benefits to offshore their U.S. manufacturing facilities. Sometimes they shut down, throwing hundreds of Americans out of work, then packed the factory pieces into crates, numbered piece by numbered piece, and shipped them to China or Indonesia or whatever country would allow blatant violation of its own labor and environmental regulations. Sometimes they closed American factories and built brand new ones overseas with breaks from foreign governments. As U.S. companies closed, union membership dropped to below 12 percent. And America found herself importing toxic lead coated toys, paper made from trees illegally harvested in Indonesian national forests and untested pharmaceuticals.

Companies that remained here threatened to leave if workers didn’t accept wage and benefit concessions. American workers were vilified for seeking a living wage while CEOs pulled millions out of corporations in annual bonuses.

The American economy began to depend less on manufacturing and more on the “financial sector,” where profit was made moving money around, betting on stock trades, and participating in asset bubbles. Remember the tech bubble? That was manufactured value – not manufactured goods – and that’s why it disappeared when the bubble burst.

The same has now happened with the housing bubble. Those smart guys on Wall Street, among the brilliant ones who sold America on the idea that greed was good, bet on housing prices never falling. A decline in home values never entered their calculations.

Then they fell. And they took down with them a couple of Wall Street banks and the largest insurance company in the world and Fannie Mae and Freddie Mac, credit markets and then the economy of the nation and the world.

Now workers are really in trouble.

They were struggling before the crash as manufacturing jobs disappeared and wages stagnated. Personal savings declined so that the average family now owes $8,000 to credit card companies. Without sufficient wage increases to sustain their lifestyle, families borrowed against their major asset, their homes. Now, because the housing bubble burst, a quarter of mortgage holders owe more than their homes are worth and 2.5 million have lost theirs to foreclosure.

All of this is because America failed to give greed the wide berth warranted by one of the seven deadly sins.

Alan Greenspan, who served as steward over the rise of the culture of avarice for nearly two decades as chairman of the Federal Reserve, admitted to Congress in October that his opposition to federal regulation was a blunder:

“I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in the firms.”

In the song, America the Beautiful,” from which the lines “from sea to shining sea, come, lyricist Katharine Lee Bates counseled in the second verse, “America! America! God mend thine every flaw.”

Clearly, this greed-based economy is a flaw. It was created by covetous humans. It must be mended by Americans of better grace, people Katharine Lee Bates described as those, “Who more than self their country loved.”

America’s workers must seize back control of their country and wrest back determination of its priorities. They must re-regulate the financial markets and remove the onerous restrictions placed on unions to prevent organization of new workplaces and bargaining of new contracts to raise worker salaries and benefits.

But, most immediately, America’s workers must insist Congress immediately pass an economic renewal package that will reinvigorate Main Streets across the nation. This is essential to prevent a prolonged and excessively painful deep recession resulting from the housing bubble collapsing.

This public investment has two purposes. It will stimulate the economy by providing jobs. In addition, it will strengthen America’s manufacturing competitiveness in the international marketplace.

The Institute for America’s Future has developed a plan called A Main Street Recovery Program calling for investment of $900 billion over two years.

The money would be targeted to areas that would create sustained, long-term, shared economic growth. This includes investing in green technologies to reduce the nation’s dependence on foreign oil and the threat of global warming. Another focus is repair and modernization of the country’s physical infrastructure, such as roads and bridges, and intellectual infrastructure – its education system. And finally, the third targeted area is assistance to workers most in need, which would include moves toward universal affordable health insurance, a middle class tax cut and expanded unemployment insurance.

More than 250 organizations and economists have endorsed this program. President-elect Barack Obama’s recovery plan outlined last weekend includes many of its aspects. Its passage would signal the beginning of conversion to an economy that values production and workers, something the self-interested greed-mongers will oppose.

But let’s work for realization of Katharine Lee Bates’ final verses:

“America! America”

God shed his grace on thee

Till selfish gain no longer stain

The banner of the free!”

 

 

 

 

Leo W. Gerard

By Leo W. Gerard
International President

In 1941, car manufacturer Willys-Overland demonstrated the strength and sturdiness of its new Army scout vehicle – the Jeep — to Congress by driving it up the U.S. Capitol steps.

Invented and manufactured in the USA, the Jeep would become an icon of American ingenuity, durability and mechanical ability. Soldiers loved the lithe little vehicle for its uncanny capacity to go anywhere. The New York Museum of Modern Art would exhibit it in 2002 and describe it as a masterpiece of functional design. Now it’s 68 and constructed by United Auto Workers for Chrysler in Toledo, Ohio.

Disregarding Jeep’s help in securing this country against fascists, conservatives like former Republican Massachusetts Gov. Mitt Romney are calling for its execution. Romney and his conservative compatriots want Congress to deny Chrysler, GM and Ford federal loans so that the Big Three go bankrupt. Using false wage information, these conservatives have persuaded the public that auto workers are overpaid. That has resulted in polls showing 61 percent of Americans oppose aid to the Big Three. And now Senate Majority Leader Harry Reed is saying he fears he can’t muster the votes necessary for a loan.

Congress cannot let the Jeep die in bankruptcy. Congress must not fail the U.S. auto industry. Doing so would be abandoning the core of the American economy – manufacturing. America is not built on Wall Street’s credit default swaps and collateralized debt obligations.  Its wealth and culture are built on and built by middle class workers who construct actual products like steel beams, tires and Jeeps, who operate and repair machines that pull oil and coal out of the ground, who log trees and man the mills that convert them into paper.

Just after the end of World War II, when the Jeep first became a civilian vehicle, 35 percent of workers belonged to labor unions. That’s significant because union members earn 30 percent higher wages than non-union workers and are 59 percent more likely to have health insurance. Those better wages and benefits helped create the great middle class in America. Workers earned enough money to buy refrigerators and homes and cars and, later, college educations for their children. The money they earned and spent churned through the economy and kept it humming.

But over the next half century, union membership declined. So it is only about 12 percent now. Business and industry groups intent on the extinction of unions can claim credit for a good part of that. These are the same organizations that are today misleading the public about auto worker wages, claiming they make $70 an hour when it’s really $28. They’re the same ones advocating auto company bankruptcy because it would allow the Big Three to renege on their contractual promises to workers and to retirees. They criticize auto workers for making a decent living, $28 an hour plus health benefits and a pension. And they denigrate the companies for being decent corporate citizens and fulfilling their health care and pension promises to retirees.

Over the past half century, multinational corporations have shipped a significant number of those good-paying union jobs overseas. With the help of wrong-headed federal policy that encouraged it, the U.S. lost an average of 12,000 manufacturing jobs per month since 1980. Since May this year, the average has been nearly 60,000. Multinational corporations sought cheap labor and lax environmental regulations in places like China and Indonesia, in what has become an international wage race to the bottom. Americans supposedly benefit from the import of cheap goods. But unemployed workers can’t afford to buy them.

Along with the decline in jobs and union membership came a reduction in the rate of personal savings and an increase in household debt. The financial situation of the typical American family became increasingly precarious even as, over the past 25 years, the very richest one tenth of one percent accrued more and more wealth. These were the kind of guys involved in short-selling – a practice through which a person owns nothing but makes money by betting that a stock will lose value – and by selling sub-prime mortgage-backed securities. These were the kind of know-it-all Wall Street risk takers who gave themselves $30 billion in bonuses last Christmas.

You know what happened next. Three months after those bonuses the initial investment bank fell. Bear Stearns got the first big federal bailout in March. Then other financial institutions and a gigantic insurance company involved in the subprime speculation toppled: AIG, Washington Mutual, Fannie Mae, Freddie Mac, and Lehman Brothers. Congress quickly offered up $700 billion to save financial institutions, and giant Citigroup took $25 billion of that in October and another $20 billion in November trying to stave off bankruptcy.

Congress used taxpayer dollars – working people’s money – to save those year-end-bonus awardees on Wall Street. Then it stiffed the working stiff. So far, there’s been talk, but no actual help for millions facing foreclosure. And while unemployment is rising, Congress is dithering over the Big Three’s request for a loan that could save millions of auto worker and support industry jobs.

Unemployment increased to 6.7 percent in November, after 533,000 people got thrown out of work in just those 30 days. Over the past 12 months, 2.7 million people lost their jobs. And finally, what every one of them already knew was officially declared earlier this week – the country has been in a recession for a year.

This nation clearly can’t survive on what is produced by Wall Street – reckless speculation. That took America down.

This country should not be spending all of its financial resources salvaging those who destroyed the economy. America needs to invest in what works – its people. Congress must provide mortgage relief. But, most urgently, it’s crucial that we re-invigorate our manufacturing base. America must be able to actually produce products. Swapping paper is not enough to sustain a strong and stable middle class that will save money and buy cars and homes.

The Jeep helped us win World War II. What has Wall Street actually done for you? Saving the Jeep – and Chrysler, GM and Ford – would be a symbol that America understands manufacturing is key to a strong economy and financially brawny workers.

Jeep owners should let Congress know they’re prepared to drive up the Capitol steps to support loans for the Big Three and investment in American manufacturing.

By Leo W. Gerard
International President

21st century slavery
The Government Accountability Office reported to Congress this week that, under the Bush administration, the Labor Department determined that what amounted to a 21st century case of slavery was just fine with the U.S. government.
A Labor Department investigator told the slave, a night attendant at an assisted living facility in Ohio, to file a civil suit to seek redress if she was aggrieved by her lot. And then he closed the case. With no action against the employer who had neglected to pay the woman any wages for an entire year.
Yep, that’s your U.S. Labor Department working for you, the very Labor Department charged with the duty of protecting 100 million workers, the very Labor Department responsible for ensuring employers pay workers, at the very least, the federal minimum wage, and for overtime hours, under the provisions of the Fair Labor Standards Act.
The GAO report arrived in Congress in the midst of high unemployment and inflation, the subprime mortgage crisis spreading like, well, just like fear of bank failure, taking down homeowners; the former global investment bank Bear Stearns, and now IndyMac Bancorp, the second largest financial institution to fail in U.S. history. Meanwhile, the nation’s two largest mortgage finance companies, Fannie Mae and Freddie Mac, are stumbling, causing havoc on the stock market. The dollar’s value continues to fall, which, of course, forces the price of gasoline in the opposite direction. (more…)