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Tom Croft and Leo Gerard

Leo W. Gerard: Tom, your new book, Up From Wall Street: The Responsible Investment Alternative, provides both cautionary tales for those responsible for investing workers’ pension funds and a field guide of practical assistance for institutional investors who want to use responsible investing (RI) techniques. Let’s start with the caution. Why should workers care how their pension funds are invested?

Thomas Croft:  As we discovered when we pulled together the original Heartland Labor/Capital Working Group in 1995, it’s incredible how much we don’t know when it comes to the investment practices and trends that affect workers’ retirement assets and other institutional savings.  Before the crash, workers owned over $9 trillion in pension trusts, and, if we added it all up, working families owned $24 trillion in all institutional savings.  So, steelworkers, teachers, insurance holders, students and college endowments, and the vast majority of our population have an interest in how these funds are invested.   

Since these funds control a majority of public stocks, we have an interest in how those corporations are governed.  In terms of the general economy, we have an interest in the general direction of investment flows.  The historian Kevin Phillips has written about the growing power of the financial services industry.  In the 1970s, manufacturing led financial services by a two-to-one margin.  By 2006, goods production had shrunk to just 12% of GDP while financial services jumped to a “swollen 20-21% of GDP.”   So, financial sector profits, as a percent of domestic corporate profits, rose from 16% in 1973 to 41% in 2000s.   That means that vast waves of our savings and assets—our money—has increasingly disappeared into a dark hole called financialization.  I’ll come back to financialization.

So, what it means in terms of the economy is that the country doesn’t build things anymore.  Remember Allentown, and the song by Billy Joel that described the shutdown of Beth Steel?  Bethlehem Steel was originally constructed to build the nation’s rail systems. And those workers helped build the skyscrapers in New York City, and they helped win WWII.   After the Beth Plant was closed, a new Las Vegas Casino was to be built on the former steel site.  Well, the casino couldn’t find the structural steel, at first, to build the casino.  Kind of ironic, but also tragic 

If we can’t find enough steel to build casinos today, how in the world will we build the green jobs industries of the future?   We need steel to build the Obama administration’s proposed new high-speed rail system, right?   And how will the Allentowns and Homesteads and Youngstowns and Flints of this country, and all of our other rust-towns ever fully recover?  We can’t depend on casino jobs, eds and meds, tourist and service jobs alone to replace the lost manufacturing jobs.   We need a robust domestic manufacturing economy if we are going to benefit from the green jobs boom.

As Lynn Williams once said, “The pension savings of American workers should not only guarantee good pensions.  They should guarantee American workers jobs to retire from.”  Beyond that, pension trusts were collectively bargained benefits that are long-term promises to workers so that they can retire with comfort and dignity.  People gave up wage increases and other current benefits to pay for that promise.  Before pensions, and before FDR created Social Security, older workers might be found scrounging through trash bins in the alley or living in poor houses.  Along with Social Security, pension funds are part of a three-legged stool, as it’s called, so that workers can retire without the constant fear of deprivation.   Do we want to go back to the days of the poor house? 

Gerard:  You documented here, and in your earlier work, Working Capital: The Power of Labor’s Pensions, that workers’ pension money could cruelly be used to injure them. Isn’t that investment practice perverse?

Croft:  It’s not only perverse, it should be illegal.  First, as our colleagues put it, there is a gigantic pension industrial complex that is centered on Wall Street that takes hundreds of billions of dollars in fees out of pension funds just to manage our pension funds.  Then, time after time, our money have been sucked and suckered into risky financial schemes that are unsustainable, and eventually crash, destroying the hard-earned savings of tens of millions of workers and their families.  As you have pointed out, before this crash, the country suffered through the savings and loans debacle and the dot-com bust, and similar made-on-Wall-Street catastrophes.  When we come to learn that the CEOs and other financial geniuses who devised these crash schemes all made off with billions in CEO compensation and bonuses, then it’s apparent that we are putting the wrong kind of people in jail.

I’d like to return to the concept of financialization.  A large driver of financialization is the shadow bank system.  The shadow banks include the large banks and investment houses that utilize un-regulated trading and derivative schemes to make immense profits.  They also include the largely unregulated investment funds that invest in the private economy, such as real estate funds, the mega-private equity funds and hedge funds.  These systems became so inter-related that the collapse of one sector then brought down many others.  For instance, when Lehman Brothers went under, the credit default insurance plans that theoretically insured the hedge funds vanished, and the hedge fund market tanked.  After AIG was nationalized, its business continued cratering due to its business selling these default swaps to Lehman and others.  And the pension funds that had invested in these massive hedge funds and the AIGs, etc., then lost tons 

Our pension funds were siphoned into these shadow bank markets.  When pensions invest in alternative investments—not stocks and bonds—there is a term for the ancillary benefits that might result from the investment.  For instance, if a pension fund invests in affordable or workforce housing, the main reason is to achieve a good return on the investment.  But the housing that is also built might be called a collateral benefit.  In Working Capital, Dean Baker and a co-author discovered how hundreds of billions of our trust funds were invested in schemes that caused “collateral damages” for pension beneficiaries, other workers and our society.  For example, our pensions were invested in off-shore sweat-shop corporations—many American owned — that not only exploited third-world workers but also then shipped cheap products back into the country, causing jobs to be ultimately lost here.  And the lure of investing in the dot-coms that never had realistic business plans contributed to the last crash.  

There’s lots of examples, but collateral damage investing continued after the crash.  We all know about the sub-prime mortgage and the housing bubble disasters.  Well, CalPERS, the California public employees pension fund, along with many other state pensions, lost $1 trillion in one case alone by investing in securities backed by sub-prime mortgages. 

A lot of my research went into hedge funds and mega-buyout funds.  Hedge funds were originally designed as an investment program for wealthy investors.   Then hedge assets boomed over the last decade, growing ten-fold from 1998 to 2008 (to over $2 trillion).  From 2002 to 2007, the share of dollars in hedge assets coughed up by institutional investors—including pensions, university endowments, foundations, and insurance funds, etc.–jumped from 2% to 50%.   That’s a lot of money for what became, in essence, a Wall Street game to short markets and firms.  

And the money pouring into private equity, climbing by 2006-2007 to $301 billion, came disproportionately from institutional investors.  In the case of the mega-private equity funds—which in reality looked like the large LBO funds in the 1980s—there’s ample evidence that many of the funds over-leveraged their portfolio firms, leading to firm failures and bankruptcies.  Or worse, they stripped and flipped their acquisitions.  That includes Simmons Bedding, a Steelworker-represented company that just filed for bankruptcy and closed plants.  That includes Mervyn’s, Linens ‘n Things, and many others.  The money that the Boston mega-fund used to destroy Simmons came from pension funds.   Why?

In addition, they have been privatizing many our longest-standing companies—firms that often had good labor relations.  These new Wall Street barons—like KKR, Blackstone Partners and Apollo Partners–now own many of the largest employers in America and Europe; in essence, they have achieved a new stage in corporate ownership.  What does that mean for those workers, communities and our economies?  We should be investing our money to build up companies, not tear them down.

They’ve also damaged many of our civic institutions.  I don’t have to look far to see the damage.  Here in Pittsburgh, CMU and the University of Pittsburgh recently filed fraud lawsuits against Westwood Capital —ostensibly a hedge fund– after their $114 million investment vanished.  And the Pennsylvania public pension fund lost an additional $2.5 billion (than they would have otherwise, according to some estimates) by betting on an extremely large hedge fund gamble (almost 1/3 of total portfolio).  Colleges, states and municipal pension funds are cash-strapped.  That’s no reason to bet the farm. 

Worse, Congress and the White House have not passed meaningful financial reforms that might have prevented or moderated the 2008 crash and the ones before it.  The author Tom Wolfe dubbed these new corporate owners the “New Masters of the Universe.”  I call them the Shadow Bank Robbers.   Not only should government and institutional investors force transparency, reasonable fees and prohibitions against practices that harm workers, companies and communities, we should re-regulate, bring back the New Deal protections that were discarded.  And it wouldn’t hurt if we put the shadow bank robbers behind bars.  Bernie Madoff got caught running what he called a hedge fund; thousands of uber-financiers are making off with billions running an even larger ponzi scheme that is perfectly legal.  It’s crack finance, and it should be illegal.

Gerard: What struck me in your book is these two sentences:

“This book tells the story of a group of responsible enterprise and real estate investors who are profitably investing pension and similar assets in good jobs, affordable housing, and a green future. This book shows how workers’ capital, endowments, and other institutional investors, through responsible investment principles, can do well and do good at the same time.”  

My emphasis added because I think most people would not believe you could do both. They would think that if you made socially-correct investments, you would lose money. What did your research show?

Croft:   When I started writing the book, I traveled to towns and cities all over North America.  I came to know some remarkable and innovative stewards of our capital…worker-friendly investors who have built projects and invested in ventures and companies in ways that make you proud.   These investors were managing about $35 billion.  And, in fund after fund, investment after investment, these responsible fund managers have been—for the most part–financially successful. 

None of the real estate funds that I surveyed in this field guide were investing in sub-prime scams.  And none of the private enterprise investors were investing, as far as I know, in the LBO over-leveraging strategies that failed so dramatically.  So, the book shows you can do well and do good.   How?  They’re making honest profits (for our pension funds) but also treating workers with respect, investing in affordable and multi-family housing, advanced manufacturing and green jobs. 

In Pittsburgh, for example, pensions invested some $3/4 billion in worker-friendly real estate funds that successfully built multi-family housing, revitalized brownfields and re-built new commercial workplaces all over the region.  And worker-friendly enterprise funds have, in fact, saved steelworker jobs of two manufacturing firms that were bankrupt.  So, thousands of jobs were created or saved just in this area.  And these investments were the tip of the iceberg, as I’m sure many of the large redevelopment investors in the region were capitalized by institutional investors.

So, my book shows that worker-friendly investment funds have indeed had singular and significant impacts on the regions, economic sectors, companies and projects in which they invest.  Most of the funds met or bested their respective investment benchmarks.  The portfolio investments showcased in the field guide yielded not just good returns-on-investment, but also collateral benefits for working people and the environment. 

Gerard:  So that is terrific news for workers. You’ve given me the big numbers. In the book, though, you provide specific examples where these investments worked out both for the investors and workers. Would you give one here?

Croft:   There are so many important examples.  The AFL-CIO Investment Trusts worked on efforts to rebuild New Orleans, including a factory making sustainable manufactured housing.  The MEPT Fund rebuilt a burned down hospital on the north tip of Roosevelt Island, New York, and converted it into an award-winning green housing community with 500 units, plus a daycare center and essential amenities.  The KPS Capital Partners Fund restructured a bankrupt transportation company with factories in towns like St. Cloud and Crookston, Minnesota, and Winnipeg, Manitoba, now employing 1,800 union workers making hybrid busses. 

And, let’s take a really big case that helped Steelworkers.  On May 14, 1999, in the largest union-led buyout in the country since 1994, KPS Special Situations Fund partnered with other investors and a minority ESOP formed by employees to buy a pulp and paper mill, an extruding plant, and five converting plants from Champion International (for $200 million), which was distressed.  The new company, Blue Ridge Paper Products, was launched with 2,200 new employee owners.  Blue Ridge is a leading integrated manufacturer of liquid packaging, envelope paper and coated bleachboard used in food service packaging. The Company also produces specialty uncoated and extrusion coated papers. 

The Company had eight manufacturing facilities located in seven states, including the paper mill in Canton, North Carolina, the extruding mill in Waynesville, North Carolina, and in five Dairy Pak converting plants in Georgia, Iowa, Texas, New Jersey & Olmsted Falls, Ohio. Blue Ridge subsequently acquired another Dairy Pak plant in Richmond, Virginia from MeadWestvaco.

And, this company became greener.  The Canton mill became a charter member of the EPA National Achievement Track Program in 1999.  Due to a $400 million investment in new technology over a decade, the facility is one of the most efficient and environmentally-friendly pulp mills in the world.

In July 2007, Blue Ridge was sold to Packaging Holdings Corp.  KPS returned approximately 2.5 times its invested capital to its investors—including pension funds– and employee-stockholders had approximately $30 million of cash deposited into their ESOP accounts.  What a huge success!

Gerard:  Let me press you a little bit, though, because everyone will be asking this question when pension funds have suffered so badly during this downturn in the economy.  Would responsible investing have made a differenc 

Croft:  In my travels, I watched as great states and communities buckled from the weight of the Great Recession: Downstate New York.  The auto towns of the Great Lakes states.  The strapped communities of California.  From years of working in Pennsylvania, I’ve come to understand what happens when investment markets red-line communities.   Boom towns go bust, and rust towns take their place.  When the economy falls as rapidly as it did, most sectors of the economy get dragged down.

This was the largest market crash and recession since the 1930s.  So, many of the investments by even good investors were bound to be weighed down.  But my point has been that irresponsible investment practices—using our money—were a large factor in the crash, as they have been over and over.  

Some of the worker-friendly investors will inevitably suffer because the firms they’ve invested in are now having a hard time.  Some of the real estate funds have suffered redemptions from pension funds having to re-balance their assets (since pension funds lost so much in the general markets).  But as I said, the responsible funds did more due diligence, so their investments were not as risky.  If they’ve had trouble, they’ll likely recover quickly. And some funds have actually done pretty well since the downturn started.

So, we also know that it’s time that our assets are put to work for the long-term, and not in ways to destroy our economy.  With the Obama Administration’s help and guarantees, for instance, we could co-invest real money to re-build our cities and towns, and re-grow and re-shape this economy.   And our money should be invested so that markets serve society—community, in other words– and not the other way around.   We indeed have the capacity to construct infrastructure, reinvigorate our cities, and create those highly-anticipated green jobs for our children.   We just have to re-claim control of our money.

Gerard:  Well, let’s talk for a minute about California Public Employees Retirement System, then, the nation’s largest pension fund. CalPERS did engage in some responsible investing, as noted in your book. But it has suffered terribly and is expected to fire some of its real estate investment managers. Is that simply a result of the market and could not have been avoided?  Or should they really, in your estimation, have been doing something else.

Croft:   For all the things that CalPERS did right in terms of double-bottom line investing, as it’s called—investing in green housing and buildings, urban investments, and clean technology– it may have been overly aggressive in alternative investments.  And CalPERS was caught up in the sub-prime and real estate bubble markets.  CalPERS is, in fact, suing Moody’s and other ratings agencies because the pension fund claims that it did not know that a $1 trillion investment in securities (that I mentioned earlier) were in fact backed by sub-prime mortgages.  And some of their high profile investments in large real estate projects and overly-risky private equity have been slammed.  But CalPERS has recovered to the $200 billion level, and, given the fiscal crisis in California, we’re all hopeful that recovery will continue.  Some of my labor friends are now concerned that CalPERS is going back into the “dark pool,” doubling down in hedge funds and the mega-LBO funds to make up for the losses.

Gerard: What kind of response have you gotten to the book and what do you hope will happen as a result. 

Croft:   It’s really been great.  We’ve started to get a lot of coverage, and the book is making the rounds.  I’d like to see Heartland be able to create an ongoing “Center for Responsible Capital” so that we can continue to push responsible investments and act as a watchdog for union members and communities against investment abuses.

Your earlier support and that of the union has allowed me to write this book.   And, your leadership in capital strategies, rebuilding manufacturing, and kicking off the green economy has provided a lot of inspiration for the book, and we actually quoted you a couple of times—simply because it could not have been stated better.   We’ve now come to understand that responsible investors have been, profitably, creating hundreds of thousands of good jobs, building hundreds of thousands of living spaces, and helping to rebuild cities and communities.  So, as you said, our capital stewards can indeed invest in a responsible future—our future, and that of our children—and invest in a vision of the economy that’s more humane and sustainable.

***

Thomas Croft is an international expert on innovative capital strategies and jobs-oriented economic revitalization policies. He serves as executive director of the Steel Valley Authority, a regional economic development organization for Pittsburgh and 11 municipalities in the Mon Valley. The authority uses creative techniques to preserve and revitalize companies in crisis. Croft also is director of the Heartland Network, a working group of responsible pension investment advocates in the U.S. and Canada. Croft was commissioned by the Heinz Endowments to write Up From Wall Street.

Leo W. Gerard

 
By Leo W. Gerard
USW International President

Can’t buy me love
Everybody tells me so
Can’t buy me love
No, no, no, no

      From the 1964 Lennon/McCartney song, “Can’t Buy Me Love”

 Maybe you can’t buy love, but you can buy a job.

Franklin Delano Roosevelt did it with the Works Progress Administration during the Great Depression. And the $787 billion stimulus package passed in February created jobs to relieve what is now 10.2 percent unemployment.

Both came at the cost of taxpayer dollars. Now, as labor and business leaders, economists and politicians gather Dec. 3 for President Obama’s Jobs Summit, some are calling for a second stimulus. These include Nobel-Prize-winning economist Paul Krugman. He says  the initial stimulus was too small and insufficiently focused on jobs. 

Krugman recommends instituting a reduced version of FDR’s Works Progress Administration (WPA), offering public-service employment, the kind that left solid WPA bridges, bus shelters and other monuments that serve citizens to this day across this country. At a cost of $40 billion a year for three years, the Economic Policy Institute (EPI) estimates this would create a million jobs. Krugman also endorses the EPI’s recommendation of tax credits for employers who add jobs. 

A second stimulus is completely reasonable at a time when there are six unemployed Americans for every job opening and when it takes six months on average for an unemployed worker to find a job, the longest since the Great Depression. But the Obama administration already has sent out signals that it doesn’t want Jobs Summit solutions to worsen the federal deficit.

Fine. There are ways to create jobs that don’t have to be bought. One is to enforce and strengthen trade policy.

Chicken Littles all over this country ran around screaming, “A trade war is coming! A trade war is coming!” in September when President Obama enforced trade law by imposing tariffs on Chinese tires being dumped in this country. That flood of Chinese tires had cost 5,000 American workers their jobs.

The Chicken Littles, always wrong, were mistaken about a trade war. China never engaged in one. And now, Cooper Tire has announced a $10 million expansion of its Findlay plant, creating 100 new jobs, and tire factories across the country have increased hours.

By contrast, a paper company, NewPage, filed a trade case in 2006 seeking protection against Chinese and Indonesian dumping of coated paper, the heavy kind used in brochures and annual reports. The Commerce Department found egregious dumping, but later the U.S. International Trade Commission (ITC) refused to impose sanctions because it decided the U.S. industry hadn’t been injured.

Now, three years later, the United Steelworkers union has joined NewPage and two other paper companies in filing for another trade case regarding coated paper. Perhaps since 7,000 U.S. paper workers have lost their jobs, the ITC will see injury to the American industry.

But here’s the thing: Why do American workers and industries have to suffer? Our trade laws should be strong enough to prevent that injury in the first place. And that doesn’t cost a dime.

Another obvious way to create good, family-supporting jobs that don’t have to be bought is to develop an industrial strategy for this country. The idea of a strategy is to design a way to rebuild manufacturing as a base of the U.S. economy.

America cannot depend on housing or high tech or financial bubbles. These false financial mechanisms have led to nothing but heartache, recession and job loss. A strong economy is based on taking raw materials, adding creativity, energy, and work to construct products – like steel and tires and glass. Those products have real value and can be sold to make real wealth. They are not risky bets on the market like credit default swaps.

We need to place our faith in our own ingenuity and industry as a country, our ability to research and develop creative new products and manufacture them here, at home. For the love of country, that’s what we can buy.  And should.

Leo W. Gerard

 By Leo W. Gerard
International President

In the title tune to the 1934 musical “Anything Goes,” Cole Porter says “times have changed,” since the stock market crashed in 1929, but the super rich, like John D. Rockefeller Jr., “still can hoard enough money to let Max Gordon produce his shows.”

The lyrics also tease FDR because Eleanor advertised a mattress from a venerable company:  “Missus R., with all her trimmin’s, can broadcast a bed from Simmons, ‘cause Franklin knows, Anything Goes.”

That 133-year-old company, which employs members of my union, the United Steelworkers (USW), will file for bankruptcy soon. Then it will be auctioned to yet another private equity firm – the seventh such sale in little more than 20 years.

Repeatedly, new owners stuck their greedy hands under the mattress and pulled out money. Each time, that hurt the company and the workers. The firm is $1.3 billion in debt now – eight times what it was when the private equity companies started passing Simmons around like a cheap date. And a quarter of its workforce – 1,000 people – is laid off.

This is Anything Goes capitalism. It destroys companies. And it destroys workers’ lives. But it sure does work for the private equity firms. They made around $750 million in profits from the now-indebted and bankrupt Simmons.

It’s time to flip the mattress on that failed economic philosophy. Time to end the days of Anything Goes, just like FDR did. Time to regulate private equity before it ruins more American manufacturing.

Too often private equity firms buy manufacturers, borrow against their assets, pull out that money as “dividends,” and run off without regard to the future of the company or its workers. It’s smoking instant cash gratification in a crack pipe. Here is how Robert Hellyer, a former Simmons president who worked under several of the private equity buyers, explained it to the New York Times, “From my experience, none of the private equity firms were building a brand for the future. . .Plus, the mind-set was, since the money was practically free, why not leverage the company to the maximum?”

It’s morally wrong. It’s economically wrong. It’s gotta stop.

Bankrupting viable companies – the way the private equity firms did Simmons – for the profit of a few and the pain of the most should be banned.  The New York Times, writing about the Simmons case, noted:

“A disproportionate number of the companies that were acquired during that frenzy are now struggling with the enormous debts. More than half the roughly 220 companies that have defaulted on their debt in some form this year were either owned at one time or are still controlled by private equity firms, according to analysts at Standard & Poor’s.”

The current owners of Simmons, the ones who put the company even further into debt, Thomas H. Lee Partners of Boston, will leave the mattress firm mired in bankruptcy while walking away about $77 million richer. Clearly, Anything Goes for them. All profit; no consequences.

Not so for Simmons bond holders, who stand to lose more than $575 million in the bankruptcy; the workers, who confront losing their livelihoods, and the company itself as it struggles to survive under an extraordinary debt burden. 

Scott A. Schoen, Simmons co-president, whined to the New York Times that the mattress downturn was “unprecedented and unforeseeable.”

On the other hand, as the Times noted of the private equity takeovers, “Many of these deals, cut in good times, left little or no margin for error – let alone for the Great Recession.”  Maybe Mr. Schoen could have shown a better business plan.

Then, again, it wasn’t about business planning. It was all about raiding the company for its assets and shipping out, like a Viking invader.

Before the likes of Thomas H. Lee and partners showed up on the scene, Noble Rogers, 50, worked happily for Simmons, mostly at the Mapleton, Ga., plant. President of the USW local, he loved Simmons because the company cared for its workers, providing a pension, and when workers retired, giving them a bonus of $20 for each year and a mattress set.

“There were picnics, March of Dimes walks, Christmas parties, and we always had Halloween parties. It was really a family-oriented company,” Rogers told the New York Times.

Then in 2003 came Thomas H. Lee Partners of Boston, the latest private equity firm extracting more money from Simmons.

In the spring of 2008, Simmons laid off the entire night shift of Rogers’ plant. A few months later, on Sept. 18, Simmons officials announced they were closing the factory altogether. 

Rogers negotiated with Simmons for the traditional gift of $20 for each year worked and the mattress set for those eligible for retirement. Simmons rebuffed him. But then, that was to be expected. Simmons – under Thomas H. Lee – had stopped the parties and picnics.

The USW has worked with legitimate private equity firms that bought struggling manufacturers, set them on a path to profitability, and moved on to the next money-making acquisition.

That is completely different from buying a company to function as nothing more than a leach, engorging on its assets until huge debts are amassed, then carelessly disengaging to snare a hapless new victim.

Anything Goes capitalism is something that must go.

Robert Borosage

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

Grading a president after 100 days always strikes me as presumptuous. The only real grade is an incomplete. And as good teachers will tell you, letter grades – as opposed to written evaluations – are inherently arbitrary and misleading.

One thing is clear. If we’re grading on a curve, Barack Obama ranks near the top, just below FDR. In changing course, getting bold things done, setting a tone, lifting our spirits and confidence, we haven’t seen anything like this since Roosevelt. Even Reagan, the great communicator, had a much harder time in his early days, starting with the limousine gridlock of his inaugural. He had to get shot to move his agenda.

Rather than just grading the president, I suggest we might profitably assess our own 100 days. Obama has stormed the national and world stages in his first weeks. But how have we done – particularly the progressives who have such a large stake in the success of this president – in relation to Obama? He has demonstrated remarkable mastery of the powers of the presidency to lead the country. Have we mastered the power of the citizenry to empower the president?

There is sophisticated organizing being done in support of Obama’s agenda. New organizations – most notably the 13 million person Obama for America – and old have joined together to mobilize citizens around the president’s key initiatives. Major groups with large memberships – from unions to MoveOn, community and citizen action networks — have coordinated target lists, messaging, and activities. Increasingly their attention is focused on herding Democrats, which will intensify as Sen. Arlen Specter’s decision to switch jerseys makes Republicans even less relevant.

Similarly, on core issues — health care reform, new energy, college affordability, immigration, empowering workers- large independent efforts are underway. The unions and other progressive groups are taking on the corporate lobby over the Employee Free Choice Act. Health Care for Americans Now leads a range of coalitions pushing health care reform. Environment and labor groups have been actively mobilizing around green jobs and new energy.

These independent efforts will help define the scope of the reforms, engage the public to support them, and strengthen the hand (or stiffen the spine) of Democrats in negotiations. Neither the public plan in health care nor cap and trade on carbon emissions will survive without popular mobilization.

For the most part, progressives have been happy to support and reluctant to question the popular president. So the fateful commitment of 60,000 troops to Afghanistan was made without much opposition, nothing like that Obama joined when it came to invading Iraq. Human rights advocates did push the administration to open up the shameful record on torture and are now demanding investigation and prosecution. Progressives helped convince the White House to shelve a proposed task force to “fix” Social Security which would have been bad policy and bad politics. Progressive economists – Krugman, Stiglitz – and journalists – Greider and Kuttner and more – have challenged the administration’s banking bailout, and pushed hard for a stronger recovery plan. The call for a full investigation of the mess – a Pecora Commission – has gained some momentum in both the Congress and the media.

But what Obama has been missing has been an independent, obstreporous citizens’ movement demanding fundamental reform. Roosevelt had the labor movement, the Townsend Clubs, Huey Long, socialists and communists challenging him from the left. Johnson had the civil rights movement forcing his hand.

This kind of opposition isn’t easy. No president likes to face disruption particularly from what he would consider his base. There are similar stories told about both Roosevelt and Johnson meeting with leaders of the movements and saying something to the effect of “I agree with you, now go out there and make me do it.” But in reality, Roosevelt wanted to squelch Long and tame labor. And Johnson repeatedly ordered Hubert Humphrey to bring the civil rights demonstrations to an end, saying that they weren’t helping the cause. King got a lot of pressure – to say nothing of wiretaps and FBI investigations – to get back in step.

Yet it is precisely these movements – independent, disruptive, passionate, demanding bolder reform, taking on entrenched powerful interests – that enabled Roosevelt and Johnson to achieve far more than they ever thought possible. The New Deal we remember – Social Security, the Wagner Act, Fair Labor Standards, the SEC and Glass Stegall, progressive taxation – came not in the first 100 days, but as Roosevelt, under pressure from his left, geared up for re-election. The Voting Rights Act surely would not have been passed with Selma, and many other sacrifices transforming public opinion to enable Johnson to act.

The absence of these movements on the left opens dangerous space for ersatz populist movements on the right. We saw that with the tea-bag parties that Fox huckstered. We’ve seen conservatives conflate the trillions going to bolster the banks with vital spending in the recovery plan to get the economy going. They are weaving a corrosive message that ties big spending in Washington with Wall Street wastrels. The country would be far better served with an angry populist movement that indicts Wall Street but demands greater support for working families and Main Street. But anyone building that movement will have to understand that they might earn respect, but they won’t be loved in the White House.

For citizens, as with Obama, 100 days is too early to judge. In these first weeks, we’ve done a good job of organizing to support key elements of the president’s agenda. But we’ve seen little evidence of a progressive movement that can challenge the limits of that agenda, and rouse an aggrieved citizenry to open up the space for the president to act far more boldly.

Grades for the first 100 days? The president, I’d say, is doing a lot better than we, his supporters, are.

Robert Kuttner

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

I do not view the labor movement as part of the problem, to me it’s part of the solution.

– President Barack Obama, January 30, 2009

The great union leader John L. Lewis, who headed the United Mine Workers from the ’30s through the ’50s and helped organize millions of workers into the CIO, used to declare in organizing drives: “President Roosevelt wants you to join the union.” Roosevelt never said that in so many words, but FDR did strongly back the Wagner Act, giving workers the clear right to organize.

During World War II, Roosevelt’s War Labor Board made clear that corporations seeking war contracts needed to have good labor relations. In practice, that meant unions; and it meant “pattern bargaining” in which workers for different companies in the same industry got the same wages, so that companies could not play workers off against each other.

Roosevelt’s wartime contracting policies, the Wagner Act, and the militancy of the labor movement laid the groundwork for the golden age of American unions during the postwar boom. Not coincidentally, this was also the one period in the past century when the economy became more equal, and more secure for working people.

So, while Roosevelt’s words never quite urged workers to join unions, his deeds spoke volumes. John L. Lewis was well within the bounds of poetic license.

On Friday, President Obama, a onetime organizer, had more words to say about unions, and they were the kind of explicit endorsement that we literally haven’t heard from a president since FDR’s day.
“We need to level the playing field for workers and the unions that represent their interests, because we know that you cannot have a strong middle class without a strong labor movement,” the President said. “When workers are prospering, they buy products that make businesses prosper. We can be competitive and lean and mean and still create a situation where workers are thriving in this country.”
Wow!

And Obama offered deeds to match. This stunning declaration of support came at the White House announcement of a Task Force on Middle Class Working Families headed by Vice President Biden, with Jared Bernstein as its executive director. The idea was proposed last summer by Change to Win unions, who endorsed candidate Obama early in the primary season. He embraced the concept, and it was a commitment he kept. His remarks and actions were a dazzling example of the transformative power of a president to shift public opinion and the political center of gravity.

The task force, and the effusive and genuine embrace of the labor movement, came as a huge relief to union leaders, who have watched anxiously as nearly all the key economic posts went to centrist veterans of the Clinton administration, and the job of secretary of labor was not announced with the other senior economic officials. As it turned out, the appointment of Hilda Solis, a very pro-union member of Congress, was delayed because others had turned down the job first, but the delay sent an unfortunate signal.

Labor activists have also been worried about whether Obama will keep his pledge not just to sign the Employee Free Choice Act (EFCA) guaranteeing the right to join a union, but to work hard on its behalf with legislators, especially in the Senate. Since the election, the US Chamber of Commerce and allied anti-union business organizations have mounted a furious publicity and lobbying offensive with one message: Mr. President, you don’t need this bruising fight right now.

But the Chamber’s allies in the Republican House Caucus have beautifully undercut that logic. The Chamber’s premise was that EFCA would be highly divisive, at a time then the new president was seeking unity. With the wall-to-wall Republican stonewalling on the Obama recovery package, that premise is up in smoke. And the Chamber’s other allies, on Wall Street, have also done a service by inviting some salutary class warfare. Obama responded last week, calling Wall Street bonuses in the face of government bailouts “shameful,” and seems to genuinely view the growth of unions as a necessary counterweight.

The task force itself will be a welcome counterweight to the outsized influence of Wall Street inside the Obama administration. Several weeks ago, Jared Bernstein, then a senior economist at the Economic Policy Institute, wrote a joint op-ed piece for the New York Timeswith Robert Rubin pointing out where they agreed. One issue where they pointedly disagreed was on the Employee Free Choice Act, which Rubin explicitly refused to endorse. The Biden operation now looks to be the go-to place for progressives seeing access to Obama’s priorities. The Task Force will serve as the White House center to review all proposals, legislative and administrative, for their impact on the effort to raise wages and rebuild a middle class.

Without Obama’s strong personal engagement, EFCA will be anything but a legislative cakewalk. Democrats may have a working majority. But at least five business-oriented Democrats are not considered certain votes for EFCA, and Obama will need to let them know that the White House considers this bill a top priority.

Our last two Democrats went out of their way not to get close to organized labor. Jimmy Carter did not lift a finger when the last big push to put some teeth back in the Wagner Act’s right to unionize went down to defeat by just two votes in the Senate in 1978.

On Friday, announcing the Task Force, Obama signed three executive orders. One will prevent federal contractors from discouraging their employees to join unions. Another will assure that workers keep their jobs when a contract changes hands. Down the road is an executive order to promote project agreements on construction contracts.

If Obama is serious, he can take a leaf from FDR’s book, and use government’s extensive contracting power to actively promote unions. Late in the Clinton administration, then Vice President Al Gore led an effort called the Responsible Contractor Initiative. The idea was to reward federal contractors who took the high road by providing good jobs and not standing in the way of unions.

It remains to be seen just how much real power Obama will give Vice President Biden. But the task force is a superb beginning. If government can just use its influence to make sure employers stay neutral, it will be a new day for the labor movement–and for American progressivism.

Robert Kuttner is Co-Editor of The American Prospect. His new book is “Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.”

This blog was first published on Huffington Post.

Leo W. Gerard

By Leo W. Gerard

International President

Within hours of Barack Obama’s election, naysayers chastened caution. Don’t go too far, they inveighed. Build trust slowly with restrained, moderate, and gradual actions, they admonished.

In other words: Start with piddling plans.

Basically, they want to abort hope — kill it before it has a chance.

That is all wrong after an election in which it’s believed that a higher percentage of Americans voted than at any time in the past 40 years; a win that brought tears to the eyes of even hardened reporters; a result that drew joyful citizens into streets across the country to celebrate, a balloting that swept even larger majorities of Democrats into the U.S. House and Senate.

This moment during which the nation is suffering great economic peril pleads for political valor. This moment screams for boldness.

Troubled times demand greatness. Franklin D. Roosevelt knew that. He’s the reason U.S. presidents are judged by the sum of their accomplishments in their first 100 days in office.

When FDR was inaugurated in 1933, the country was in the midst of the Great Depression. He didn’t waste time tinkering. After 100 days, he’d given the country the Emergency Banking Act, the Securities and Exchange Commission, the Civilian Conservation Corps, the Federal Emergency Relief Act and the Tennessee Valley Authority.

Obama may not inherit a Great Depression, but he’ll take the oath during an intense recession. Look at the news that arrived the same week as his election: unemployment rose to 6.5 percent after 10 straight months of jobs losses totaling more than 1.2 million; the stock market dropped 1,000 points in 48 hours after the worst October showing in two decades; auto makers travelled to Capitol Hill begging like hobos for handouts to stave off bankruptcy, two dozen major retailers revealed sales declines, most double digit, and the New York Times reported hospitals strained as they register fewer paying patients and increasing charity cases.

These problems won’t be solved with timidity. In his first press conference after the election, Obama said resolving the economic crisis is his top priority. He said, in fact, “I will confront the economic crisis head on.” No weak-heartedness suggested there.

He said a new president can restore confidence and advance an agenda for the middle class. That is exactly what FDR did with the combination of legislation and fireside chats.

During this brief press conference, Obama got it right, emphasizing aid to the middle class. He said it is essential to pass a rescue plan that would create jobs and extend unemployment benefits. He wants aid to state and local governments so they don’t increase taxes or furlough workers.

The federal government should help both small businesses and the huge auto industry, which provides jobs directly and indirectly through its suppliers.

The $700 billion bailout must be reviewed, he said, to ensure that it is stabilizing markets, that it’s not unduly rewarding the Wall Street risk-takers who caused the crisis, and that it’s helping families avoid foreclosure.

In addition, he said it’s essential to implement policies to grow the middle class such as investing in clean energy technology, resolving the nation’s health insurance dilemma, and providing tax relief for working families.

These are the correct priorities. And his plans are audacious. Which means he needs our help.

He called for bi-partisan cooperation in accomplishing these goals. But he’ll need more than that. He will need the kind of support he got in those weeks just before Election Day.

All of those who voted for him, all of those who want to keep hope alive, and all of those who want real change must demand both houses of Congress and both political parties work with Obama to accomplish it. Those who believe in real change must make it clear that they won’t stand by and allow courageous action to be reduced to faint-hearted baby steps.

On election night, Obama told the crowd in Chicago that the victory was theirs: “I know you didn’t do this just to win an election and I know you didn’t do it for me.”

Then he warned of what is ahead:

“You did it because you understand the enormity of the task that lies ahead. For even as we celebrate tonight, we know the challenges that tomorrow will bring are the greatest of our lifetime – two wars, a planet in peril, the worst financial crisis in a century.”

With more than 10,000 volunteers across the country, the United Steelworkers campaigned hard to help get Obama on that Chicago stage to make that speech. We will back him as he works to fulfill his promises of what is a New Deal for the new century. And we urge every American who wants real change to join us to ensure his success, the nation’s success.

Robert L. Borosage

By Robert L. Borosage

Co-Director Campaign for America’s Future

Today, in the New York Times, an Institute for America’s Future op ad calls on us to “remember who we are,” comparing the present crisis with that our parents and grandparents faced at dawn of the New Deal. To see the ad, go here.

If, as seems likely, Obama is elected and Democrats win greater majorities in both houses of Congress, will we witness a new era of bold progressive change – a 21st century Green New Deal? Certainly many of the elements are present:

.. “their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit, they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They only know the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.”

In his “closing” for the election, Obama is already issuing a similar moral indictment. He too is calling Americans to come together, to trust one another.

In one week, you can turn the page on policies that have put the greed and irresponsibility of Wall Street before the hard work and sacrifice of folks on Main Street….

I know these are difficult times for America. But I also know that we have faced difficult times before. The American story has never been about things coming easy – it’s been about rising to the moment when the moment was hard. It’s about seeing the highest mountaintop from the deepest of valleys. It’s about rejecting fear and division for unity of purpose. That’s how we’ve overcome war and depression. That’s how we’ve won great struggles for civil rights and women’s rights and worker’s rights. And that’s how we’ll emerge from this crisis stronger and more prosperous than we were before – as one nation; as one people.

Does all this add up to a new era of bold reform? Two more elements are vital.

Obama will face the same choice in the worst economic crisis since that Great Depression. Yet, today’s conditions are far less dire. Many voices will counsel caution. Many will tell him to limit his priorities. Many will warn of unsustainable debts and deficits. What he decides is needed will be telling.

The current progressive movement is neither as organized nor as grounded. Some good many are pure Obama fans. Some – including much of the best of the bloggers – grew up in opposition to the war in Iraq and the crimes and catastrophes of the Bush administration. They are scornful of compromised Democrats, suspicious of a leadership that didn’t end the war, cynical about the many corruptions of modern day politicians. Most of the organized progressive movement has spent the last years fighting to stop bad things from happening. Will a progressive movement come together that is independent enough to push Obama hard to go father than he might otherwise go, and responsible enough to help support reforms, and go after those in both parties that stand in the way? The Obama White House will clearly prefer the remarkable base that they have built during the campaign, ready to be mobilized in his support. Will they come to appreciate the benefits of an independent progressive movement demanding more than they think is possible?

Inheriting a country mired in two wars, headed into a deep and long recession, marked by Gilded Age inequality and growing insecurity, the next president will face stark challenges. If Obama is elected, he will have the moment, mandate, momentum, and moral armament to launch a new era of bold progressive reform. And in the coming months, if all goes well on Tuesday, we will learn if he has the audacity of hope to undertake it, and whether progressives can forge a force for change to propel it.