Tuesday, March 17, 2009

Bonuses and Cutbacks

by Norman Markowitz

AIG is acting as if the 1980s have just begun, planning to give its Executives over 160 million in bonuses (for what, hustling tens of billions in taxpayer "bailout money" from the federal government). Now it isn't trade unionists who are taking the fall from union busters, workers losing their pension funds that leveraged buyouts, the poor pushed off public assistance rolls as "welfare" is demonized. It is the great majority of Americans faced with a mounting economic crisis that threatens their employment, housing, wages and salaries and benefits. In the 1980s, the "lean and mean" vulture capitalists who were celebrated by stooge center right journalists took their rewards as they forced real wages down for the majority and made hunger and homelessness social problems in the country again. Today, the vulture capitalists of the Bush II era are again seeking obscene monetary rewards as if they had a Mummy of Ronald Reagan proclaiming over and over again "It's Morning in America."

Actually, this is so obscene even many Republicans are shouting enough. But the Obama administration, which has been forceful in its denunciations of the bonuses, should act directly to inform AIG that if they are not rescinded immediately, aid funds will be withdawn.

Also, more importantly, the Obama administration should begin to work with the states and cities to resist the counterproductive cutbacks that are being put forward to deal with the economic crisis. I am a college professor and a state employee in New Jersey which has a Democratic governor and state legislature. New Jersey is generally a strong pro union progressive state, but it has two special problems. First it is in the New York metropolitan area and has thus suffered greatly by the loss of tax revenues created by the Wall Street collapse. Second, its Republican Governor, Christine Todd Whitman, pursued a Reaganite economic policy in the state in the 1990s, cutting state income taxes by 30% and thus setting the stage for huge deficits (this in the 1990s when many states in less better shape than New Jersey were recovering from the effects of national Reaganite policies).

The Governor has proposed a wage and salary freeze for unionized public employees for this year of their contracts(which was the year in which the largest increases were to be paid). He has also called for 12 days of suspensions without pay(the propaganda term "furlough" is being used, although "furloughs" are leaves from service in the military, vacations of sorts, with no pay losses, and have nothing to do with these policies, which would amount to a two and a half week pay cut for public employees, a layoff in the private sector, a suspension without pay in the public sector).

The state unions, including my own, will do everything in their power to fight this, which would be if it is successful quite similar to the "givebacks" which private employers coerced unions to accept in the Reagan years.

My point though is that this policy called for by Governor Corzine in New Jersey and by other governors and mayors is in direct opposition to the Obama policy, whose purpose is to sustain mass purchasing power by pumping money into the economy to prevent the worst recession of the post WWII from becoming a depression. Reducing the incomes and purchasing power of tens of thousands of public employees and their families is in effect pumping money out of the economy. Along with increasing regressive taxes (which has also been suggested in the form
of eliminating the ability of home owners to write off their regressive property taxes from their state income taxes, thus raising state income taxes in a regressive way, since property taxes are often higher in moderate and low income communities because of the large public school systems they support than in affluent communities, where property values are much higher)such policies negate the compensatory fiscal stimulus program of the national administration and also continue (this time in New Jersey with a Democratic governor) the old rightwing Republican strategy of scapegoating public employees and playing them against moderate income private sector workers in a race to the bottom.

The states and cities have a huge problem rooted in thirty years of public sector underfunding. The cynical contentions from establishment media that public sector workers must "share the pain" ignores the fact that both real incomes and benefits for many public sector employees have been in decline for a long time, as newer workers have been denied the benefits of older workers, "merit" schemes have been employed to reduce overall wages and salaries, and the out of pocket expenses for existing benefits have risen sharply. When these facts are cited, the lame response is that things are worse for private sector workers(in regard to benefits and job security, they often are, but progress is about raising standards, not lowering them, and Keynesian fiscal theory, at least the Keynesian theory in the U.S. from the New Deal on associated with the Democrats) has been rooted in a commitment to maintain and increase income and thus mass
purchasing power as the only sound way to maintain the demand for goods and services in the economy that will foster quantity economic growth and guard against recession and especially depression. State and local policies that make workers pay for escalating budget deficits only increase the downward spiral, which will further reduce revenues and in the long run increase state deficits.

As he informs AIG that rewarding a handful of executives with millions in bonuses goes against his administration's economic policy, President Obama might also tell the Governors, Mayors and legislators of his own party that addressing their budget crisis by striking at the salaries and benefits of public employees goes against his administration's economic policy and offer to work with them, in the context of the rescue plan, to fund alternatives.