The enclosed two articles by Doug Henwood are an exceptionally pertinent and relevant analysis of the state of affairs in the U.S. labor movement today. Further below are three other articles–one by ISO members written on the eve of the Wisconsin referendum vote that took place on June 6, 2012, another on Wisconsin by Connor Donegan, a member of the Vancouver Renters’ Union and a graduate student in the department of geography at the University of British Columbia, and one on recent attacks on public sector workers in California.–RA
Walker‘s victory: Un-sugar coated
By Doug Henwood, LBO News, June 7, 2012
Democrats and labor types are coming up with a lot of excuses for Scott Walker’s victory in Wisconsin. Not all are worthless. But the excuse-making impulse should be beaten down with heavy sticks.
Yes, money mattered. Enormous amounts of cash poured in, mainly from right-wing tycoons, to support Walker’s effort to snuff public employee unions. While these sorts of tycoons—outside the Wall Street/Fortune 500 establishment—have long been the funding base for right-wing politics, they seem to have grown in wealth, number, consciousness, and mobilization since their days funding the John Birch Society and the Goldwater movement in the 1950s and 1960s.
But lingering too long on the money explanation is too easy. Several issues must be stared down. One is the horrible mistake of channelling a popular uprising into electoral politics. As I wrote almost a year ago (Wisconsin: game over?): “It’s the same damn story over and over. The state AFL-CIO chooses litigation and electoral politics over popular action, which dissolves everything into mush. Meanwhile, the right is vicious, crafty, and uncompromising. Guess who wins that sort of confrontation?”
Please prove me wrong someday, you sad American “left.” At this point, few things would make me happier to say than I’d been proven wrong. But I wasn’t.
There were several things wrong with the electoral strategy (beyond, that is, the weakness of electoral strategies to begin with). Barrett was an extremely weak candidate who’d already once lost to Walker (though by a slightly narrower margin than this time). Potentially stronger candidates like Russ Feingold refused to run, probably out of fear of these results. And the bar was very high for a recall. Only 19 states have recall provisions, and Walker was just the third governor to face one. Well over half of Wisconsin voters think that recalls should be reserved only for misconduct—and less than a third approve of recalls for any reason other than misconduct (Wisconsin recall: Should there be a recall at all?).
Suppose instead that the unions had supported a popular campaign—media, door knocking, phone calling—to agitate, educate, and organize on the importance of the labor movement to the maintenance of living standards? If they’d made an argument, broadly and repeatedly, that Walker’s agenda was an attack on the wages and benefits of the majority of the population? That it was designed to remove organized opposition to the power of right-wing money in politics? That would have been more fruitful than this major defeat.
It is a defeat. It is not, as that idiot Ed Schultz said on MSNBC last night, an opportunity for regroupment. (Didn’t hear it myself, but it was reported by a reliable source on the Twitter.) Because in the wise and deservedly famous words of Ralph Waldo Emerson, “When you strike at a king, you must kill him.” When you don’t, you look like a fool if you’re lucky. More likely, you’ll find your head in a noose.
And as much as it hurts to admit this, labor unions just aren’t very popular. In Gallup’s annual poll on confidence in institutions, unions score close to the bottom of the list, barely above big business and HMOs but behind banks. More Americans—42%—would like to see unions have less influence, and just 25% would like to see them have more. Despite a massive financial crisis and a dismal job market, approval of unions is close to an all-time low in the 75 years Gallup has been asking the question.
A major reason for this is that twice as many people (68%) think that unions help mostly their members as think they help the broader population (34%). Amazingly, in Wisconsin, while only about 30% of union members voted for Walker, nearly half of those living in union households but not themselves union members voted for him (Union voters ? union households). In other words, apparently union members aren’t even able to convince their spouses that the things are worth all that much.
A major reason for the perception that unions mostly help insiders is that it’s true. Though unions sometimes help out in living wage campaigns, they’re too interested in their own wages and benefits and not the needs of the broader working class. Public sector workers rarely make common cause with the consumers of public services, be they schools, health care, or transit.
Since 2000, unions have given over $700 million to Democrats—$45 million of it this year alone (Labor: Long-Term Contribution Trends). What do they have to show for it? Imagine if they’d spent that sort of money, say, lobbying for single-payer day-in, day-out, everywhere.
So what now? Most labor people, including some fairly radical ones, detest Bob Fitch’s analysis of labor’s torpor. By all means, read his book Solidarity for Sale for the full analysis. But a taste of it can be gotten here, from his interview with Michael Yates of Monthly Review. A choice excerpt: “Essentially, the American labor movement consists of 20,000 semi-autonomous local unions. Like feudal vassals, local leaders get their exclusive jurisdiction from a higher level organization and pass on a share of their dues. The ordinary members are like the serfs who pay compulsory dues and come with the territory. The union bosses control jobs—staff jobs or hiring hall jobs—the coin of the political realm. Those who get the jobs—the clients—give back their unconditional loyalty. The politics of loyalty produces, systematically, poles of corruption and apathy. The privileged minority who turn the union into their personal business. And the vast majority who ignore the union as none of their business.”
Bob thought that the whole model of American unionism, in which unions were given exclusive rights to bargain over contracts in closed shops, was a major long-term source of weakness. I find it persuasive; many don’t. But whatever you think of that analysis of the past is rapidly becoming irrelevant. Collective bargaining has mostly disappeared in the private sector, and now looks doomed in the public sector. There are something like 23 states with Republican governors and legislative majorities ready to imitate Walker who will be emboldened by his victory. And there are a lot of Dems ready to do a Walker Lite. If they don’t disappear, public sector unions will soon become powerless.
That means that if unions ever want to turn things around—and I’m old-fashioned enough to believe that we’ll never have a better society without a reborn labor movement—they have to learn to operate in this new reality. Which means learning to act politically, to agitate on behalf of the entire working class and not just a privileged subset with membership cards.
By Doug Henwood, LBO News, June 8, 2012
I’ve been amazed at some of the tendentious misreadings of the piece that have made the rounds, mainly from left labor people. My favorite is that I just wasn’t aware of all the door-knocking and retail campaigning that union forces were doing over the last few months. Two points about that. One, months isn’t enough. I’m talking about years of education, organization, occupying. Face-to-face talk, direct action, all manner of things. And two, all that actually existing door-knocking was subsumed to a stupid electoral campaign—one whose defeat has only elevated Walker’s status and power. All those resources are now doubtless going into the Obama campaign—Obama, who did no more than tweet support for Barrett at the last minute!
Which reminds me of another thing—a pervasive, macho tendency in union culture to dismiss anyone who isn’t “in the trenches” as a pansy or an out-of-touch pointy-head. Outside analysts just don’t know all the great work they’re doing! Well, you know, it’s not really working out so well. Maybe all that time in the trenches just leaves you with a mouthful of dirt.Another reaction was to think I don’t care about workplace issues. Of course I do. Workers, especially in private companies (though the post office isn’t much better) live under an authoritarian regime that offends their dignity every day. Unions can be a crucial defense against that. But the heavy emphasis on the contract and the workplace has led to a narrowing of vision, and to a perception among the 88% of the workforce that’s not unionized that unions don’t give a damn about them.
In other countries, unions are about more than contracts, and have done a lot better job fighting for broad public benefits, like pensions and health care. Our unions look too much like they’re fighting to defend their own private welfare states and not fighting to expand the public ones. They look like that because they all too often are. There’s no more disgraceful instance of this than the behavior of the Service Employees International Union around health care. SEIU’s former president, Andy Stern, dismissed single-payer as a Canadian import—while making common cause with then-Walmart CEO Lee Scott to try to craft a more distinctively “American” scheme. As one SEIU staffer told Liza Featherstone (“Labor Head Andy Stern Has Some Unusual Corporate Bedfellows”) [disclosure alert: she’s my wife], Stern “doesn’t hold social democracy in high regard.” Also, as Bob Fitch argued, unions typically take their cue on political matters from their employers. SEIU represents a lot of health care workers—and health care providers would hate single-payer.
The Wisconsin results overshadowed voter approval—by wide margins—of public sector pension cuts in San Diego and San Jose. Sad to say there’s not much of a sense of solidarity in America these days. Seeing generous retirement and pension provisions, the masses don’t say, “I want those too!” Instead, they say, “They can’t have them either!” It’s not clear that pouring more resources into fights to defend pensions will yield any good results against a 65–70% consensus on that.
Regardless of what I think about contracts and benefits, though, the old model is dead. Private sector unions are virtually gone, and those that remain are negotiating concessions. Public sector unions were safe for a long time, but now they’re on the chopping block. Dems will chop more slowly than Reps, but they will chop nonetheless. A lot of what I hear from even good union people amounts to an intensified dedication to the status quo. But that won’t work. Unions have to shift their focus from the workplace to the community at large, from private benefits enjoyed by a few to public benefits enjoyed by everyone, or they’re doomed.
“Authoritarian Populism” and the Wisconsin Recall
By Connor Donegan, MR Zine, June 10, 2012
On June 5th, roughly 1,334,450 people voted in favor of Wisconsin Governor Scott Walker and his program of union busting, austerity, corporate tax-cuts, and property-tax freezes. 1,162,785, voted to recall the governor midway through his term. Walker’s victory will be seized on by the Right as they drum up support for copycat union-busting bills while Walker himself has reinforced his “mandate” to “make tough decisions.”
2011 has been heralded as a year of “dreaming dangerously,” as mass movements and rebellions reasserted themselves as complex, unpredictable, and very real historic forces. In Wisconsin, tens of thousands of people participated in a fight with the legislature to protect the rights of public sector workers to collective bargaining and to protect public services like education and the state health insurance program from severe budget cuts.
By directing the statewide movement into recall elections, Wisconsin progressives chose to fight a battle on ground that the Republican Party has been preparing for decades. There was no “overreach” of power, as many insisted, but instead, forward movement of a political program that always sought to overturn the status quo. The Democratic Party had no alternative agenda to offer, let alone a compelling one, but progressives had no other political organ to carry through their demands either. And, of course, many remain loyal supporters of the Party anyways.
Progressives need to understand why Walker won. Blaming Citizens United does not cut it, not even close. The roots of the successful Republican strategy in Wisconsin go back to the years of Ronald Reagan and Margaret Thatcher. These were right-wing leaders who sought unabashedly to destroy working-class power. They blamed the economic crisis (“stagflation”) on unions. They scapegoated people of color and offered reassurance to middle-income whites by promising social discipline, building on the ‘law and order’ platforms of the 1970s, while whipping up anxiety and resentment over the social movements of the 1960s and early ’70s.
In short, they consolidated their own electoral base while attacking the very basis of working-class power not only through union busting and economic deregulation but also through carefully crafted ideological battles that discredited unions and trumpeted individualism.
As Alan Budd, a key economic advisor to Thatcher stated, “My worry is . . . that there may have been people making the actual policy decisions . . . who never believed for a moment that this was the correct way to bring down inflation. They did, however, see that it would be a very, very good way to raise unemployment, and raising unemployment was an extremely desirable way of reducing the strength of the working classes — if you like, that what was engineered there in Marxist terms was a crisis of capitalism which recreated a reserve army of labour and has allowed the capitalists to make high profits ever since.”
The crisis for the Left was not due mainly to the fact that elites decided to take the offensive, but that these politicians won elections and re-elections. The Right successfully melded an elite, capitalist-class political program to the anxieties, frustrations, identities, and political imaginations of millions of workers, professionals, and small business owners. They fancied themselves freedom fighters willing to stand up to the “Big Labor Bosses” and the “Welfare Queens.”
Of course not everyone was content with this “authoritarian populism,” as the British cultural critic Stuart Hall aptly called it. Jesse Jackson’s Rainbow Coalition would, however, be the last time that progressives would be allowed to organize independently inside the Democratic Party. Rather than create a progressive vision for society that would energize its base, the Democratic Party decided it would be far safer to pander to the middle and has since been continually “dragged” to the Right by the more ambitious Republican Party.
Today’s Republican Party strategy is a hyper-charged repeat of the Reagan years. The New Right thrives in crisis situations, since crises provide ammunition for the war against the status quo, always skirting the fact that they themselves are at the direct service of the financiers and corporate executives — the real parasites. In 2008, capitalism nearly came crashing down on top of us and neoliberalism, so we thought, no longer looked so appealing.
The Right took the crisis and ran with it, turning it into a grand opportunity. Wisconsin provides a case in point. Progressives exclaim, not without reason, that Walker’s legislation negatively affected just about every group of people in the state — cutting education, restricting eligibility to Badger Care (state health insurance for low-income residents), effectively barring undocumented immigrants from attending university by charging them out-of-state tuition, disfranchising the thousands of voters without state-issued I.D.’s, and busting unions.
Another look at the legislation shows that the Republicans provided material incentives to each key group of supporters, while cultivating and harnessing to their program the real fears and anxieties that have been generated by economic insecurity. While Walker’s support is tilted towards higher-earners, exit polls show that 44% of voters with a 2011 family income below $50,000 voted for Walker. One hears over and over the complaint that public-sector workers are “privileged” and “sheltered” from the pain that everyone else is suffering. As obvious and dubious as this little trick is — pitting workers against each other instead of against the super-wealthy — it did its job.
The multi-national corporations who wrote the legislation have thrown the blame for the crisis of capitalism onto the working class by re-scripting it as a budget crisis caused by “Big Labor” and Big Government spending. It was always clear that this legislation advanced a national anti-labor agenda that seeks to destroy the last remaining island of union density in the American economy and overturn federal labor law. It’s well on its way.
By breaking the unions, they strengthened the power of government administrators who can now dictate terms of employment, benefits, and workplace rules. Thus, ALEC’s national strategy was articulated to local governments’ immediate interests, even while gutting their funding. Mandating a freeze on local property taxes may sound like big government coercion, but I suspect a lot of property owners, not just stingy Tea Partiers, are happy to take the money.
Walker eliminated taxes for manufacturers and agricultural producers in Wisconsin. Moreover, the state has already begun giving millions of dollars in tax credits to manufacturers and developers to pay for doing businesses in Wisconsin. Now, small business owners and other industries are waiting for their break too. However facile this is as an agenda for jobs or economic security, it is nonetheless a decisive action that looks like an effort to keep jobs in Wisconsin. Workers who fear more plant closings and runaway factories, and those who have been convinced that, in a world scarce of jobs, their wellbeing is dependent on their employer’s profits, may see these action as “common sense.”
As for the Democratic Party, their agenda was far less ambitious, if they even had one. Tom Barret was at least in principle against ending collective bargaining for public-sector workers and pledged an honest effort to restore their rights. He campaigned to “end the ideological civil war” started by Walker. His plan for reconciliation consisted mostly of public workers reconciling themselves to the new normal of austerity and sacrifice.
Wisconsin progressives made two fatal errors. They greatly underestimated the Republican Party, believing that progressives held the majority and that Walker’s only real supporters were billionaires and Tea Partiers. Worse still, progressives misunderstood the longstanding purpose of the Democratic Party in American politics. Rather than a political platform built to give voice to our daily frustrations with structural unemployment, exploitation and indignity at work, mass incarceration, extreme inequality, endless war, and corporate political rule, the Democratic Party effectively neutralizes our anger while advancing the very policies we abhor.
This does not mean that progressives need to leave the entire electoral stage open to the Right. It does mean, however, that if we’re going to be successful we first have a lot of groundwork to do. Here’s a suggestion from Doug Henwood: “Suppose instead [of the recall] that the unions had supported a popular campaign — media, door knocking, phone calling — to agitate, educate, and organize on the importance of the labor movement to the maintenance of living standards? If they’d made an argument, broadly and repeatedly, that Walker’s agenda was an attack on the wages and benefits of the majority of the population? That it was designed to remove organized opposition to the power of right-wing money in politics? That would have been more fruitful than this major defeat.”
First things first: progressives and labor unions have to abandon their unconditional support for the Democratic Party. They need us much more than we need them.
Connor Donegan is a member of the Vancouver Renters’ Union and a graduate student in the department of geography at the University of British Columbia. He is from Wisconsin.
Why are Democrats behind in Wisconsin?
By Michael Billeaux, Phil Gasper, Paul Pryse and Katie Zaman
Socialist Worker online (U.S.), June 5, 2012
WISCONSIN VOTERS will go to the polls on Tuesday, June 5, for the recall election that pits the hated Republican Gov. Scott Walker against Tom Barrett, the mayor of Milwaukee and the same Democrat that Walker defeated in the 2010 regular election.
In Wisconsin and across the U.S., huge numbers of people who were inspired by the uprising early last year against Walker and his union-busting austerity program are hoping Walker will be kicked out of office.
Unfortunately, opinion polls over recent weeks show Walker with a narrow but consistent lead over Barrett.
If those polls hold up, it will be a painful loss for the movement that emerged from the uprising, when thousands of unionists, workers, teachers, students and citizens of Wisconsin occupied the state Capitol in response to Walker’s “budget repair bill” that attacked public-sector unions and slashed away at social programs.
The occupation was ended by labor officials and Democratic Party leaders who argued that energy should be redirected into recall efforts against Walker and Republicans in the state senate.
The recall of Republican state senators did win two seats for the Democrats, but that wasn’t enough to overcome the GOP majority.
As for Walker’s recall, an army of volunteers gathered 900,000 verified signatures to initiate the process. Unions spent $4 million on its failed contender in the Democratic primary, Kathleen Falk, and then millions more on the general election.
For his part, Walker has pulled in tens of millions of dollars in campaign contributions from wealthy out-of-state donors to finance his campaign. But the Democratic Party itself is ultimately responsible for its candidate’s poor performance.
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EARLY ON, the Democrats conceded the debate about unions to Walker. During the Senate recall races last summer, Democrats quietly dropped restoring collective bargaining and union rights from their campaign speeches.
In this spring’s primary to choose a candidate against Walker, other Democrats attacked Falk, a former Dane County Executive and the labor leadership’s favored candidate, as being in the pocket of unions. In an op-ed supporting Barrett, former Madison Mayor Dave Cieslewicz jabbed at Falk: “A candidate beholden to big unions is no more appealing to independent voters than one who answers to the Koch brothers.”
During a debate with Walker, Barrett made a point to mention that he was not labor’s candidate. Rather than put up a defense of unions, the Democrats have treated them as supporters of “special interests” and an embarrassment.
Barrett has ceded further ground to Walker on austerity. Walker’s rationale for budget cuts has been a familiar one: the state is out of money and needs to control its expenses. Yet despite the fact that Wisconsin’s corporations are taxed at a rate below the national average–and that the current tax burden is primarily on Wisconsin’s middle class rather than the rich–Barrett made no attempt to challenge Walker’s claims.
Instead, Barrett emphasized that he won’t increase taxes on corporations and the wealthy. He told a Milwaukee radio station, “It is certainly my hope that by the end of my first term, at the end of my second term, and at the end of my third term that Wisconsin will take in less tax revenues from its citizens and businesses each year.”
While Barrett says he will reverse corporate tax cuts that Walker passed in January 2011, the Milwaukee Journal-Sentinel reports that “he doesn’t want to raise taxes beyond the levels they were at when Walker took office.” This means that while Barrett could shift some priorities around, he wouldn’t be able to restore most of Walker’s cuts, including $1.25 billion taken from education and $500 million from Medicare.
During last year’s uprising, Barrett proposed an “alternative budget repair bill” that included Walker’s cuts to benefits and pensions, but extended them to police and firefighters, whom Walker had spared.
Wisconsin Democrats have complained that the national party has not channeled enough resources into the recall campaign. But when the Democratic National Committee did get involved, it was to reinforce the same political message–by sending former President Bill Clinton, who enforced neoliberal policies at the national level in the 1990s and who recently praised Mitt Romney’s business record, to campaign with Barrett.
The right-wing Wisconsin Club for Growth has put up billboards pointing out that Barrett used Walker’s anti-union Act 10 to extract concessions from Milwaukee municipal employee unions last year. This gave the right more ammunition to claim that Walker’s measures were necessary. Walker has also deployed a “divide-and-conquer” strategy to pit private-sector workers against public-sector workers, depicting public employees as a privileged caste living off other people’s tax dollars.
The myth of the overcompensated public employee has been debunked thoroughly. However, in a state with a declining manufacturing sector and high unemployment in rural areas, many people see little reason to stand up for the collective bargaining rights of 130,000 unionized public employees.
Kathy Cramer Walsh, a UW political science professor who surveyed political attitudes in northern Wisconsin, told the Capital Times: “Many of the people’s take was ‘Here I am, working hard, I haven’t fixed my teeth in seven years, and I’m paying high taxes for these great [public] pensions.'”
But Wisconsinites aren’t lost to right-wing ideology. A poll by Marquette University Law School found that 65 percent of registered voters in Wisconsin favor higher taxes on the rich, 67 percent oppose cuts to education, and 57 percent oppose kicking people off BadgerCare, Wisconsin’s low-income health care program.
Although Walker’s baiting of public employee’s has gained some traction, labor could counter his “divide-and-conquer” tactics by supporting universal health care and access to education, and putting the blame for the budget crisis on corporations and the wealthy.
Creating this class-wide solidarity would require a new kind of labor movement–one closer to a social movement, including organized and unorganized workers, rather than the current service model of unions as “insurance companies and grievance machines,” to use the words of author Stanley Aronowitz.
Unions must challenge austerity and insist that the rich pay for the crisis they caused. But this can only happen if labor breaks with the Democrats and their neoliberal politics.
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ALTHOUGH THE Wisconsin labor movement has almost universally fallen in line behind Barrett, one Wisconsin local offered a glimpse of what a new labor movement could look like.
The Teaching Assistants’ Association (TAA) at the University of Wisconsin-Madison, the union representing graduate student employees, voted–in a controversial and close decision–to withhold endorsement from Tom Barrett at the last membership meeting of the semester.
At a membership meeting in March, the TAA had previously voted to withhold endorsement from Falk, too. Though Falk was the union leaders’ top choice, she would not agree to the goal of a full restoration of Walker’s public-service cuts or a restoration of public workers’ benefits. She also campaigned on her record of slashing $10 million from workers’ wages and benefits “without taking away collective bargaining rights,” while she was Dane County Executive.
Members of the TAA who opposed endorsing Falk or Barrett argued that the original aims of the Wisconsin uprising in winter 2011–that is, to kill the bills attacking union rights and drastically cutting social services–must not be reduced to the electoral aims of forcing Republican politicians out of their seats.
After the primary, other TAA members argued that the union should “Grin and Barrett” and support Barrett’s campaign, even though he is not the ideal candidate, because he is now the only chance to unseat Walker. Recalling Walker has for many become the only way to imagine victory, and there was immense pressure to campaign for him.
But this political orientation, which puts winning elections–and more specifically, electing Democrats–at the center of movement strategy, is what led to the dismantling of the Capitol occupation last year and continues to threaten the vitality of the labor movement.
While rightly identifying the danger of Republican politicians, labor’s Democratic supporters ignore the fact that forcing workers to pay for the economic crisis and undermining the power of unions are points of broad consensus between the Democratic and Republican Parties.
As AFSCME Local 171 member Mike Imbrogno said of his union in an interview with the Isthmus, “We supported [former Democratic Gov.] Jim Doyle when he ran on reducing the state workforce by 10,000 jobs, and we gave him money to do that. Why are we paying for them to lay us off and to furlough us?”
If Walker wins on Tuesday, it will be a blow to many people’s morale. But we shouldn’t forget that in a period of rising class struggle on a national and global scale, it remains possible to build a fighting labor movement here in Wisconsin and elsewhere. Whoever occupies the governor’s seat on June 6 shouldn’t anticipate an end to the battle. The future of our movement will depend on taking an independent stand for workers.
A new front in the war on public employees
IN A drastic escalation of the offensive against the rights of public employees–in particular, to a decent retirement–voters in two of California’s biggest cities overwhelmingly passed ballot measures designed to gut workers’ pensions. The proposals, titled “Measure B” in San Jose, and “Proposition B” in San Diego, breezed to victory with two-to-one support in both cities, despite fierce opposition from unions.
The referendums were slightly different in the two cities, according to Associated Press. In San Jose, current workers will have money taken out of their pay if they choose to keep their current pension plan–or they can accept reduced benefits. New hires will automatically receive reduced benefits. The San Diego measure imposes a six-year freeze on pay levels that determine benefits, and it shifts new hires, except for police officers, into 401(k)-style plans.
Coming on the heels of Republican Gov. Scott Walker’s victory in the Wisconsin recall election, the California results are certain to encourage anti-worker ballot initiatives in the coming months and years.
As Roxanne Sanchez, president of SEIU Local 1021, said in a June 11 statement: “I’ve said it before, and I’ll say it again: We are not the reason for this country’s bad economy. Big business is to blame, and pension reform is nothing more than a thinly veiled attempt by the 1 percent to line their wallets with more money.”
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CALIFORNIA LAW makes it relatively easy to put these sorts of measures up to a vote by allowing people to be paid up to $3 per name to gather qualifying signatures–as a result, millionaires and billionaires can get their pet projects on the ballot virtually at will.
This is exactly what happened in San Diego and San Jose, where libertarian billionaire and ex-Enron energy trader John D. Arnold directed his private nonprofit fund to donate $150,000 to the California Foundation for Fiscal Responsibility (CFFR). The CFFR is registered as a 501(c)3 foundation, legally barring it from political advocacy, but a quick look at the group’s website shows its links to the proposals in San Diego and San Jose.
And California won’t be the only state to hear from Arnold and his wife, Laura. According to Bloomberg.com, the modestly named Laura and John Arnold Foundation was worth $660.3 million in 2009, and “plans to be involved in pension-overhaul efforts around the U.S.”
Unfortunately, the attack on public employee pensions reaches far beyond the ranks of Republicans like San Diego Mayor Jerry Sanders and maverick fat cats like Arnold.
San Jose Mayor Chuck Reed, a Democrat, fought hard for Measure B and toasted its passage at a victory party to the glee of real estate interests and wealthy campaign donors.
Meanwhile, Democratic Gov. Jerry Brown has proposed sharp cuts in pensions for state employees, including forcing all state workers to pay for 50 percent of their pension costs, moving workers to a 401(k)-type plan with no guaranteed retirement benefits, and raising the retirement age to 67.
According to an analysis of the effects of Measure B in San Jose by an AFSCME-sponsored organization, city workers already faced a 26 percent reduction in take-home pay due to previous wage cuts and benefit reductions. The passage of the ballot measure will push that cut in take-home pay above 40 percent.
Brown is unlikely to get his full plan through the Democratic-controlled state house, but by blaming California’s budget deficit on teachers, nurses and other public employees, he hopes to wrest more concessions from unions in contract negotiations, as well as work with Republicans and centrist Democrats to enact parts of his overall proposal legislatively.
Although backers withdrew a planned statewide ballot initiative mirroring the San Jose and San Diego measures, it is now very likely that anti-union forces in cities and municipalities across California will try to imitate the two local referendums.
Not even workers in liberal bastions like San Francisco are safe from this assault, as liberal Democrats like Jeff Adachi and even progressives like former Green Party mayoral candidate Matt Gonzalez have supported proposals shifting the burden of pension costs to public employees.
The rush to blame public workers for budget deficits is so strong that unions have agreed to preemptive givebacks and increased contributions from members in the hopes of staving off even sharper attacks.
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ALL OF this is premised on the idea that there is a “crisis” in public-sector pension funds.
Unlike 401(k) plans, California public employees are guaranteed a fixed-benefit plan when they retire, based on a formula that includes their salary and their years of service.
Contributions from employees and employers (which vary according to union contracts) are pooled into giant financial funds such as the California Public Employee Retirement Fund (CalPERS), valued at $233 billion, and the California State Teachers Retirement System (CalSTRS), valued at $147 billion. These, in turn, invest in state bonds and stocks on Wall Street, functioning as a semi-public collective mutual fund. Pensions for retired workers are then paid out of the fund’s returns on its investments.
The “crisis” in public-sector pension funds flared in 2007 and 2008 with the stock market crash. CalPERS and CalSTRS lost tens of billions of dollars, and so, because the state is obligated to pay retired workers the amount they agreed to in union contracts, there is a “deficit” between the rate of return on the funds and their ability to pay current pensions without dipping into their capital base. Thus, the state, county and city governments are obliged to make up the difference by paying out of their yearly budgets.
In the case of CalPERS, the fund’s managers recently voted to lower their projected annual return–what it pays out to retirees–from 7.75 percent to 7.5 percent, or a reduction of about $303 million, which gets added to the projected state budget deficit of $9.3 billion. The red ink is then passed on down to localities, and the difference has to be made up in local budgets.
For instance, CalPERS cuts to its projected rate of return this year will leave an additional $67 million hole in the Santa Clara County budget–which just happens to be where San Jose is located.
At the macro level, CalPERS estimates that it has $85 billion, spread out over decades, in unfunded mandates–the gap between expected returns on investments and what the fund owes retired or future retiring workers.
That sounds like a lot of money, and it helps drive the attack on public employees when cuts to public services are blamed on the state and localities having to “raid” their budgets to pay for retirees.
But the reality is that even the highest estimates for CalPERS’ shortfall pale in comparison to the estimated $13 trillion that the U.S. Treasury handed out to private banks and companies in the massive Bush/Obama bailout of Wall Street.
There is a crisis–but it’s really a side-effect of taxes on the 1 percent falling to historic lows. In California alone, there are over 650,000 households with liquid assets (not including the value of their homes) of more than $1 million.
If those households were all taxed $20,000–or 2 percent on just their first $1 million in liquid assets–the state would generate $13 billion in additional revenues, which would more than cover the entire state budget deficit. If the state taxed these households just $100,000, or 10 percent of their first $1 million in assets, it would generate $65 billion–enough not only to wipe out all deficits, but allow California to restore past cuts to public education, health care and public transportation, while launching a massive jobs program to eliminate unemployment.
Union members and progressive activists attempted to take a very small step in this direction this spring by putting a proposal on the November ballot statewide for the “millionaire’s tax” that would have raised between $6 billion and $9.5 billion in the first year by increasing taxes on households earning more than $1 million.
Brown fought tooth and nail against the initiative and pressured organizers to withdraw their proposal in favor of his plan, which also includes a regressive sales tax on the poorest Californians. It’s unclear that Brown’s so-called “compromise tax” will pass in November.
Brown’s own vilification of public-sector unions has only helped the initiatives of labor’s enemies on the right. In fact, public employees recently agreed to pay hundreds of millions of dollars more towards the costs of their pensions with increased deductions from their paychecks.
However, the unions rightly resisted Brown’s attempt to transform their guaranteed retirement benefits into 401(k) plans, which rise and fall with the stock market and can leave workers high and dry.
While it’s true that turnout for the June 5 election was very low, thus amplifying the conservative vote in favor of the San Jose and San Diego ballot measures, it’s nevertheless obvious that the bipartisan campaign against public employee pensions has reached dangerous levels–and is in danger of becoming “common sense” if it isn’t challenged forcefully, and soon.
Larry Bradshaw, vice president of SEIU Local 1021 in Northern California, explained the stakes involved in this fight:”Pensions are an anti-poverty device for working people. A recent study by the University of California Berkeley Labor Center predicts that nearly half of Californians will retire in poverty. Defined-benefit pensions are the antidote to that scenario of destitution and poverty for seniors.”