The economic slump is causing a crisis of state solvency. Entire countries like Ireland, Iceland and Greece are in way over their heads. This is also true of many cities and states here in the U.S. Capitalism inevitably leads to a crisis of over-production, since capitalist exploitation prevents the workers from being able to purchase all the goods and services that they have produced. This particular crisis is sharper as the bourgeoisie has tried to postpone the slump by the enormous expansion of credit. This vast extension of loans to many who could not possibly pay them back, in order to artificially expand the economy, led to its opposite.
Even if the GDP is growing slowly, there is still “deleveraging” going on in the economy as a whole. That’s economist-speak for banks trying to collect their debts, which can lead businesses to cutbacks in production, lay offs, and cuts in hours and pay. As this happens, people must make due with less. This means less income and sales taxes revenue for state and local governments. Home prices drop, fewer homes are sold and foreclosures are up. This leads to a decline in property tax revenues. The federal stimulus package temporarily helped pump money into the states and cities, but this program has ended, further aggravating the situation.
Big Business Blames Workers
The Big Business media and their politicians are screaming that the public employees’ high salaries and benefits, especially their pensions, are what is causing the budget problems. This is ridiculous. Prior to 2007, the states and local governments were not in the present mess. These budget problems are caused by the economic slump. The budget problems were made even worse by tax cuts given to the rich and Big Businss. We have seen this ploy a million times. Business threatens to leave a state or locality and the government officials offer them big “tax incentives” to stay. Gradually, more of the state and local tax burden is shifted on to the backs of working people.
Politicians, such as NJ Governor Christie, claim that the public employee pensions are what is causing the budget problems. They point to the fact that the pensions’ liabilities are under-funded. It should be noted that if a pension is underfunded, this was not the fault of the workers. It was the fault of the politicians who used the pension money for other projects or gambled it on the stock market. If the pensions were fully funded and invested in government bonds, there would not be a problem now.Those bonds pay a reliable interest rate, as opposed to the stock market where you can lose your initial investment.
Therefore it is only logical that Big Business, the bankers and their political puppets should pay to fix the pensions, not the workers who worked hard all these years and were promised these benefits, only to see attempts to have them stolen from them at the last minute! Pensions are a form of deferred wages — not paying them out amounts to wage theft! Ironically, many state constitutions have guaranteed that state and local pensions cannot be reduced for anyone already in this system. So much for constitutional guarantees!
Threat of Bankruptcy
A number of mayors, both Democrats and Republicans, have floated the idea of using the threat of bankruptcy as a way to get the public employee unions to reduce their pensions. Cities can declare bankruptcy, although in many states, they need the approval of the state government. Bankruptcy could transform retirees into “unsecured creditors.” That would mean they lose their pensions.
Due to federal constitutional issues, state governments cannot currently file for bankruptcy. Presidential hopeful Newt Gingrich, among others, believe that Congress should find a way to allow state governments to declare bankruptcy as a way to eliminate their pension obligations, so they would be free to scale back benefits. According to the New York Times, average state and local pension benefits are only $19,000 per year. Put bluntly, most retirees are not living high on the hog.
Whether or not states would actually declare bankruptcy, the very threat to do so is like pointing a revolver at the heads of the workers. By threatening the “worst case” scenario, the politicians of corporate America hope to extract big give-backs in wages, health care, and pension benefits. This is all part of the plan to make the workers pay for the capitalist crisis. While about 7% of the private sector work force is unionized, well over 30% of the public sector is unionized. Big Business must therefore take on and attempt to defeat the public sector unions if they are to achieve their goal.
A Strategy to Win
We can not just stand there while our hard-earned wages and benefits are taken way from us. The AFL-CIO, Change To Win, and the National Education Association must launch a national campaign to get the federal government to bail out the states and cities. The example of Wisconsin shows that broader community support against these attacks exists. To begin, there must be a national day of action, with mass mobilizations in every city and town around the country. This could prepare the ground for a nationwide general strike, focused on demands that unite both public and private sector workers:
Hands off the public sector unions! No givebacks, no concessions!
Hire more public workers as a step to improve education and social services and reduce unemployment!
For a program of useful public works to rebuild the infrastructure and create construction jobs under union conditions and pay!
The richest one percent own more than the bottom 95%. There is plenty of money, but the rich have it all: Make the rich pay for the crisis!
What activists in and outside the unions need to do is fight to get the union leadership to adopt this strategy. Where supporters of this approach have enough support, we can run for union office. The above demands will be opposed by both the Republicans and the Democrats. The Democrats claim to be labor’s friend but they are involved in getting labor to take concessions as well.
The Campaign for a Mass Party of Labor seeks to link up with anyone that wants to fight for these demands. Ultimately, we think this will help more people see why labor needs to stop supporting Big Business politicians and build its own political party.