Workers Vanguard No. 1048
13 June 2014
Capitalists Tell Workers: Pick Your Poison
Detroit Pension Robbery
In May, over 32,000 active and retired Detroit city workers started receiving ballots asking them to vote on a bankruptcy scheme that will slash their pensions, eliminate their medical plans and gut their unions no matter what the result is. Officials overseeing the nation’s largest ever municipal bankruptcy are pressuring workers and retirees to vote “yes” on what they call the “grand bargain”: draconian attacks on retirees and current public employees as well as basic services in return for funding from the state of Michigan, private foundations and the Detroit Institute of Arts’ backers to “rescue” the city. Municipal workers and retirees vested in the city’s pension plans have been placed among the many classes of creditors being asked to approve the package. Make no mistake: eliminating or diminishing pensions is pure theft of workers’ earnings. The Detroit pension rip-off is a harbinger of what lies in wait for workers across the country.
Largely crafted by federal mediators, the “grand bargain” is a grand scam. The plan involves sweetheart deals with Wall Street banks, secret concessions from union leaders and a battery of state laws hammering at the rights and the very lives of the residents of this 82 percent black city. Once bankruptcy was declared last July, the presiding judge was legally empowered to “cram down” whatever terms he decides, irrespective of the objections of individual creditors.
The facts about the deal speak for themselves:
• It was widely reported that pension checks for former city workers would drop by 4.5 percent. The plan also calls for a “claw back” of “overly generous” interest earned in their retirement annuity accounts, in effect doubling or tripling the actual reduction in monthly pension payments, which even now average only about $1,600. Exempted from the most severe cuts are the police—the racist, anti-labor guard dogs of the capitalist class—as well as firemen.
• Retiree health care coverage is eliminated, an especially vicious blow to as many as 7,500 retirees too young for Medicare. The city walks away from a $4.3 billion liability in return for setting up a $450 million health care trust. While mid-range Obamacare insurance can cost around $5,000 per year (not including hefty out-of-pocket expenses), Detroit retirees are slated to receive a mere $175 per month to help buy it.
• Unelected authorities vested with special powers will oversee the massive slashing of benefits and wages. State lawmakers have approved a legislative package that for at least 13 years subjects the city to the diktats of an oversight commission, composed mainly of state officials or people appointed by Republican governor Rick Snyder. Modeled on a board that controlled New York City budgets after the 1975 municipal fiscal crisis, the commission will have final say on labor contracts and will exert authority over and above elected city officials.
• The big banks will make out as always. In late April, the main architects of the Detroit bankruptcy—Emergency Manager Kevyn Orr and U.S. bankruptcy judge Steven Rhodes—cut a deal with Bank of America and UBS, granting them $85 million to settle claims stemming from wildly speculative financial “swaps” that the banks had already handsomely profited from. The city had made these transactions in the mid 2000s to shore up the pension plans, only to see them go belly-up during the subsequent world financial crisis.
• Linked to the bankruptcy are plans to privatize the Detroit Water and Sewerage Department. This is a direct attack on a unionized workforce and a sure sign that further suffering is in store for city residents. Already, the water department is sending out crews to shut off 3,000 homes behind in their bill payments each week.
The bankruptcy ballot is a complete sham. As one retiree said, “When you open your envelope, there’s a gun to your head.” And if the deal is turned down, the government and the courts threaten far worse terms, including pension cuts of as much as 27 percent. The choice, another retiree aptly put it, was between the “deep blue sea with a heavy stone around our necks or burning in hell.”
By the lights of the pro-capitalist labor officialdom, workers and retirees have no option other than accepting terms dictated by the capitalist government and courts. To help prepare the creditors’ ballot, in late April bureaucrats from 14 municipal unions agreed to massive concessions in new five-year contracts. As a rubber stamp for pension and health care cuts, the government appointed an official retirees committee including representatives from AFSCME, the largest union of city workers, and the United Auto Workers (UAW). Under pressure from angry retirees, some AFSCME officials are telling unionists to hold off on voting. But construction union officials have agreed to kick in cash for the grand scam while the UAW tops have started a fund drive—another illustration of the bureaucrats’ program of subordinating workers’ class interests to those of the U.S. capitalist rulers, as represented by the Republican and Democratic parties.
Marxists reject the entire framework of the Detroit bankruptcy vote. Guaranteed pensions, decent health plans and other gains for working people came not through the beneficence of their exploiters but through hard class struggle. And it will take real struggle to halt the rulers’ efforts to steal what remains of those gains. For a start, the labor movement should demand that the federal government insure the full value of both public and private pension funds. Government-provided health care should be available to all at no charge. The ruling class has no intention of providing these or other necessities to the workers whose labor it exploits, much less to the unemployed, the ghetto poor and everyone else on the bottom. In fighting for these necessities, the working class must be won to the understanding that the way forward is to sweep away capitalist rule and create its own government, laying the basis for the socialist reconstruction of society to meet human needs.
Threat to All Workers
With the Detroit bankruptcy, the racist capitalist rulers are once again making the working class and the black poor pay for the greed, decay and irrationality of the system of production for profit. Once a powerhouse of the U.S. economy and a center of integrated union power, Detroit has been turned into a giant, rusting disaster area by the auto corporations that abandoned the city in order to exploit cheaper, non-union labor in the U.S. South and overseas. What had once been the fifth-largest metropolis in the U.S. is today the 18th-largest. Hollowed out by the decline of the American auto industry and further wrecked by the financial crisis, Detroit today faces estimated long-term debts of over $18 billion.
The former Motor City, where hundreds of thousands of unionized black auto workers once had the semblance of a decent job, is now a vast urban wasteland. Simply put, black Detroit has been deemed expendable by the racist ruling class, which endlessly blames “overly generous” union contracts for the devastation the capitalists themselves have wrought. While black industrial workers were the first to be written off by the bourgeoisie, since their labor was no longer needed to produce profits, such ruin now increasingly stalks the working class across the country. (For more, see our article “Detroit: The Rise and Fall of a Labor/Black Stronghold,” WV Nos. 1044 and 1045, 18 April and 2 May.)
From Obama on down, the government has made clear that Detroit’s black masses are not about to receive a smidgen of the largesse that was dished out not too long ago to the big banks and auto companies. Continuing a move undertaken by the Republican Bush White House, the Democratic Obama administration bailed out General Motors and Chrysler with tens of billions of dollars when they threatened bankruptcy. With the companies claiming that they could no longer afford to pay union pensions and health benefits to retirees and new-hires, the UAW tops saluted their Commander-in-Chief and willingly agreed to massive givebacks. These included a two-tier wage scheme that allowed the automakers to hire assembly-line workers at a bit more than half the previous pay scale as well as a no-strike pledge. GM, for one, has since bounced back to reap record profits for its owners—a capitalist success story recently dimmed by the exposure of the GM bosses’ murderous indifference to those who purchased a Cobalt.
The UAW bureaucracy’s role in gutting union wages as part of the auto bailout was the climax of decades of sacrificing its members on the altar of the profitability of American capitalism, not least through peddling chauvinist “America first” protectionism. In sapping the fighting strength of the UAW, once the powerhouse of the U.S. labor movement, the union tops undermined the ability of the working class in Detroit to counter the auto bosses with concentrated power. The labor sellouts thus not only helped prepare the ground for the devastation of Detroit but opened the door to further attacks on workers more broadly, as seen, for example, in the anti-union “right to work” law passed in Michigan in December 2012.
The outcome of the Detroit bankruptcy scheme will have far-reaching consequences for public-sector workers across the country. Pension obligations for public employees had been considered legally protected until two recent municipal bankruptcies—one in Pritchard, Alabama, and another in Central Falls, Rhode Island, where pensions were cut as much as 50 percent. In fact, Michigan and some other states have constitutional statutes guaranteeing public employees’ pensions.
Detroit’s “grand bargain” would change all that. It would set a precedent for supposedly cash-strapped governments to slash pensions, as well as eliminating hard-won medical benefits and throwing workers onto the mercy of the “Obamacare” insurance marketplace. Officials in San Bernardino, California, which is also in bankruptcy, see Detroit as a test case for slashing their obligations to the state’s public employee retirement system. From California to Illinois and New Jersey, Democratic and Republican politicians are looking for a way out of their commitments to retirement plans, many of which are woefully underfunded.
For decades, public union misleaders had helped state and local governments hold the line on increased wages and benefits with the promise of greater contributions to pension funds. A form of deferred wages, pensions are supposed to be held in trust until they are needed. But those funds became a honeypot for high-rolling bankers and hedge fund managers, in league with state pension plan managers, for some of their riskiest investments. And when these imploded, pension funds were burned.
American corporations (steel, airline and auto companies, to name just a few) have long utilized bankruptcy as a tool to loot pensions, slash labor costs and bust unions. Now capitalist politicians are using the same weapon against government workers. In Detroit’s case, the rulers are counting on the isolation of the city’s overwhelmingly black population from the mainly white workforce in the rest of the state to push through cuts that will be the leading edge of an assault on all workers. The Detroit plan is a continuation of the war waged by both the Democratic and Republican parties of capital against public employee unions, which, due to deindustrialization in the Midwest and Northeast and the precipitous decline of private-sector unions, now comprise about one-half of organized labor. We say: All labor must fight the assault on public workers! No to pension and health care cuts!
For a Class-Struggle Perspective
For workers and retirees, the Detroit bankruptcy ballot is a lose-lose situation. But the “Moratorium Now! Coalition to Stop Foreclosures, Evictions, and Utility Shutoffs” backed by the reformist Workers World Party (WWP) tells workers and retirees to vote “no” in order to wage a fight “in the courts and in the streets” to “make the banks pay.” By signing on to the ballot hoax and urging yet more court suits, WWP & Co. are telling people to rely on the very instruments the ruling class is using to force through the bankruptcy and its savage cuts. As for the union misleaders and Democratic Party pols who are complicit in the scheme, mum’s the word from the WWP.
Meanwhile, the counterfeit “Trotskyists” of the Socialist Equality Party (SEP) have switched from telling pensioners to vote “no” to acknowledging that the ballot is itself a fraud. This shift, to be sure, is not to help prepare the way for some desperately needed union struggle in defense of pensions and health benefits. A May 15 SEP statement argues for “action committees” against the bankruptcy plan to be “organized independently of and in opposition to the trade unions.” This puts the SEP in league with the very forces driving the bankruptcy scheme, which want to crush whatever is left of public workers unions in the city.
Conflating the unions—the basic economic defense organizations of the working class—with their pro-capitalist misleaders, the SEP has opposed organizing non-union auto plants, as seen in its gloating over the UAW’s defeat in Chattanooga earlier this year, and openly alibied for scabbing. And these political bandits do not stop there. Two years ago, as millions were outraged over the killing of 17-year-old Trayvon Martin by a racist vigilante in Florida, a statement by the SEP’s presidential candidate Jerry White opined that the killing “is not fundamentally about race” and concluded by urging a “fight for socialism” (see “SEP Denies Racism in Trayvon Martin Killing,” WV No. 1005, 6 July 2012). The SEP peddles the grotesque notion that the socialist liberation of the working class means denying the reality of black oppression—a cornerstone of capitalist rule in the U.S. To anyone tempted by the SEP’s “Marxist” verbiage, we say: Buyer, beware!
The crisis in Detroit glaringly shows the need to sweep out the sellout labor bureaucrats and forge a new, class-struggle leadership of the unions—independent of and opposed to all capitalist parties—as part of the fight to build a revolutionary workers party. The arrogant capitalist rulers presume that people will passively accept being thrown from their jobs and homes, losing vital services and any hope for a decent future for themselves or their children. But there is enormous resentment at the base of society toward the tiny class of obscenely rich exploiters. The key is to harness and direct anger among workers and minorities toward the eradication of racist capitalism.
Laying out the programmatic framework for such a struggle, the 1938 Transitional Program, written by Bolshevik revolutionary Leon Trotsky, raised a series of “transitional demands, stemming from today’s conditions and from today’s consciousness of wide layers of the working class and unalterably leading to one final conclusion: the conquest of power by the proletariat.” Against the catastrophe of mass unemployment, we call for a shorter workweek with no loss in pay to spread the available work. Desperately needed is a massive program of public works to rebuild America’s decaying infrastructure—from housing, schools and hospitals to roads, transit systems, bridges and dams. Such a fight would unite private and public unions together with the unemployed and would mobilize the power of labor in the interests of the ghetto and barrio poor, striking a blow against the racial and ethnic hostilities whipped up by the capitalists to prop up their rule.
Against the swindles of the finance capitalists who control the economy, Trotsky wrote: “Only the expropriation of the private banks and the concentration of the entire credit system in the hands of the state will provide the latter with the necessary actual, i.e., material, resources—and not merely paper and bureaucratic resources—for economic planning.” But as he emphasized, “The state-ization of the banks will produce these favorable results only if the state power itself passes completely from the hands of the exploiters into the hands of the toilers.”
There may be no better argument for the revolutionary overturn of decaying capitalism than the situation in Detroit today. What must be done is to build a workers party that champions all the exploited and oppressed in the struggle for a workers government, where those who labor rule. The victory of the workers on a world scale will lay the basis for an internationally planned socialist economy that will finally rid the planet of poverty, racial and national oppression, war and all other evils of capitalist society.