Tag Archives: Corporate Aristocracy

The Koch Brothers’ Governors: Butlers Selling the Public’s Silver

A Dress Rehearsal for Hillary?

By Jeffery Sommers and Michael Hudson
December 13, 2014
Counter Punch



The Koch Brothers are the closest thing the United States has to Russia’s oligarchs. They fuse ownership of the economy and state, using the latter to enrich themselves while making private gains through the public’s losses. Their idea of a “market economy” is to buy government officials and the assets they privatize at giveaway prices.

The top three butlers at the Koch’s nouveau riche ‘Downton Abbey’ are Governors Sam Brownback of Kansas, Wisconsin’s Scott Walker, and Chris Christie of New Jersey. All three ran elections based on the anti-Keynesian oxymoron of promoting job creation by balancing budgets with regressive tax plans. All declared that cutting taxes (chiefly on their wealthy campaign contributors) was the way to achieve their goal (more campaign contributions). All have served at least one term in office and the results are in: Their rates of job creation and income growth are way below the national average. Rather than closing budget deficits, tax cuts create them – providing more excuse to privatize state assets, post-Soviet style.

Brownback simply hopes to stay on the job as governor of the state where the Kochs’ corporate headquarters are located. Despite flagging poll numbers, he remained in office thanks to a mildly tawdry incident involving his Democratic opponent’s youthful visit to a strip club (in the era of talk radio and Fox News, anything can be manufactured into a scandal). Christie and Walker, by contrast, have presidential aspirations and are raising funding as the two top prospects from the Kochs’ political farm team.

The looming public danger ahead is how these Koch governors will ‘repair’ the fiscal potholes their tax policies are creating. Chanting the GOP refrain of ‘lower tax rates good, higher taxes bad’ as their stage-magic abracadabra, they proselytize Arthur Laffer’s cocktail napkin ‘Laffer Curve’ depicting lower tax rates delivering higher tax revenues as a sacred scroll – its inevitable failure leading to privatization of rent-extracting opportunities in a Yeltsin-like post-Soviet policy under the banner of free markets.

All three Koch Governors are following this fiscal folly of widening budget deficits. The effect is to force more cutbacks in public services, with sermons exhorting voters to tighten their belts while the Kochs gorge themselves on the tax cuts enacted by their pet governors.

Christie and Walker are the two governors with the most to lose by reciting the same tax-cutting catechism that Brownback parroted while driving Kansas into insolvency. Walker ran for re-election largely on having eliminated a $3.6 billion budget shortfall while cutting taxes and – more to the point – by cutting public employee benefits while holding most state wage increases below the rate of inflation. Christie likewise originally ran on closing deficits. Both now find themselves big budget deficits after serving a term with the policy they would like to impose on the nation at large.

Christie and Walker both sought to finance budget deficits and tax cuts (chiefly for the wealthy) by reducing living standards for public sector workers. But the deficits have re-appeared, while the cuts to public worker compensation have reduced consumer spending at local restaurants, taverns, car dealers and the innumerable goods and services tendered by New Jersey and Wisconsin businesses.

Christie and Walker pretended that cutting inflation-adjusted wages and benefits would not reduce consumer demand if the ‘savings’ were spent by the taxpayers enjoying lower tax bills. This argument ignored the obvious fact that the tax cuts go disproportionately to the wealthiest. As every economic textbook for the past century has taught, the rich typically spend and invest more of their money out of state, or simply buy more Wall Street stocks and bonds and foreign luxuries. The supposed savings thus escape Wisconsin, slowing economic growth – and hence, state tax revenue!

Christie and Walker are now facing deeper deficits after their tax cuts. Governor Walker no longer has a balanced budget. New Jersey’s shortfall for this year was close to $1.6 billion. Christie was counting on revenues from the state lottery to serve as income transfer from the poor and working class to pay for his tax cuts to the rich. But lottery revenues have fallen short. So he is trying to make up by cutting state payments to the pension system. As for Wisconsin’s state deficit, it is projected to widen to $2.2 billion.

Just as important as how much tax is collected, is how it is collected – who/whom? The aim should be to structure tax policies in ways that maximize wealth creation. But Governor Christie and Walker’s tax policies cut the bone, not the fat.

Their political dilemma is that their ‘tools’ of income and property tax cuts have not ‘repaired’ their respective budgets. The danger is that their pursuit of the 2016 GOP presidential nomination will lead them to use the next ‘tool’ in today’s class war arsenal: weaponizing fiscal policy to sell off the public domain.

Governor Walker has led the way by trying to sell state land and power plants in no-bid contracts. The idea is for privatization sell-offs to raise enough short-term revenue to allow the Koch Governors to wave the banner of fiscal rectitude, just in time for the 2016 presidential primaries.

But this will sell their states’ ‘family silver’ of land, power plants and other basic infrastructure that has been kept in the public domain to benefit taxpayers by keeping their basic infrastructure prices low. Selling off this public property, currently owned free of debt, would provide rent-extraction opportunities for the buyers. It would turn their taxpayers into rent payers for the services of the assets they formerly owned free and clear. The new prices for hitherto public services will include debt servicing charges, management charges, the cost stock dividends, and whatever rack-renting the new owners can squeeze out of the public.

To be sure, there is room for investigating whether a private vender could better manage our state-owned power plants, or if a private developer should construct and manage buildings on public land to maximize revenue. But this is different than selling the underlying assets owned by taxpayers.

Tax rates can be lowered or raised in response to budgetary needs – and to pay for errors by past political office holders. But once public assets are sold, they cannot easily be re-acquired. The long-term fiscal damage from their sale is permanent. That is what England learned from the devastating wave of Thatcherism. It raised the fees that taxpayers must now pay for transportation, water and other hitherto public services that have been privatized and financialized. They lose more paying such rents than they saved in the tax cuts (financed by much higher public debt levels).

The problem with New Jersey and Wisconsin is that unlike Britain, whose economy was saved by North Sea oil revenues coming online just when Thatcher’s policies were cutting demand in the economy, these states have no such natural resource windfall to save them from the short-term fixes to the budgetary shortfalls that have been created by tax cuts benefiting the most affluent.

Beyond New Jersey and Wisconsin, the whole country needs a more enlightened discourse on wealth creation. Blanket lowering or raising taxes will not balance our state budgets or deliver prosperity. The aim should be to make the tax structure more progressive, and to incentivize investment over speculation. What must be avoided at all costs is selling off public infrastructure. This Koch ‘tool’ will not ‘repair’ our budgets. It risks shattering budgets, and also the middle class. Selling off public property returns the public to their role as peasants on the Kochs plantation.

But here’s the real nightmare: President Obama has been giving speeches warning about the nation’s deteriorating bridges, roads and other infrastructure. This sounds like a Grand Bargain in the making by the Democratic ‘Rubinomics’ and Koch crowds to raise the funds to ‘fix’ America by privatizing bridges and other infrastructure that have been starved of maintenance as a means to balance local budgets in the face of cutting taxes for the rich. A Democratic Congress might block Koch tax cuts on the national level – but a Democratic presidential victory could restore Obama-Clinton style neoliberal policies to out-Koch the Koch brothers by engaging in privatizations as a means to both restore our infrastructure, while levying a de facto tax on the middle class in the form of tolls and fees going to private investors for infrastructure currently paid for by general government revenues.

In short, the 2016 presidential election could be another example of ‘heads you lose, tails you lose’ with either the Democrats or Republicans. The best chance of staving off this ‘casino fix is in’ is to focus on electing progressives to the Congress rather than ‘investing’ in a Hillary victory for 2016.

Jeffrey Sommers is an associate professor at the University of Wisconsin – Milwaukee and visiting faculty at the Stockholm School of Economics in Riga. His book with Charles Woolfson, The Contradictions of Austerity: The Socio-economic Costs of the Neoliberal Baltic Model  is available from Routledge.

Michael Hudson’s book summarizing his economic theories, “The Bubble and Beyond,” is available on Amazon. His latest book is Finance Capitalism and Its Discontents.  He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. He can be reached via his website, mh@michael-hudson.com


US Congress to vote on union-backed plan to cut workers’ pensions

By Jerry White
December 2014
World Socialist Web Site


A bipartisan proposal has been added to the US government funding bill now before Congress that would end 40 years of federal law and sanction the reduction of pension payments to millions of retired truckers, coal miners, supermarket, construction workers and other private sector workers.

The measure would free employers and unions, which jointly administer so-called multi-employer defined benefit pension plans, such as the Teamsters Central States and United Mine Workers funds, to “adjust” benefits, which active and retired workers have accrued and up to now could not legally be cut.

Randy Frehn, executive director of the National Coordinating Committee for Multiemployer Plans (NCCMP), which served as a consultant on the legislation, told the Washington Post, “We have plans where a 10 percent cut will be enough” to keep them solvent. In some cases, however, “cuts as high as 30 percent may be necessary,” the newspaper reported. This is a huge reduction in the already meager pension checks owed to an estimated 10 million active and retired workers or their widows.

The congressmen who drafted the amendment—long time liberal stalwart George Miller (Democrat-California) and conservative John Kline (Republican-Minnesota)—have packaged it as means to “save” the funds, which, they say, could run out of money over the next 15-20 years because of supposedly unsustainable payouts.

The failure of these funds, they claim, would trigger the collapse of the Pension Benefit Guaranty Corporation (PBGC), endangering the pensions of 41 million workers, retirees and their dependents, which the federal agency insures. “We have to do something to allow these plans to make the corrections and adjustments they need to keep these plans viable,” Miller told the Post. Opponents say the managers of the employer-union funds have exaggerated the state of the pension funds, and the amendment was added at the last minute to the $1.1 trillion omnibus spending bill to prevent any debate.

Joyce Rogers, a senior vice president for American Association of Retired Persons (AARP), said in a statement: “After a lifetime of hard work to earn their pensions, retirees don’t deserve to receive a bad deal, in which they have had no say, cut behind closed doors and excluding the very people who would be impacted the most.”

Major US corporations, especially in the steel and airline industries, have long used the federal bankruptcy courts to escape pension obligations owed to millions of workers. Companies like United Airlines, US Airways, LTV Steel and Kaiser Aluminum dumped their plans onto the PBGB. In many cases the pension plans were deeply under-funded after years in which top executives siphoned off pension money including for their own multi-million dollar retirement plans. Retirees owed $30,000 or more a year in pension benefits were then instantly tossed into poverty, since the PBGC is limited to paying at most $13,000 a year.

Under the federal Employee Retirement Income Security Act (ERISA) of 1974, defined benefit plans have been allowed to change the rate at which a worker earns future benefits but cannot reduce the amount of benefits a worker or retiree has already accumulated. The new legislative language will allow preemptive cuts in payments from still-solvent pension funds which claim they are in “critical status.”

The attack on private sector pensions takes place as millions of teachers, firefighters and other public sector retirees face the first-ever cuts to their own retirement benefits. Backed by the Obama administration, federal judges overseeing bankruptcy proceedings in Detroit and Stockton, California, have approved pension cuts despite explicit provisions in state constitutions prohibiting the “impairment” of accrued benefits.

In Detroit, the American Federation of State, County and Municipal Employees (AFSCME) and the United Auto Workers agreed to a restructuring plan that will slash pension and health care benefits to more than 33,000 retired and active workers.

The Miller-Kline amendment was drawn up based on proposals by the NCCMP, a joint labor-management body, which includes the presidents of the Teamsters, the Service Employees International Union, the United Food and Commercial Workers and several construction trades unions.

In a letter sent to senators this week, the NCCMP said it strongly supported the bipartisan agreement to “implement key provisions of the Solutions Not Bailouts proposal,” which the coalition of 40 labor and management groups issued in February 2013. The proposal “puts the plans recovering from the economic downturn on firmer ground, and helps those plans – and retirees – in trouble avoid losing everything” while “avoiding a massive taxpayer-funded bailout that would cost billions.”

The letter denounced the AARP and other pension rights organizations for saying the proposals “take benefits away from retirees” when the “hard truth is that the retirees in troubled plans are going to lose benefits under current law, and these vital reforms will preserve benefits above what current law provides.” It continues, “These reforms will provide the trustees with the option of voluntarily adopting a 10% benefit reduction today, which would prevent the looming catastrophe. This is what we mean when we say that the proposal preserves benefits.”

Addressing the charge that the “bipartisan agreement … has been rushed through and debated in secret,” the letter says for nearly five years, “we have worked with both labor and business stakeholders, and importantly, Members of Congress, to debate and act on the provisions of the Solutions Not Bailouts … The time for debate is over. Now is time for action.”

As they have for decades, the trade unions act not on behalf of workers and retirees but of the corporations, which are seeking to boost their profits by slashing their “legacy” costs and transferring even more wealth from the working class to top executives and financial investors. Over the last two decades in particular, the multi-billion-dollar pension and retiree health care funds managed by the unions have become an essential source of income and investment opportunities for the business executives who run the unions. This has enabled them to prosper even as they have overseen the destruction of millions of jobs and the slashing of the wages and benefits of the workers they claim to represent.

Last month, the release of the annual report on the financial status of the PBGC was seized upon by politicians of both parties and the media, including the Wall Street Journa l and the Washington Post, to press for a new round of devastating cuts to pension benefits. (See: “US government, corporations preparing new offensive against workers’ pensions

Nowhere in the media or political commentary on the so-called pension crisis is there any suggestion that the government should carry out a Wall Street-style bailout of the pension insurer. Nor are there any proposals from Congress to mandate a major increase in contributions from the big corporations, which have made trillions from the labor of generations of workers they now want to throw into destitution.

Over the last three decades, more and more corporations have jettisoned their employer-paid plans—one of the most important gains won by the working class in the mass industrial battles of the 1930s, 1940s and 1950s. All but a few have forced current workers onto employee-paid 401(k) plans subject to the vagaries of the stock market.

The Obama administration and both big business parties claim society simply cannot afford to keep the “overgenerous promises” made to workers in an earlier, more prosperous period. They also complain that workers are living too long after retirement and imposing an unsustainable burden on the rest of the population.

This takes place as government turns over trillions in bank bailouts, corporate tax cuts, and virtually free money for the banks from the Federal Reserve that have fueled record corporate profits and the stock market bubble.

As the WSWS noted last month, “the financial oligarchy that controls the economy and both big-business parties is determined to steal the pensions that tens of millions need to survive and return workers to the dark days when they labored without end until they died.”

Police killings in America: The class issues

By Joseph Kishore
December 05, 2014
World Socialist Web Site


Eric-GarnerOnce again, a police officer has been let off without charges after killing an unarmed man on the streets of an American city.

The decision by a Staten Island grand jury not to indict New York City police officer Daniel Pantaleo for choking Eric Garner to death in July is another judicial travesty, coming only two weeks after a similar failure to indict the Ferguson, Missouri cop who shot Michael Brown.

In some ways, the exoneration of Pantaleo is even more egregious than the non-indictment of Darren Wilson. Garner was accosted for selling loose cigarettes. He was tackled to the ground for no reason, strangled with a chokehold long banned by the police department and pinned to the ground as he cried out repeatedly that he could not breathe. After he passed out, cops stood around for seven minutes before administering first aid.

The entire incident was captured on video, seen by millions of people around the world. The city’s medical examiner ruled the death a homicide. Yet there is to be no trial, no opportunity for the facts of the case to be considered by a jury and punishment meted out according to the law. Instead, as in Ferguson, a grand jury, in secret proceedings, guided by a prosecutor with close ties to the police, has decided not to indict.

The grand jury decision in the Garner case has produced a wave of outrage throughout the country. Thousands have poured into the streets in angry spontaneous protests that have blocked highways and filled streets in New York City, Chicago and other US cities.

Millions of people are asking themselves: If a police officer can strangle an unarmed man to death, with the entire incident recorded on tape, and still get off without even being charged for a crime, what is not permitted? The anger is entirely justified. It must be guided, however, by a clear and informed political understanding.

It is impossible to talk seriously about police brutality without talking about capitalism, without recognizing the connection between the violence of the state and the massive social inequality that is the defining feature of American life. It is this basic fact that the ruling class and its various spokesmen seek above all to obscure.

The response of the political and media establishment to the Garner non-indictment betrays a nervousness over its implications. Politicians of varied stripes, Democrat and Republican, have rushed to call for further inquiries, for a federal “civil rights” investigation, for various measures aimed at restoring “public trust.” There is a general understanding within the ruling class that the “civic fabric of the United States” (a phrase used by the New York Times after the non-indictment of Wilson) is frayed to the point of breaking.

These maneuvers have been led by President Barack Obama, who met with New York City Mayor Bill de Blasio on Thursday to work out a common political strategy in response to the protests over Garner’s killing. According to White House press secretary Josh Earnest, “the two pledged to work together to help strengthen the trust and bond between law enforcement and the local communities that they serve.”

These measures are to consist of various palliatives, such as proposed funding for police body cameras (irrelevant in the Garner case, since the entire incident was filmed anyway) and more police “training.”

Following the meeting, Obama declared that “too many Americans feel a deep unfairness when it comes to the gap between our professed ideals and how laws are applied on a day-to-day basis.” Beyond the discrediting of the police and legal system, Obama said, there was “a larger question of restoring a sense of common purpose.”

What Obama cannot acknowledge, however, is that the absence of a “sense of common purpose” is not a question of perception or failure to communicate, but rather an objective reality. There is no “common purpose” between the corporate and financial aristocracy, determined to pursue a policy of endless war abroad and social counterrevolution at home, and the millions of workers and young people who confront a relentless attack on jobs, wages, social programs and democratic rights.

Amidst this social divide, the state, including the police, is not a neutral body, but an instrument of class rule. Obama himself has encouraged and augmented the powers of the state at every turn, from the building up of a massive and unconstitutional spying apparatus; to the declaration of his right to assassinate anyone, including US citizens, without due process; to the militarization of domestic police through the provision of billions of dollars in armored vehicles, weapons and other equipment—a policy that the president endorsed again this week.

In its attempt to cover up the basic class issues at stake, the Democratic Party has deployed its various auxiliary groups and media organs, along with proponents of identity politics like Al Sharpton, to insist that the fundamental issue involved in police violence is race and “race relations.” The corollary to this claim is that Obama, the first African American president, will be “serious” about addressing police brutality.

While racism plays an undeniable role in the criminal operations of the police, it is entirely subordinate to the fundamental class divide. Indeed, central to the political crisis facing the ruling class is the fact that the political mechanisms it has deployed in the effort to undermine class consciousness—including racial and identity politics—are themselves deeply discredited, due in no small part to the experiences of the Obama administration itself.

The aim of police violence is not racial, but class oppression. Not only are workers of all races the victims of police brutality, but the instruments of repression built up systematically and consciously by the ruling class are being readied for use against strikes, protests, demonstrations and other forms of social and political opposition to the dictates of the banks and corporations.

Opposition to police brutality and the erection of police-state forms of rule in the United States must be rooted in a political movement of the working class, mobilized as an independent force, in opposition to the capitalist system and the state apparatus that serves as the enforcer of social inequality.