Corporate profits spurred by anti-worker austerity and unemployment

Obama, Congress call for austerity; U.S. workers are their prime target

by Andrew Pollack

While their European competitors impose countrywide austerity plans, and their Chinese trade rivals focus on continued state support for booming industries, capitalists here at home seek to boost their global competitive stance, and overcome their profitability crisis, with their longstanding policy of misery by a thousand cuts. That means attacking the U.S. working class for the most part—one industry, one policy, one benefit at a time.

But the absence of resistance to such cuts has emboldened both ruling political parties to go after bigger game. The most threatening example at the moment is the call by the co-chairs of Obama’s “Deficit Reduction Commission” in late November for a drastic overhaul of Social Security. The co-chair of the commission, Alan Simpson, told the executive director of the National Older Women’s League that Social Security was “like a milk cow with 310 million tits.”

Co-chairs Simpson and Erskine Bowles would like to gradually raise the early retirement age from 62 to 64 and the standard retirement age from 67 to 69. They would reduce scheduled benefits for better-off retirees and use a less-generous measure of inflation to calculate cost-of-living increases. The commission co-chairs also want to keep taxes low for corporations and the rich, but eliminate or slash tax benefits for workers’ health care and housing.

Liberal columnists have pointed out that Social Security is self-financing, and so it is an odd target for a body charged with reducing a deficit to which the program doesn’t contribute.

National Nurses United pointed out that delayed retirement is a particular burden for workers in occupations like nursing with tremendous physical pressures. NNU also noted that the commission’s goals are designed to allow “high-income earners to continue to receive tax breaks and our endless Middle Eastern wars [to] continue unabated.”

Another “budget-balancing panel”—headed by Alice Rivlin, a budget director under President Bill Clinton, and Pete Domenici, a former Republican senator from New Mexico—issued a report that largely mirrored the recommendations of the Simpson-Bowles Commission. And both panels’ proposed cuts will be reinforced by parallel attacks at state and municipal levels, carried out simultaneously but separately in each governmental entity—thus fragmenting potential labor response in the absence of more far-seeing leadership.

The Washington Post reported, “Consensus is forming on what steps to take in cutting the deficit.” This bipartisan consensus includes “big cuts at the Pentagon. Higher taxes, including those on home ownership and health care. Smaller Social Security checks and higher Medicare premiums.” We can be sure the Pentagon cuts will be minimized. But they’re dead serious about the rest, as well as others not named—especially attacks on pensions and job security for public workers.

Reports from a recent meeting of state governors said that “everything is on the table” for possible cuts. This is necessitated by state funding gaps of more than $425 billion and surging borrowing costs for states (and cities as well). Governors of both parties, of course, ruled out tax increases on the rich.

On a level less noticeable to workers not typically informed of class-wide events, but no less insidious, bosses around the country continue their one-company-at-a-time imposition of cuts. One increasingly common scheme is the imposition of permanent two-tier labor schemes.

Louis Uchitelle reported in The New York Times on Nov. 19, “Even at manufacturing companies that are profitable, union workers are reluctantly agreeing to tiered contracts that create two levels of pay.”
In recent decades such schemes were presented as temporary measures until profitability returned. But increasingly employers are dropping the pretense and admitting they are imposing a permanent second tier with lower wages, benefits, worse work rules, casual status or no union membership—just because they can. In some cases, workers in the higher tier will be stuck into the lower one if called back after a layoff.

The result of such cuts is already showing in booming corporate profits, which are up 28% over the past year, and reached an all-time high (although not adjusted for inflation) in the third quarter. Profits have grown for seven consecutive quarters.

Part of the profit boom is due to comparisons with last year’s low levels, especially the disastrous balance sheets of financial companies that took huge write-downs on bad investments. Another part, however, is their successful use of the crisis to squeeze workers. Thus businesses’ spending on compensation for employees rose only 7.6%. Economists also attribute the rise in part to stronger productivity (i.e., more goods turned out by fewer workers), as well as to rapidly expanding markets in countries such as India and China.

Nonetheless, said Paul Dales of Capital Economics, “The [U.S.] economy is not growing fast enough to reduce significantly the unemployment rate or to prevent a slide into deflation. This is unlikely to change in 2011 or 2012.”

What’s more, such profits, as they are not based on a revival of system-wide consumption and production, can’t last—just as the very modest return to growth in GDP this year is merely a temporary upswing before the next, and likely far more severe, return to absolute decline in GDP. Dependence on China and other growing markets is running up against limits there as well.

Even in the midst of this temporary return to profitability, the Federal Reserve said in late November that the official unemployment rate would still be at least 8% when the next presidential election arrives, in late 2012. And as we go to press, Congress appears likely to refuse to extend unemployment benefits, meaning millions will enter the holiday season facing eviction and hunger.

In contrast to the nationwide revolts in some European countries, as well as a recent nationwide public-worker strike in South Africa, resistance to the rulers’ policies in the U.S. has been as fragmented as the cuts imposed on them in bits and pieces. But there are small signs of resistance, including ones that could be a precursor to an overall working-class fightback.

Militant autoworkers, for instance, continue efforts to combine resistance to attacks in their particular industry with advocacy for nationwide plans to boost employment while reversing climate damage. Their campaign was described in a Labor Notes article concerning a meeting of UAW dissidents planning resistance to union President Bob King’s “collaborative” policies in bargaining for next year’s contracts.

The journal reported that Al Benchich, retired president of UAW Local 909, noted that a gathering of the activists was held “in the shadow of a large wind turbine generator and adjacent to a solar panel farm—the kind of green products that Autoworkers Caravan [the dissidents’ organization] has advocated be produced at converted auto plants.”

> This article was originally published in the December 2010 print edition of Socialist Action newspaper.