Against "shared sacrifice"
If anyone was living "beyond their means" during the 2000s, it was Corporate America and the rich.
April 10, 2009
"THERE IS no magic that can transform our situation into something other than what it is: A time for shared sacrifice, dedicated to a vision of a brighter future for this city."
That's what Philadelphia Democratic Mayor Michael Nutter said as he delivered his new budget proposal to the City Council in March--a "people's budget," he called it, even though it requires deep cuts to city services and givebacks from city workers on health care, pensions and work rules.
"This is the time," Nutter said, "for all of us to either stand up and be counted, or sit down and be quiet."
Nutter, of course, isn't the only one talking "shared sacrifice." Similar calls can be heard at all levels of government, from the Obama administration on down, and throughout Corporate America. But wherever you hear the phrase, you can be sure that the intention is to make sure that workers are the ones to "share" the sacrifice.
The Obama administration's late March announcement that it was rejecting more federal funds for the Detroit Three auto companies is a case in point.
White House officials insisted that workers at General Motors and Chrysler would have to make further sacrifices--coming on top of years of concessions already--for the carmakers to receive more federal assistance. Meanwhile, GM CEO Rick Wagoner was forced by the administration to resign his top post--but he won't have to sacrifice any of the $63.3 million he's raked in during his career at GM.
Of course, the auto giants aren't the only companies demanding cuts in hours, wages and benefits--and using the rapidly rising unemployment rate, now at its highest point since 1983, to threaten workers with shutdowns and layoffs if they don't get their way.
A Watson Wyatt survey released in March found that 56 percent of the 245 corporations surveyed had a hiring freeze in effect, 42 percent had salary freezes, 12 percent had reduced 401(k) matching contributions, and 13 percent had instituted a shortened workweek.
State and local governments are following the same strategies. The New York Times gave the example of Vallejo, Calif., where city officials just filed for Chapter 9 municipal bankruptcy, allowing the city to tear up its existing contracts with firefighters and other city workers.
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THE ARGUMENT in all cases is that the only way we'll make it through the crisis is for everyone to tighten their belts. The thing is, some people have already been cutting back for a very long time--and others haven't.
According to the Massachusetts Institute of Technology's Frank Levy, median family income in the U.S. has stayed flat for the last 25 years. During the Bush years, it actually fell. But for the top 1 percent of U.S. households, their median income rose by about $250,000 between 1986 and 2005.
Corporate America called them the "boom years" for good reason--CEO pay and benefits took off. In 1980, the average CEO made 42 times the average worker's salary--a fairly outrageous difference. But by 2007, CEOs were getting 364 times what an average worker makes.
If many workers are seeing their wages and working hours disappear, their mountains of debt aren't. The conventional wisdom in the media and among politicians is that the American people were living "beyond their means"--using credit to buy things they couldn't afford. But for many Americans, credit filled the gap between what they earned and what it costs to live.
If anyone was living "beyond their means" during the 2000s, it was Corporate America and the rich. As Financial Times columnist Michael Skapinker wrote:
Special treatment that passes unnoticed when times are good provokes rage when they are not, as the fury over bonuses paid at AIG shows. Warren Buffett said: "You only find out who is swimming naked when the tide goes out." You also find out who has been wearing diamond-studded flippers.
People are taking notice, though--and taking action. Like the people who protested the bailout of Citigroup and AIG, or the students and teachers protesting educations cuts in California and elsewhere. In France, Caterpillar workers facing layoffs took their managers hostage at the end of March--the fourth "boss-napping" in less than a month.
While the Obama administration tries to portray its economic policies as benefiting working America, they fall far short of what's needed to fundamentally improve ordinary people's lives. On the contrary, they leave the burden where it's always been, on workers and the poor.
Countering conservative accusations that Obama's bailout of the banks amounts to "nationalization," economist Joseph Stiglitz, in a column for the New York Times, called the administration's policy "ersatz capitalism, the privatizing of gains and the socializing of losses. It is a 'partnership' in which one partner robs the other."
It's no surprise that Corporate America isn't being asked for much sacrifice by the Obama administration--since many of them are old friends of big business. Obama's top economic advisor Larry Summers, for instance, collected $5 million last year from the hedge fund D.E. Shaw and $2.7 million in speaking fees from Wall Street firms, including many of the companies now expecting bailout money.
How can Summers--the person that advised Wall Street in the first place--be expected to mete out "shared sacrifice"?
The crimes of Corporate America and their allies in Washington have been exposed for everyone to see. We should tell them it's their turn to sacrifice.