Americans want a Peace Dividend, but their leaders won’t give it to them. Despite multiple polls showing broad support for cuts in U.S. defense spending, a sort of anti-democratic bipartisanship has emerged in Washington, where both Republicans and Democrats oppose such cuts, often vocally.
The most recent polling data on the issue, released last week by the Program for Public Consultation (PPC), in conjunction with the Center for Public Integrity and the Stimson Center, shows that Americans believe defense spending should shrink next year by a fifth to a sixth of its present size. Other polls released during 2012, including surveys by Gallup, Roper, and others, have been similar, although variations have occurred.
The issue has arisen this summer because, under a budget compromise reached last year between Democrats and Republicans, 10% across the board cuts are set to kick in at the beginning of 2013, which would give the Department of Defense a budget next year of $470 billion—an amount it got by on during the George W. Bush administration while the U.S. was fully engaged in both the Iraq and Afghanistan wars. Nevertheless, both Republicans and some Democrats in Congress oppose these spending reductions, and former Vice President Dick Cheney recently emerged to lobby Congress against them, joined by representatives of Lockheed Martin Corp., who warned of thousands of layoffs if the cuts occur.
Lockheed Martin, the largest arms merchant in the world, is eager to keep filling up from the taxpayers’ money spigot. With annual revenues of about $45 billion, it invests its profits in influence, especially in Washington, where since 1989 Lockheed has donated $23 million to political campaigns, spent $125 million on lobbying; received $20 million in earmarks; received 31 grants and 15,358 contracts from the federal government; and placed 257 of their people on 135 government advisory committees.
The economic impact of defense cuts, especially on jobs, is one of the main reasons otherwise moderate or liberal Democrats oppose defense cuts, reasoning that the recession-ravaged economy cannot sustain a significant spending cut. Yet according to the PPC poll the public, even when provided information about the possible economic consequences of defense spending reductions, still opts for them over cuts to domestic programs like Social Security, health care, or education. Further, people in congressional districts with high defense spending supported defense cuts as readily as those in other districts, although Democrats generally supported larger cuts than Republicans.
“The idea that Americans would want to keep total defense spending up so as to preserve local jobs is not supported by the data,” said PPC director Steven Kull. On average, Democrats supported a Pentagon cut of 22%, while Republicans wanted a cut of 12%.
There are some policies that are pretty much no-brainers. We all agree that the Food and Drug Administration should keep dangerous drugs off the market. We all agree that the government should provide police and fire protection. And, we pretty much all agree that workers should be able to count on at least some minimal pay for a day’s work.
The minimum wage is non-controversial. The vast majority of people across the political spectrum support the minimum wage. In fact, one of the big accomplishments of the Gingrich Congress in 1996 was a 22 percent increase in the minimum wage. The only real issue is how high it should be. There are good reasons for believing that the minimum wage should be considerably higher than it is today.
At the current rate of $7.25 an hour, a full-time year-round worker would have gross pay of less than $15,000 a year. This is less than half of what the average Fortune 500 CEO makes in a day. It would be hard enough for a single person to survive on this income, imagine trying to support a child or even two on this money. And, close to 40 percent of the workers who would be benefited by a minimum wage increase have kids.
The counter-argument against raising the minimum wage is that it would actually hurt the people we are trying to help by reducing employment. There is little basis for this claim. The impact of the minimum wage on employment is one of the most heavily researched topics in economics.
Most recent research finds that it has no impact on employment. Even the research that finds job loss shows that the effect is small, suggesting that a 20 percent increase in the minimum wage may reduce employment of young people by around 2 to 3 percent.
While it’s not desirable to see anyone lose their job, it is important to remember the character of these jobs. They tend to be high turnover jobs that people leave after working relatively short periods of time. Job loss in this context is not likely to mean people being fired, rather it means that firms might be somewhat slower to hire. This would cause a typical low-wage worker to spend somewhat longer between jobs.
The dollars and cents might mean, for example, that a typical low wage worker ends up working 2 percent fewer hours in a year, but they take home 20 percent more pay for each hour that they work. This nets out to an increase in pay of 18 percent, a deal that most workers would likely consider pretty good.
In terms of whether we can afford a higher minimum wage, it is worth remembering that the minimum wage in 1968 would be almost $9.22 an hour in today’s dollars. In spite of the high minimum wage in the late 1960s, the job creators of that period pushed the unemployment rate down to 3.0 percent.
And, the country has not gotten poorer in the last four and a half decades. We have policy wonks running around Washington who seem to think that cell phones, computers, the Internet, and all other innovations of the past four decades that we now take for granted have reduced our standard of living.
This is of course nonsense. Productivity has increased by more than 120 percent since the late 1960s. If the minimum wage had kept step with productivity growth and inflation it would be over $20 an hour today.
The real problem in our economy today is not a lack of productivity. The problem is that the gains from productivity growth have not been broadly shared. The wealthy have used their power to rig the deck so that most of the benefits of growth have gone those at the top. They have used their control of trade policy, the Federal Reserve Board, and more recently the Wall Street bailout, to ensure that those at the top have gained at the expense of everyone else.
A higher minimum wage is an important step toward reversing this rigging. It should not be too much to expect that workers today should get at least as much as they did 45 years ago, and perhaps some dividend to allow them to share in the benefits of economic growth over this period. A minimum wage of $10 an hour would be a big step in the right direction.
KHARTOUM – Sudan’s ruling National Congress Party (NCP) has again dismissed the significance of protests that erupted in different part of the country over the last month describing them as “isolated”.
On Sunday night some hundreds of demonstrators took the streets in areas south of the capital Khartoum to protest a previously unannounced increase in electricity rates that were introduced yesterday which were as high as 150%.
There was no official explanation from the government regarding the rate change.
The move contradicted government assertions made in the past that electricity rates would remain unchanged following the inauguration of the multi-billion dollar Merowe dam in northern Sudan three years ago.
Police and security officers managed to disperse the protests which continued until late into the night in Buri Lamab and and Jebel Awlia areas in Khartoum State.
Abdel-Jalil al-Karoori, a member of the NCP leadership bureau, said that the protests that began in late June are “isolated” and not reflective of the general sentiments among the people.
He stressed that the government is putting significant efforts to contain the economic crisis and accused the opposition of attempting to exploit it politically.
The International Monetary Fund (IMF) is forecasting that Sudan’s GDP growth will shrink by 7.3% in 2012 following the secession of the oil-rich South a year ago. South Sudan now controls what used to be 75% of the formerly united Sudan’s oil production worth billions of dollars.
The government scrambled to find alternatives in the form of expanding gold exploration which is not expected to make up for the revenue shortfall any time soon. Moreover, Sudanese officials have made little progress in attempts to get financial aid from Arab and friendly nations.
China, a major ally of Sudan, has suspended funding to dozens of projects citing the lack of oil collateral after South Sudan broke away.
In a bid to redeem the state’s ailing finances, the government announced a number of measures including the lifting subsidies on fuel which increased frustration among ordinary Sudanese who are struggling to make ends meet amid rising prices.
Annual inflation hit 37.2% in June this year, double the level in June 2011.
Furthermore, the government partially devalued the currency in a bid to further align it with the black market exchange rate and encourage those with US dollars to sell them in the official market. The move meant that Sudan will pay more for imports considering that much of its needs, including many basic food products come from abroad.
The government has also slashed ministries on the federal and local levels to cut expenses but economists say that the step is largely symbolic and would have a negligible impact on the budget.
Despite widespread anger among Sudanese citizens with the measures, only small protests broke out, which saw the participation of few hundred. Khartoum insists that the demonstrations do not amount to an “Arab Spring” as activists have hoped.
In Khartoum, a senior NCP official further downplayed its significance.
“Of more than 5,000 mosques in Khartoum only two protested [after Friday prayers]. That can give you the size of the whole thing,” NCP’s external relations secretary Ibrahim Ghandour told Reuters.
Ghandour revealed that the government would keep in place some fuel subsidies until the end of 2013 to minimise social pressures.
“I don’t think the government will go and fully lift subsidies to oil. That would be a very unwise political and economic decision,” he said.
The NCP official said the austerity measures would generate savings of 7 billion pounds, enough to close a finance gap of around 6.5 billion pounds, stated by Finance Minister Ali Mahmoud Abdel-Rasool, due to the loss of oil revenues.
“The goodies… of those economic arrangements are expected to start coming out at the end of the year provided that the Bank of Sudan [central bank] was able to support the pound,” Ghandour said.
He acknowledged that the central bank has been unable to stop a slide of the pound against the dollar, despite the partial devaluation.
“Until now they managed [to stabilise] to a degree but now the dollar is coming up in the equivalent [black] market,” the NCP official said.
“The Bank of Sudan [central bank] cannot in my opinion continue to support the pound against the dollar. They need new measures,” Ghandour added.
To stop the slide Ghandour said the central bank should license more foreign currency exchange bureaus to attract more dollars from Sudanese who are using the black market.
“Why don’t we open exchange offices for whoever wishes to sell and buy?” he said. “There are few very exchange offices.”
However, he ruled out a total liberalisation of the exchange rate, saying this would be a “disastrous” move.
Former US National Security Advisor Zbigniew Brzezinski has warned that a US military confrontation with Iran could be devastating for the American economy.
“A war in the Middle East, in the present context, may last for years,” Brzezinski said in an interview with Newsmax.TV published on Wednesday.
“And the economic consequences of it (the war) are going to be devastating for the average American; High inflation, instability, insecurity,” he added.
He warned the US administration not to rush into a war with Iran and said, the consequences of yet another military strike in the Middle East “will be certainly very costly for the United States.”
The four-decade politician said that a possible closure of the Strait of Hormuz by Iran even not for a very long time would prompt the costs of oil to skyrocket as the vital oil-shipping route would be a dangerous passage as a result of the military conflict.
“In effect, the American taxpayer should be ready to pay $5 to $10 a gallon for the pleasure of having a war in the Strait of Hormuz,” Brzezinski explained.
He described democracy as the “best weapon of choice” in the present circumstances, but warned that negotiations over Tehran’s nuclear energy program would fail to yield result if they are meant to corner Iran.
“If the negotiations are designed to humiliate Iran and to put it in some sort of separate box, confining it to a status totally different from all the other signatories of the Non-Proliferation Treaty, then we probably will not get an agreement.”
The United States and Israel have repeatedly threatened that all ‘options’, including the military action, are on the table against Iran to force the Islamic Republic to halt its nuclear energy program, which Washington, Tel Aviv and some of their allies claim includes a military aspect.
Iran dismisses the allegations, arguing that as a committed signatory to the nuclear Non-Proliferation Treaty and a member of the International Atomic Energy Agency, it has the right to use the nuclear technology for peaceful purposes.
Sudan’s millions of poor have yet to surge into the streets to back scattered Arab uprising-style protests as government austerity measures try to stem soaring prices and a falling currency.
Inflation reached 37 percent year-on-year in June and jumped almost 10 points in May but the demonstrations, sparked by high food prices, have been largely youth driven.
“So far the movement is concentrated with students and protest activists,” one veteran activist said, adding it could take time for the “oppressed” poor to rise up.
Sudanese history shows that “usually the poor join late,” following the professional classes, said University of Khartoum economist Mohammed Eljack Ahmed.
But more than a month after protests began at the University of Khartoum there has been no mass support from professionals, although lawyers have demonstrated.
“So far they are so limited,” Ahmed said of the protests.
Demonstrations spread to include a cross-section of people, but often only in groups of 100 or 200. Protests have lately focused on Fridays at a mosque linked to the opposition Umma party in Khartoum’s twin city of Omdurman.
Rallies have not attracted the tens of thousands of students, engineers, lawyers and trade unionists who toppled Sudanese military regimes in 1964 and 1985.
Sudan, with more than 30 million people, has a poverty rate of 46.5 percent, the United Nations says.
In its latest report on Sudan the World Bank described as “alarming” the 28.6 percent annual inflation rate reached in April, with prices having gone even higher since.
The bank said food prices were mainly behind the inflation, which was “partly due to the rising import cost of basic goods as a result of weakening local currency value.”
Sudan’s pound has tumbled on the black market from about four pounds per one dollar in September to around six now. Some say it could drop to 10 or more if inflation is not contained.
The pound has been under pressure since South Sudan separated in July 2011, taking with it about 75 percent of Sudanese oil production that is worth billions of dollars and was the country’s largest source of hard currency.
Loss of oil revenue has led to “serious external and internal deficits, inflation and economic hardship”, the World Bank said.
Failure to agree with South Sudan on oil fees cost the Sudanese economy another 6.5 billion pounds ($1.48 billion), Finance Minister Ali Mahmud al-Rasul has said.
The fees, which South Sudan would pay for exporting its oil through Sudan’s pipeline and port, are a major issue to be negotiated at African Union-led talks being held in Addis Ababa.
Trying to address the fiscal imbalance, Sudan announced measures in June that Rasul said would save $1.5 billion.
The government devalued the pound from 2.70 per dollar to 4.40, while sanctioning a trading band that lets the price range to 5.30, closer to the unofficial rate.
An international economist said the “very significant” depreciation should lead to a balance of payments adjustment, boosting exports and curbing imports after the loss of oil revenues.
But foreign reserves, needed to pay for imports, remain “very, very low” despite a “sizeable amount” that apparently arrived from offshore, said the economist, asking for anonymity.
The government also said taxes on bank profits will rise along with value-added tax.
It also cut five of 31 cabinet posts, trimmed ministers’ salaries and laid off presidential advisers.
Another move led to a rise of about 50 percent in the pump price of petrol under a phasing out of fuel subsidies which had been set at 2.2 billion pounds this year.
Despite the cut in subsidies there was a rise in social safety net spending, said Paul Jenkins, resident representative of the International Monetary Fund. On the revenue side the government measures were “quite solid,” he added.
A French auto workers’ union member says the country’s largest automaker Peugeot cannot find a replacement for the Iranian market after the company was forced to slash 8,000 jobs over Iran sanctions, Press TV reports.
“We have no sales not for economic reasons but for political reasons. The Iranian market is one that cannot easily be replaced for Peugeot. It’s an unacceptable decision for us,” Jean-Pierre Mercier from a closed Peugeot plant told Press TV.
Peugeot’s announcement on Thursday that PSA Peugeot Citroen would axe 8,000 jobs and shut the first car factory in 20 years has caused a political firestorm.
“If the state can prevent Peugeot from selling cars to Iran, why cannot they prevent these firings? Unfortunately, the unions insufficiently mobilized to tip the scale and stopped the embargo,” Mercier said.
Iran is Peugeot’s largest foreign customer, with half a million in auto sales translating into some several billion Euros each year. However, citing new banking sanctions, Peugeot ended cooperation in February.
Peugeot’s auto sales this year are down nearly a quarter of a million units, almost exactly the amount that Iran would have normally purchased.
According to reports, giving up the Iranian market might have been the price of Peugeot’s recent alliance with Detroit’s General Motors, owned by the US government, which has imposed sanctions on Iran for decades.
This is while Renault, another major French automaker, saw their Iranian sales double last year to 100,000 vehicles and they expect this number to rise.
Perhaps the most humiliating legacy of our nation-building venture in Afghanistan is the stubborn narco-state flourishing under our noses. The opium crop in Afghanistan has doubled since US forces deposed the Taliban, and the drug trade threatens to dominate the country as never before when our forces leave in 2014. How did this happen?
By and large, it seems US forces followed a policy of turning a blind eye to the opium crop, on the premise that poor farmers are not our main enemies in Afghanistan, and attacking their livelihood would turn them to the Taliban. To combat opium production, our principal initiatives included helping farmers cultivate alternate crops, and setting up an independent court system to try traffickers. While these have shown some promise, progress has been slow, and funding for these programs is drying up. Crop eradication was on our minds, too, but we charged the Afghan forces with that task. Their efforts, however, have been undermined by political corruption on the ground.
Underscoring the futility of our drug war in Afghanistan is the impact of the current blight on opium poppies in the country. At first glance, this might sound like a God-send: crop eradication at its best. However, something happened that we American capitalists should have anticipated. With opium supply suddenly scarce, the price of the crop soared. This has in turn enriched –and entrenched—the big dealers, inspired farmers to double down on next year’s crop to make up for current losses, and likely attracted more people to the drug trade in a very poor country. The result of this blight illuminates the main problem of crop eradication: it drives up prices, providing more incentives surrounding the drug trade.
In Latin America, our anti-narcotic efforts have largely featured interdiction, eradication, and assaulting the drug gangs. Our tactics on this front were recently highlighted by reports of a bloody incident in Honduras where local forces, with US financing and support, have been intercepting drug traffickers from South America in the remote Honduran jungle. The Honduran forces mistakenly killed unarmed civilians while intercepting a drug shipment. Notable in our efforts in Honduras is the extensive involvement of the US military. The Honduran forces who conducted this raid flew out of one of the three bases the US military operates in that country. The forces were tipped off by our military’s Southern Command in Miami, carried to the location by State Department helicopters, and accompanied by DEA agents. For all intents and purposes, the US seems to be waging war in Latin America.
So far it seems the most obvious result of our aggressive approach in Latin America is increasingly grotesque violence. Since Mexico started its crack down on the drug cartels, thanks to US prodding and support, the country has suffered 50,000 deaths. Mexican cartels have exploded, resorting to mass killings, beheadings, mutilation—body parts found in bags in public squares—assassinations of government officials. Savage violence surrounding the drug trade is spreading through the countries of Central America as we ramp up interdiction efforts there. The brazen and pervasive violence is testimony to what’s at stake, namely, the incredibly lucrative US drug market. The sum total of our efforts in Latin America compounds the problem.
As the New York Times Magazine explained in a recent expose on the Mexican drug cartels (“The Snow Kings of Mexico”, 6/17/12), the cost of drugs on the street is largely determined by the amount of risk assumed in getting the product to market. So: make the risk greater and the prices rise; more dealers get involved, and jockey (or kill) for a piece of the action.
This is why, our former ambassador to Colombia has argued, we must pair our negative policies with economic development in Latin America. If we build schools and hospitals, and help develop businesses in the region, we can reduce incentives to enter the drug trade. And yet, as long as the drug trade remains so lucrative, it’s reasonable to suppose, incentives to enter it will always be powerful.
What strikes me in the many prongs of our current war on drugs is how we seem to focus on everything but ourselves—and go to great efforts in so doing. We monitor the nations our drugs come from, and toil to frustrate traffickers thousands of miles from our borders. We work to change the economic conditions on the ground in very poor nations—no small task—while poor neighborhoods at home beg for attention. We enlist our military, the largest in the world, to stem the flow of drugs northward. And none of it works. These efforts have the opposite effect of what we intend, for they drive up prices and stoke the drug trade. The traffickers will do anything to get the product to market as a result: Colombian gangs have built submarines for this purpose; the Mexican cartels use catapults to launch drugs over our multi-million dollar border fences.
We’d rather do anything but zero in on demand here, but it’s so clear this would be the cheapest, most direct, most effective, most humane solution. It makes you wonder if we want to win the war on drugs at all.
Firmin DeBrabander is an Associate Professor of Philosophy at the Maryland Institute College of Art.
The results of a new survey indicate that most Americans, from both Democratic and Republican congressional districts, support the reduction of the country’s military spending.
The result of the poll, published on July 16, indicated that 76 percent of Americans favored slashing of the defense budget, while only 20 percent approved of increasing the military spending.
The poll was conducted by the Program for Public Consultation (PPC), a newly-established joint program at the University of Maryland, US-based nonprofit investigative journalism organization, the Center for Public Integrity, and the Stimson Center, a nonprofit global security think tank.
According to Steven Kull, the director of the PPC, those respondents, who lived in Republican districts advised a 15-percent reduction in defense spending, while those from Democratic districts proposed an average 28-percent cut.
The poll further showed that the main reason behind the American citizens’ support for the cuts is their strong belief that a large amount of the military budget goes to waste.
The view is held by 80 percent of the participants in Republican districts and 86 percent of the respondents in Democratic districts, the study showed.
The soaring military spending comes despite the Obama administration’s cuts in public spending to compensate for the budget deficit.
The US has reportedly spent over USD one trillion in taxpayer money on its wars in Iraq and Afghanistan since 2001.
Germany’s environment minister has admitted that the government faces an uphill climb if it is to achieve the targets it has set out for reducing carbon emissions while simultaneously stopping nuclear energy production.
Germany’s environment minister raised eyebrows on Sunday by conceding that some of the targets that are part of the government’s policy of phasing out the use of nuclear energy, while at the same time cutting emissions of greenhouse gases, may not be achievable.
“It has to be questioned whether we’ll really succeed in reducing electricity use by 10 per cent by 2020,” Peter Altmaier said in an interview with the Bild am Sonntag newspaper.
“If we are going to somehow achieve this, it will take tremendous effort, ” he said.
Altmaier also admitted that the government had a long way to go in efforts to convince a large number of Germans to switch from vehicles powered by internal combustion engines to electric cars.
There may be “significantly fewer” electric cars on the road by 2020 than the government had previously assumed, the minister said.
Chancellor Angela Merkel’s center-right coalition had previously said that it was on track to put a million electric cars on the road by 2020. Official figures put that number at just over 4,500 at the start of 2012.
Rising consumer costs a possibility
Altmaier also warned of the danger of rising energy costs for consumers.
“If we aren’t careful, the energy reforms could develop into a social problem,” he said, admitting that in efforts to replace nuclear energy with renewables, “the question of energy affordability had been overlooked.”
He also said that turning off a number of nuclear plants meant that power shortages could not be ruled out in the coming winter.
“Last winter there were a few critical moments, which we have learned from,” he said, adding that preparations were underway to ensure this doesn’t happened again. … Full article
The United States has experienced the biggest political upheaval in its recent history: the transformation of a burgeoning welfare state into a rapidly expanding, highly intrusive and deeply entrenched police state, linked to the most developed technological innovations.
The ‘Great Transformation’ occurred exclusively from above, organized by the upper echelons of the civil and military bureaucracy under the direction of the Executive and his National Security Council. The ‘Great Transformation’ was not a single event but a process of the accumulation of powers, via executive fiats, supported and approved by compliant Congressional leaders. At no time in the recent and distant past has this nation witnessed the growth of such repressive powers and the proliferation of so many policing agencies engaged in so many areas of life over such a prolonged period of time (a time of virtually no internal mass dissent). Never has the executive branch of government secured so many powers to detain, interrogate, kidnap and assassinate its own citizens without judicial restraint.
Police state dominance is evident in the enormous growth of the domestic security and military budget, the vast recruitment of security and military personnel, the accumulation of authoritarian powers curtailing individual and collective freedoms and the permeation of national cultural and civic life with the almost religious glorification of the agents and agencies of militarism and the police state as evidenced at mass sporting and entertainment events.
The drying up of resources for public welfare and services is a direct result of the dynamic growth of the police state apparatus and military empire. This could only take place through a sustained direct attack against the welfare state – in particular against public funding for programs and agencies promoting the health, education, pensions, income and housing for the middle and working class.
The Ascendancy of the Police State
Central to the rise of the police state and the consequent decline of the welfare state have been the series of imperial wars, especially in the Middle East, launched by every President from Bush (father), Clinton, Bush (son) and Obama. These wars, aimed exclusively against Muslim countries, were accompanied by a wave of repressive ‘anti-terrorist’ laws and implemented through the rapid build-up of the massive police state apparatus, known as ‘Homeland Security’.
The leading advocates and propagandists of overseas militarism against countries with large Muslim populations and the imposition of a domestic police-state have been dedicated Zionists promoting wars designed to enhance Israel’s overwhelming power in the Middle East. These American Zionists (including dual US-Israeli citizens) secured strategic positions within the US police state apparatus in order to terrify and repress activists, especially American Muslims and immigrants critical of the state of Israel.
The events of 9/11/01 served as the detonator for the biggest global military launch since WWII, and the most pervasive expansion of police state powers in the history of the United States. The bloody terror of 9/11/2001 was manipulated to institute a pre-planned agenda – transforming the US into a police state while launching a decade-long series of wars in Iraq, Afghanistan, Pakistan, Libya, Somalia, Yemen and, now, Syria as well as covert proxy wars against Iran and Lebanon. The military budget exploded and government deficits ballooned while social programs and welfare were denigrated and dismantled as the ‘Global War on Terror’ swung into full gear. Programs, designed to maintain or raise living standards for millions and increase access to services for the poor and working class, fell victim to ‘9/11’.
As the wars in the Middle East took center-stage, the US economy tanked. On the domestic front vital public investment in education, infrastructure, industry and civilian innovations were slashed. Hundreds of billions of tax payer dollars flowed into the war zones, paying mercenaries (private contractors), buying off corrupt puppet regimes and providing a golden opportunity for military procurement officers and their private contractor-cronies to run up (and pocket) huge billion dollar cost overruns.
As a result, US military policy vis a vis the Middle East, military policy, which at one time had been designed to promote American imperial economic interests, now took on a life of its own: wars and sanctions against Iraq, Iran, Syria and Libya had undermined profitable oil contracts negotiated by US multi-nationals while enhancing militarism. Indeed, the Zionist-Israeli power configuration in the United States has become far more influential in directing US Middle East military policy than any combination of Big Oil – and all to the benefit of Israeli regional power.
Imperial Wars and the Demise of the Welfare State
From the end of World War II to the end of the 1970’s, the US managed to successfully combine overseas imperial wars with an expanding welfare state at home. In fact, the last major pieces of welfare legislation took place during the bloody, costly US-Indo-Chinese war, under Presidents Lyndon Johnson and Richard Nixon. The economic basis of welfare-militarism was the powerful industrial-technological foundations of the US war-machine and its dominance over world markets. Subsequently, the declining competitive position of the US in the world-economy and the massive relocation of US-MNC (and their jobs) overseas strained the ‘marriage’ of domestic welfare and militarism to the breaking point. Fiscal and trade deficits loomed even as the demands for welfare and unemployment payments grew in part because of the shift from stable well-paid manufacturing jobs to low paid-service work. While the global US economic position declined, its global military expansion accelerated as a result of the demise of the Communist regimes in the USSR and Eastern Europe and the incorporation of the new regimes of the former Eastern bloc into the US-dominated NATO military alliance.
The demise of the Communist states led to the end of competing global welfare systems and allowed capitalists and the imperial state to slash welfare to fund their massive global military expansion. There was virtually no opposition from labor: the gradual conversion of Western trade unions into highly authoritarian organizations run by self-perpetuating millionaire ‘leaders’ and the reduction of trade union membership from 30% of the work force in 1950 to less than 11% by 2012 (with over 91% of private sector workers without any representation) meant that American workers have been powerless to organize strikes to protect their jobs, let alone apply political pressure in defense of public programs and welfare.
Militarism was on the ascendency when President Jimmy Carter launched his multi-billion dollar ‘secret war’ against the pro-Soviet regime in Afghanistan and President Ronald Reagan initiated a series of ‘proxy wars’ throughout Central America and Southern Africa and sent the US Marines into the tiny island of Grenada. Reagan oversaw the escalation of military spending boasting that he would ‘bankrupt’ the Soviet Union with a new ‘arms race’. President George Bush, Sr. invaded Panama and then Iraq, the first of many US invasions in the Middle East. President Bill Clinton accelerated the military thrust, along the way slashing public welfare in favor of ‘private workfare’, bombing and destroying Yugoslavia, bombing and starving Iraq while establishing colonial enclaves in Northern Iraq and expanding the US military presence in Somalia and the Persian Gulf.
The constraints on US militarism imposed by the massive popular anti-Vietnam War movement and the US military defeat by the Vietnamese Communists, were gradually eroded, as successful short term wars (like Grenada and Panama) undermined the Vietnam Syndrome –public opposition to militarism. This prepared the American public for incremental militarism while chipping away at the welfare system.
If Reagan and Bush built the foundation for the new militarism, Bill Clinton provided three decisive elements: together with Vice-President Al Gore, Clinton legitimized the war on welfarism, stigmatizing public assistance and mobilized support from religious and political leaders in the black community and the AFL-CIO. Secondly, Clinton was key to the ‘financialization’ of the US economy, by de-regulating the financial system (repealing the Glass-Steagal Act of 1933) and appointing Wall Street financiers at the helm of national economic policy. Thirdly, Clinton appointed leading Zionists to the key foreign policy positions related to the Middle East, allowing them to insert Israel’s military view of reality into strategic decision-making in Washington. Clinton put in place the first series of repressive police state ‘anti-terrorist’ legislation and expanded the national prison system. In sum, Bill Clinton’s Middle East war policies, his ‘financialization’ of the US economy, his ‘war on terror’, his Zionist orientation towards the Arab world and, above all, his own ideological anti-welfarism led directly to Bush Junior’s full scale conversion of the welfare state into the police state .
Exploiting the trauma of 9/11, the Bush and later the Obama regimes nearly tripled the military budget and launched serial wars against Arab states. The military budget rose from $359 billion in 2000, to $544 billion in 2004 and escalated to $903 billion in 2012. Military expenditures financed major foreign military occupations and colonial administrations in Iraq and Afghanistan, border wars in Pakistan and US Special Forces covert operations (including kidnappings and assassinations) in Yemen, Somalia, Iran and seventy-five other countries world-wide.
Meanwhile financial speculation ran rampant, budget deficits ballooned, living standards plunged, international trade deficits reached record levels and public debt doubled in fewer than eight years. Multiple imperial wars dragged on without end; the costs of these wars multiplied while the financial bubble burst. The contradiction between domestic welfare and militarism exploded. Finally, the massive roll back of basic social programs for all Americans topped the Presidential and legislative agenda.
Previous ‘untouchable programs’ like Social Security, Medicare, the US Post Office, public sector employment, services to the poor, elderly and handicapped and food stamps were all put on the butcher’s block. At the same time the federal government increased its funding of private military and police contractors (mercenaries) overseas and extended the scope and depth of US Special Forces clandestine operations. Bush-Obama vastly increased spending for the military and espionage agents in support of wildly unpopular, brutal collaborator regimes in Pakistan and Yemen. They funded and armed foreign mercenaries in Libya, Syria, Iran, and Somalia. By the first decade of the new century it had become clear that imperial militarism and domestic welfarism were in a zero sum game: as imperial wars multiplied, domestic programs were slashed.
The severity and depth of the cuts to popular domestic welfare programs were only in part the result of imperial wars; equally important was the huge increase in the funding for personnel and surveillance technology for the burgeoning police state at home.
The Origins of the Conversion of the Welfare State to the Police State
The precipitous decline of the welfare state and the dismantling of social services, public education and access to affordable health care for the working and middle classes cannot be explained by the demise of organized labor, nor is it due to the ‘right-turn’ of the Democratic Party. Two other deep structural changes loom large as fundamental to the process: the transformation of the US economy from a competitive manufacturing economy into a ‘FIRE’ (finance, insurance and real estate) economy; and secondly, the rise of a vast police legal-political-administrative state apparatus engaged in permanent ‘internal warfare’ at home, designed to sustain and complement permanent imperial warfare abroad.
Agencies and personnel of the police state expanded dramatically during the first decade of the new century. The police state penetrated telecommunications systems, patrolled and controlled transport outlets; dominated judicial procedures and oversaw the major ‘news outlets’, academic and professional associations. The expanded police state covertly and overtly entered the private lives of tens of millions of Americans.
The loss to taxpayers in terms of citizen rights and the welfare state has been staggering.
As the biggest and most intrusive component of the police state apparatus, christened ‘Homeland Security’, grew exponentially, the budget and agencies providing welfare and public services, health, education and unemployment shrank. Tens of thousands of domestic spies have been hired and costly intrusive spyware has been purchased with tax-payer money, while hundreds of thousands of teachers and public health and social welfare professionals have lost their jobs.
The Department of Homeland Security (as of the end of 2011) is composed of approximately 388,000 employees, including both federal and contracted agents. Between 2011-2013 the DHS budget of $173 billion has faced no serious cuts. Homeland Security’s rapid expansion occurred at the expense of Health and Human Services, education and the Social Security Administration, which currently face large scale ‘retrenchment’.
Among the top officials, appointed by the Bush, Jr. Administration to key positions in the police state apparatus, there are two who have been the most influential in setting policy: Michael Chertoff and Michael Mukasey.
Michael Chertoff headed the Criminal Division of the Justice Department (from 2001 – 2003). During that time he was responsible for the arbitrary arrest of thousands of US citizens and immigrants of Muslim and South Asian heritage, who were held incommunicado without charge and subject to physical and psychological abuse – without a single resident alien or Muslim US citizen linked to 9/11. In contrast, Chertoff quickly intervened to free scores of Israeli spy suspects and 5 Israeli Mossad agents who had been witnessed filming and celebrating the destruction of the World Trade Center and were under active investigation by the FBI. More than any other official, Michael Chertoff has been the chief architect of the ‘Global War on Terror’ – co-author of the notorious ‘Patriot Act’ which trashed habeas corpus and other essential components of the US Constitution and Bill of Rights. As Secretary of Homeland Security from 2005-2009, Chertoff promoted ‘military tribunals’ and organized the vast internal spy network, which now preys on private US citizens.
Michael Mukasey, the Bush-appointed US Attorney General, was an enthusiastic defender of the Patriot Act, supporting military tribunals, torture and overseas assassinations of individuals suspected of what he called ‘Islamic terrorism’ without trial.
Both Chertoff and Mukasey are zealous Zionists with longstanding ties to Israel. Michael Chertoff was believed to hold dual US-Israeli citizenship as he launched the Administration’s domestic war on US citizens.
A cursory review of the origins and direction of the police-state apparatus and the top echelons of the global war on ‘Islamic terrorism’ – code languages for military imperialism – reveals a disproportionate number of Israel-Firsters, who placed greater importance on persecuting potential US critics of the Middle East wars for Israel than in upholding Constitutional guarantees and the Bill of Rights.
Back in ‘civilian’ life, Michael Chertoff profited greatly from the bogus ‘War on Terror’ promoting radioactive and degrading body scanning technology in airports throughout the US and Europe. He established his own security consulting firm Chertoff Groups (2009) to represent the manufacturers of surveillance body scanners. Americans can thank Michael Chertoff every time they pass through the humiliation of an airport body scan.
The fusion of the police state apparatus with the industrial-security complex and its prominent overseas links with its corporate security counterparts in the state of Israel, underscores the imperial state’s ties to the Israeli military establishment.
As the police state has grown it has created a powerful lobby of high tech surveillance industry backers and beneficiaries who push federal and state ‘security’ spending at the expense welfare programs.
The police state’s squeeze on social programs, education and welfare has a powerful ally on Wall Street, which emerged as the dominant sector of US capital in terms of access to and influence over US Treasury and its budgetary allocations.
Unlike the manufacturing sector, financial capital does not need a population of educated, healthy and productive workers. Its own ‘labor force’ is composed of a small educated elite of speculators, analysts, traders and brokers at the top and middle levels and a small army of ‘contract’ office sweepers, secretaries and menial workers at the bottom. They have their own ‘invisible’ army of domestic servants, cooks, caterers, gardeners and nannies devoid of any ‘Social Security’, health coverage and pension plans. And the financial sector has its own private networks of doctors and clinics, schools, communications systems and messengers, estates and clubs, and security agencies and body guards; it needs not an educated, skilled public sector; and it certainly does not want national wealth to support high quality public health and educational systems. It has no interest in supporting this mass of public institutions which it views as an obstacle to ‘freeing up’ vast amounts of public wealth for speculation. In other words, the dominant sector of capital has no objection to ‘Homeland Security’; indeed it shares many sentiments with the proponents of the police state and supports shrinking the welfare state. It is concerned about lowering taxes on finance capital and increasing Federal bail-out funds for Wall Street while controlling the impoverished citizenry.
Conclusion
The conversion of a welfare state to a police state is the result of militarized imperialism abroad and the ascendancy of finance capital at home, as well as the proliferation of security state agencies and related private industries and the strategic role of rightwing Zionists in top positions of the police state apparatus.
This convergence of international and domestic structural changes took hold during the 1980’s and 1990’s and then accelerated during the first decade of the 21st century. The downgrading of the vast public services of the welfare state was covered up by a massive government propaganda campaign to promote the ‘global war on terror’ together with a fabricated widespread domestic ‘terrorist threat’ involving the most hapless of suspects (including oddball Haitian millenarianists entrapped by FBI agents). The supporters and beneficiaries of the welfare state found themselves on the margins of any national debate. The mass media/regime propaganda campaign demanded and successfully secured massive increases in centralized powers of domestic policing, surveillance, provocations, disappearances and arrests. Throughout the past decade what the welfare state lost in support and funding, the police state gained. The rise of financial capital and the deregulation of the financial system crowded out any public subsidies to promote and sustain the competitiveness of the US manufacturing sector. This has led to a major break in the links between industry, labor and the welfare state. Huge tax write-offs to big business, combined with the growth in expenditures for a non-productive police state bureaucracy and the series of costly overseas wars, has caused unsustainable budget and trade deficits, which then became the pretext to further savage the welfare state.
Significant political, cultural and ideological shifts have aided the rise of the police state over the public welfare state. The success of prominent American Zionists in securing power within key media propaganda mills and obtaining appointments to critical positions in the top echelons of the police state apparatus, judiciary and in the imperial state bureaucracy (Treasury and State Department) has put Israel’s colonial interests and its own police-state apparatus at the center of US politics. The US police state has adopted Israeli-styled repression targeting US citizens and residents.
US society is now split into two sectors: the ‘winners’ linked to the expanding and lucrative financial – security complex embedded in the police state while the ‘losers’, tied to the manufacturing – welfare sector, are relegated to an increasingly marginalized ‘civil society’. The police state purges dissidents who question the ‘Israel-First doctrine’ of the US security-military apparatus. The financial sector, embedded in its own luxurious ‘cocoon’ of private services, demands the total gutting of public services directed toward the poor, working and middle classes. The public treasury has been taken over in order to finance bank bailouts, imperial wars and police state agencies while paying the bondholders of US debt.
Social Security is on target to be privatized. Pensions are to be reduced, delayed and self-financed. Food stamps, access to affordable health care and unemployment support will be slashed. The police state cannot pay for glitzy new repressive technologies, greater policing, more intrusive surveillance, arrests and prisons while financing the existing welfare state with its vast educational, health and human services and pension benefits.
In sum, there is no future for social welfare in the United States within its powerful financial-imperial-police state system. Both major political parties nurture this system, support serial wars, appeal to the financial elites and debate over the size, scope and timing for further cuts in social welfare.
The American social welfare system was a product of an earlier phase of US capitalism where US global industrial supremacy allowed for both military spending and welfare support and where US military spending was constrained by the demands of the domestic socio-economic sectors of manufacturing capital and ‘labor’. In an earlier phase Zionist influence was based on wealthy individuals and their congressional ‘lobby’ — they did not occupy key Federal policymaking positions setting the agendas for war in the Middle East and domestic police state.
Times have changed for the worse: a police state, linked to militarism and perpetual imperial wars in the Middle East has gained ascendancy and now impacts our everyday life. Underlying both the growth of the police state and the erosion of the welfare state is the rise of an inter-locking ‘financial-security power elite’, held together by a common ideology, unprecedented private wealth and the relentless drive to monopolize the public treasury to the detriment of the vast majority of Americans. A confrontation and full exposure of all the self-serving propaganda, which undergirds the power elite is an essential first step. The enormous budgets for imperial wars are the greatest threat to US welfare. The police state erodes real public services and undermines social movements. Finance capital pillages the public treasury demanding bailouts and subsidies for the banks. Israeli Firsters, in key decision-making positions, serve the interests of a foreign police state against the interests of the American people. The state of Israel is the mirror opposite of what we Americans want for ourselves and our children: a free and independent secular republic without colonial settlements, clerical racism, and destructive self-serving militarism.
Today the fight to restore the advances in citizens’ welfare established through public programs of the recent past requires that we transform an entire structure of power: true welfare reform requires a revolutionary strategy and, above all, a grass-roots mass movement breaking with the entrenched ‘two party’ regime tied to the financial- imperial- internal security system.
A pension crisis of major dimensions is growing in the US across all three forms of defined benefit plans (DBPs)—public, private single employer, and private multi-employer plans.
Corporate America and its political friends have begun to use the economic crisis that commenced in 2007 as an opportunity to initiate and expand yet another offensive aimed at further undermining defined benefit pensions in the U.S. Having already begun in 2009-10 with a new attack by governors on public employees’ pension plans, the Corporate Offensive over the subsequent eighteen months has expanded to include new coordinated attacks on private sector multi-employer and single employer DBPs as well.
Contrary to corporate, press and politicians’ claims, the crisis in pensions has had nothing to do with pension benefit increases for the workers. In many cases pension benefits have been frozen or actually reduced over the past decade and especially so since 2008.
Rather the crisis is directly attributable to government and corporate policies that have been implemented over the past thirty years—including, but not limited to, two decades of government encouraged management practices reducing pension funding, stagnant jobs and wage growth since 2001, massive speculative investment losses by pension funds, the collapse of the economy, jobs, and pension contributions after 2007, and the failure of the US economic recovery to restore jobs and wages the past three years, 2009-12.
Brief Overview of the Pensions Funding Gap
Multi-employer defined benefit pensions in the 1990s averaged shortfalls in funding (i.e. ratio of assets to liabilities) of only a very manageable $30 billion throughout the decade.
A 2009 Report by the Pension Benefit Guarantee Corporation, the quasi-government agency responsible for ensuring pension funds stability and solvency in the private sector, had a funding shortfall of $355 billion. A similar scenario applies to ratios and shortfalls in funding for single employer pensions, with funding shortfalls of approximately $407 billion. The highly respected Pew Center’s 2008 estimated public sector pensions gap for 2008 of $452 billion.
But the shortfalls in all the defined benefit pensions are overwhelming the result of economic conditions, government policies, and corporate practices over the past 12 years. In 1999, state public employee pensions were 103% funded, according to the Pew Center. Similarly, private pensions—multi-employer as well as single employer—were in good shape at the beginning of 2000. Whatever has happened is therefore clearly a consequence of events and policies since 2000.
Employers sense an opportunity today to falsify the facts regarding the causes of defined benefit pension shortfalls, and to use that falsification to attack and dismantle what’s left of defined benefit pensions that now cover barely 18% of the workforce compared to three decades ago when the percentage of coverage was two thirds or more. What facts are being conveniently ignored in this new corporate offensive?
Corporate Manipulation of the Pension Funding Gap
Corporations have not hesitated to take advantage of the funding gap that they themselves have largely created, with the help of compliant politicians.
On the multi-employer side, the employer new offensive is evident in a series of banks’ reports claiming the funding gap is even greater than it is. By making extreme low-ball assumptions on returns, banks’ research departments and corporations argue the gap for multi-employer plans is significantly higher than even the PBGC has estimated. Their conclusion is major reductions in pension benefits are therefore required, even though pension benefit payments are not the source of the problem.
This strategy of overestimation of the funding gap, cherry-picking the worst assumptions and then extrapolating the losses in a straight line out for decades, has been adopted as well by governors and state politicians intent on cutting pension benefit payments to resolve a crisis workers did not create.
A typical, extreme case is New Jersey governor, Chris Christie, who over-exaggerates an estimated $2.5 trillion funding gap in 2010—i.e. six times greater than that estimated by the respected Pew Center. Christie’s answer to the shortfall in New Jersey is a massive gutting of public employee pension benefits. However, Christie conveniently hides the fact that his state, New Jersey, only made 31% of the required contributions to its employee pension fund in 2009, thus contributing significantly to its relatively low funding ratio of 66%. Like Christie, governors complaining the most about State pension funding gaps are typically those who created those gaps by refusing repeatedly to make the required contributions to their pension funds in the first place.
Single Employer Pension funds are also under a similar direct attack, exemplified by the latest efforts of American Airlines to project massive losses in its fund as a way to justify dumping it on the PBGC and thereby shedding $9 billion in contributions it should have made, but didn’t, for decades. American Airlines for decades has been one of the most egregious practicers of ‘pension contribution holidays’, refusing year after year to make legally required contributions to its fund, and thereby ensuring it would be under-funded.
Fundamental Causes of the Pension Funding Crisis
The deterioration in defined benefit pensions over the past decade has had virtually nothing to do with providing more generous benefits for workers. Nor is it the case that workers are retiring in greater numbers all at once. The causes of the pension shortfalls are due to reductions in employer contributions to the pension funds for multiple reasons, to speculative investments gone bad and massive losses in pension funds over the preceding decade, a major collapse in jobs since 2000 due to repeated and protracted recessions, jobless recoveries, and shifting of jobs offshore that have further undermined total pension fund contributions, and government policies since 2008 that have ensured pension fund returns on investment are reduced to below-normal historical rates of return..
The following is a partial summary short list of a dozen true causes of shortfalls in defined benefit pension funding.
Two recessions since 2000 and two bouts of ‘jobless recoveries’ (2002-05 and 2009-12) resulting in sharp reductions in contributions to the funds
Structural unemployment due to offshoring and free trade that has in addition to #1 progressively reduced jobs and therefore contributions, especially in tech and manufacturing industries
Government allowed ‘pension contribution holidays’ that permitted suspension of employer contributions for decades, thus further lowering the contributions base of the funds
Employer manipulation of actuarial assumptions, like phony overstated rates of return and projected hirings that never happen, that covered up the shortfalls
Government rules that allow the diversion of pension funds to cover 20% of rising employer health care insurance costs
De-unionization of the workforce, resulting in employers suspending private pension plan participation for new workers, thus further reducing contributions.
Shift in U.S. job markets to part time and temp ‘contingency’ jobs and workers by tens of millions, who are excluded from participating (and thus contributing) to DBPs
Legislation and court decisions over the past decade that have promoted 401k plans and conversion to ‘Cash Balance Plans’, diverting contributions to what would have been to defined benefit pension funds.
Phony business bankruptcy policies that have permitted easy dumping of pensions on the PBGC, the Pension Benefit Guaranty Corporation that ensures DBPs, encouraging employers to underfund the pensions to create justifications for dumping the pensions.
Easing of restrictions allowing companies to leave multi-employer plans and for single employers exiting the PBGC
Pension Protection Act of 2006 that allowed pension funds to partner with high-risk speculators like hedge funds, resulting in pension funds’ headlong rush into speculative investing in subprime mortgages and other high risk real estate and financial markets, the consequence of which was massive fund losses in 2000-02 and again in 2008-12.
Low rates of return in general over the last decade on investments by pension funds, attributable largely to the protracted recession since 2008 and, even more so, to the Federal Reserve Bank’s still continuing policy of zero interest rates for four consecutive years.
Fundamental Solutions to the Pension Crisis
Pension funds are financial institutions. They perform much like commercial banks by lending to other non-financial institutions.
In 2008-09, the Federal Reserve bailed out the banks to the tune of $9 trillion by providing zero interest loans to banks for the past four years. The Fed also bought up bonds, especially mortgage notes, from the banks at their full value instead of their real depressed market values, thus further directly subsidizing the banks. The Fed in this manner not only bailed out banks and investment banks, but big conglomerates like GE and GM and their credit arms. So why shouldn’t it similarly provide assistance to financial institutions like the pension funds?
Given that the real causes of current pension fund shortfalls are: insufficient contributions by employers, bad investments by fund managers as a result of high risk speculation and losses, government rules allowing the undermining of pensions, and poor rates of return on investments by funds due to government economic policies since 2000—real solutions to the crisis should tackle the real causes.
Therefore, Congress, the President, and the Federal Reserve should:
Provide short term 2 to 5 year bridge loans as needed to pension funds temporarily whose funding falls below 70%–i.e. funding provided at the same rate the Federal Reserve has been bailing out banks for the past four years, at a rate of 0.25% interest.
Allow pension funds to issue their own bonds, much like corporations now issue bonds, and the Fed purchase those bonds long term, 10 and 30 years, to provide additional funding as necessary to pension funds.
Prohibit pension funds from partnering in investments with hedge funds and other high risk financial institutions and financial instruments.
Cities and local municipalities should be reimbursed for losses due to banks’ fraudulent and false promotion of derivatives and interest rate swap deals of the last decade, just as other institutional investors have been reimbursed for fraudulent subprime mortgages deals of recent years.
Pension funding contribution holidays should be legally banned. Diversion of pension funds’ resources to subsidize employer health plans should be further prohibited.
Corporate bankruptcy laws should be amended to prevent dumping of single employer plans. All non-pension assets in bankruptcy should be ruled subordinate to pension assets, requiring all other assets disposed of before pension funds are considered.
Restrictions on employers exiting from multi-employer plans and from the PBGC should be strengthened.
Public employee plans’ spending on consultants should be limited by law to no more than 1% of annual contribution levels.
Employers should be prohibited from exempting ‘contingent’ workers from participation in plans, and should be required make pension fund contributions for all part time and temporary workers proportional to their total hours worked.
Restore jobs and wage growth. The most important long run source of restoration of pension fund solvency is the creation of jobs at an historically acceptable rate.
A sustained economic recovery—not the current ‘stop-go’ economy—that would raise rates of return on normal pension fund investments to restore losses of recent years
The crisis in Defined Benefit Plans is a crisis that has been brewing for decades, but that has appreciably worsened since 2000 and significantly further deteriorated after 2007. It is a crisis of falling and insufficient contributions fundamentally and not a crisis of excess liabilities or benefit payments to workers. Employers, both private and public, are now using the crisis they created that reduced contributions for decades to attack benefits. Fundamental solutions to the pension funding problems in DBPs must rectify the source problems on the contributions side of the fund ledger.
Jack Rasmus is the author of the April 2012 book, “Obama’s Economy: Recovery for the Few”, published by Pluto Books and Palgrave-Macmillan, which includes a final chapter on ‘An Alternative Program for Economic Recovery’.
On Friday, July 6, President Obama signed into law a bill that would renew transportation programs and extend low interest rates on student loans for one year. While this minimal gesture resulted in, no doubt, sighs of relief from those burdened by student debt, tucked away within the bill’s pages was a little-noticed proposal to further erode the funding of workers’ pensions. The bill was a brilliant sleight of hand where what it appeared to be giving with one hand distracted the public from what it was taking away with the other.
Aside from the more publicly known parts of this bill, it also reduced the amount that corporations pay into an already grossly underfunded pension system. The way it achieved this is with a complex equation factoring in interest rates, changes in how businesses calculate what they must contribute to retirement premiums, and how these contributions are tax deductible. The end result of this opaque process of number crunching is that, according to the Society of Actuaries, employer pension contributions will be reduced overall from a mandatory $80 billion to $45 billion this year alone. Next year this amount will be slashed by $73 billion. (1)
While the amount of company pension contributions would increase afterwards, there is no guarantee that this can be counted on to make up for the short-term cuts. Without a fundamental change in the political climate, it can be assumed that this distant increase will be reversed.
Some have said that these employer pension payment deductions will not amount to much given the $1.9 trillion employers have already invested into these plans over the decades. Yet the political importance of this bill cannot be calculated by arithmetic alone. It is another example of a pattern of how politicians have enabled corporations to minimize their responsibility towards their employees’ pensions to the point where the entire system is in danger and the dream of a comfortable retirement is approaching collapse.
How far has the pension system fallen into disrepair? According to The Pension Benefit Guarantee Corporation (PBGC), the quasi-government agency responsible for retirement funds, the public employees pension was being funded at 103 percent in 1999. The pension funds for the private sector were likewise robust.
By 2008, according to the Pew Center, the public sector pensions were short $452 billion. By 2009 the PBGC reported a funding shortfall of $355 billion and a shortfall of $407 billion for “single employer pensions.”
Why this dramatic change? The corporations, their politicians, and media lay the blame on growing pension costs (though many have been frozen) and an increased number of workers retiring. This is turning the reasons behind the pension system’s shortfall on its head. Fundamentally, the reason for the growing threats to retirement is corporate greed, backed up by their political power, as well as the effects of the economic crisis.
There are numerous examples of how big business and their two parties, the Democrats and Republicans, have colluded to erode their legal responsibility to fund pensions. The Pension Protection Act of 2006 enabled pension funds to partner with high-risk speculators, resulting in massive loses to the system in 2008-2010. Corporations have been allowed to declare phony bankruptcies in order to dump their pensions on the PBGC. They are also allowed to divert funds that should go into pension funds towards covering health care costs as well as buying back company stocks and making dividend payouts to stockholders. The list could go on for the ways the political system lets the corporations off the hook at the cost of threatening workers’ retirement. The effect of these measures is to starve the pension system in order to fatten corporate profits.
In addition, the Great Recession has also had a debilitating effect on pension funding. A jobless recovery means fewer workers able to contribute. If corporations were adequately taxed on the trillions they are hoarding to finance a real jobs program, this would not be a problem. Instead, the corporations and their politicians are pursuing the opposite course. They are using the bad economy to justify making the problem worse by cutting away at company obligations to their workers and their pensions.
The provision of the bill Obama signed into law on July 6th regarding pension funding demonstrates the bipartisan priorities geared towards benefiting corporations at the expense of workers. The public justification for this scheme is that the economy is bad and it wouldn’t help workers if these companies went broke as a result of trying to cover the pension shortfalls.
This is a variation of the same line of argument used to justify all austerity measures. Playing on the assumption of common cause between the economic elite and workers, corporations plead poverty and sermonize on the need for “shared sacrifice.” The truth, however, is that big business isn’t broke. There is plenty of money to assure a comfortable retirement for all workers, not to mention universal health care, social security, and full employment. The problem isn’t fiscal, it’s political. The corporations do not want to pay their fair share, and they own the political system.
Solutions to the pension crisis will not be found within the Democratic or Republican Parties. It will take the force of an independent social movement to make the rich pay. Such a social movement could start with the demands of “Jobs – Not Cuts” “Tax the Rich.” From this starting point, it could mature to take on other issues that unite workers such as a solution to the pension crisis.
What kind of solution could be proposed? A demand that a mass movement can get behind. In order for this to happen the demand would have to solve the crisis, be easily understood to inspire, and make a clear demarcation between the interests of the 99% and 1%. To do this a social movement around the pension crisis should call on the federal government to takeover pensions with a heavy tax on corporations that would ensure that they are fully funded and fine those who have willfully failed to properly pay into their pension funds. Then we could demand that Social Security be strengthened so that it could gradually replace the precarious pensions offered in both the public and private sectors. But demands around pensions should be linked to the more immediately pressing demand for most workers, namely a massive jobs creation program. In this way working people will be united and in a position to mount a massive campaign.
By James W. Carden | The Realist Review | June 14, 2026
Joe Biden’s presidency may ultimately come to be seen as a cautionary tale. Here was a president who showed little interest in entertaining arguments that might have contradicted his most deeply held assumptions.[1] And there were precious few within the upper ranks of the administration who might have attempted to do so, after all, only policy hands and political operatives who had come up through the ranks of the Clinton and Obama administrations or had longstanding ties to the citadels of the foreign policy community were invited into the fold. … continue
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