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January 6, 2006
WASHINGTON, D.C. - The U.S. House on Dec. 14 approved legislation to reduce the deficit of the federal government's pension insurer and to pressure companies into fully funding their pension obligations.
The Senate approved a similar bill in November, and Congress hopes to send a final version of the bill to President Bush this month. The bill passed the House 294-132, a vote which reflects a desire to fix the nation's broken pension system - but a lack of a consensus as to how to do it.
Rep. Sander Levin of Michigan, a senior Democrat on the House Ways and Means Committee, told USA Today that he believed the bill would impact negatively on manufacturers, "both in terms of the short-term competitiveness of companies and the long-term terminations of worker pensions."
The Republican-sponsored bill would set fiscal milestones to allow companies with underfunded pension plans to catch up. The plans would have to be 100 percent funded during a five-year phase-in program that would start in 2007. Accounting procedures would also be tightened to prevent future shortfalls. Defined-benefit plans are now underfunded by an estimated $450 billion.
The federal agency which insures pension plans for 44 million workers, the Pension Benefit Guaranty Corporation (PBGC), currently has a deficit of $22.8 billion. A premium increase for employers would help lower that deficit. The shortfall has led to fears that taxpayers would have to bail out the PBGC, a la the savings and loan fiasco.
Rep. John Boehner (R-Ohio), who sponsored the bill, said "for too long, outdated pension laws have allowed companies to under-fund their employees' plans, often as they've promised more extravagant benefits. The Pension Protection Act closes loopholes in the law and ensures that employers fully fund the benefits they promise workers."
John Tesija, a funds attorney for a dozen Michigan-based building trades pension plans, said the great majority of this legislation is aimed at shoring up single-employer plans for companies like bankrupt steelmakers, or GM.
"I'm not saying there aren't problems, but the multi-employer plans that cover the building trades unions are much more conservatively managed, and are in much better shape, than single-employer pension plans," Tesija said.
A portion of this legislation that would affect multi-employer pensions would set mileposts for how funds are managed. Tesija said if a pension plan is less than 80 percent funded, benefits could not be increased. If a plan falls under 60 percent funding, "all kinds of bad things would happen," he said, most of them involving tightening up of the bookkeeping of plans. Tesija said most building trades pension plans are funded over 90 percent.
The UAW offered its approval of the plan. But Rep. George Miller (D-Calif.), the ranking member on the House Education and Workforce Committee, said, "I know that some businesses and some labor unions managed to get things in this bill that were important to them. But this bill affects all Americans, not just those organizations, and the majority of Americans with pensions or the hopes of having a pension are going to be seriously harmed if this bill becomes law."
"This bill makes pensions less secure," he added. "It increases the chances that more companies will freeze their pension plans and does nothing about companies that plan to dump their pension plans onto the federal government at the expense of taxpayers and employees."
The Bush Administration has threatened to veto the measure,
said the Wall Street Journal, claiming it does not sufficiently
pressure companies to keep their pension obligations funded.
By Mark Gruenberg
WASHINGTON (PAI) - A new federal study has given further ammunition to groups representing workers who are victims of asbestos-caused disease and to two key senators, who all say that the proposed asbestos trust fund for victims and their families is too small. The senators fear the taxpayers might have to bail it out.
The non-partisan Government Accountability Office (GAO) report paints a dismal financial history of other such trust funds for workers and warns lawmakers the same fate could occur with the asbestos trust fund.
Other funds that exceeded initial cost estimates include the federal black lung program, pushed by the Mine Workers, and one for former nuclear plant workers over-exposed to lethal radiation, advocated by the then-Oil, Chemical and Atomic Workers.
The mid-December GAO report comes as Senate Majority Leader William Frist (R-Tenn.) plans to bring the asbestos trust fund bill (S. 852) up after the Senate returns in January. The report is important because S. 852 limits the trust fund for the 200,000-plus asbestos victims and their families to $140 billion over a period of years. It sets extreme standards workers must meet to claim money for asbestos-caused disease.
And it lacks ways to add money to the fund once it runs out. It also bars victims and their families from going to court against asbestos manufacturers and their insurers, throws out past lawsuits and forces victims to start the process all over again. The firms and insurers pushed S. 852 and would pay the $140 billion, but no more.
The groups, who represent worker victims of mesothelioma, an asbestos-caused cancer, and asbestosis, and their widows and children, say the bill is pro-industry, the trust fund is too small, and that long-suffering victims would be thrown out of court should the trust fund run out of money. Victims, including construction workers, auto workers, steel workers, shipyard workers, suffer from diseases years after their work.
The revisions prompted victims groups and families to oppose S. 852. Early last year, the AFL-CIO walked away from the negotiations in disgust at the strong corporate influence when it was written. In December the two key senators, leaders of the Budget Committee, objected.
Frist "made a commitment to bring up the asbestos trust
fund bill on the heels of receiving a letter from six asbestos
victims' groups voicing our concerns with the funding and asking
the Senate take more time to review pertinent issues," said
Susan Vento, chair of the Committee to Protect Mesothelioma Victims.
But "Frist made clear that regardless of whether or not
serious problems with the bill are resolved, he will force it
to the floor for a vote in January.
The GAO warns that the money in the trust fund may not be enough to compensate the victims and their families.
"Because these programs may expand significantly beyond
the initial costs
GAO found that in the black lung program and two for workers handling the nuclear materials, "the actual number of claims filed significantly exceeded the estimates of the number of anticipated claims." It said the oldest program, for black lung, was supposed to cost $3 billion in its first, limited, time frame, from 1969-76. It has cost $41 billion for coal miners permanently disabled by the crippling lung disease.
Senate Budget Committee Chairman Judd Gregg (R-N.H.) and the panel's top Democrat, Kent Conrad (D-N.D.), raised many of the same objections in a latter to Frist. They said the cost of asbestos claims could be up to four times the money - the $140 billion - that the insurers and asbestos manufacturers pledged to the fund.
That lack of cash would force the taxpayers to bail out the manufacturers and insurers, in order to pay the victims and their survivors, Frist and Conrad said.
"There remain major unresolved questions about the budgetary
impact of the bill," the senators warned. They include "the
actual cost of the program," whether the trust fund will
have enough money to pay asbestos claims, and "a lack of
clarity" on how much companies will pay into the trust fund
and how much the insurers will pay.
By Marty Mulcahy
Lesson plans are carried out every day in the nation's school buildings - but the new Alfred Taubman Student Services Center building will actually be part of the curriculum for instructors at Lawrence Technological University in Southfield.
To casual passersby, the 42,000-square-foot, $9.6 million building isn't remarkable. But look beneath the floors, behind the walls or dig in the dirt on the roof - as the building's design will let students do - and it becomes obvious that the Student Services Center isn't your average office or classroom building.
"We're leaving quite a bit of the interior of the building exposed, so that we can demonstrate mechanical and structural techniques to students," said Joseph Veryser, associate dean of Lawrence Tech's College of Architecture and Design and the university architect. "We teach design to architectural and engineering students. We feel that if we're going to teach it, we should put those principles in practice and show how it's done."
As a tool for teaching, the three-story building is much more than just exposed wiring, pipes and structural sections. The Student Services Building will also extensively utilize principles of environmentally friendly construction - or "sustainability" - which focuses on energy savings and the use of renewable resources.
"There are a lot of different mechanical systems in here," said Patrick Hughes, project manager for Walbridge-Aldinger, which is overseeing construction on the project. "First of all it's not a square building design; everything's a radius. There are a lot of angles, and getting everything to fit together has been our biggest challenge."
There are a multitude of pieces to fit together:
All the mechanical innovations should lead to an estimated 34 percent reduction in energy use for the Student Center compared to conventional systems, with a seven-to ten-year payback period on equipment costs.
The university is seeking a "Silver" certification from LEED - Leadership in Energy and Environmental Design, a voluntary standard developed by the U.S. Green Building Council. The green council seeks to "transform the building market" by promoting a common standard of measurement for whole building designs that emphasizes strategies for sustainable site development that include water savings, energy efficiency, materials selection and indoor environmental quality.
The LEED process also requires extensive recycling - for the Student Center, the construction team recycled 96 percent of building materials that would have been formerly been sent to a landfill. That information is documented for LEED, as is information on the use of renewable materials in the construction process, like bamboo flooring.
"We're doing a little bit of a lot of different things, but it all adds up," Veryser said. "We're fortunate to be working with Walbridge, which is a first-class operation, and their subcontractors and the workers. They're not just doers, they're thinkers, and they've always been able to come up with solutions when problems arise."
Founded in 1932, Lawrence Tech offers more than 50 undergraduate, master's, and doctoral degree programs in Colleges of Architecture and Design, Arts and Sciences, Engineering, and Management. Beyond its use as a green building project, the Student Services Center will consolidate and become a one-stop center for all student support services, such as financial aid, career counseling and alumni services.
"It's been a great job," Hughes said. "We've
had a lot of talented tradespeople out here, and we've been fortunate
to be able to pick their brains."
By Thomas I. Palley
WASHINGTON (PAI) - For the past five years the global economy has been flying on one engine. That engine is the U.S. consumer, who has been on a consumption binge financed by borrowing, in turn backed by a housing price bubble.
This situation poses the threat of a serious hard landing when that engine eventually stalls, as it must.
Ever-inflating house prices and rising debt-to-income levels are not sustainable. And as the late Herbert Stein, Chairman of President Nixon's Council of Economic Advisers, wryly observed: "If something cannot go on forever, it will stop."
This view, regarding the global economy's excessive dependence on the U.S. and the financial fragility of the U.S. economy, is not just held by progressive economists. It is also shared by Wall Street.
Thus, Stephen Roach, Chief Economist for Morgan Stanley, recently wrote in the Financial Times (Nov. 4, 2005): "There is now about a 40 percent probability of a hard landing in the next 12 months." And in a research brief, Roach singles out China as being particularly dependent on the U.S.: "China's export prowess is balanced on the head of a pin - a pin made in America. Fully 35 percent of Chinese exports go to the United States."
Roach's Wall Street warnings are sobering. But they miss a
That hollowing-out process has long been visible in U.S. statistics on wages and family income distribution, and it has been rendered keenly concrete by Delphi Corp.'s recent bankruptcy filing. It is only because of successive stock market and housing price bubbles, combined with a massive increase in consumer access to credit, that the hollowing-out has not been worse.
A major cause of these dangerous trends is the flawed structure of the global economy. Spurred by our own policy makers, the International Monetary Fund, and the World Bank, developing countries adopted an export-led approach to manufacturing growth and development.
This approach has two critical features. First, countries
rely on selling in foreign
China exemplifies this model, exporting over half of its manufacturing output and having an exchange rate that is up to 40 percent undervalued. And focus on export-led growth distorted the global economy. First, it created the global financial imbalances that Wall Street is so apprehensive about, manifested in the record U.S. trade deficit.
Second, U.S. manufacturing has been undermined by unfair competition subsidized by undervalued currencies. This in turn accelerated the hollowing of America's middle class.
Third, export-led growth promotes the global race-to-the-bottom, since countries look for international competitive advantage however possible. Consequently, workplace standards, wages, and the environment are all subject to persistent retrograde pressures, impeding the development of a middle class in developing countries.
The implication is that the global economy must shift from export-led development to domestic market-led development. In an export-led world, higher wages undermine employment. In a domestic market-led world, higher wages can promote employment. This is where labor standards and unions enter.
The challenge is to establish a system that has wages rising with productivity so that workers can buy what they produce, rather than dumping it on world markets. Setting wages by government edict does not work. Labor standards and unions are the way forward, since they provide a decentralized mechanism that links wages and productivity through collective bargaining.
History supports this. Every country that has ever made the transition to developed industrialized status has traveled this route.
China is the poster-child for export-led manufacturing growth. It has the most under-valued exchange rate, the worst labor repression, and is by far the largest developing country exporter. As such, China is the gravitational attractor for the race to the bottom. Other countries must change, but can only do so if China changes so none lose relative competitive advantage. If China revalues its exchange rate, other East Asian countries can do so. Likewise, if China raises wages, so too can the others.
One area where China shows leadership is its stated commitment
to increase social spending. This will be good for China's citizens,
and it will also contribute to incomes and domestic demand there,
which will be good for the global economy. However, there is
a problem unique to China: Labor standards and trade unions are
key to domestic market-led development, but China's political
system prevents them. That creates an additional political roadblock
that must be solved. Democratic reform in China is not a nicety.
It is a necessity for the global economy to work.
Wal-Mart's latest foray into construction of a new store in Michigan is meeting with a resounding thud in Vienna Twp., north of Flint area.
The huge retailer is just coming out of the ground with a new supercenter at M-57 and Linden Rd., and only two or three union trades are represented on the project. The use of out-of-area labor and the payment of substandard wages and benefits brought scores of protesters to the job site during three days of picketing, Dec. 19-21, in an effort sponsored by the Flint Area Building Trades.
"We were very pleased with the turnout," said Plumbers and Pipe Fitters Local 370 Market Recovery Agent Ben Ranger, who sits on the Vienna Twp. Planning Commission. "There were not only building trades people out there, we had UAW members, United Food and Commercial Workers and a number of local politicians alongside us."
One of the local politicians who joined the protest was Vienna Twp. Supervisor Tony McKerchie. He and Ranger said throughout the planning process, Wal-Mart pledged to use local union labor - and then backed off when the time came to put shovels in the dirt.
"One of the reasons I supported the project in the first place is that Wal-Mart said all along that they were going to use local union labor," McKerchie said. "Then they didn't live up to their agreement. That upset me a lot. I totally support what these guys are doing out here."
Ranger said the construction of the Wal-Mart is the start of a major development on the site, which will include a Menard's, a strip mall and restaurants.
"There's a significant amount of work out there, and we're not going away, we're going to be regulars out there," Ranger said. "This is part of a long battle."
By Andrew Korfhage
The documentary "Wal-Mart: The High Cost of Low Price" premiered last month (on PBS). It was only the latest in a steady stream of public commentary on how the business model of America's biggest company and largest employer is bad for America.
Beginning almost a year earlier, Wal-Mart felt so pressured by its critics that it featured CEO Lee Scott in public relations ads in major newspapers, on television and on National Public Radio, insisting that Wal-Mart couldn't be as bad as its critics claim.
Don't believe it. Internal Wal-Mart documents published in The New York Times just before release of the Wal-Mart documentary showed that not even Wal-Mart's own analysts could buy wholesale into the idea of the company as a responsible employer. Wal-Mart's own memos warned that Wal-Mart risks damage to its "overall reputation" as consumers learn more about its costs. "Our critics are correct in some of their observations," stated one memo.
"Specifically, our (healthcare) coverage is expensive for low-income families, and Wal-Mart has a significant percentage of Associates on public assistance." The memo went on to explain how 46 percent of the children of Wal-Mart workers depend on Medicaid or go uninsured.
Unfortunately, the cost to society of the Wal-Mart business plan doesn't end with its unaffordable employee healthcare plan. It starts on the factory floor in countries where workers allege sweatshop abuses by Wal-Mart suppliers. It continues into American communities where Wal-Mart builds stores financed by taxpayer subsidies that put local companies out of business. That's the Wal-Mart way.
In order to sell ever-cheaper products and seize ever-larger market shares, its business model shifts the costs of low prices elsewhere. This is at odds with the history of business in America since the Industrial Revolution. Until Wal-Mart, American companies had increasingly accepted the responsibility to internalize all the real costs associated with their businesses. They paid decent wages, offered healthcare benefits and vacations, limited the workweek to 40 hours, reduced their environmental impact, and more. Wal-Mart turns that trend around, and externalizes its costs however it can - pushing its costs of doing business onto you, me, our communities, and the environment. We pick up the price tag while Wal-Mart picks up billions in profit.
Wal-Mart externalizes the cost of acquiring its products by insisting that suppliers lower their prices year after year. This sends suppliers scrambling for cheaper labor, as detailed in a Pulitzer-winning 2003 series in The Los Angeles Times. Its constant pressure to lower prices not only exports American jobs, but also promotes abuses at the beginning of the supply chain in factories overseas.
Last September, workers from five different countries filed the most recent lawsuit to allege workplace mistreatment by company suppliers, including charges of beatings, forced overtime without pay, denial of maternity leave, and payment below minimum wage.
Wal-Mart externalizes the cost of its new-store construction by soliciting taxpayer subsidies for perks like low-cost land, road construction, and tax credits - accumulating at least $1 billion by the end of 2004. It promises to bring jobs and low prices to town in return, and yet a 2002 University of Missouri study found that a new Wal-Mart provides a mere 50 net-new jobs on average, after it drives other local retail jobs out.
Communities have also suffered from violations of the Clean Air and Clean Water Acts, and from driving down of local wages and encouragement of sprawl.
Finally, as admitted in its internal memo, Wal-Mart externalizes its employee healthcare costs, relying on state-supported public health insurance programs to pick up its slack. In states where this cost to taxpayers has been measured, it has not been insignificant - $6.6 million in Georgia in 2002 and $4.75 million in Wisconsin in 2004, for example.
Wal-Mart's dirty secret is that it can't really lower its costs as far is it would like consumers to believe; after a point, those costs are simply distributed onto someone else. When shoppers are paying taxes for roads, land deals, health care, and more - for a company that made $10 billion in profits in 2004 - those low prices start to look less and less like a good deal.
(The author is an editor at Co-op America, a nonprofit consumer education organization for socially and environmentally wise purchasing and investing. Distributed by minutemanmedia.org)
U.S. money moves Flint labor museum
Democratic Congressman Dale Kildee's funding request for the Flint labor museum was included in a federal bill on Nov. 18. The 1,000-square-foot exhibit will have the desk at which the agreement ending the 1936-37 Sit Down Strike was signed .
The Flint Sit-Down Strike lasted 44 days and would impact the course of the industrial labor movement forever, establishing the UAW as the exclusive bargaining representative for GM employees.
The grant comes as a breath of fresh air for the museum's artifacts, which had been in mothballs since they were last shown at Mott Community College in 1998.
Kildee said the Labor Museum and Learning Center "will tell the story of a historic event in Flint that changed the lives of working Americans across this country."
The UAW said it would cost about $2 million to build a free-standing
labor museum, which is the long-term goal.
State turnaround expected in '07
Over the past five years, Michigan's economy has lost a total of 308,900 jobs and will lose another 9,600 jobs in 2006. The state's manufacturing workforce has declined by about 25 percent during this time and will lose another 28,600 jobs in the next two years.
On the positive side, the private non-manufacturing sector, which lost 5,400 jobs last year, will add 4,400 new jobs in 2006 and 24,100 jobs in 2007, the forecast predicts. The service sector will show positive employment growth next year, while the trade, transportation and utilities sector are expected to turn around by mid-2006.
"We're not at the point of declaring that the Michigan economy has fallen into the fire, but we don't see it getting out of the frying pan soon, either," said U-M economist George Fulton. "Some progress has certainly been made since the large job dumps between 2000 and 2003. The losses have dwindled significantly since then, but they still persist."
In their annual forecast of the Michigan economy, Fulton and colleagues Joan Crary and Saul Hymans predict that the state will return to overall positive job growth in 2007, with 10,600 new jobs. However, compared with other years of job growth, this would rank as the weakest increase in the past 50 years, they say.
"Again, the chief culprit in the stagnant profile is
the manufacturing sector," Crary said. "Manufacturing
is forecast to sustain significant job losses over the next two
years. This reflects our assumption of a continued loss of auto
industry market share among the domestic producers, coupled with
our forecast of fairly flat annual sales of light vehicles."