Mooney, Green, Baker & Saindon's
Archive Page

Prepared by Paul Green

Photograph from "Ground Zero" by labor photojournalist Earl Dotter.

On this page, we present some of the classic articles that previously appeared on our main Labor Page.  To see our current articles, essays and stories discussing issues of interest to labor and workers everywhere, click here.  A table of contents for this page and the other pages that together constitute our Labor Pages appears in the frame on the left.

The Other War

The concept of class warfare is an old one, well known to the likes of Marx, Mao–and the majority in Congress. Buried deep within the rhetoric of social conservatism and international jingoism is a brand of economics-based class warfare that is as little understood as it is dangerous. The signs of what these people have in mind, however, are not hard to find.

For more than sixty years, the federal income tax system has included provisions designed to encourage employers to provide health care as an employee benefit. When an employer pays health insurance premiums for an employee, not only is the cost of that premium deductible for the employer, it is not taxed as income to the employee. The reason for this beneficial tax treatment is a judgment made long ago, initially by the Executive Branch and ultimately by the Congress, that it is a good thing to encourage employers to provide health care to employees. The result is that more than 100 million Americans receive health care through this employment-based system. While a far cry from the universal health coverage that is the standard in the rest of the industrialized world, it represents a remarkable success of tax policy. It now appears that it has been too successful, according to a recent report from the Congressional Joint Economic Committee (JEC).

The JEC is one of four committees of the U.S. Congress that includes both Senators and Congressmen. The JEC has long propounded the view that the U.S. tax system is fundamentally unfair because it overtaxes the rich and undertaxes the poor and middle class. Recently, these ideologues have managed to produce a set of reports that meld two of their themes–the unfairness of the tax system and the concept that health care is a privilege to be reserved for the wealthy, rather than a right that should be equally available to all.

Twin reports entitled "How the Tax Exclusion Shaped Today’s Private Health Insurance Market" and "The Health Benefit Tax Exclusion Distorts the Health Insurance Market" were released by the JEC on December 17, 2003. The theme of these reports is that employer-provided health care deprives people of the opportunity to make their own health care choices. Even worse, because too many people have health insurance that will pay for their care when they get sick, the demand for health care services is just too high, driving up the cost. The report even has a term for this excessive consumption of health care–"Moral Hazard." According to the report, Moral Hazard occurs whenever health insurance permits someone to obtain health care services they could not otherwise afford. As stated in the report:

Moral hazard occurs whenever [the amount of insurance people have] alters their behavior that affects their expected losses. Moral hazard squanders scarce resources by encouraging individuals to spend more on health care instead of on other goods and services that would be more valuable (absent insurance considerations).

In other words, without employer-provided health insurance, employees could have the benefit of choosing between health care and more important things–like food and shelter.

Are these guys serious? You bet they are. The real question is what is their true motivation. Certainly, they are concerned with rising health care costs. In their view, if health care were rationed more intelligently–that is to say by price–then, not only would national expenditures on health care go down, but costs probably would drop for those remaining people who could afford to foot the bill. Plus, the waits in the doctor's office would be shorter. Without doubt, however, there are other motives as well.

By taxing one of the most important middle class and working class benefits, the share of the overall tax burden borne by the rich would be driven down even further than it already is.  This serves the goal of the Congressional ideologues of making the tax system more fair--for the rich.

Additionally, with some major exceptions, the difference in wage rates between unionized and non-unionized employees is often fairly small. Otherwise, the non-unionized employers would have trouble hiring people, or keeping unions out. One thing that unions have been able to deliver for their members, however, is employer-provided health care. In fact, according to the U.S. Bureau of Labor Statistics, a unionized employee is about fifty percent more likely to have health insurance than a non-unionized employee. By attacking employer-provided health care, the Congressional ideologues are taking aim at organized labor.

Were health benefits to become taxable, employees with health coverage would see their pay checks reduced, with the additional taxes owed on their health coverage deducted from their pay.  This, in turn, would result in employers dropping health coverage.

If one of our common social goals is to make health care available and affordable for all, it is pretty obvious that eliminating the tax exemption for health care would be a disaster because it would only increase the number of uninsured. While, in the words of Dickens, it would decrease the surplus population, it would do so at a tremendous moral cost–a genuine "moral hazard."

Will these ideologues succeed? They will if we let them. And so far, nobody has really tried to stop them. With all the sloganeering going on, the real issues–the issues that literally mean life and death to millions of people–have gotten lost. It is time to act, before it is too late to undo the damage.

Deja Vu All Over Again–The Health Care Crisis in America (Updated March 1, 2004)

In the late 1980s and early 1990s, the major issue dominating collective bargaining around the country was health care. As the result of the unprecedented spike in the cost of health benefits, the continuation of employer-provided health care became the overarching concern of both labor and management, crowding out such traditional issues as wages and pension benefits. With the escalating expense of providing health care, employers sought ways of capping their increases, even if that meant doing little more than shifting the costs to their employees. Employees, in turn, finding their wages already stagnant as the result of the Reagan-Bush era recessions and "jobless recovery," saw increases in their share of health costs for what it was–a cut in real wages.

Today, we find ourselves in a very similar situation. As before, the cost of health benefits is spiking upwards, with annual increases in the double digits. Also, as before, we see the stagnation of wages, this time as the result of the (W.) Bush recession and jobless recovery. With these factors in place, it comes as no surprise that labor negotiations around the country are focusing on the thorny issue of health care. From grocery chains in Southern California, Missouri, West Virginia, Ohio and Kentucky, to transit workers in Los Angeles, tens of thousands of workers have walked off their jobs and taken to the streets seeking to preserve their health care.

The cost of health coverage has increased by more than 50% over the past three years, and is expected to continue its double digit annual rise for the foreseeable future. Currently, the national average cost for family health coverage is over $9,000 per year, with more than a quarter of that amount paid by the employee. Paradoxically, the share of health insurance premiums required to be paid by employees rises as wages drop. At companies with significant numbers of low-wage workers, employees pay more than a third of the cost of family health coverage. In other words, the lower the wages, the greater the share of health insurance costs required to be paid by the employees. As a result, the people who can least afford to pay are required to pay the most.

The result of this paradoxical and unfair imposition of health care costs on employees, as reflected in actual plan participation rates, is both obvious and profound. According to a recent study by the Bureau of Labor Statistics, among workers earning $15 or more per hour, fully 61% participate in employer-provided health coverage. Among workers earning less than $15 per hour, less than half that amount–a mere 30%–participate in their employers’ health plan.

According to a recent study, less than a quarter of U.S. employers pay the full cost of individual health coverage, and a paltry 8% provide family health coverage without requiring their employees to share in the premium. As the cost of health benefits continues to spike, it is safe to expect that the percentage of employers providing fully-paid health care will continue to drop, while the share paid by employees will continue to rise.

What does all of this mean? Some of the implications of the rising cost of health care are obvious, while others are more subtle.

One obvious result is that the rising cost of health care has created a divisive issue between labor and management, with employers seeking relief from rising costs and employees fighting to hold onto what they have. It also means that the numbers of the uninsured will continue to rise, as employers–particularly non-unionized employers–drop coverage or make it increasingly unaffordable for their lower-paid employees.

Another result is that, even where the employees’ share of health care costs is rising, the amount actually paid by employers continues to increase. This drives up the cost of U.S. manufactured goods. On the other hand, in every other industrialized nation, the provision of health care has been nationalized. Only in the U.S. does the burden of health care fall almost entirely on employers. This places American-produced goods at a competitive disadvantage to foreign goods.

One of the less obvious results of the dramatically rising cost of health care is the overall effect upon the economy. Recently, the Bureau of Labor Statistics pronounced that the U.S. economy has undergone the largest single-quarter of growth in 19 years. At the same time, however, the U.S. economy actually lost more than 140,000 jobs. Why have employers continued to shed employees in a time of economic growth? Some economists are now pointing to the staggering cost of health care as the culprit. With health coverage as expensive as it is now, and with the cost of coverage expected to continue to skyrocket, not only are employers reluctant to add to their employment rolls, they are continuing to reduce them. In other words, the continued loss of jobs in the economy is at least in part attributable to the nation’s dysfunctional health care system.

Putting all of this together, it is clear that rising health care expenditures are hobbling the U.S. economy and are costing jobs. Furthermore, they are creating an ever increasing disparity between the "haves"–the people who can afford health care–and the "have nots"–those who must go without. Unless something is done, the problems will only get worse. To their credit, most of the Democratic Presidential candidates have specific proposals to address problems in the delivery of health care. Since the only domestic policy the Republicans can agree on is tax cuts, they are unlikely to deal seriously with the problem in anybody's lifetime.

The last time we went through a similar health care crisis, one Presidential candidate–Bill Clinton–ran on a platform of national health care. Although the implosion of the Democratic party in Congress prevented him from implementing his proposals, the Clinton administration’s efforts nevertheless scared the bejesus out of the health care industry. The result was a moderation in health care costs that lasted through the term of the Clinton Presidency. Unfortunately, we can no longer count on this "fear factor" to provide a sufficient solution to our problems in the delivery of health care. The time has finally come to catch up to the rest of the industrialized world and adopt a comprehensive national solution to the health care crisis. Only with such a comprehensive solution can we unshackle the U.S. economy, and secure equity in our health care delivery system.

Rolling-Back Labor Standards

Recently making the news has been the coordinated series of raids of Wal-Mart stores and offices across the country, dubbed by federal officials as "Operation Rollback."  Wal-Mart is accused of hiring contractors to perform basic janitorial and maintenance services which, in turn, are staffed with undocumented aliens. Based upon information gleaned from federal wire taps, Wal-Mart is accused of conspiring with the contractors to hire these undocumented workers.

To anyone familiar with Wal-Mart’s own employment practices, this story is replete with ironies.

Wal-Mart is utterly shameless regarding its pro-poverty practices. It has gone so far as to distribute hand-outs to its employees giving them advice on how best to apply for government anti-poverty services like Medicaid, food stamps and temporary assistance to needy families.

Wal-Mart is well known as among the worst employers in the country. At Wal-Mart, a typical sales associate makes $8.50 an hour. Unlike fellow big-box retailer Costco, where a sales associate may start as low as $10 per hour, Wal-Mart provides little or no benefits. While health care is available, the monthly cost is over $100 per month for coverage. For someone already earning wages below poverty level, this makes health coverage an impossibly expensive luxury.

So, if Wal-Mart is already paying poverty-level wages with virtually no benefits, why would it then flout the law by hiring contractors with whom it conspires to hire undocumented aliens? The answer, of course, is greed. Why pay even $8.50 per hour, or even the Federal minimum wage of $5.15 per hour, when you can get by by paying even less, sometimes as little as $2 per day? After all, who will complain? The undocumented aliens? If you think that is true, what do you think happened to all of those undocumented aliens who were rounded up in these Wal-Mart raids? By and large, they are being held in detention pending deportation, if they haven’t been deported already. What do you get when you complain? A trip to Club Fed, followed by a ticket home.

Why, then, wouldn’t Wal-Mart just hire these folks themselves, instead of relying upon middlemen? The answer is insulation. Even now, Wal-Mart spokesmen defend their conduct by pointing out that they didn’t actually employ these people, but that it was actually their contractors who were violating the immigration and labor laws.

The major irony, of course, is that Wal-Mart, which keeps tens of thousands of its employees in poverty, is well known for its pattern of discrimination against women and minorities, and is one of the most virulently anti-union, anti-worker employers in the country, can actually save money by contracting some of its work out to contractors who exploit their workers even more than Wal-Mart itself. In its effort to further "rollback" labor standards, Wal-Mart has provided us with a compelling demonstration that, no matter how low you go, you can always go lower.

Labor Day 2003

In many ways, this Labor Day is one of the strangest we have seen in a while. While the forces opposed to workers and workers’ rights become more and more brazen in their attacks, few people seem to care. The Bush Administration and its right-wing allies continue their war on workers, and the American public is not up in arms. Want an example?

Recently, the President signed an executive order exercising his "emergency powers" to trim the automatic cost of living adjustment provided by federal law. His basic rationale is explained in the following statement:

A national emergency has existed since September 11, 2001, that now includes Operation Enduring Freedom in Afghanistan and Operation Iraqi Freedom. Full statutory civilian pay increases costing 13 percent of payroll in 2004 would interfere with our Nation's ability to pursue the war on terrorism. Such increases would cost about $13 billion in fiscal year 2004 alone -- $11 billion more than the 2 percent overall Federal civilian pay increase I proposed in my 2004 Budget -- and would build in later years.

Such cost increases would threaten our efforts against terrorism or force deep cuts in discretionary spending or Federal employment to stay within budget. Neither outcome is acceptable. Therefore, I have determined that a total pay increase of 2 percent would be appropriate for GS and certain other employees in January 2004.

In other words, President Bush will cut the automatic pay increases by about 85% because the country just can’t afford the $11 billion cost without jeopardizing the wars in Afghanistan and Iraq and the continuing war on terrorism. And yet only a few months ago, the Administration and its Congressional allies crowed with unrestrained glee over their enactment of a tax cut that even the Administration admits costs $350 billion. And, of course, that doesn’t count the much larger tax cut passed two years ago. Nor does it take into account the accounting tricks that were used to generate this low-ball number.

Why, then, are we so overextended that we cannot afford $11 billion for a cost of living raise for federal workers, but we have no problem borrowing against our future for a $350 billion tax cut? This one’s pretty easy to answer. A pay raise goes to government workers, while the bulk of the $350 billion tax cut goes to the corporate behemoths and wealthy individuals that own this administration.

Want more proof? It has recently come to light that, in an effort to make the delivery of logistical support to our troops in the field more "efficient" (and to artificially reduce the number of troops), the Administration has "privatized" this function. This means that the job of delivering essentials like food, drink, ammunition, clothing and (considering the 100E + days in Iraq) air conditioning has been "contracted out." Which company has the largest of these logistical support contracts? The largest is Vice President Cheney’s old haunt, Halliburton, which has recently won $1.7 billion in federal contracts, and stands to win hundreds of millions of dollars more, most of which are no-bid, as part of the war in Iraq. Number two in this grab for federal dough is engineering giant Bechtel. As long as our troops are getting the support they need and we are saving money in the process, what does it matter that the support is provided by private contractors rather than by American soldiers?

The answer is that, first, our troops are not getting the support they need. Even though the military has promised relief from the intense heat to our troops by providing air conditioners, those air conditioners have not materialized. Private donors (organized by the parents of heat-stricken troops) are contributing air conditioners by the hundreds because the Halliburtons and Bechtels have failed to do so. Even worse, neither the government, the military postal service, nor these fat-cat contractors will even ship these air conditioners to Iraq. These parents who scrounged up the air conditioners have had to raise the money to pay a private shipping firm to ship them to Iraq. Come on now.

Well, even if it means that our troops are suffering, that’s their job, right? No one said this would be a cake walk, and besides, we’re saving money, right? No on all counts. Let’s not forget that about 185,000 of our troops in the field right now are not professional soldiers, but are reservists. These are people who signed up with the understanding that they might be called up to serve for a couple of months, or even, in a worst case, up to a year, but many of whom have now been serving pretty much nonstop since the beginning of the war in Afghanistan--nearly two years ago. This isn’t what they signed up for. Don’t they deserve to at least get the support they need from their own military? Our government says no.

And the upshot is that nobody even contends that this system, providing no-bid logistical contracts to huge corporations, is either more effective or less expensive than just providing this support in the traditional way–having the military provide its own logistics. And yet, this is just one obvious–and stupid–example of what the current administration wants to do to the entire government.

Putting this all together, what does it mean? It means that our government is more interested tax cuts for its wealthy supporters than in supporting its own workers, whether they be in civilian service or in the trenches actually fighting the war on terrorism. It means that our elected officials are more interested in providing lucrative, no-bid contracts to their corporate cronies than in delivering services efficiently and economically. And maybe most galling of all, it means that these ideologues are willing to do all of this without apparent shame, cynically exploiting our horror and despair over the events of September 11 to advance their radical agenda. The most shocking thing about it all, however, is that we are letting them get away with it.

Where does that leave us on another Labor Day? The Administration’s (and Congress’) war on workers should provide organized labor with an opportunity to garner public support. Couple that with the stagnant economy, the growing health care crisis and problems with pension plans around the country, and you should have an opening to for Organized Labor to make its case to the American people. Is Labor’s inability to effectively make its case due to its own lack of imagination, or have the American people become so complacent that they are willing to believe whatever ridiculous words our elected officials and their media henchmen spout off?

Will the American people wake up before things get worse? Do we need to hit bottom first? Will it take another horrible terrorist attack before we wake up and see that our government is more interested in fighting its war on workers than in winning the war on terrorism? Let’s hope not.

Turning on the Power

The U.S. Northeast and Southeastern Canada are recovering from the worst power outage in history. While the experts and pundits argue over the specific causes of this particular blackout, one thing is clear: At its heart, this disruption is the direct result of a poorly thought-out and ineptly implemented drive toward deregulation.

Prior to deregulation, power generation and distribution was in the hands of a series of local and regional power monopolies. These monopolies, which were subject to extensive government regulation, were responsible for everything from generating the power, transmitting it from the power plants to local distribution points, and then delivering that electricity to homes and businesses. The costs of running this system were all paid for by the consumers of electricity, whose rates were set by government regulators.

This system had its good and bad points. On the plus side, it, along with instances of direct federal intervention (such as the creation of the Tennessee Valley Authority and the building of huge Western dams), led to the electrification of the entire United States. Furthermore, with the environmental movement that arose in the 1970s, power companies were in a position to make the capital investment to install new clean energy technologies (such as coal scrubbers), amortizing the costs and passing them on to the consumers. While the implementation of these technologies resulted in relatively small increases in electric rates, the environmental and health benefits were enormous, more than making up the cost. Additionally, when it became clear that local power systems were subject to periodic temporary failures and shortages, while simultaneously other local systems might have excess capacity, the power companies linked their systems up under the watchful gaze of the federal and local regulators, forming today's power grids. Because of these grids, when one local system has a shortage, it can buy surplus energy from another system.

On the minus side, incompetent management teams, coupled with lax regulators, could shield their mistakes, passing the costs of their follies through to consumers. At least occasionally, regulated utilities became bloated and inefficient, investing in dubious and untested technologies.

The government’s solution? Energy deregulation.

The theory was that, by permitting limited competition in the production and distribution of energy, inefficiencies could be squeezed out of the system, costs could be reduced, and lots of money could be made by savvy investors (who also happened to be major campaign contributors). In a crazy scheme concocted by the architects of deregulation, the creation and distribution of electricity was broken into three pieces. First, there is power generation. The power plants, formerly operated by local and regional utilities, will now be separately owned and operated. Second comes national and regional power distribution, including the power lines and distribution facilities connecting the damns and power plants to the local distribution facilities and that make up the regional "grids."  Finally, there is local electricity distribution, which includes the gaggle of local power companies that deliver electricity to our homes and businesses.

As part of this process of deregulation, the local utilities that used to produce the power are, more and more, limiting their activities to merely providing the local distribution of electricity. Electric power generation, where the greatest benefits of deregulation were expected to be realized, is more and more in the hands of large companies who are, at least in theory, subject to market forces. Unfortunately, these power oligopolies are frequently operating old, out of date facilities, and lack incentives to modernize because they have a very limited ability to recover their costs. Coal scrubbers? More efficient generators? Other new, clean technologies? Who’s going to pay for them?

Nevertheless, the real bastard children in this scheme are the regional power distributors. Although their services are absolutely necessary, there is simply no profit in upgrading facilities that work–most of the time. The result is that our power "grids" are woefully out of date, terribly inefficient, and lack sufficient capacity to handle our nation’s needs, as clearly demonstrated in the massive blackout. A small problem (whatever that problem was) that should have been contained locally, tripped the power off in the entire region. This is not supposed to happen.

The problem of nationwide power distribution is not helped by the laws of physics, which make the transmission of electricity terribly inefficient. As electricity flows through power lines, resistance in the lines causes them to heat up and power is lost to the atmosphere in the form of generated heat. The more electricity that flows, the hotter the lines get. The hotter they get, the greater the resistance. Not only does this mean that much power is lost (so that the amount of power generated needs to be substantially larger than the amount that will actually be used), it also limits the amount of power that can be transferred over these lines before they burn up. This also means that the farther electricity has to travel, the greater the power loss. Further compounding the problem is the sad fact that our nation’s power grids are replete with older, smaller, lower capacity lines that greatly limit the amount of electricity that can be transferred from place to place. The cost of upgrading these out of date facilities is huge, and, in the absence of direct federal intervention, is just not going to happen.

Curiously, the example of energy deregulation is often cited as a deregulation success story. As anyone in California (if you remember the power crisis they had so recently) or in the Northeast can tell you, if this is success, how bad does it have to be before it is considered a failure? How do we fix the problem? Clearly, we have to move beyond the simple minded slogans and code words, like "deregulation" and "privatization," and actually try to develop a system that works, and that is capable of continuing to meet our needs into the future.

Disingenuous Drug Debate

It is not surprising the lengths the pharmaceutical industry will go to protect the sweet deal that it has in the U.S. marketplace. After all, the system (if you can call it that) now in place has permitted the drug companies to reap huge profits over the past twenty years, unparalleled by any other major industry. The reasons for the drug industry’s success are not hard to understand. In the U.S., most people have some form of insurance, either through their employment or from the government. This means that neither the people who prescribe the drugs–the doctors–nor the people who use the drugs–us consumers– really have any idea how much these drugs cost. As a result, the drug companies are free to push their latest, greatest, and most expensive new patent-protected drugs on both doctors and consumers, and the market forces that would ordinarily control prices in a real free market simply do not work. Although health plans have tried to institute managed care programs to push people off of these pricy new drugs onto older, cheaper, yet equally effective drugs, it is an uphill battle.

This has led some critics of the current system to propose a means of introducing a little competition into the mix. The scheme, known as "drug reimportation", would permit pharmacies to import into the U.S. prescription drugs from other industrialized countries where either market forces or direct government intervention have kept down prices. As matters now stand, the same drugs often cost half as much or less in Canada than they do in the U.S. The effect of such reimportation would be two-fold. First, it would create an instant supply of cheaper, identical drugs that pharmacies could stock and sell to their U.S. customers. Second, it would force the drug manufacturers to lower their domestic U.S. pricing so that they can continue to sell in the U.S. through their domestic supply chains.

So what’s the problem? Shouldn’t this be a no-brainer?

If you listen to the intensive lobbying campaign of the Traditional Values Coalition, a right-wing conservative Christian advocacy organization, the major effect of permitting drug reimportation would be to flood the market with RU-486, the "morning after" abortion pill. The logic goes that the law currently prohibits RU-486 from being distributed through the mail. According to the TVC, any drug reimportation legislation would vitiate this prohibition, and allow our 14-year old daughters to borrow our credit cards and order abortion pills willy-nilly, flooding our mailboxes with these agents of infanticide. Obviously, the purpose of this lobbying campaign is to pressure the many socially conservative legislators who support drug reimportation into switching their positions.

There are at least two problems with the TVC’s argument. First, it is fabricated out of whole cloth. The currently pending legislation simply doesn’t do what the TVC says it does. Second, according to published reports, the TVC’s campaign was written, bought and paid for by the pharmaceutical industry itself. In other words, rather than representing a principled (if somewhat wacky) criticism of drug reimportation, it is really a cynical effort by the drug manufacturers to cloak their own greed and avarice in the guise of conservative Christian values. In fact, the only "value" that they seek to protect is the value of money.

Nor has the pharmaceutical industry limited its anti-reimportation efforts to using Christian right front groups. Another innocuous-sounding group, United Seniors Association (with the patriotic acronym USA) has also jumped into the fray. USA has been in the midst of a heavy-duty lobbying campaign raising the alarm that reimportation will disrupt the currently-secure drug supply chain and allow fleets of trucks groaning from their loads of counterfeit drugs to stream in from across the border. Like the TVC’s efforts, according to published reports, this campaign was also bought and paid for by the drug industry.

Nevertheless, just because this criticism comes through a shill doesn’t necessarily make it wrong. It is, however, highly misleading for several reasons. First, the bills currently pending in Congress all require authentication of drugs brought into the U.S. Second, all of the pending bills would limit reimportation is to industrialized countries, each of which has measures in place to protect its own citizenry from ingesting phony medicines. What the USA and its drug industry supporters do not mention is that the major industrialized countries with one of the most serious counterfeit drug problems is the United States itself, a problem the drug industry has done little to address. Considering their lack of attention to this extremely important problem, the drug industry’s protestation of concern for the welfare of the American drug consumer reeks of cynicism and hypocrisy. Clearly, counterfeit drugs are a problem, but they are a problem that needs to be dealt with, not used as a bogeyman to protect drug industry profits.

Another argument raised by the drug industry and its allies is that the huge profits generated by the outrageous pricing in the U.S. market is necessary to finance the drug industry’s enormous research and development activities. Once again, this argument is misleading. For one thing, the drug companies actually spend far more on marketing than on research and development. Perhaps if they spent more on research and less on physician junkets they wouldn’t need their huge monopoly revenues to finance their development of new drugs. For another, is it really fair that Americans are saddled with the responsibility for paying for research and development? Why should the rest of the world benefit form the drug companies’ gouging of American consumers? Already, the outrageous health care costs shouldered by U.S. industries has placed us at a competitive disadvantage around the world. Is it really necessary to cannibalize America’s industries in order to pump money into medical research and development? Isn’t there a better way? Finally, most of the money being pumped into this research and development is going toward developing potential new blockbusters, without regard to the actual benefit of the new drugs. This means that there is a lot of research for the next drug to calm an upset tummy or to still our hay fever, but very little directed toward cures for malaria or tuberculosis.

Does this mean that drug reimportation is a panacea that will solve the problems with our medical delivery system? Certainly not. Millions of America lack access to quality health care. At the same time, billions of dollars are squandered on a system that is irrational and out of whack. Even the most optimistic proponents of drug reimportation see it as providing little more than modest relief from some of the extremes in drug pricing. Until we are willing to admit that we have a serious problem will we be in a position to seek a meaningful solution that addresses all aspects of the health care system in the U.S.

Hula Hoops, Beanie Babies and Other Corporate Fads

Like consumers throughout the industrialized world, Corporate America regularly finds itself sucked into the latest fad. In the 1960s, U.S. corporations were driven by the perceived need to increase shareholder value by pumping out dividends, even while neglecting their U.S.-based production facilities. For example, a company like Chrysler continued to pay record dividends, all the while lumbering toward financial collapse. Utterly failing to anticipate the onslaught of better-designed, better-engineered, more reliable and more efficient Japanese cars, Chrysler permitted its production capabilities to deteriorate. Who were the big losers from these corporate missteps? Typically, it was the workers who saw their jobs eliminated, squeezed out by more efficient, more productive foreign competition.

During the 1970s, drunk with the corporate imperative to diversify, the trend was for conglomeration. Rather than make the investment necessary to maintain their competitive edge, these behemoths chose to buy assets that were often incompatible with what had been their core business.  Besides lacking focus and being impossible to manage, these unnatural conglomerations of unrelated enterprises continued to lose ground to their more focused, better managed foreign competitors. Who were the big losers from this short-sighted trend towards corporate diversification? Typically, it was the workers who saw their jobs eliminated, as their employers became increasingly uncompetitive.

The 1980s was the era of the leveraged buy-out and the junk bond. Free from the scrutiny of federal regulators, undercapitalized wannabe tycoons sold high interest "junk bonds" and used the proceeds to buy-up the stock of their target companies. They would then either sell off assets from their newly-purchased businesses to pay down the bonds or they would simply saddle the businesses with a crushing burden of debt. It was precisely through such a purchase that Woodward & Lothrop, a successful, unionized enterprise and one of Washington, D.C.’s oldest department store chains, was looted and destroyed. Who were the big losers in these shenanigans? Typically, it was the workers who lost their jobs as their new owners pillaged what had previously been successful businesses.

The early 1990s brought with it a new paradigm, along with a host of gobbledy-gook buzzwords (like "new paradigm"). Under the cloak of meaningless slogans like "work smarter, not harder," the 1990s was an era where downsizing was the key to increasing stock prices. It did not matter that those production workers and middle managers who got the ax actually did something (like manage and build stuff), or that, while firing your research and development staff may reduce your payroll expenses, it might make it harder to stay competitive. No, as far as the financial markets were concerned, any layoff announcement was sure to drive up stock prices. Who were the big losers from this corporate short-sightedness? Typically, it was the workers who saw their jobs "downsized" as their employers "streamlined."

The current hot corporate fad is toward "consolidation."  Unlike the 1970s vintage conglomeration, this latest trend involves the merger of companies that do pretty much the same thing. In some cases, they may do it in different places serving different markets, but in others, they are direct competitors. Whether it is defense contractors (with the merger of Lockheed, General Dynamics and Martin Marietta), airplane makers (such as the merger of Boeing with McDonald-Douglas), or consumer products (with the merger of Kraft and NABISCO under the umbrella of the former R.J. Reynolds), big business is growing ever bigger.

So what’s wrong with consolidation?  More than 100 years ago, the government and people of the United States decided that artificial monopolies are bad, and that free competition is good. Today, however, while the government uses the buzzwords of free enterprise, like "competition" and "efficient markets," their actions belie this belief. In the long run, what will be the effect of this latest corporate trend?  Will consolidation result in the greater productivity promised by its proponents?  Or will it turn out to be just another dangerous fad that distracts corporate America from investing in the retooling and recapitalization that is necessary to stay competitive in our global economy?  If past is prologue, the prognosis is not good, and, ultimately, it is the employees who will suffer.

Treating Our Addiction to Drugs

The health care system in the U.S. is once again heading into crisis, in a way that we have not seen for over ten years. Just as in the 1980s and early 1990s, health care costs are rising out of control. What finally reined in the explosion in medical expenditures in the early 1990s was the "failed" effort by the Clinton administration to adopt a system of government-mandated, universal health coverage. While the Clinton administration may have failed to adopt the comprehensive legislation that was so desperately needed, it clearly succeeded on at least one level. Those efforts scared the bejesus out of the health care industry. The result was that the double-digit annual increases in health care expenditures leveled off, rising only 5% to 6% per year for the period from 1994 through 1998.  At the same time, the Clinton expansion of the U.S. economy reduced the number of unemployed who were without health coverage. Unfortunately, the election in 2000 has ushered in a new (old) era.

Despite the similarities between what is going on now and what happened in the 1980s and early 1990s, there are some important differences. During the era of Ronald Reagan and the first George Bush, the upward spiral of medical expenditures was broad-based, covering many areas of health care. This time, however, it is primarily focused in one specific area–prescription drugs.

Maybe as a result of their own strong medications, the one group that started pushing prices back up at double digit levels even during the Clinton administration was the prescription drug industry. In 1998, for example, while expenditures for hospitalization increased a paltry 2.9% and expenditures for physicians’ fees and clinical services increased a mere 6.6% (still ahead of inflation), prescription drug expenditures rocketed upwards at 15.2%. Nor has this trend abated, as shown by the following table:.

In terms of the overall health care "pie", this means that prescription drug expenditures are grabbing an increasingly larger share. In 1980, expenditures for prescription drugs were less than 5% of total national health care expenditures. By 1998, that share had increased to about 7.5%. By 2001, it had increased to nearly 10%. For those people with health insurance, this rise is even more dramatic. In one health plan with which I am associated, the share of the plan’s expenditures for prescription drugs has climbed from less than 10% in 1995 to more than 25% in 2002. Over the same period, a different plan that covers retirees has seen the share of its expenditures for prescription drugs skyrocket to 50% of its total expenditures. It is no surprise that employer health insurance premiums, which increased a mere 8/10ths of 1% in 1996, increased an average of 12.7% in 2002. This year, the situation is even worse, with employers, unions and insured individuals seeing premium increases often in excess of 20%.

How has this happened?

There are a number of factors at work. The drug companies will tell you that it is because they have continued to devote huge sums of money on research and development for new, cutting-edge medications that have extended our life expectancies, improved the quality of our lives, and have made other forms of medical care (such as hospitalization) unnecessary. While there is a grain of truth in this argument, for the most part, it is a gross distortion of reality.

The single largest expenditure for the major drug companies is marketing, far exceeding anything spent on research. Moreover, even as ubiquitous as the new-fangled direct-to-consumer marketing seems to be, the drug companies’ expenditures for marketing to physicians, the gate-keepers to prescription medications, is estimated to be 10 times larger.

Notwithstanding all of this marketing, the obvious question is why haven’t health plan efforts at prescription drug cost containment made more of an impact? After all, virtually every health plan now requires the use of generic versions of drugs, where available. Moreover, during the last few years, such highly-used blockbuster drugs like Prozac and Claritin have gone generic. Why hasn’t this resulted in a drop in prescription drug expenditures?

The case of Prozac is instructive. Shortly before Lily’s patent on Prozac expired, it introduced a new 7-day, time release Prozac that only needs to be taken once a week. Otherwise, this new Prozac is exactly the same as the old stuff. But look at the pricing. Retail, a month’s supply of the new 7-day Prozac costs $100. If bought through a typical health plan, the total cost (that is, the amount paid by the plan plus the amount of any copayment) will be about $77. For comparison, old-style, brand name Prozac retails for about $89, with a negotiated plan price of about $87. Generic Prozac, however, retails for a mere $34, with a negotiated plan price of about $27! And these drugs all do exactly the same thing!. Indeed, Prozac is one of a group of anti-depressant medications known as "Selective Serotonin Re-uptake Inhibitors" or "SSRIs", including Paxil, Zoloft, etc. Each of these other drugs remains under patent, and costs pretty much the same as the 7-day Prozac for a month’s supply. Even though not chemically identical, each of these drugs does pretty much the same thing. While some people will react better to a Zoloft or Paxil than Prozac, most people will not notice a difference. In view of this dramatic price difference, you would expect more physicians to be prescribing generic Prozac, and you would think that its market share would double or triple above the share occupied by the old (and expensive) brand name Prozac.

Maybe that would have happen if our system of medical care made any sense. Instead, since Prozac lost its patent and began to be sold in generic form, it has actually lost market share. In other words, after Prozac got cheap, physicians began to shift their patients away from Prozac and towards the more expensive (but no more effective) patent drugs. Why? The answer is marketing, both direct-to-consumer and to physicians. Because of the low profit margin, no one is marketing generic Prozac. It is the patent drugs that have gotten the big push, and each of us is stuck paying for it.

Another case in point is Claritin. Did you know that you can pick up a 75-day supply of generic Claritin at a local warehouse club, without having to bother going to see a physician, for $24 (this works out to $10 per 30-day supply). Clarinex does exactly the same thing as Claritin. However, it remains under patent. To get a 30-day supply of Clarinex, you must go to a doctor and get a prescription. Then, if you are buying it retail, you will pay about $78. If your health plan is paying, the negotiated price will be about $62. Even excluding the cost of the doctor’s visit, this means that either you or your health plan is paying 6 to 8 times as much for a drug that does exactly the same thing, and works exactly the same way! Even if you say this doesn’t affect you, because all you pay is your copayment, that’s not true. Ultimately, we all pay for these new, expensive drugs, one way or another.

Over the past few years, collective bargaining has focused on health care costs. Employers are, understandably enough, seeking to limit their exposure for their employee health care expenditures. Workers, also understandably, are trying to do the same thing. Wage increases? Forget about it–that money is needed to pay the rising cost of health care, which, in turn, is being driven by the skyrocketing increase in prescription drug expenditures.

How do we get a handle on this? As in any 12-step program, if we are to reduce our addiction to the latest and greatest prescription drug, we have to acknowledge that we have a problem. No doubt, any solution will be painful. Only when we acknowledge the gravity of the problem can we prepare ourselves to take the steps necessary to resolve the problem.

The Steeling of America

Recently, I spent the afternoon in court.  The subject of the hearing that I attended was the bankruptcy of one-time steel giant LTV Steel. From its beginnings as Ling Electric Company in 1947, LTV grew through a series of mergers and acquisitions until, by 1961, it became known as Ling-Temco-Vought, shortening that inelegant name to LTV during the 1970s. In 1968, the company bought a majority interest in Jones & Laughlin Steel, which, in 1984, it merged with Republic Steel to form LTV Steel, the nation's second-biggest steelmaker. This was LTV’s zenith.

Even as it built up its steel-making capacity, LTV began to rid itself of its non-steel assets, including, most notably, its coal mines and coal processing plants. However, its efforts were insufficient to achieve profitability, and, in 1986, LTV filed its first bankruptcy. During its nearly 10-year bankruptcy, LTV continued to shed its non-steel assets, reduced its steel-making capacity from 24 million tons per year to 10 million tons, moved its headquarters from Dallas to Cleveland, and paid hundreds of millions of dollars in attorneys’ fees. Although the company made a profit for about 5 years during the mid-1990s, it returned to red ink as cheap imports began to crowd it out of the market.

Finally, in 2000, LTV filed its second bankruptcy. Although it continued to operate for a period, it eventually became clear that LTV was going to stiff its creditors and leave its retirees hanging without their promised health care and with inadequately-funded pension plans. Now, it has sold off the bulk of its operating assets and is in the process of liquidating the remainder.

What happened? How did the second largest steelmaker in the U.S. come to this?

Unfortunately, the fate of LTV reflects the current state of the U.S. steel industry over all. With the exception of U.S. Steel, it is hard to even think of an American steel company that is not in bankruptcy. In part, the collapse of the steel industry was the result of increased overseas production and declining prices. Part of the collapse was also due to bad management decisions, and poor choices in the allocation of assets. Yet another factor in this collapse was the rise in so-called "legacy costs," attributable to large under-funded pension liabilities and retiree health expenses.

While some U.S. steel companies, may survive, albeit with reduced productive capabilities, others will meet the fate of LTV, with some assets scrapped and others picked up by "bottom feeders," like ISG (International Steel Group), which buys them up cheap, without any responsibility for these "legacy" costs. This fate has also befallen another steel giant, Bethlehem Steel. Whatever happens, it is clear that the U.S. has lost a significant portion of its steel-making capacity, and is now completely dependent upon a steady supply of cheap imports.

Is this necessarily a bad thing? If other countries can produce steel more cheaply than the U.S., isn’t it more efficient to make that steel overseas, and invest our capital in those areas where the U.S. can effectively compete? There are a lot of responses to these questions, and most of them lead to the conclusion that we should not let this happen.

During the Second World War, the U.S. turned its massive industrial machine to war production and saved the world from Nazi Germany, Imperial Japan and their fascist allies. Again, during the cold war, the U.S. was, in the prophetic (albeit backwards) words of Nikita Kruschev, able to "bury" the Soviet Union and its communist allies in a sea of industrial, consumer and military production, against which the Soviet Union could not compete.  Eventually, its efforts to match the U.S. resulted in the bankruptcy and eventual collapse of the Soviet Union and communist eastern Europe. Can the U.S. surmount the challenges of the 21^st Century, without the productive capability that brought it to its position of power and influence?  How will it face the immediate crises of terrorism around the world, a looming war in Iraq, the continuing instability in Afghanistan, a potential disaster in North Korea, multiple civil wars throughout Africa, the lack of a functioning peace process between Israel and its Arab neighbors, and a host of other perils that may explode at any time? How many wars can a nation fight as it disposes of its productive capability?

On another level, the loss of high-paying industrial jobs creates problems in our own country. With the elimination of the jobs that supported a well-paid working class, how can we maintain a general standard of prosperity? Can we even preserve social and political stability as our nation experiences an increasing stratification between rich and poor?

Additionally, the adverse consequences of industrialization in places lacking effective environmental, safety and workplace standards can be extreme. Proof of this lies in the largely uninhabitable swaths of Eastern Europe and Asia that have been blighted by the worst horrors of unregulated industrialization. Bhopal, India, is just one of the best know examples. Does it really do anyone any favors when the cost of cheap steel imports is a ravaged and poisoned landscape, and lost lives and limbs?

Identifying a problem, however, is the easy part. Finding solutions is much more difficult. Simply imposing barriers to imports is, at best, a short-term solution. As the current world situation clearly demonstrates, an impoverished world neither benefits the security nor the prosperity of the U.S. Clearly, any solution must preserve and augment the wealth and productivity of the U.S., without sacrificing the rest of the world in the process. Indeed, it falls to the U.S. to lead the world into a bright and prosperous future. Simply stated, nobody else is capable--or willing--to take on that job.

Getting back to where we started, LTV is all but gone, and Bethlehem Steel is soon to follow. How much longer before we wake up and realize that something must be done? How many more of our basic industries will we allow to collapse before we decide that we have a problem that deserves our serious and immediate attention?

Independence Day 2003

On this, the 227^th anniversary of our Nation’s founding, it is once again time to reflect upon where we are, and where we are headed. This past year has been full of triumph and tragedy, and it’s often hard to tell them apart.

Most notably, we have seen our human grief and anger over the crimes of September 11 cynically exploited and misdirected to topple the regime in Baghdad, ostensibly because of its links to the September 11 terrorists and the imminent threat to our lives and safeties from that regime’s possession of Weapons of Mass Destruction. Of course, neither the fact that there has yet to be one shred of credible evidence actually linking Iraq to the September 11 attacks nor the mysterious disappearance of those Weapons of Mass Destruction, seem to have bothered our political leadership in its orgy of self-congratulation. Obviously, Saddam Hussein is a really bad guy, and deserved to be removed from power. Perhaps if the invasion of Iraq had been justified on that basis, we could have had a meaningful national debate on the merits of military intervention. And maybe we would have reached the same conclusion. However, we had no such debate. One thing we have learned. When the current administration ran for election, one of the major planks in its platform was its promise of "No Nation-Building."  Only now do we truly see the wisdom of this promise.

We have also seen unconscionable violations of America’s democratic values through the long-term imprisonment of foreign nationals. Often held on evidence that could be easily discredited if only these imprisoned soles were given the opportunity, their detention remains shrouded in a cloak of secrecy. While it may be true that most of these people really are threats to U.S. national security, we have no way of knowing. Rather, we are asked to trust the judgment of our political leadership instead of the wisdom of our founding fathers who wrote the constitution that purported to guarantee civil liberties and the right to due process of law.

We have also seen the brief spurt of prosperity that characterized the late 1990s collapse, much like the stock market. The government tells us that the answer to our current plight is to keep cutting taxes, as if, somehow, bankrupting the U.S. government will ultimately lead to greater prosperity. Besides being absurd on its face, the proponents of these measures conveniently ignore one of the lessons of the Clinton administration–a fiscally responsible government, one that lives within its means while still providing the array of services that we have come to expect in a liberal democracy, goes hand-in-hand with economic growth and prosperity. Of course, the reality is that the current economic debate is fundamentally dishonest. The objectives of the tax cutters have nothing to do with spurring economic growth in a stagnant economy. Rather, their goals are two-fold.

First, as Reagan-era budget director David Stockmen candidly admitted, the reason for cutting government revenues while increasing spending is to bankrupt the government, thereby not only preventing it from providing the new services demanded by the populace, but also forcing it to curtail existing services. Whether that means fewer police, less funding for education, cutting maintenance for federal highways and mass transportation, or simply reducing social services is besides the point. These people have an ideological opposition to government and want to prevent it from functioning, consequences be damned.

Second, as the administration candidly admitted last year, our tax-cutting policy makers believe that the rich are over-taxed, while the poor and middle class are not pulling their weight. It is, therefore, no surprise that the wealthiest Americans are the principal beneficiaries of the latest round of tax cuts.

The past year has also seen an acceleration in the assault on working people and on their representatives, organized labor. By exercising its regulatory authority, the Department of Labor is issuing regulations that will sharply curtail the ability of many workers to get overtime pay. At the same time that workers are losing their legal rights, the government’s assault on the representatives of workers–their labor unions–is increasing. The Department of Labor remains intent on "staying the course" toward adopting new reporting and disclosure requirements for unions that are not only burdensome and expensive (and far beyond what corporate America is subjected to), but that will also lay unions open to ongoing litigation by such anti-union organizations as the National Right to Work Foundation.

On the other hand, the forces that should defend working people remain in disarray. The AFL-CIO has been distracted by the ongoing scandal at union-owned insurer ULLICO. We can only hope that, with the newest reforms in place, this matter is now behind us.  The Democratic Party, which has long been more amenable to labor and working people than its Republican counterpart, remains in chaos. It continues to be torn between those who believe that it must appeal to the "center" by becoming, in essence, a more moderate version of the Republican party, and those who believe it should become more ideological in its approach. Even among the more ideological, there is little consensus on what ideology to adopt.

Where do we go from here? Are we like the alcoholic who cannot seek recovery until he or she has hit bottom? Where is that bottom? How bad do things have to become before we wake up and realize that something must be done?

During the last national election, less than half of eligible U.S. citizens bothered to vote. The result is that we have a government that didn’t even win a plurality of those who cast ballots, let alone a majority of eligible voters. Our country truly was founded upon noble ideals of justice, liberty and equality. Despite our frequent and repeated failures to live up to those ideals, they must remain at the center of our national identity. It is, after all, the striving to fulfill the promise of America that defines who we are, and gives the world its last, best hope for the future.

Contracting Out America

One of the oft-repeated slogans of the far right in this country is that services currently provided by the government could be provided more effectively and cheaply by private enterprise working under contract with the government. Whether called "contracting out", "open competition", or "privatization," it all means the same thing: replacing government workers with private employees. Today, with the influence of the far-right at an all-time high, controlling both the White House and Congress, more and more of our national policy incorporates this ideological bent.

A case in point is the proposed Medicare prescription drug benefit. As everyone knows, it now appears that this long awaited addition to the Medicare program is soon likely to become a reality. At the center of this debate over the shape of this added coverage is the issue of privatization. The versions of this Medicare drug package that will likely form the core of the legislation that is expected to be enacted this year depend upon private managed care systems to deliver this benefit. What Congress seems to have forgotten is that its last attempt to privatize Medicare–the Medicare+Choice program–was a failure.

Congress enacted the Medicare+Choice program in 1997, which was intended to encourage entrepreneurs to establish private alternatives to the government-administered Medicare program. Seniors would then have the option of remaining in the existing Medicare system, or moving their care into the one of the private plans. To induce seniors to make the switch, these private plans would offer enhanced benefits over and above the normal Medicare benefits. Ironically, in view of the current debate over a Medicare prescription drug benefit, it was generally assumed that these private plans would provide prescription drug coverage. These Medicare+Choice plans would be compensated by receiving a fixed monthly payment for each enrolled beneficiary, at a level lower than the cost of benefits for an average beneficiary under the existing Medicare program. How would these private plans be able to afford to provide these additional benefits, for less money than traditional Medicare? That would be through the expected savings they would realize through their greater efficiency and flexibility in managing care.

Unfortunately, it did not work that way. The fundamental problem is that it turns out that these private plans have not been more effective in managing costs than the government-administered Medicare system. Rather, the most efficient provider of medical benefits remains the old, government administered Medicare program. In fact, the few Medicare+Choice Plans that have been financially viable have only done so by "cherry-picking." In other words, the successful plans have succeeded in signing up the healthiest of the elderly who utilize the fewest services, leaving the sicker, less healthy Medicare beneficiaries in the government-administered program.

This failure of the Medicare+Choice program can also be demonstrated by its low levels of enrollment. Even at their height, only 16% of Medicare-eligible beneficiaries actually opted into one of these plans, far short of the expectation that more than a third would sign up. Since reaching that peak in 1998, the percentage of Medicare beneficiaries in Medicare+Choice programs has dropped by one-third to 11%. At the same time, the availability of these programs has declined, with many plans either withdrawing from the program or reducing their coverage areas.

Moreover, the remaining plans are not evenly distributed. In 19 states plus the District of Columbia, these programs are either not available at all or have virtually no enrollees. Another 15 states have less than 10% enrollment. Even in the state with the largest proportional enrollment, the massive state of Rhode Island, only 34% of Medicare-eligible beneficiaries have enrolled in these private plans. The reality is that, in most of the country, Medicare+Choice Plans do not exist.

Even the numbers of physicians and other providers agreeing to participate in these programs has been woefully inconsistent, with an average annual turnover of 14% nationwide. In some states, the annual turnover rate has been as high as 36%.

Nor have the enhanced benefits that were supposed to be the hallmark of these plans lived up to expectations. Either they have only come at the price of a high premium, or they have been eliminated entirely.

In the end, all this experiment has done is to drain resources from the Medicare system. The fact that this failed model forms the basis for the new prescription drug benefit shows that the debate is being driven by ideology, rather than by any real consideration of good policy.

Another example of this form of double-think is the resilient, and absurd, notion of partially privatizing Social Security. How drawing 10% of all contributions out of the Social Security and investing it in the volatile stock market will resolve the inevitable shortfall in the system is something that the proponents of this scheme have not even bothered to try to explain.

Finally, in perhaps the most audacious example of the influence of this right-wing ideology is the effort by the Bush administration to fire about half of all government workers and replace them with contractors. While it may be true that private bill collectors, unrestrained by such limitations as the Taxpayer Bill of Rights, may be more effective than the IRS at collecting unpaid taxes, do you really want to be dunned by a collection agency for your back taxes? Even worse, do you really want your private tax information, now protected by stringent government privacy laws and regulations, to be freely turned over to these private bill collectors? That’s what the Bush administration and its right-wing allies want.

Clearly, we all want our government to run better. We also desperately need to improve our nation’s health care delivery system, not only for the elderly, but for everyone. Maybe, if we can focus on figuring out how to improve the efficiency and effectiveness of the delivery of services, rather than trying to impose extreme ideologies, we can actually have some success.

The Death of Live Music

American Federation of Musicians (AFM) Local 802, which represents the musicians who staff the orchestras in Broadway musicals, went out on strike on Thursday, March 6 against the theater owners and producers. In contrast to so many of today’s labor disputes where the issues center on health care, this dispute is focused on an older, more traditional issue. Like the recent lockout at the West Coast ports, the major dispute on Broadway involves issues of job security and the introduction of new technologies.

The controversy involves the requirement that theaters utilize a minimum number of musicians in their orchestras. In the 1993 contract, in response to the theater owners’ complaints that the existing minimums were too rigid, the parties negotiated a more flexible arrangement. Under this revised system, orchestra sizes varied, depending upon the musical needs of a show. A panel of prominent orchestrators, arrangers and musical directors was created to arbitrate disputes over orchestra size, based upon artistic criteria. Now, however, the theater owners want to revisit the deal they made in 1993, arguing that the decision as to how many musicians a show needs should be vested solely in a show’s "creative team."  The Union responds with several points. First, they contend that, in the absence of minimums, the theaters would short-staff their musicals. Indeed, the Union has presented testimony by members of these so-called "creative teams" stating that they have been pressured to reduce orchestra size below what is artistically required, and that it is only the contractual minimums that permit them to adequately staff their orchestras. Second, they argue that the theater owners’ real goal is to reduce the number of musicians in each show, or to eliminate them altogether, replaced by recorded or computer-generated music. Moreover, although this dispute involves the preservation of jobs, it is really about the survival of live music in the theater.

The issues raised in this strike have echoes from the past. At least twice before, musicians have fought the battle to save live music from the onslaught of new recording technologies.

It is no small irony that the same technologies that initially create large numbers of jobs eventually result in the elimination of those same jobs. Such was the case with moving picture technologies. When movies were first developed, they were, of course, silent. Although recorded music existed, there was no means of either amplifying those recorded sounds sufficiently to fill a theater, nor was there any way to synchronize the sounds to the pictures. While the lack of dialogue could be addressed through titles, it was apparent that people needed something to listen to that would complement and emphasize the action on the screen. Consequently, musical scores were developed, and live musicians were needed in each theater to play those scores. Although some movie houses would employ only a single organist, many would employ a band or orchestra. The use of musicians required that theaters be built with orchestra pits and other facilities for live music. To maximize the return on their investment, both in terms of recouping their construction costs and recovering the expense of maintaining orchestras, many theaters augmented their movie showings with live musical and comedy performances. These live shows were, of course, what we know as vaudeville. For this reason, the enormous popularity of silent movies helped to spread vaudeville across the country. This was a boon for musicians and other performers. Indeed, tens of thousands of musicians were employed at these multi-purpose theaters.

In the late 1920s, however, a number of new technologies were developed to permit moving pictures to be accompanied by sound. Although the early efforts were riddled with problems (particularly in both the quality of the sound and the continued difficulty in synchronizing the sound with the picture), in 1929, a new process was developed by Western Electric, known as the Kinegraphone or Photophone. This new system placed an image of the recorded sounds directly on the film, resolving the problem of synchronization. This technological revolution not only made possible the introduction of so-called "talkies," it also permitted the recording of musical scores.

The public demanded talkies, and silent movies lost their audience. This meant that theater owners needed to make a large investment in the necessary equipment to play the recorded sound. To recoup their investment, the theater owners typically fired their musicians, eliminated all live music and other performances, and began to play movies all day. Tens of thousands of musicians lost their jobs. Moreover, as new theaters were built, they no longer included orchestra pits or other provisions for live musicians. Thus, the introduction of the new "talking picture" technology also led to the death of vaudeville, and the elimination of thousands of more jobs.

The musicians did not take this lying down. The AFM devoted its principal effort to convincing the theater-going public of the superiority of live music, albeit without much success. In some cities, the AFM locals took a more active tack. In places around the country, musicians struck and set up picket lines, which were often honored by other unions. Local 802, the same local involved in the current strike, was particularly active, setting up picket lines and organizing boycotts. In some cities, the union succeeded in gaining agreements from theater owners to continue maintaining orchestras, although generally at reduced staffing levels. In most cases, however, the musicians’ efforts failed, and their jobs were eliminated. Even where the musicians had modest success, eventually even those jobs too disappeared.

Musicians faced a similar issue with the advent of radio. In the early days of radio, stations around the country needed to employ house orchestras, and to otherwise provide a venue for live music. As the quality of recorded music improved, so too did the propensity of radio stations to play those recordings. With the first "disc jockeys" appearing in the 1920s, live music began a slow decline. The AFM struck back. Rather than focusing solely on radio itself, the AFM targeted the recording industry, demanding new royalties payable to its members, not only on the sale of records, but also on the use of recorded music on radio, in movies and in other commercial venues. During 1942, the AFM went on strike, refusing to permit its members to record any music, a strike that went on for about a year. In the end, the Union won its core demands, and musicians began to benefit from royalties for their work. A second strike in 1948 was less successful (although by no means a failure), because both the recording and broadcast industries were better prepared, having stockpiled recordings. Nevertheless, whatever the AFM won in terms of royalties, it could not hold back the progress of technology. Today, live music on the radio is a rarity.

The progress of technology has continued to create new challenges for musicians. With digital sampling technologies and computer-generated music, the temptation to abandon live musicians in favor of this mechanical music is greater than ever.

The ongoing strike by Local 802 is in some ways a last stand for live music. The theater owners’ efforts to cut down their orchestras, something they can only do with electronic augmentation, erodes one of the last pure bastions of live performance. Already, it is not uncommon for live theaters around the country to substitute recorded music for live musicians. Just this week, as the musicians prepared to strike, Broadway actors rehearsed to the sounds of "virtual" orchestras. In the words of that queen of Broadway Harvey Fierstein, it sounded like a roller rink. That is just one reason why the actors, along with the other unionized theater workers, decided to support the musicians, making it impossible for the shows to go on. As a result of this solidarity, nearly all Broadway musicals went silent.

In some ways, this strike is like every other strike that has involved the substitution of machines for human beings. What makes this strike different is that it is about keeping the "live" in "live theater." For those $100 tickets, will the theater-going public tolerate recorded music? What’s next, a "virtual" string section at the symphony? That is really the question: will live theater remain live, or will it go the way of the movies and radio?

Under the watchful eye of Mayer Bloomberg, the parties sat down to a marathon negotiating session, where, at 9 a.m., Tuesday March 11, they were finally able to reach agreement.  Although the minimums have been reduced, they remain substantial, and have now been fixed for a period of at least ten years.  Among other things, the success of this strike shows the importance of union solidarity.  Congratulations to all involved!

Waging War Against Workers

It has only been a few months since the President won his fight to create a Department of Homeland Security (DHS), free from the terrorist influence of labor unions. The newest fight against terror is taking place at an agency that is only slightly older–and, although currently part of the Department of Transportation, one that will eventually merge into the DHS–the Transportation Safety Agency (TSA). As you may recall, the TSA was created in the wake of the terrorist attacks of September 11, with the goal of replacing the system of contractors and its workforce of underpaid, undertrained and overworked baggage screeners, with a professional workforce. In one year, the TSA went from 13 employees to 64,000, including 56,000 baggage and passenger screeners.

The creation of this new agency has not been without problems. For example, at one point, screeners went for more than a month without getting paid. Instances of sexual harassment have been far too common, and workers lack even the most basic protective gear, such as radiation detectors, notwithstanding their close and continuous exposure to X-ray machines of uncertain repair. Naturally, committees of TSA screeners at several airports contacted various unions looking for help.

That is how it came to be that the American Federation of Government Employees (AFGE) filed petitions–each containing signatures of at least 30% of the bargaining unit–seeking a certification election for TSA screeners at Baltimore-Washington International Airport and Laguardia Airport. In response, TSA Director Admiral Jim Loy issued an order prohibiting the unionization of TSA employees. According to the TSA press release, the basis for this order is Adm. Loy’s conclusion that "mandatory collective bargaining is not compatible with the flexibility required to wage the war against terrorism."

Obviously, someone is confused about what this war is all about. While most of the American people thought it was supposed to be about protecting America, American values and the American way of life, apparently the apparatchiks running the government have a different idea. After their convincing electoral victory, they see this war as just one more arrow in their quiver to advance their overall social and political agenda and to crush their enemies. Unions–especially government unions–have never been the friends of the Republicans. The last serious alliance between any government employees’ union and the Republicans was when PATCO supported Ronald Reagan in 1980. After that administration turned on PATCO and destroyed it, the remaining unions learned their lesson–these guys are not our friends. Should it be a surprise that the same people who destroyed PATCO, and who believe that the poor and middle class are not pulling their weight and paying their fair share of taxes, also see unions as a threat to national security?

AFGE has not taken this lying down. It is continuing its organization drive, including petition drives at airports around the country. It has also filed suit in federal court, seeking to overturn Adm. Loy’s order. Unfortunately, with the Republicans having successfully bottled up hundreds of judicial appointments during the Clinton administration, the same people who control the executive and legislative branches now also largely control the judiciary.

Joseph McCarthy used the very real threat of communism as a political tool to destroy his enemies and to advance his own political career. Now, fifty years later, it is happening once again, albeit in a more subtle manner. Will we sit idle and permit further erosion of our rights as Americans? So far, most of us have done exactly that. Until the American people are prepared to answer this question with a resounding no, we are sure to see more of the same.

Shock and Awe

In these pages, we have often carelessly tossed around the words "war" and "warfare" to apply to the Bush administration and its anti-union, anti-worker policies. Perhaps we can be forgiven for this hyperbole, because of the stakes involved. But now, America really is involved in a shooting war. Hundreds of thousands of Americans, along with their British and Australian allies, have placed their lives in danger to wage a war thousands of miles away with the avowed purpose of deposing a dictator, and freeing the people of this distant country from a brutal and thuggish regime.

Whatever our views of the merits of this war, there can be no doubt that we, the American people, feel a deep concern for the lives and safety of our troops abroad, and hope for a speedy, and successful, conclusion to this war. We also feel concern for the people of Iraq. Ostensibly, this war is intended to liberate them. We can only hope that the Viet Nam paradox–that we must destroy this village to save it–will not be visited upon the nation and peoples of Iraq.

For those of us who live and work in the region of the Nation’s capital, this is a very unsettling time. The horrific events of September 11 taught us that distance is no shield: we are at risk. This new war has revived our sense of insecurity and vulnerability. Are we really safer now than we would have been had the government permitted inspections to continue? Assuming that the Iraqi regime continued to obfuscate, would we be at greater risk if we had waited another 30-days to build a comprehensive world-wide coalition? Any answer to this question at this point can be nothing more than rank speculation. Because now, we are at war.

What we do know is that this war is different from any war that has come before. During the second World War, journalists like Ernie Pyle followed the troops around on the front lines, writing their stories. It was a way for the American people to gain insight into what was really happening on the battlefield. Today, we no longer have to wait for the newspaper and weekly news magazines. Instead, we can see bizarre, live images of television reporters crawling on their bellies on the front lines to interview troops engaged in battle. We also see live images from the enemy capital, not only showing the rain of bombs and missiles, but also the reaction of its citizens to their plight. Weird and unsettling.

The AFL-CIO has issued a statement in support of U.S. Troops abroad and, in this, represents the overwhelming majority view of the American people. This does not amount to an endorsement of the policy that led us to this point. Just like the rest of the American people, the labor community remains divided on its reaction to those policies.

What will the long-term results of this war be? Will it usher in a new era of democratic change amongst the oppressive dictatorships and monarchies of the Middle East? Will it enhance American prestige, enabling the United States to use its influence to broker peace throughout the world? Or will it only inflame anti-American sentiment around the world, and increase support to those who would destroy us? At the moment, in the words of Chou En Lai when asked whether the French revolution was a success, it’s too soon to tell. For now, we can only hope for a speedy and successful end to this war.

Reflections on 2003

The year 2002 was a difficult year for organized labor and workers’ rights. With few exceptions, the power and influence of the institutions created and maintained for the sole purpose of protecting workers’ rights have continued to diminish. Under constant attack from the forces of oligarchy and oppression, and in a state of internal disorganization and disarray, the labor movement continues to struggle.

The reasons for this decline are not hard to find. The decline of the older, more heavily unionized industries continued unabated, and has hit organized labor hard. For instance, the year 2002 showed the continuing collapse of one of the nation’s basic industries: the steel industry. During the last five years, we have seen the bankruptcies of Acme Metals (September 29, 1998), Laclede Steel (November 30, 1998), Geneva Steel (February 1, 1999), Qualitech Steel SBQ (March 24, 1999), Worldclass Processing (March 24, 1999), Gulf States Steel (July 1, 1999), J&L Structural Steel (June 30, 2000), Vision Metals, Inc. (November 13, 2000), Wheeling-Pittsburgh Steel (November 16, 2000), Northwestern Steel and Wire (December 20, 2000), Erie Forge and Steel (December 22, 2000), LTV Corp. (December 29, 2000), CSC Ltd. (January 12, 2001), Heartland Steel (January 24, 2001), GS Industries (February 7, 2001), American Iron Reduction (March 23, 2001), Trico Steel (March 23, 2001), Republic Technologies (April 2, 2001), Great Lakes Metals (April 11, 2001), Freedom Forge (Standard Steel) (July 13, 2001), Precision Specialty Metals (July 16, 2001), Excaliber Holding Corp. (July 18, 2001), Laclede Steel (July 30, 2001), Edgewater Steel (August 6, 2001), Riverview Steel (August 7, 2001), GalvPro (August 10, 2001). Bethlehem Steel (October 15, 2001), Metals USA (November 15, 2001), Sheffield Steel (December 7, 2001), Action Steel (December 28, 2001), Geneva Steel (once again on January 5, 2002), Huntco Steel (February 4, 2002), National Steel (March 6, 2002), and Calumet Steel (March 19, 2002). While some of these companies will survive, albeit in a different and reduced form, mostly they have already closed their doors or have announced their intentions to do so.

The transportation industry has fared only slightly better. Two of the nation’s major airlines–United Airlines and U.S. Airways–are operating in bankruptcy.  Although they have indicated their intentions to reorganize, they will do so with substantially reduced capacity, and with substantial financial concessions from their employees. Other major airlines–like TWA–have not been so lucky and are gone forever. Indeed, every single major U.S. airline but one is losing money. Amtrak, the nation’s major passenger railroad line, was threatened with a shutdown as well. Similarly, the U.S. shipping industry has seen has seen a significant decline, as more U.S. ships move their flags abroad.

The year 2002 also saw the closing of the last shirt manufacturer in the U.S.–C.F. Hathaway Co., which, under its one-eyed logo, had clothed Americans since before the Civil War. This was just one more step in the apparently inexorable movement of the clothing manufacture industry out of the U.S. Not only does the decline of these older industries decimate organized labor’s traditional member base, it also contributes to the growing concentration of wealth in fewer and fewer hands by eliminating these well-paying industrial jobs.

In general, the decline of these basic industries has presented a challenge that organized labor has not dealt with effectively. Over the last few decades, rather than focusing its attention on grass roots organizing, particularly in those fields where organized labor has yet to make a significant impact, organized labor has instead sought to extend its influence in the political arena. Not only has that legislative effort yielded few tangible results, it too is now under fire.

Last fall saw the overwhelming success of anti-worker, anti-union candidates. At the federal level, all three branches of government–the legislative, the executive and the judicial–are dominated by enemies of working people. Moreover, the recently-enacted campaign finance reform law will severely impair organized labor’s ability to influence elections. By default, the influence of large corporations and other big-moneyed interests will be increased.

With so many setbacks and obstacles, it is easy to become discouraged. Where are the bright spots in all this gloom? Certainly, there are some, if you know where to look.

They exist in the individual organizers who are engaged in the fight for economic justice at the local level, and are simply too busy to notice the bad climate for organized labor. These dedicated people work too hard at trying to help the people they serve to waste time bemoaning how difficult their task is, or how hostile the political climate.

There is also hope in the changing demographics of the United States. The country’s growing ethnic diversity provides an unparalleled opportunity for organized labor, provided labor can successfully adapt to these changing conditions. New immigrants to the U.S. present special challenges. Not only do they often lack skill in English, they are often susceptible to employer intimidation.

Some labor unions have shown their ability to adapt, both to the new economic realities and to the changing workforce, and are already beginning to change their approach. In some cases, the necessary steps are obvious: using multilingual organizers. In others, unions have begun to build coalitions with other community-based organizations as a way of better reaching out to workers.

Will these small steps be enough to reverse labor’s decline? As long as there remain organizers in the field who are too busy helping their fellow workers to worry about these types of questions, the answer may well be yes.

The PBGC and Me

Did you know that there is an agency of the United States government that guarantees that the monthly pension benefits that were promised to you by your employer will actually be paid? Did you know that the agency that provides this guarantee often provokes controversy among employers and unions alike? Most people don’t. What is this agency, what does it do, and why is it so controversial? By way of explanation, a little history lesson is in order.

With the rise of organized labor in the middle part of the 20^th century came the growth of pension plans. For the first time, no longer was care of the elderly left solely to personal savings and family responsibility. When employees bargained their wages, they also bargained a promise from their employers to set aside some of those wages for a later day. Beginning on a large scale in the 1940s, and growing through the 1950s and 1960s, pension plans began to be established in large numbers. In some cases, these plans were "multiemployer" plans, covering employees of different employers, and managed by boards of Trustees that included both union and employer representatives. In most cases, however, the plans only covered the employees of a single employer, and were exclusively managed by the employer itself.

Unfortunately, in many cases employers could not (or did not) fulfill their promises. In one of the most notorious cases, when the oldest automobile maker in America, Studebaker, shut its doors in 1963, it left behind a pension plan that simply did not have enough money to pay promised benefits. Some of its former employees–the lucky ones–received 10% to 15% of their promised pensions, while others received nothing at all. The hue and cry that arose from this debacle, including the parade of these newly-impoverished elderly to offices on Capitol Hill, began the 10-year push that led to the passage of the Employee Retirement Income Security Act of 1974 ("ERISA").

Among the reforms embodied in ERISA were minimum funding standards that require employers to set aside adequate amounts to actually pay for those promised pensions, fiduciary standards governing the conduct of the people who run the plans, reporting and disclosure requirements, and enhanced investigatory authority for both the Department of Labor and the Internal Revenue Service. One of the most important, but least-well understood of these reforms, was the guarantee program for defined benefit pension plans, and the federal agency that enforced that program: the Pension Benefit Guaranty Corporation ("PBGC").

The PBGC guarantees private pension benefits in much the same way that the Federal Deposit Insurance Corporation guarantees private bank deposits. Just like the FDIC, the PBGC guarantee is subject to limitations and caps.  This guarantee is funded by a premium paid by all private sector defined benefit pension plans.  In the case of single employer plans, the PBGC guarantee comes into play when an underfunded plan is terminated.  If a plan has enough money to pay all benefits, then the employer is required to go to an insurance company and buy annuities to provide those benefits. If a plan is underfunded, the PBGC will take it over, and the PBGC guarantee fund will make up the shortfall up to the full value of the guaranteed benefits. At the same time, the PBGC has the right to recover the amount of the shortfall from the employer.

Since guaranteeing pensions is a good thing, shouldn’t everyone be happy about the PBGC? After all, what’s not to love about a government agency that ensures that people who have worked all of their lives for the dignity of a comfortable retirement will actually get what they were promised?

The reality is far more complicated. While nobody disagrees that guaranteeing pensions is a good thing, the actions that the PBGC takes in effectuating that guarantee often results in controversy. For example, in the largest plan termination ever, the PBGC recently commenced proceedings to take over Bethlehem Steel’s pension plans. Although the plans have assets of $3.5 billion, the value of the benefits promised from by the plans is $7.8 billion. This means that the plans are short an estimated $4.3 billion. With the PBGC takeover, after figuring in the caps on guaranteed benefits, the PBGC figures that it will be on the hook for about $3.7 billion.

Both Bethlehem Steel and the United Steelworkers of America were angered by this action. Why? For several reasons. Most of this ire comes from the fact that terminating a pension plan freezes everybody’s rights. This means that nobody will earn any additional pension, even if they keep working. Even more galling to labor and management alike, employees who would soon have become eligible for special shut-down or layoff pensions can now never earn them. If they had not met the plan requirements for these special benefits as of the date of plan termination, it is now too late.

Furthermore, by terminating the plans, all of the sudden the PBGC has a bankruptcy claim of $4.3 billion. All of the other creditors of Bethlehem (including Bethlehem’s retired employees who have lost their health care) will see their share of any eventual distribution of assets significantly reduced as the result of this huge claim.

How does the PBGC justify this action? From its point of view, the PBGC (and its insurance system) are already on the hook for billions of dollars in this case.  In the wake of Bethlehem’s announced intention to close its doors and stiff its creditors (including the PBGC), it is the PBGC’s view that permitting the plan to continue to operate–and to permit Bethlehem’s employees to continue to earn additional benefits–only increases the liability of the PBGC’s insurance system–a liability that other U.S.