Frederick Douglass

"Power concedes nothing without a demand. It never did, and it never will. Find out just what people will submit to, and you have found out the exact amount of injustice and wrong which will be imposed upon them..." Frederick Douglass

Monday, October 18, 2010

I'll Huff, and I'll Puff, and I'll Blooooooooooow Your House Down

I'll Huff, and I'll Puff, and I'll Blooooooooooow Your House Down,
A Response to Frank Blethen and the Seattle Times
by Dave Fryett

[ Here's the article which prompted my response: ]

Know what a naked credit default swap is? Collateralized debt obligation ( CDO )? How about liar loans? I bet you that Frank Blethen knows. He doesn't need to worry though, the human misery loosed by the wild excesses of his fellow free-marketeers on Wall Street will never darken his door. The fiercely anti-union newspaper he owns, the Seattle Times, pays him a $2,000,000 salary. His contract also provides him with a generous cost-of-living allowance ( COLA ). Times readers might find this a bit befuddling as in a recent edition his paper's lead story, "Cash-strapped Metro targets drivers' pay", he contends that Metro's drivers are overpaid and cites COLA as the source of the "problem." Apparently the editor believes in COLA for millionaires only.

The article, subtitled "Decade of cost-of-living raises pushes top scale to third nationally," is part of an international drive, launched by the owners of the world's largest banks, to get workers to give up pay and benefits, particularly cost-of-living- allowances. This, the theory goes, will enable businesses to expand and governments to balance budgets and repay loans necessitated by the recession.

In North America, Europe, India, Japan, Korea, China, South Africa, and elsewhere, workers are under relentless pressure to accede to the impossible demands of their employers and governments. Worldwide, millions are on strike and, tragically, not a few have fallen to police, soldiers, and hired thugs in the effort to defend their livelihoods. This war has come home to us in King County as our bus drivers are now being targeted for destruction. The voice of this hostility is the Seattle Times, and Frank Blethen.

The article is a fairly typical piece of journalistic propaganda. Its presence as the lead story speaks to just how determined the bankers are to snare ever larger portions of our national wealth. Its author, Mike Lindblom, spins quite a yarn. He's learned his craft well, no doubt he received good guidance. Lindblom does what any good journagandist would: He seeks out like-minded sources for information and statistics; withholds the fact that they are run by interested parties; presents the conclusions their analysts make of their own "studies" as fact; allows spokespeople for these advocates of union-bashing to belch demonstrably false allegations without so much as a homeopathic trace of protest on his part; counters opposing opinions aggressively; gives much more space to those on his side of the dispute than to his opponents; front-loads the article with argument supporting his thesis and buries damaging, contradictory information deep within the piece long after most will have stopped reading. Then, remembering the first rule of propaganda--assert the opposite--he presents a comparative chart which largely refutes his position and offers it triumphantly as confirmation.

While Lindblom may blurt specious claims to journalistic neutrality, the intent of the Times was made clear in an editorial in which it insists that drivers must give up their COLA. The case advanced by both has two major contentions: Drivers make much too much money, and there no longer is enough money to pay them.

The article's subtitle roars that a decade of COLA has pushed Metro driver's top pay to third highest in the nation. It is a measure of the disconnect between the super rich like Blethen and the rest of us that he believes this genial fact will outrage the people of our county and compel us to accept Wall Street's immiserating demands. The reason we drivers have been able to hold on to our hard-won victories is largely the support we have had, and continue to enjoy, from our ridership. If the paper's intent was to intimidate us by inflaming our passengers, it hasn't worked. In the weeks since that edition hit the streets, only eight passengers have mentioned the article to me, each expressed support. Blethen's mistake is in his inability to appreciate how embittered working people are with Wall Street and the remorseless concessions which they and he now seek to impose. Most people here in King County are happy that their transit operators have been able to hold their ground when so many haven't been so fortunate.

Are our drivers overpaid? First, let's look at the paper's subtitle. It does not say that our average or starting pay puts us third. Indeed they do not. The Times chose the comparison which bests supports their point of view. They didn't evaluate our wages by where Metro ranks in proficiency vis-a-vis other transit agencies, that would have been embarrassing for them. They also ignored how much our drivers are paid in relation to what is expected of Metro drivers versus other transportation services around the country, that wouldn't do either. They just picked the one thing that best supports their invidious charge that we drivers are paid too much.

It may well be true that that Seattle isn't the third most expensive city in the nation, but it's not too far from it. The cost of housing, groceries and fuel here far exceed most American cities, and are much higher than most of the cities to which the Times compares us ( like Newark, Minneapolis, and Pittsburgh ). Much is made of the fact that we make more than drivers in New York City and San Francisco. According to Lindblom's article, we make 47 and 55 cents more per hour respectively, which is a 1.6 and 1.9 percent higher wage. In real terms, that's about twenty bucks gross per week. Are we supposed to squander our COLA, the single protection we have against Wall Street's criminal negligence, for an extra fifteen dollars in our paychecks every week! Is this small sum really generating all this animosity at the Times? Or is this just another example of Blethen's oft-voiced contempt for unions?

For every city to whom we compare favorably, there are others, like Boston and San Jose, whose drivers' top pay surpasses ours in markets where the cost of living is slightly less than here in Seattle. Metro's drivers are overpaid in relation to those in this city, underpaid when contrasted with those in that. We are right in the mix, where we should be. We live in an expensive place, and our pay is commensurate. The opprobrious charge leveled by Blethen and Lindblom is simply untrue.

The article then disingenuously stresses how much driver's pay has risen in the past few years, and how many have earned more than $75,000 or $100,000 last year ( 255 and 20 respectively ). In order to reach six figures, one has to work about 67 hours per week. How is this possible? Interred in the 33rd paragraph of a 43 paragraph story, long after most newspaper readers have moved on, Lindblom glumly admits that in response to their own audit, the county concluded that it would be more cost effective to increase overtime for existing staff than to hire new people and shoulder the expense of training and extra benefits. In other words, it is a result of Metro's own policy that twenty overworked drivers earned $100,000. Metro's overall labor costs, so onerous according to the Times, actually were ameliorated. They are currently running at about twenty-five percent of the budget, which is quite good, far from "out of control" as the Times would have you believe.

Frank Blethen dedicated most of his front page and a good deal more to convince his readership that paying Metro's avaricious drivers was busting the agency's budget and, if nothing was done, would lead to severe service rollbacks. This is just not so.

Conspicuously absent from the Times' lengthy discourse on Metro's budgetary problems was any mention of the fastest-rising cost: fuel. I was unable to ascertain the figures but a supervisor in the training office told me that they have about tripled. Metro has cited fuel costs as justification for requesting fare increases, which were granted on that basis. Since fuel costs are rising ten times faster than payroll, one can only wonder as to why the Times didn't consider this ink-worthy.

The worst was yet to come. Most of the data Lindblom uses comes from the Washington Policy Center, whose motto is "improving lives through market solutions." What the author doesn't tell you is that this is Kemper Freedmen Jr.'s think tank. He's hardly a disinterested party. Freedmen is a developer with a long history of opposing transit projects ( the ones which don't net him any money anyway ). As his advocacy group's motto reveals, he's a Wall Street devotee whose free-market mantra and ruinous "solutions" are the origin of this current fiscal meltdown.

Michael Ennis is Director of WPC Center for Transportation. His media role is to oppose any transit initiative which isn't supported by the Republican Party, no matter how cost-effective, green, or widely popular with citizens. One of his five core principles for "responsible transit policy" is that funds should be spent to alleviate congestion. This means road construction, which, as luck would have it, is how our friend Kemper Freedmen makes his millions. How fortuitous for him that the "non-partisan" Center's research always seems to cleave most agreeably with his commercial interests. In fact, there appears to be not a single point of divergence. What they think about most at Tank Kemper is corporate profits. His!

Ennis' breathlessly alarmist essays often appear in the Times, [1] so it came as no surprise that it was to him that our journagandist Lindblom turned to strike the key blow. The free-market cult has never been a friend to working people, and since the budgetary crises birthed by Wall Street's immolation of our economy, they have turned up the volume. In July, the sophists at Tank Kemper fired the first shot by producing a paper which despaired that drivers' pay was out of control. As we have seen, this is absurd, but no matter, the Tank still had water left in its hose.

Ennis blamed raises and overtime for Metro's inability to deliver most of the new service it promised. As previously noted, the increase in overtime was imposed on drivers by Metro as a result of a county audit which recommended it. It mitigated labor costs, it didn't exacerbate them.

The county has produced most of the new service it presented to voters for support ( hybrids, light rail, streetcar, Rapid Ride )! What little it hasn't been able to put on route is directly attributable to Wall Street. The budgetary shortfall is the offspring of the cash and credit shortfall. Despite receiving trillions in taxpayer dollars, the big banks are refusing to issue loans and thereby return desperately needed money back into the economy. This hoarding has resulted in businesses closing, unemployment, and shortages in public budgets. Wall Street has used the head-spinning sums of our bailout money to make acquisitions instead. Great for them, a disaster for us. Blaming public bus drivers for this is as ridiculous as it is reprehensible.

Unrestrained by skill, fact, wit, or scruple, Ennis dishes up a revolting lie: "While taxpayers and transit users have not received what they were promised, one group has benefited from the two tax increases, public bus drivers."

Firstly, the monies resulting from the tax measures of 2001 and 2006 were for equipment and service, not for driver's pay. At no time did our union ask for, or receive, any of it. The non-COLA raises we have received were not tied to either of these tax initiatives, and would have been the subject of negotiation whether the voters approved the measures or not.

As for the COLA raises we have received, once again, we have the WPC's friends on Wall Street to blame for that. Increases in the cost of living are the indirect result of currency inflation. And its rate is determined by the trillion dollar private monopoly we call our Federal Reserve Bank. It is owned by the same big banks which received our bailout money and are currently cash-starving the entire Western world. Our fault? One thing we can say about our hard-working huckster Mr Ennis, he does have a sense of humor.

The worst of the Times' deceptions, however, is their central point--there isn't enough money to pay us. Nonsense! Problems like this one has been around as long as Wall Street. This economic crash stands on the shoulders of countless others. This isn't the first time we've had the big banks shut off the money tap and blow our houses down, they've done it many times. We have had to clean up their messes before.

There are lots of potential solutions to this problem. During these last two years while Metro and their allies have been berating our drivers, they have been remodeling our service bases. Clearly this is something that can wait until Wall Street's gluttony is finally sated and the banks agree to release our money back into circulation and end the recession.

Whenever our union tries to propose alternate solutions we are met with defiance. Nothing short of the nuclear option--surrendering our COLA-- is acceptable to them. Metro is not at fault here. They didn't create this nightmare, they are not hoarding our national money and credit supply. Nevertheless, they are demanding the impossible. Our COLA is the only protection we have against the merciless effects of free markets and Wall Street's shameless irresponsibility. Our governments at all levels are powerless to save us from the ravages of these unregulated financial markets. We are yet in the beginning stages of the fallout from Wall Street's craven casino gambling. The cost of living is going to rise steadily over the next few years, Without a COLA, the real buying power of our paychecks will plunge steeply. Some of us will no longer be able to pay our mortgages, keep our kids in college, or care for aging parents. It is the worst possible scenario for us but yet is precisely this precious lifeline which Metro and their allies demand we sever.

A credit default swap is when someone holds a investment of some kind, say a bond, and wishes to offset the risk of the issuer defaulting. One option is to insure it. It's very much like playing black-jack in a Las Vegas casino. You have a good hand but the dealer is showing a face card, so for a small fee you can buy insurance from the house. On Wall Street, the major firms insure financial instruments just the way the casino insured your hand.

A naked credit default swap is when a third party, neither the bond-holder nor its issuer, makes a wager on whether a given financial instrument, in our case a bond, will default. The wagerer has no skin in the game, he just has an opinion as to whether the government or corporation issuing the bond will be able to make good and pay it off. It's like betting on a football game, the wagerer may have no interest in the game, he isn't affiliated with either team, he may not even be a fan, he just has an opinion as to which side will win and places his bet accordingly.

On Wall Street, predictably, it quickly got out of hand. The big banks placed huge bets and then hedged them by buying insurance. They were able to do this due to economic deregulation implemented by free-marketeers Bill Clinton and George W. Bush.

Many of these bets were placed on mortgage-backed securities ( MBS ). These were bundles of sub-prime mortgages from the housing bubble. One didn't need to be all broke out with genius to see that these were worthless, yet the richest banking houses in the world somehow didn't see it. They placed enormous bets on them, sometimes wagering many thousands times more than the value of the underlying financial instrument. And then they insured those bets. When this house of cards collapsed, the insurance companies, laden with worthless paper themselves, were unable to pay their naked credit default policy-holders due to the enormous sums wagered. This is precisely what happened to AIG.

All of this occurred under the nose of, and with the permission of, the Federal Reserve Bank, whose primary responsibility is to prevent economic instability.
As of this date, it is still going on. A bill to outlaw naked credit default swaps was defeated in the Senate.

CDOs? They are not at all what they sound like. They are bundled debt with no collateral securing it, much of it sub-prime mortgages, used as collateral. These highly dubious IOUs were used to buy real assets, or to raise credit. It is like going into a dealership and buying a $20,000 car and telling the dealer that your cousin owes you that sum and he'll give the money for the car next week, and then producing an IOU from your cousin confirming the debt. In real world the dealer would likely point you in the direction of the nearest exit. Not Wall Street. Thus did billions in fictive money enter the system and artificially inflate stock and bond markets. When this bubble inevitably burst, the life savings and retirement pensions of millions of Americans were lost.

Asking us to surrender our COLA is asking us to put ourselves at the mercy of the same remorseless Wall Street bunko artists and flim-flam men who created this mess in the first place. We would have to be insane to agree to this. It's like asking us to jump off the Aurora Bridge.

Retaining our COLA is not only an effective immunization against Wall Street's pandemics, it is a benefit to the people of King County. If we lose this precious protection, the buying power of our incomes will decline sharply over the next few years. That means we will have less money to contribute to the local economy. Six Wall Street banking families, most of them foreign, control over sixty percent of all the dollars extant internationally. This is recessionary. The goal for our community, any community, is to keep money circulating locally. The more broadly money is distributed, the better off we all are. Everybody should have a COLA. Everybody needs a prophylactic for protection against Wall Street's financially transmitted diseases. The solution to our economic woes is not eliminating COLA where it exists, but extending this crucial defense to everyone.

If I were to tell you plainly, dear friends, how I feel about the super rich like Blethen and Freedmen trying to rob me and my colleagues, most of whom make far less than the average here in King County, of the one guarantee that allows us to maintain the modest standard of living we have attained, I fear that it might prejudice you against me. It will suffice to say that I was not born to live in service, and I will not. I am not a commodity. My life is not a bond whose value is to be determined by Wall Street's rating firms and traded to and fro in exchange for promisory notes. I am not a collateralized debt obligation, damn it! Nor is my livelihood a source of ready income for the world's richest men when they get moneydrunk and lose too much at the Wall Street Resort and Casino. The argument that Wall Street has drunk so much from the public trough that there's nothing left for me is profoundly insulting. I will not be hectored into voting for a contract with no COLA by the likes of Blethen and Freedmen and their passel of professional liars. They are not going to blow our houses down again. It is time to say no to Wall Street, and get these shysters, once and for all, out of our lives.

[1] As I said before, he does have quite a sense of humor:
ennis says light rail will electrify i90