Pensions under the knife

AMERICAN AIRLINES has used bankruptcy to bludgeon its unions into accepting a freeze on pensions.

The airline will stop contributing to the pension funds for ground crews, ticket agents and flight attendants. Ironically, the freeze won't apply to pilots because their pension plan includes a lump-sum payment upon retirement, and the company is afraid that too many pilots would take the chance to retire.

American was threatening to ask a bankruptcy judge to cancel the pension plans entirely. That would have meant that some workers would lose pension benefits. The unions were afraid to take a chance on the judge.

The entire bankruptcy system is stacked against workers and unions. It is designed to favor creditors at the expense of workers' wages and pensions. Bankruptcy is increasingly being used to make companies more profitable by slashing wages and pensions.

Decisions are made by bankruptcy judges who typically come from large corporate law firms. Sean Lane, the bankruptcy judge in the American Airlines case, was a partner in the firm of Baker Hostetler, whose clients include companies like ExxonMobil, IBM, Morgan Stanley and ABC. Later, he was a top federal prosecutor, an assistant U.S. attorney for the Southern District of New York.

Another company, Hostess Brands, is also using bankruptcy court to threaten to void its contracts with the Teamsters and other unions. The Teamsters has countered with an offer to take $150 million in concessions, which would include the suspension of pension payments for a year. These givebacks would follow some $110 million in concessions made three years ago.

The United Auto Workers has urged Congress to reform the bankruptcy laws to stop companies from using it against workers. Unfortunately, the labor movement hasn't made this a political priority. And the chances that President Barack Obama or the Democrats in Congress will fight for it are approximately those of a snowball in hell.

THE AMERICAN Airlines pensions freeze is only the latest development in the ongoing attack on workers' pensions--especially public employee pensions. Since 2008, 43 states have reduced pension benefits for new public-sector employees, according to a report by the National Conference of State Legislatures. Public workers are especially dependant on their pensions because 25 percent of them are not eligible for Social Security.

New Jersey and New York have become the latest states to cut their workers' pensions. Both were truly bipartisan efforts. In New Jersey, a right-wing Republican governor cooperated with some Democratic legislators. In New York, a liberal Democratic governor proposed pension cuts that were passed by both the Democratic State Assembly and Republican State Senate.

New Jersey Gov. Chris Christie, a rising star in the national Republican Party, is trying to blame public employees for the state's deficit. But he needed Democratic votes to cut the pensions.

Their deal will eliminate cost-of-living adjustments entirely. New workers will have to work longer to earn smaller pensions, and all public employees will have to pay more into their pension fund.

The CWA, one of the largest public employees unions in New Jersey, attacked the pension cuts. Its political director, Bob Master, told the Wall Street Journal, "This is an outrageous attack on the collective bargaining rights of New Jersey's public workers and their standard of living. Nowhere else in the country have Democrats turned their backs on working people."

Unfortunately, Masters didn't need to look any further than neighboring New York to see Democrats doing just that. Gov. Andrew Cuomo, who reportedly wants to run for president, forced through a plan that will create a lower pension level for new hires in the public sector.

Cuomo's deal will also raise the retirement age. Workers who retire early will collect pensions that are 6.5 percent lower per year because most overtime won't count toward their pensions. All government workers will have to pay more into their retirement plans. Municipal as well as state workers will have their pensions cut.

Union leaders who backed Cuomo when he ran for governor in 2010 reacted with shock and outrage. Lillian Roberts, executive director of AFSCME District Council 37, the largest New York City union, released a statement saying, in part, that it was "a sneaky way to privatize the state and city pension systems--modeled on George W. Bush's defeated plan to privatize Social Security. It would funnel huge profits to the bankers who sent our economy into recession and leave retirees at the mercy of the stock market."

Danny Donohue, president of the Civil Service Employees Association, the largest union of state employees, issued a press release stating that, "This deal is about politicians standing with the 1 percent--the wealthiest New Yorkers--to give them a better break while telling nurses, bus drivers, teachers, secretaries and laborers to put up and shut up."

But by November, these same union leaders will be back endorsing Democratic politicians. They will say that they have no choice because the Republicans are even worse. In the real world, this means it's better to have Cuomo cut your pension than a Republican do the job.

Unions could change all this by running their own independent candidates. Democrats would think twice about attacking labor because they might actually be voted out. At the very least, they would face losing the unions' endorsement and their contributions.

Independent labor candidates would dramatically transform the whole political spectrum. Suddenly, there would be candidates for the 99 percent, saying tax the rich to pay for jobs, education and public services. There could be a coalition of the dispossessed--everyone from Occupy Wall Street, to tenants, to African Americans, Latinos and Asian Americans.

Labor has a simple choice. If they keep supporting Democrats, there will be more cuts in wages and pensions for public employees. The cuts to social services will become even more severe. If labor dares to run its own candidates, a whole new political world is possible.