THE ROLE OF LABOR UNIONS

Here’s issue #37 of my Policy and Politics Newsletter, written 6/28/12. Labor unions have been in the news quite a bit lately. This issue focuses on the role of unions in our society and economy.

Labor unions allow workers to approach employers as a group to discuss working conditions, pay, benefits, and other workplace issues. This affects the balance of power between workers and employers.

If you as an individual employee approach your employer about any of these issues, for example, receiving paid sick days if you currently had none, where does the balance of power lie? With the employer, of course. But if workers as a group approach the employer about such issues the balance of power is quite different.

Pay is probably the first item that comes to mind when thinking about employer – employee issues. There is lots of evidence that when employees are members of unions and bargain collectively on pay, they average 10 – 30% higher pay after controlling for other important variables. [1]

Employee pay is ultimately about how the profits of a business are divvied up among front-line or on-the-floor workers, senior executives and managers, and owners (which may be senior executives or stockholders). The balance of power among these groups affects how the rewards of the business are split. If workers participate in the discussion as a group, i.e., as members of a union, the result will be different, as indicated by hard evidence, common sense, and economic theory. Highly visible examples of this have been the negotiations between professional athletes and team owners in basketball most recently, but also in football, baseball, and hockey.

Therefore, it’s not surprising that as union membership in the private sector has dropped dramatically (from 34%in 1954 to 7% today [2]), income inequality has widened. Senior executives and stockholders have gotten much richer, while the rest of us have barely maintained our standard of living. The share of profits going to workers’ pay is the smallest it’s been since tracking began in 1947. [3]

This has not just increased in income inequality, but has undermined the middle class broadly. Union members’ pay and benefits used to set a standard in many sectors of the economy and to some extent for the economy as a whole. Non-union workers would receive similar compensation because there was competition in the job market, so companies with non-union workforces had to pay competitively to attract good workers. As union membership has declined, this is less of a factor in the job market and therefore there is downward pressure on wages and benefits.

The erosion in benefits has been very visible. Fewer and fewer workers have company managed pension plans, which were standard for union workers. And workers are paying more and more for their health care. Reductions in job security and increasing use of part-time workers are also partially the result of decreased union membership. Other issues that unions over the years have had an impact on are the length of the work week, overtime rules, availability of paid vacation and sick time, safety in the workplace (there are an estimated 58,000 workplace related deaths each year [4]), the minimum wage, unemployment and workplace injury compensation, how layoffs are handled, unfair or arbitrary actions by supervisors, and discrimination in hiring, pay, and promotions in the workplace.

Without or with weakened unions, union and non-union employees have less power and employers have more power. As a result, workers are likely to receive less pay, fewer benefits, and experience less desirable working conditions.

The next issue of the newsletter will address the reasons for the decline in private sector union membership.

[1] Wikipedia, retrieved 4/23/12, “Labor unions in theUS,” en.wikipedia.org/wiki/Labor_unions_in_the_Unitede_States

[2] Bureau of LaborStatistics,US Dept. of Labor, 1/27/12, “Union members – 2011”

[3] Reich, R., 3/2/12, “Bye bye American pie: The challenge of the productivity revolution,” retrieved on 3/3/12 from www.commondreams.org/view/2012/03/02-6

[4] Nader, R., 3/30/12, “If big labor would fight millions would join them on the ramparts,” retrieved at http://www.commondreams.org/view/2012/03/30-5

FIXING THE FILIBUSTER

Here’s issue #36 of my Policy and Politics Newsletter, written 6/15/12. The previous issue outlined the abuse of the filibuster [1] and its impact on the gridlock in Congress. This issue focuses on what can be done about it.

The requirement for 60 votes to end debate and stop a filibuster is part of the Senate’s rules of operation. This cloture rule, as it is called, was adopted in 1975, so it is not part of the Constitution or even a rule with great historical tradition. [2] It means that 41 Senators, who potentially represent less than 15% of the US population, can bring progress in the Senate to a halt.

The Founding Fathers and the Constitutional Convention considered and rejected requiring a super majority vote to pass legislation. They established the fundamental principle of our democracy of majority rule in a legislative body. [3] As a result, the Constitution specifically lists six instances when a super majority vote is required, such as impeachment, overriding a presidential veto, ratifying a treaty, and amending the Constitution. [4]

The current, unprecedented use of the filibuster is largely unreported by the media. They typically describe the need for 60 votes to proceed in the Senate as ordinary procedure and rarely differentiate a bill or other matter that had enough votes to pass (51 or more) but was filibustered (i.e., didn’t have the 60 votes needed to end debate) from one that didn’t have the 51 votes to pass. [5]

Senator Tom Harkin (Democrat from Iowa) has proposed that the first cloture vote to end debate require 60 votes, but that over a period of days or weeks the required vote fall to a simple majority of 51 Senators. This would allow ample time for debate and discussion, in the Senate and with the public, but would provide an incentive for compromise and an ability to stop obstruction. He originally introduced this proposal in 1995 when the Democrats were in the minority, so he is offering it as an institutional reform, not to gain a partisan advantage. [6] Other Senators have presented other proposals to change the Senate’s rules to weaken the power of the filibuster. However, it takes 67 votes to change a Senate rule in the middle of a two year Congressional session. A simple majority vote of 51 Senators can change the rules when they are adopted at the beginning of a session, which occurs after an election (e.g., in January 2013).

In May 2012, a lawsuit was filed against the Senate claiming that the filibuster is unconstitutional. It was brought by four members of the US House of Representatives, three immigrant students (who would have been helped by the DREAM Act that was filibustered), and the nonpartisan, good government group Common Cause. [7] [8]

There is growing agreement that the filibuster is being seriously abused and significantly harming the ability of our federal government to govern effectively. Because of the partisan implications of filibuster reform, it is unclear whether this consensus or the current efforts to fix the filibuster will reduce its use.

[1] A filibuster occurs when one or more Senators refuse to end debate on a piece of legislation or other matter. It requires a super-majority of 60 out of 100 votes to close off debate (cloture) and allow a vote on the bill or other matter.

[2] Wikipedia, retrieved 6/8/12, “Filibuster in the United States Senate”

[3] Harkin, T., 6/30/10, “Fixing the filibuster,” The Nation

[4] Millhiser,I., 5/15/12, “Four members of Congress sue to declare the filibuster unconstitutional,” Think Progress

[5] PR Newswire, 12/18/07, “Record breaking: Senate conservatives use filibuster for 62^nd time in this session of Congress,” United Business Media

[6] Harkin, T., 6/30/10, “Fixing the filibuster,” The Nation

[7] Wong, S., 5/14/12, “Group sues Senate to scrap filibuster,” Politico

[8] Millhiser,I., 5/15/12, “Four members of Congress sue to declare the filibuster unconstitutional,” Think Progress

THE FILIBUSTER: WEAPON OF OBSTRUCTION

Here’s issue #35 of my Policy and Politics Newsletter, written 6/10/12. It focuses on the filibuster as an important problem contributing to the gridlock in Congress.

The use of the filibuster [1] – or the threat of a filibuster – by the minority party in the Senate to block action has become much more frequent in the last six years, accelerating a trend that goes back to the 1970s. “The filibuster … became a routine weapon of obstruction” according to Mann and Ornstein in their Washington Post article of April 27 [2] (see Newsletter issue #32). Traditionally, it was used to block legislation, such as civil rights laws. More recently, since 2005, a filibuster or the threat of one has been used to block presidential nominations of judges. [3] Most recently, it has been used to block presidential nominations for positions in the executive branch and to obstruct progress in general.

The official Senate statistics only track the formal motions to end a filibuster, not the threats to filibuster, so they understate the use and impact of the filibuster. In the last six years, since the Democrats gained control of the Senate, the occurrence of formal motions to end filibusters by the Republican minority has doubled (average per two year Congressional session of 138 vs. 65 in the previous four years when the Democrats were the minority). The pattern of the Republicans increasing the use of the filibuster also occurred in the 1987-94 (average of 58 vs. 38 in the previous six years with a Democratic minority) and in 1971-80 (average of 32 vs. 7 or fewer in all previous Congressional sessions). [4]

Presidents used to receive routine approval of personnel for high-ranking executive branch positions that require Senate approval because it was seen as the President’s right to build his own team. Recently, however, the Republicans have blocked some of President Obama’s executive branch appointments. Most notably, they threatened a filibuster to block his nomination of anyone to head the Consumer Financial Protection Bureau (CFPB). This body was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in the wake of the 2008 collapse of the financial sector, to protect consumers from abuses particularly in mortgage lending, but also in credit card and banking practices. To prevent the CFPB from functioning effectively, the Senate Republicans threatened to filibuster the appointment the head of the CFPB, first Elizabeth Warren (so Obama never formally nominated her) and then Richard Cordray (former Ohio Attorney General). Obama eventually appointed Cordray without Senate approval when the Senate was in recess so the agency could function. [5]

On the judicial front, Republican filibusters and other delaying tactics have created a situation where nearly one in nine federal judgeships sits empty (80 positions in the District and Circuit Courts), and nearly half of those vacancies are in courts so overburdened that they have been deemed judicial emergencies. As-of March, there were 22 judicial nominees who had been approved by the Judiciary Committee and were waiting yes or no votes in the full Senate. Sixteen had strong bipartisan support in the Committee, having received unanimous support or one dissenting vote. The wait for full Senate votes on committee-approved nominees is averaging over 3 months. For comparison, under President George W. Bush the wait was less than one month. Of the 22 filibusters of district court nominees that have occurred in the last 60 years, 19 have been of Obama nominees.

On the legislative front, the filibuster threat has been used to block the legislation preventing a doubling of the interest on student loans, the Paycheck Fairness Act promoting gender equity in wages, attempts to extend unemployment benefits, the reauthorization of the Export-Import Bank, the DREAM Act providing a path to citizenship for immigrant children brought to the country when they were quite young, and the DISCLOSE Act that requires increased disclosure of political contributions. The last three of these had passed in the House of Representatives and would have passed in the Senate except for a filibuster. [6]

As Republicans filibuster or threaten to filibuster 70% of the major legislation in the Senate, not only is important legislation blocked, but laws that ultimately pass are watered down, often hopelessly convoluted, and sometimes include irrelevant or wasteful add-ons or earmarks as necessary to get the 60 vote super-majority needed to move to a vote. The filibuster incentivizes grandstanding and the power of small minorities (sometimes an individual Senator’s threat of a filibuster) rather than effective governance. [7]

The next issue of the newsletter will examine efforts to limit the impact of the filibuster.

[2] Mann, T.E., andOrnstein,N.J., 4/27/12, “Let’s just say it: The Republicans are the problem,” The Washington Post. Adapted from their book “It’s even worse than it looks: How the American Constitutional system collided with the new politics of extremism.”

[3] Wikipedia, retrieved 6/8/12, “Filibuster in the U.S. Senate”

[4] U.S. Senate, retrieved 6/8/12, “Senate action on cloture motions,” http://www.senate.gov/pagelayout/reference/cloture_motions/clotureCounts.htm

[5] Editorial, 1/28/12, “Filibustering nominees must end,” The New York Times

[6] Wong, S., 5/14/12, “Group sues Senate to scrap filibuster,” Politico

[7] Guess, S., 1/21/10, “Filibusters are strangling the Senate,” The Guardian

STUDENT DEBT: THE NEXT MIDDLE CLASS CRISIS?

Here’s issue #34 of my Policy and Politics Newsletter, written 6/6/12. It examines the rising levels of student debt.

Total student debt topped $1 trillion dollars recently (surpassing credit card debt) with borrowing exceeding $100 billion for the first time in 2010. The average 2010 graduating senior who had a student loan owed a little over $25,000 and 17% of graduating seniors’ parents had loans, and they averaged $34,000. Family incomes, grants, and public investments in higher education have not kept up with rising higher education costs, and therefore the use of loans has increased. Use by older students has grown as they pursue re-training and further education in an effort to increase their chances of landing a good job. Parents are taking on increasing debt to support their children’s education (roughly 10% of the total or $100 billion) and increasing numbers of seniors who are receiving Social Security owe money on student loans.

There is growing concern that student loan defaults could become a problem for lenders. Among members of the Class of 2005 who had begun repaying loans, an estimated 25% have missed at least one payment, making them delinquent, and 15-20% have defaulted, having been delinquent for nine months or more. Once default has occurred, the full amount of the loan is due immediately and interest, penalties, and fees can accumulate. Also, for federal government loans, the borrower loses eligibility for loan forgiveness and future aid, and can also have wages, tax refunds, and federal benefits (including Social Security) garnished. There is no statute of limitations (as there is for most crimes except murder and treason), so borrowers are responsible for the loan literally forever.

There is no relief from student loans under bankruptcy except under very rare and difficult to assert hardship situations. Prior to 1976, student loans were forgiven in bankruptcy, but since then bankruptcy laws have been tightened and in 2005, in a major rewriting of the bankruptcy laws (with a big push by financial institutions wanting to make it harder for consumers to escape credit card debt), student loans were made “non-dischargeable” except for “undue hardship.” This provision was slipped into the 2005 law by an unidentified lawmaker with no hearings or public discussion. After the law was passed but before it went into effect, the House Judiciary Committee recommended that this student loan provision be repealed because less than 1% of student loans were being discharged in bankruptcy. However, repeal never happened. [1]

The student loan debt burden is hampering the economic recovery; it dampens consumer spending, which is what drives our economy. The middle class is getting squeezed again. It is struggling to maintain its standard of living through higher education but can only afford it with increased debt. With high unemployment, jobs that reward education and allow students to pay off their debt are hard to get. The middle class has no economic margin. If they have jobs, wages and benefits are stagnant at best, and families have increased work hours as much as possible. Home prices are depressed with no equity to tap and credit card debt is high. Defaulting on student debt could be the next crisis for middle class families – and for lenders. Long-term delinquency rates on student loans (around 9%) are already higher than they are for mortgages, auto loans, and home equity lines of credit. [2]

In the midst of this, the interest rate on federal student loans will double, from 3.4% to 6.8%, on July 1 unless Congress acts. This will affect 7.4 million students. The cost for keeping the rate at 3.4% is about $6 billion in lost revenue. (This is less than 0.2% of the federal budget of $3.8 trillion including Social Security and Medicare.) Despite the fact that the federal government can currently borrow money at rates well below 3%, in the current political and fiscal environment every reduction in projected revenue must be offset. The fight in Congress is, ostensibly, over how to pay for the cost. The Republicans have proposed cutting preventive health care programs in the new health care law. This was defeated. The Democrats’ version had 51 votes but was filibustered by the Republicans. [3]

In addition, to keeping the interest rate low, advocates are calling for reinstating bankruptcy relief, a reasonable statute of limitations on loan collection, and controls on private interest rates and collection practices. [4] [5]

[1] National Association of Consumer Bankruptcy Attorneys, 2/7/12, “The student loan ‘debt bomb’:America’s next mortgage-style economic crisis?”

[2] Common Dreams, 5/31/12, “Student debt explodes, climbing 275% since 2003,” www.commondreams.org/headline/2012/05/31-8

[3] Associated Press, 5/26/12, “Senate rejects two plans on student loan rates,” The Boston Globe

[4] Brown, E., 5/11/12, “Indentured servitude for seniors: Social Security garnished for student debts,” Common Dreams, www.commondreams.org/view/2012/01/11-8

[5] National Association of Consumer Bankruptcy Attorneys, 2/7/12, see above