U.S. Economic/Financial News
Judge: Bankrupt United Allowed to Dump Pensions
United Airlines Bankruptcy Judge Eugene Wedoff ruled May 10 that United can dump all four of its employee pension plansunderfunded by $9.8 billionon the Pension Benefit Guaranty Corporation. United argued that this was essential if it were to exit bankruptcy, and will be a precedent for many other corporations. It also means another $5 billion obligation for the PBGC, which is already running a $23 billion deficit. It represents the biggest pension bailout in the PBGC's history (the previous largest was Bethlehem Steel, which cost it $3.6 billion). Many workers will receive far less money than promised. The PBGC reportedly agreed to take over United's pensions after United offered it $1.5 billion in notes and convertible stock, when it emerges from bankruptcy, where it's been since 2002. Talk about worthless IOUs!
United's Association of Flight Attendants is threatening to appeal Wedoff's decision and take other actions, and the Machinists are threatening a strike.
Other airlines are arguing that this gives United a huge advantage. The world's largest airline, American, will hold a lobbying day in Washington to urge Congress to let airlines stretch out pension payments.
Delta Airlines, which has lost $9.6 billion since 2001, is reportedly near bankruptcy. Delta is a leader in trying to get such legislation throughan exemption allowing airlines to stretch out catching up on pension funding over 25 years (!), rather than four years under current law. This legislation for the 25-year stretchout, introduced by two Republicans from Delta's home state of Georgia, had been reported to be dead in the Education and the Workforce Committee. Instead, legislation embodying the Bush Administration demandthat the PBGC, now $28 billion in deficit, needs to be protected, rather than pensionswill be put forward by that Committee's Chairman, Rep. John Boehner (R-Ohio).
United Unions Prepared To Strike
Three unions that represent United Airlines workers said they are prepared to strike to protect labor contracts. The International Association of Machinist and Aerospace workers announced that 94% of the members who voted authorized a strike. The Association of Flight Attendants, which has 21,000 members at United, said they would most likely respond with "chaos strikes," if the pension order is not reversed. The strike of flight attendants could take the form of a one-day national strike, or a strike on a single flight at a remote location.
United Airlines announced that its first-quarter losses more than doubled to $1.07 billion.
Financial Times: U.S. Real Wages Dropping Fast
The London Financial Times May 11 headlined "U.S. Real Wages Fall at Fastest Rate in 14 Years," citing the Times' survey of Bureau of Labor Statistics data. The drop in real wages, from September 2004 to March 2005, was at an annual 0.9% rate, the steepest rate of fall since 1991 during the Bush "41" recession. This assessment by the Times accepts as an inflation measure, the thoroughly doctored, hedonic fraud of the Consumer Price Index. So, only the pace and direction of the fall of real household incomes is indicated, not the real magnitude of it.
State V.A. Homes Fear Closure Due to Bush Budget Cuts
The new director of the National Association of State Veteran Homes testified in the Senate Veterans Affairs Committee hearing on Veterans' long-term care May 12, that the Bush Administration 2006 budget would cause 80% of residents in the state of Washington's Veterans Administration homes to become ineligible for care; they would be kicked out. Alfie Alvarado-Ramos testified that these patients would be the poorest, the most needy; they are the ones who need 24-hour nursing-home care, and those who have non-service-connected medical conditions. The budget cuts per diem rates to the state V.A. homes. The homes will close just as the number of elderly is rising, and the number of disabled and indigent increases.
Sen. Ken Salazar (D-Colo.), told of one state veteran home in his state, where 93 out 100 patients would be kicked out by the budget, stated the obvious: "This policy was driven by budget priorities."
V.A. 'Scratching the Surface' of Vets' Long-Term Needs
The Veterans Administration is "scratching the surface of supplying long-term care needs of elderly, disabled veterans," Sen. Larry Craig (R-Idaho) told the Senate Committee on Veterans Affairs hearing May 12. Expert testimony contained the following: 38% of veterans are of age 65 or older, as compared to 12% of that age in the general population. The number of veterans age 85 and older is expected to triple by 2012. More older veterans have a high level of disability, and are poorer than the general population, and they are being joined by many new veterans with disabilities after serving in Iraq. What is required is significant expansion of V.A. infrastructure, not the cuts as in FY 2006 Bush budget.
V.A. Cannot Provide Care for All Veterans
"Veteran Affairs alone cannot possibly provide nursing-home care for all the veterans who need it over the next decade," according to Dr. Jonathan B. Perlin, the newly sworn Under Secretary for Health in the Department of Veterans Affairs (V.A.), to a Senate hearing May 12. He used double-talk to justify undercutting state V.A. nursing homes, by speaking of providing "choices" to vets to stay at home, or get "community" care. One Senator exposed this, pointing out that the Government Accountability Office found such V.A. services were often not available.
Dr. Josh Wiener, Program Director of Aging, Disability, and Long-Term Care, Research Triangle Institute, N.C., pointed out that half of those in long-term care have dementia or Alzheimer's disease, or other serious problems which require specialized nursing care, and cannot be shifted to "the community."