In this issue:

Pension Guaranty Corp. Faces Bailout of Airline Pensions

Millions of Americans Lose Employer Health Coverage

BLS: Layoffs Are Highest Since the 1960s

Peoria Caterpillar Guts Wages, Health Care, Jobs

Vanishing Jobs and Population in Central Pennsylvania

Home Foreclosures Soar in Philadelphia

Consumer Group Calls for Electricity Re-Regulation


From Volume 3, Issue Number 32 of Electronic Intelligence Weekly, Published Aug. 10, 2004

U.S. Economic/Financial News

Pension Guaranty Corp. Faces Bailout of Airline Pensions

When United Airlines announced in July that it would stop making contributions to its pension plans while under bankruptcy protection, it raised the specter of defaulting on its pensions. If it does, the Pension Benefit Guaranty Corp., which already has a $9.7 billion deficit, would add another $5 billion to its red ink. Overall, 11 airlines have a combined deficit of $31 billion in pension plans covering 444,000 workers.

In 2003, there were 1,050 companies with an aggregate $279 billion in underfunded pension plans, down from 1,058 and $306 billion in 2002, but well above the 747/$111 billion in 2001, the 221/$20 billion in 2000, and the 166 companies with $18 billion in underfunding in 1999.

"The PBGC wasn't designed to withstand the level of underfunding that we are now witnessing in the system," said former PBGC head Steve Kandarian, who stepped down in February. "How does the agency withstand that kind of an assault, when you are talking about a $5 billion potential claim coming from one company and possibly more multibillion claims in the queue?"

"The similarities are incredible" when comparing the pension crisis to the S&L fiasco, which required a huge Federal bailout, said Emory University Finance Professor George J. Benston. He said that companies were "doctoring the numbers ... [and] especially doing it for steel and airlines. Shades of the savings and loan crisis. Same darn thing."

Under pension law, the $13 billion that United owes its pensioners cannot be taken away. However, the pension fund only has $7 billion in assets, and under bankruptcy law, the remaining $6 billion is an unsecured debt, putting the pensioners in the category of unsecured creditors. Were the bankruptcy judge to allow United to cancel its pension debts, the airline's pension debts and assets would go to the PBGC, which would have to make up the difference. Some pensioners would still lose out, since the PBGC only pays up to certain limits.

Millions of Americans Lose Employer Health Coverage

Nearly 9 million Americans lost employer health coverage from 2001 to 2003. The proportion of Americans under age 65 who receive health insurance through their employers fell sharply, from 67% in 2001, to 63% in 2003. This means that 8.9 million workers lost coverage, after accounting for population growth, according to an Aug. 1 report of the Center for Studying Health System Change. Escalating job losses were cited as the main reason for the dramatic drop, while insurance premiums jumped by 28%, and some employers stopped offering coverage. Low-income families were hardest hit, as the proportion with coverage declined from 37.4% to 32.5% during the three years.

State public-health coverage for children is falling for the first time in the six-year history of the program, amid budget cuts. Enrollment in the State Children's Health Insurance Program (SCHIP) dropped during the second half of 2003, as 11 states have made cutbacks, the Kaiser Commission on Medicaid and the Uninsured said July 23. Texas accounted for more than 50% of the decline, as 149,000 children were dropped from SCHIP since the beginning of FY 2004, as a result of state legislators projecting a slashing of $1.6 billion from Medicaid and SCHIP during the fiscal year.

BLS: Layoffs Are Highest Since the 1960s

Of all U.S. adult jobholders, 8.2% or 11.4 million people were permanently dismissed from their jobs during the first three years of the Bush Administration, the Bureau of Labor Statistics reported July 30. The current level of layoffs is reported to rank second only to the 9% rate during the 1981-1983 period, since the 1930s Depression.

Of 5.3 million persons who had worked for at least three years at time of their layoffs, 20% were still unemployed.

"No one should be surprised by the increasing frequency of layoffs, James Glassman, economist for J.P. Morgan Chase, said. "It is the echo of globalization. Companies are shifting production around more frequently to take advantage of low-cost centers."

Of those the BLS polled who said they found new jobs, 56.9% said they are now paid less than in their former jobs, compared with 46.6% in 1991-93 ("recession") and 42.2% in 1997-99 ("boom"). One-third of these re-employed had earnings losses of 20% or more.

Peoria Caterpillar Guts Wages, Health Care, Jobs

In a letter made public by Caterpillar Corp., in Peoria, Ill., July 20, the company proposes cutting starting salaries from $20-25 per hour, down to $10 per hour, and forcing workers to pay 5-10% of health premiums (from zero now) and deductibles of $1,000, the Journal Star reported July 30.

Caterpillar is threatening that the company will pack up and leave town, if the workers don't capitulate. We must "reach an agreement that enhances our ability to compete and succeed from these locations.... We must do it well because our future in these locations relies on it." The company is also attempting to crush the UAW local that represents its workers: Salaried and management employees have been trained to take over if the UAW strikes. Already, the firm has hired 1,000 "supplemental workers" with no benefits, who will only be made full-time workers if the union accepts the proposed contract—even though the supplementals will then get a pay cut from their supplemental pay!

Vanishing Jobs and Population in Central Pennsylvania

"It's almost as if all of Lewistown has been outsourced," lamented the Patriot-News Aug. 1. Over the past four decades, the population in the region has plummeted 29%, from 12,640 in 1960, to 8,998 in 2000. Due to a series of plant closures during the past six months—many in the name of moving production overseas—even dead-end jobs are hard to find in Lewistown (about 70 miles east of Altoona), despite the falling population. Likewise in neighboring counties, six plants closed during the past year. "Lewistown is decimated," says Bill Thompson, an instructor at Harrisburg Area Community College, where laid-off manufacturing workers take retraining courses for nonexistent jobs. Wal-Mart has destroyed downtown merchants.

Home Foreclosures Soar in Philadelphia

Mortgage foreclosures in Philadelphia reached a record high in March—reportedly worse than during the Great Depression—and continue at chilling levels: Over 700 families in Philadelphia lost their homes in July, the Philadelphia Daily News reported Aug. 4. The worsening foreclosure crisis in the city, as in Chicago, is due to lax lending laws, predatory lending practices by banks, and the U.S. economic breakdown.

In Monroe County, for example, mortgage foreclosures have risen dramatically over the past 10 years, according to the first of a series of reports released by the state Banking Department. Foreclosure filings have risen faster than housing construction in the county (located in the northeastern corner of the state, in the Pocono Mountains). From 2000 to 2003, 2,745 families were hit with foreclosure filings and an estimated 42% were forced to leave their homes. The number of foreclosures has jumped by 34% since 2000, and has shot up 242%—more than tripled—since 1995.

Nationwide, there were a staggering 22,768 new mortgage foreclosures in July, up 2.87% from the level in June, according to Foreclosure.com.

Consumer Group Calls for Electricity Re-Regulation

On the eve of the first anniversary of the Aug. 14, 2003 East Coast blackout, a report by the Association of American Public Interest Research Groups (PIRG), released July 30, documents the take-down of the reliability of the nation's electric grid through "restructuring," and calls for re-regulation of the industry. "Experiments in retail deregulation" should be ended, the report advises, and public accountability should be restored to the industry. The report points out that rate caps that were instituted as a lead up to deregulation are due to expire in many states. Prices will skyrocket, such as the recent double-digit increases in Maryland.

PIRG was an initiative by Ralph Nader over 20 years ago, and pushes "environmental" policies, and consumer-oriented programs. Most interesting was the response to the report from the energy "establishment." The Electric Power Research Institute—funded by the utilities with a policy of "going along to get along"—disputed many of the report's claims, and what it called an "alarmist tone." The North American Electric Reliability Council, which oversees grid operation across the country, admitted that it was a "true statement" that thanks to deregulation, "the grid is being used in ways that it wasn't designed for ... and this has increased the strain on it."

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