U.S. Economic/Financial News
USAir Faces Liquidation; 30,000 Jobs, 3,000 Flights Gone
US Airways' second bankruptcy filing in two years on Sept. 12 is likely to lead into liquidation of the airline by early next year, according to most industry analysts cited in press coverage. The carrier does not have any debtor-in-possession financing arranged; it filed for protection to dodge a $110 million payment to its employees' pension fund on Sept. 15, to escape cash requirements of the $720 million in government-guaranteed loans it got during its last bankruptcy, and to try to force disastrous new cuts in salaries and benefits from its workers. The flight attendants' union rejected USAir's latest demanded concessions on Sept. 12, although the pilots' union has agreed to discuss them further. Liquidation has been the fate of 12 of the 15 companies with over $1 billion assets which have tried "Chapter 22" (two Chapter 11s) in the past decade.
Several key facts of USAir's failure make clear that re-regulation of the airline industry, not government bailouts of airlines, is the only way to keep air travel from shrinking to a 1950s-sized flight grid. Whereas USAir faced "low-cost competition" (i.e., non-union airlines with limited service) on 25% of its flights in 2001, only two years later it had such "Air Wal-Mart" competitors on 70% of routes. The same has bankrupted United, and if Delta Airlines shortly goes bankrupt as expected, 42% of flights in and from the U.S. will be on bankrupt carriers which are cutting those flights drastically. USAir has eliminated one of its six hubs (Pittsburgh) and in "Chapter 22" is likely to eliminate two more, Charlotte and Philadelphia. This cuts flights. It flew 400 planes on 4,800 flights in 2001; but 282 planes on 3,300 flights in 2003. While much attention is given declining losses, this is meaningless given USAIR's collapsing revenuedown 45% from 2000. Its 28,000 employees are 20,000 fewer than three years ago.
The new bankruptcy brings closer the bankruptcy and required government bailout of the Pension Benefit Guaranty Corporation (PBGC), whose director told Congress in July that if USAIR and United reneged against their pension funds, PBGC would be unable to handle the new load. USAir is indeed now ducking its pension fund payments, and United is attempting to do so as well.
Massive Job Loss in U.S. Aerospace Industry
The aerospace industrycritical to a science driver capability for the U.S. economyhas lost 200,000 jobs in the last three years, according to the Aerospace Industries Association.
Employment in U.S. Aerospace Collapsed by 25% in Three Years |
|
June 2001
|
June 2004
|
Total number aerospace jobs |
797,000
|
597,800
|
Total number non-aircraft jobs |
333,000
|
217,200
|
Total aircraft jobs |
233,000
|
197,300
|
Aircraft engine and part jobs |
99,000
|
82,900
|
Other aircraft part jobs |
131,000
|
82,400
|
LaRouche Youth Civil Service Policy Urgently Needed
"Operation Blue Roof"Army Corps' role in emergency Florida logistics indicates the kind of mass civil public works activity Lyndon LaRouche proposes for youth, in a new program for universal service. Robert Carpenter, Commander of the U.S. Army Corps of Engineers' Hurricane Charley Response and Recovery Office, issued a report Sept. 10, "Operation Blue Roof Progress at Full Force," referring to how the Corps is covering as many as 30,000 damaged roofs with blue tarp temporary covers, after Charley and subsequent storms. "The task is vast." One focus of this work is in Charlotte, Lee, DeSoto, Hardee, Highlands, and Polk Counties. As of Sept. 10, more than 6,000 roof coverings were in place. On Labor Day, 298 crews repaired 622 roofs. On Sept. 8, 310 crews completed 880 roofs, and so on. The Corps is supplying blue tarps to counties for direct distribution to homeowners. The extreme damage suffered in the Caribbean islands indicates the wide scale of this "first-response and recovery" that ought to be going on in our hemisphere by a vastly expanded U.S. Army Corps of Engineers mobilization, in the wake of the season's storms.
South Florida System of Dikes, Levees, Pumps Proves Its Worth
So far, the worst flooding crises in Florida, during the recent hurricane episodes, have slammed the areas with the least developed infrastructure, meaning the St. John River basin in northeast Florida, and Tampa Bay Basin to the west. However, the legendary Everglades regiondrained by a network of thousands of miles of channels, levees and pumps, has handled the summer torrents well. This system was built, and is managed by the Army Corps of Engineers and the South Florida Water District. The system came about after several extreme disasters over the past century. In 1928, a hurricane breached a flimsy dike, releasing floods from Lake Okeechobee. In 1947, twin hurricanes left South Florida under water for months. This whole region can receive up to 60 inches of rain a year, and is flat as a board. The Everglades drainage system that was eventually built comprises a network of structures to channel the water, so that 7 million residents, 40 million tourists a year, and agri-business have been located here. In 2000, Congress approved an $8 billion ecological make-over for the Everglades to downplay flood control, and revert areas to "nature." Today's events show that, without the drainage infrastructure, a new "Lake Florida" would be in place, and thousands dead.
Army Corps of Engineers Decimated by Budget Cuts
Budget cuts have forced the Army Corps Of Engineers' Pittsburgh district to lay off 29% of its workforce over the past three years, placing the huge waterway system in peril. Due to cuts in Federal funding under the Bush Administration's fiscal austerity policy, the Pittsburgh District of the Army Corps of Engineerswith Pittsburgh being the second-busiest inland river port in the nationissued lay-off notices Sept. 13 to 50 more employees, effective Nov. 19. The local office, which operates 23 locks and dams and 16 reservoirs, and oversees 42 flood-protection projects in the Great Lakes and Ohio River region, is being slashed from 790 employees in fiscal 2002 to about 560 employeesa workforce reduction of 29%. Since just March, 170 lay-offs have taken place. Federal funding for the district has been cut from $140 million three years ago, to just over $100 million this year, and a proposed $98 million for next year.
The Army Corps could be forced to close dams along the Youghiogheny and Monongahela Rivers, due to the budget cuts, warned Rep. John Murtha (D). Just to keep the dams in the area operating, he said, the Corps needs about $60 million but will only receive about $30 millionhalf the necessary amount. "It takes a lot of money to keep the dams going," Murtha declared. "There is a possibility they will have to close for safety issues," he added, noting that the funds needed for necessary upkeep are too meager to provide for proper maintenance.
Current Account Deficit Shoots to New Record
The U.S. current account deficit grew to a record $166.18 billion in the second quarter, with a $163.58-billion shortfall in trade in goodsreflecting the growing inability of the U.S. economy to produce the goods needed for its physical existence. This deficit is unsustainable, representing 5.7% of the nation's official output of goods and services. The current account gapthe broadest measure of trade and investment flows between the U.S. and the rest of the worldhit $313.34 billion for the first six months of the year.
U.S. Banking Casino Continues To Hyperinflate
According to the FDIC, U.S. commercial banks held $81.7 trillion in derivatives as of June 30, 2004, up from $77.2 trillion in the first quarter, and up 23% from $66.6 trillion on June 30, 2003. Backing this mass of side bets were $8.0 trillion in (overvalued) assets and $742 billion in (overstated) equity capital. This is a milestone of sorts, representing the first time the derivatives-to-assets ratio has topped 10-1.
Bush Budget Contains $3 Trillion in Hidden Costs
According to the Washington Post Sept. 14, President George W. Bush's spending plan has an unstated $3 trillion price tag over the next decade$1 trillion more than Democratic Presidential candidate John Kerry's proposed budget agenda, because making the Bush tax cuts permanent would cut revenue by $1 trillion, and privatizing Social Security would cost $2 trillion. This does not include costs for Iraq and the "war on terror."
Delphi Shuts Flint Plant; More Closures To Come
Delphi, the world's largest auto supplier, permanently shut down its Flint West, Mich. manufacturing plant, eliminating 450 jobs producing automotive generators, AP reported Sept. 13. Delphi, whose biggest customer is GM, had already slashed 4,925 jobs as of June 30; and imposed a "two-tier" wage structuredrastically lower wages for new employees. More factory closures are coming; according to a spokesman, Delphi will cease production at plants in Anaheim, Calif.; Olathe, Kan.; and Tuscaloosa, Ala.
|