States cut social programs as deficits deepen

By Hiram Lee
1 August 2009

As the new fiscal year begins, the economic crisis has left many states in the US unable to successfully put a budget into place. North Carolina, Arizona, Connecticut, Michigan and Pennsylvania have yet to establish a budget for the 2010 fiscal year. Many of the states that did succeed in planning a budget for the new year still face enormous deficits.

A new report from the Center on Budget and Policy Priorities (CBPP) provides an alarming picture of the situation. Entitled “New Fiscal Year Brings No Relief From Unprecedented State Budget Problems,” the CBPP report states that “At least 48 states have addressed or still face shortfalls in their budgets for fiscal year 2010 totaling $163 billion or 24 percent of state budgets.”

In response to budget shortfalls, states have carried out deep cuts to essential social services. The CBPP reports that “budget difficulties have led some 39 states to reduce services to their residents, including some of their most vulnerable families and individuals.” The numbers are staggering. Twenty-one states have made cuts that will restrict access to health care services for low-income families. Twenty-two states are “cutting medical, rehabilitative, home care, or other services needed by low-income people who are elderly or have disabilities, or [are] significantly increasing the cost of these services.”

Thirty-two states have made cuts in funding to colleges and universities while 24 states have made cuts in K-12 and early education. Forty-one states have had to reduce the hours of state employees or the size of their public workforce.

In North Carolina, where layoffs are widespread and the unemployment rate is at a record high of 11 percent—89,500 manufacturing jobs have been wiped out since 2007—state workers are now bracing themselves for the worst. In the Burlington, North Carolina school system alone, 130 teaching assistants have been laid off as a result of the state’s budget crisis. At least 200 teachers have been told they may also lose their jobs as the start of the school year draws nearer.

North Carolina’s poor and unemployed are increasingly turning to a woefully-unprepared system of private charities. The Winston-Salem Journal recently reported that this month the Second Harvest Food Bank of Northwest North Carolina ran out of food for the first time in its 28 year history. The organization has been unable to keep up with the demand for food which has risen an alarming 76 percent this year. According to the latest numbers, 20 percent of North Carolina’s children live in poverty.

Arizona, another state yet to establish a budget, has cut by 20 percent the amount of state funding received by families with foster children. Azcentral.com reports that “The cut dropped the monthly average for fostering a child from $910 to $728 and annual funding for clothing, diapers, books and education expenses were cut in half.”

In addition to slashing programs for Arizona’s children, plans are underway to sell the state House and Senate buildings. These and other state buildings would be sold off to investors, leased, and gradually “repurchased” by the state over the next 20 years.

The list of attacks on the living standards of poor and working class people is overwhelming. To mention only a few examples, Illinois will cut $40 million from programs providing prescription drugs to the elderly and the disabled. Washington state has cut 40 percent of funding for a program that provided low-cost health insurance for the poor. Ohio and Louisiana are both ordering cuts and facility closings that will affect those struggling with mental health issues and addiction. All of these programs are being slashed at a time when the unprecedentedly high level of unemployment makes them more necessary than ever.

The story repeats itself from one state to another. Workers are told there is no money available and that they will have to shoulder the burden of a crisis for which they aren’t to blame. Cuts in the most basic and essential social programs are combined with a reckless and short-sighted juggling of finances.

As the most vulnerable are asked to sacrifice and tighten their belts, there appears to be no limit to the funds available to bailout banks and no limit to the willingness of the two big business parties to clear the way for the further accumulation of personal wealth by a narrow elite. Representatives of both the Democratic and Republican parties, at all levels of government, are seizing on the current crisis as an opportunity to roll back any social gains that have been achieved through the struggles of workers over the past decades.

Billions in bonuses for bailed-out bankers

1 August 2009

Nine major Wall Street banks that were among the biggest recipients of the US government bailout paid out nearly $33 billion in bonuses last year, including awards of $1 million or more to nearly 5,000 people, according to a report released Thursday by New York state’s attorney general. Six of the nine banks paid out more in bonuses than they made in profits—proving that the billions from the US Treasury went straight into the pockets of the best-paid executives and traders.

The nine banks awarded the bonuses—the largest in history—despite recording combined losses of $81 billion, and lining up to receive $165 billion in cash infusions from the US government. Citigroup and Merrill Lynch lost $55 billion combined and still awarded $8.9 billion in bonuses. The three most profitable firms, JP Morgan Chase, Goldman Sachs and Morgan Stanley, awarded bonuses that amount to approximately double their 2008 profits: $9.6 billion in combined profits compared to $18 billion in bonuses.

The total bonus payout for each bank, together with the number of million-dollar-plus bonuses awarded, is as follows (Bank of America and Merrill Lynch merged on December 31, 2008, so their figures are presented separately):

Bank	Bonus total	# >$1m
JP Morgan Chase	$8.7 billion	1,626
Goldman Sachs	$4.8 billion	953
Citigroup	$5.3 billion	738
Morgan Stanley	$4.5 billion	438
Merrill Lynch	$3.6 billion	696
Bank of America	$2.8 billion	200
Bank of New York Mellon	$945 million	74
Wells Fargo Bank	$978 million	62
State Street Bank	$470 million	44

Of the 4,793 bonus millionaires, 836 received bonuses of more than $3 million apiece, and at least 40 received more than $10 million apiece. The best paid banker, Citigroup’s Andrew Hall, received $98.9 million for 2008, while its CEO Vikram Pandit took in $38 million. The bank itself had to be bailed out twice, with $45 billion in government aid.

These figures refer only to bonuses, usually paid at year’s end, and do not include the six, seven and eight-figure salaries and other compensation paid out to the top Wall Street “earners.” And the figures for 2009 are likely to be considerably higher—thanks to the run-up in the stock market generated by the bank bailout and other Obama administration handouts to the wealthy. Goldman Sachs, for instance, has already set aside $11 billion for compensation, more than double its total in 2008.

The report sheds light on the parasitic and socially destructive role of the American financial aristocracy. What did these 5,000 gentlemen and ladies accomplish in 2008 to justify their million-dollar paydays? They played the central role in the greatest financial collapse in the history of the world, one which has wiped out untold tens of trillions of dollars in wealth, bankrupted giant corporations and entire countries, and plunged the world into the deepest economic crisis since the Great Depression.

One could easily justify arresting the lot of them and parading them before television cameras as a public demonstration of the utterly irrational character of contemporary capitalism. But these are the best-paid and most highly valued servants of the super-rich, the ones whose past financial manipulations added billions to the wealth of the billionaires. Accordingly, they are to be protected from the outrage felt by the vast majority of the population.

The state attorney general’s report does not name a single one of the 4,793 bonus millionaires, citing “privacy” considerations. No such discretion is observed for small businessmen compelled to close their doors, homeowners foreclosed and evicted, or workers who lose their jobs and must file for bankruptcy. All these names can be found easily enough on the Internet.

Compared to these figures, the $165 million in bonuses that were allocated by bankrupt insurance giant AIG, which created a public furor in March and led Obama to intervene to block legislation limiting bankers’ pay, is a drop in the bucket. The press coverage of the bank bonuses, particularly on the television networks, was notably restrained, particularly coming amid reports of growing unemployment and social misery (the New York Times carried the bonus story side by side with a report on homeless people living in tents).

What could one do with the $33 billion wasted on bonuses to the Wall Street mafia? The sum is one-third larger than the budget deficit for California, which has compelled widespread cutbacks, furloughs and elimination of vital social benefits for millions in the most populous US state.

According to one study, total compensation at the nine banks for this year, 2009, will hit $156 billion, more than the projected $139.2 billion in budget deficits of all 50 states combined, for the fiscal year that began July 1. This study estimates that while the aggregate net income of the nine firms will fall from $255 billion in 2006 to $211 billion this year, their aggregate compensation will rise from $143 billion to $156 billion.

In other words, the Wall Street elite will see its personal income rise, even though the income of the institutions they control declines, and the wider economy plunges into depression. This narrow social layer that controls the financial levers stands as an absolute obstacle to any rational allocation and development of society’s resources. In fact, in its blind greed and obsession with self-enrichment, it undermines the viability of the very firms it dominates.

Both the Bush administration last year and the Obama administration today are the political servants of this corrupt, parasitic social layer. It was to protect the interests of a few hundred billionaires and a few thousand Wall Street bankers and traders that Democrats and Republicans joined forces last year to push through the $700 billion bailout, the first in a series of raids on the Treasury which have mortgaged the entire resources of the country to the financial oligarchy.

White House spokesman Robert Gibbs delivered the Obama administration’s response to the Wall Street bonus report. “The president continues to believe that the American people don’t begrudge people making money for what they do,” he told the media.

This slavishness before Wall Street is in sharp contrast to the ruthless demands of the White House and its “czars” for the destruction of auto workers’ jobs, the closing of auto dealerships, and the implementation of austerity policies by every state and municipality.

Only three days before the bonus report, Obama gave a lengthy interview to the editors of BusinessWeek magazine for a cover story assuring Corporate America that he was not anti-business. “My working assumption has always been, if the market could do it better, have the market do it,” he said. “I have very little confidence, as I said, in some sort of command-and-control regulatory regime. I think businesses create jobs. And I’m a big believer in the profit motive...”

Obama is a political tool of the corporate and financial elite, and his policies are dispelling whatever illusions were promoted among working people by the election campaign and the media celebration of the election of the first African-American president. The working class must break with the Democratic Party and build an independent political movement to defend its own class interests.

At the forefront of this struggle must be the demand to break the grip of the financial mafia over American society. The nine big banks profiled in the bonus report, and the rest of the major financial institutions, must be placed under the ownership and democratic control of the American people as a whole. The resources plundered by this predatory social layer must be taken back and used to meet social needs—for jobs, education, health care, the repair of the social infrastructure and the natural environment.

A socialist policy of nationalization of the banks and the abolition of the stock exchange and all other forms of parasitic financial swindling is the only answer to the criminality and greed revealed in the Wall Street bonuses.

Patrick Martin