Carla Katz on the 'F Word'

There have been numerous press stories covering the "F" word in the past month-furloughs, not the other New Jersey favorite.  The fight over furloughs has been characterized by the press in a variety of ways. The Governor's "tough times budget" spin-the state is in an economic meltdown, everyone must share the pain, and 14 unpaid days and a wage freeze is better than layoffs. The unions' collective message-a contract is a contract and furloughs (AKA pay cuts) and demands for givebacks of negotiated wages undermine the collective bargaining process and unfairly penalize middle class working families who have already made massive concessions and cannot afford to give more in this troubled economy any more than their neighbors can.

Some of this battle is playing out on the streets, some in the press, and now also in the courts as the state appellate court  has recently agreed to hear argument on the issue of public worker furloughs and whether an emergency rule of the Civil Service Commission was an illegal end around the contract as the unions say or a proper exercise of government in "imminent peril" as Governor Corzine says.  Similar high profile furlough battles are taking place across the country, including in California and Washington State, and in cities like Newark where the Mayor just proposed city employees take 18 furlough days over the next year.

Even though furloughs are a hot topic, the issue is not really the "F "word but two  "C" words-Contract-and a "C" word that we rarely discuss-Class. How is it that an employment contract is so inviolate that it warrants government protection of AIG executives' $23 million dollar bonuses while a contract that protects the wages of regular workers who earn $50 grand or less a year is not?   Why is it that taxpayer dollars spent on high paid executives is a "binding obligation" but the legally binding collective bargaining agreements for thousands of middle-income state workers, police, firefighters and local government workers are not?

Of course, I am referring to the most massive public bailout of a financial institution in this country's history-of the insurance giant American International Group (AIG) that is paying hundreds of millions of dollars in bonuses to executives who presided over the transactions that bankrupted the company and threatened the world economy.  It is well publicized now that AIG, which received $170 billion in bailout funds, is paying out a reported $165 million in bonuses to executives in the financial products division who presided over the company's nearly 100 billion dollar losses in 2008.  Those bonuses are on top of the hundreds of millions of dollars in so-called "incentive pay" and "retention pay"  coming out of taxpayer pockets to bail out  AIG executives.   

When popular outrage at the AIG bonuses hit fever pitch, Treasury Secretary Timothy Geithner is reported to have called  government-appointed AIG Chairman Edward Liddy to demand the executive bonuses be reduced.  Liddy responded that the bonuses were "binding obligations" as they were part of the AIG executives' employment contracts and that failure to pay them might provoke lawsuits.  Responding to the public backlash, President Obama demanded that the Treasury Secretary "pursue every single legal avenue to block these bonuses and make the American taxpayers whole." Geithner promised to recoup some of the bonus money by deducting it from future AIG aid.  But that still means the executives get to keep the money.

In mid-March, on ABC's "This Week," Larry Summers,  Director of the White House Economic Council, declared that despite his outrage at what's happened at AIG, and despite the fact that the government now owns 80% of AIG, the administration could do nothing about the obscene bonus packages.  Regarding the bonuses, Summers said, "We are a country of law. These are contracts. The government cannot just abrogate contracts."  A contract is a contract--good to know.

Here is where the second "C" word-Class--is so glaringly apparent.  At the same time that contracts for executives are sanctified, abrogating contracts for has been de rigueur for the country's working and middle classes.  AIG executive bonuses are protected but the bonus payments, and the pay, of American autoworkers were slashed by the White House as a condition of the $17.4 billion in government financing to automakers to stave off bankruptcy in the industry.  There were no pious statements about the inviolability of labor contracts.  Rather autoworkers themselves were maligned and their contracts were slashed-overtime, bonuses and cost-of-living raises for middle class workers were on the chopping block.  

Now, the contracts of public workers at every level of government in New Jersey and across the country are facing the same fate.  No government proclamations about " a nation of law" or about the sacredness of contracts seem to be forthcoming when it is workers' contracts, rather than executives' contracts, that are being broken.

One thing is abundantly clear-working people in New Jersey, and across the nation, continue to be angry. They are angry about the greed on Wall Street that helped propel us all into this economic crisis, angry about their dwindling bank accounts and lost jobs, angry about the fear they feel at just opening their bills, and angry about demands made for workers and the middle class to "share the pain" while they watch Wall Street and AIG executives continue to get richer.  

If a contract is a contract for the executives at AIG, then a contract is a contract for a caseworker in Camden or a nurse's aide in Burlington or a firefighter in Elizabeth.  As anger continues to mount, the most common "F" word that will be used by working people when they go the polls this year won't be furloughs.