Friday, February 1, 2013

AFGE Week in Review –Government Spending Cuts Hurt Economy

Feb. 1, 2013

Government Spending Cuts Hurt Economy: Tightening the belt is the wrong way to go about fixing the depressed economy, as seen from the Commerce Department’s newly released numbers. The U.S. economy shrank 0.1 percent from October to December last year mainly due to government spending cuts and slow business inventory building. Contrary to popular nonsense, the deficits didn’t hurt our ailing economy – government spending cuts and not investing did. The economy would not have shrunk if not for the 6.6% decline in government spending, particularly the 22.2% decline in defense spending. The Center for Economic and Policy Research calculated that this decline in spending cut 1.33 percentage points from GDP (gross domestic product) growth.

“Moving forward, we can expect an even steeper decline in economic growth if Congress fails to cancel sequestration,” said AFGE National President J. David Cox Sr. “Cutting an additional $85 billion in government spending through sequestration this year will be ruinous not only to economic growth, but also to the lives of furloughed federal employees and people who depend upon them to provide much-needed government services.”

Sequestration could result in two million federal employees being furloughed – in effect, laid off without pay – for up to 30 days in the remainder of 2013, NP Cox said.

“These workers will have less money to spend, causing the GDP to decline further or grow much more slowly than it should. Why would Congress refuse to act to stop this madness? What good can come of sequestration?  The answer is absolutely nothing good – only hardship and decline.”

But That Doesn’t Stop Some Lawmakers from Pressing for Sequestration: House Budget Committee Chairman Paul Ryan became one of the latest lawmakers who are pushing for deep spending cuts. He went on NBC’s Meet the Press last Sunday to reiterate his out-of-touch position on sequestration, saying “I think the sequester is going to happen.”

Sequestration was not designed to happen and is not supported by everyone in Congress, said White House press secretary Jay Carney, who added that the president doesn’t support the irresponsible across-the board cuts.

“We believe that the right course of action is to take steps to make sure that sequester doesn’t happen because it’s bad for the economy and bad overall for the effort to reduce our deficits in a reasonable way,” Carney said.

AFGE, SBA Reach Contract Agreement: AFGE and the Small Business Administration have reached agreement on a new labor contract covering more than 2,000 federal employees. The new master agreement extends a number of benefits to SBA employees who are represented by AFGE Council 228. Highlights of the new contract include:
  • A new flexible work schedule that lets employees work four days a week at 10 hours a day;
  • A streamlined process making it easier for employees to obtain approval for telework;
  • A series of awards that recognize employees who suggest ways to improve the agency, who have worked for 5 years at a time or whose performance deserves appreciation and commendation;
  • Expanded transit subsidies for all employees;
  • An expedited arbitration process for employees who receive unfair performance appraisal ratings or are denied within-grade increases.
The new contract takes effect immediately and lasts for three years. The previous contract was ratified in 1999. The new agreement also stipulates that managers, employees and union officials will be trained jointly on the contract.

“This new agreement has many benefits for both the agency and the SBA employees, and it is a result of committed leadership,” AFGE National President J. David Cox Sr. said. “I commend SBA Administrator Karen Mills for her personal support of an agreement and hope that we will see many more labor agreements at other federal agencies settled in the next few months.”
“The signing of this contract signifies a positive shift in the relationship between AFGE and SBA and will help improve employee morale and the effectiveness of SBA in fulfilling the mission of the agency,” Council 228 President Elaine Powell-Belnavis said.

AFGE Questions Army’s Plan to Replace Feds with Military Personnel: AFGE is taking issue with the Army’s recently released guidance that calls for the use of soldiers instead of civilian employees to perform base operations support in order to “reduce costs”.

“If your intention is to actually reduce BOS costs, it makes no sense to substitute military personnel because the former workforce consistently costs more, usually by a significant amount. In fact, senior Pentagon officials as well as the department’s favorite think tanks have warned repeatedly about the unsustainability of cost growth in military personnel costs,” AFGE National President J. David Cox Sr. said in a Jan. 30 letter to Army Secretary John McHugh.

NP Cox reminded the Army that in order to use military personnel, the service would have to secure a waver from the Pentagon’s Office of Personnel and Readiness, whose guidance limits the use of borrowed military manpower to military essential functions. For everything else, the Army would need to do a cost analysis. NP Cox asked several pointed questions about how the Army is going to go about it. NP Cox noted that arbitrarily replacing federal employees with military personnel is not consistent with existing laws that require a holistic, analytical approach to total force management. He pointed out that the plan clearly shows it is easier for the service to cut costs by reducing spending on civilian personnel than for the Army to reduce outsourcing costs by cancelling complex, cumbersome contracts.

“Should the Army acknowledge that civilian personnel are far more flexible than service contractors and should that thoroughly inform the Army’s future workforce management policies?” NP Cox asked.

SSA Administrator to Step Down: Social Security Administration Commissioner Michael Astrue, who has headed the agency since 2007, is stepping down next month. President Barack Obama has not nominated his replacement.

“I’m pleased that he’s leaving,” AFGE National Council of SSA Field Operations Locals President Witold Skwierczynski told Federal Times.
AFGE National President J. David Cox Sr. recently sent a letter to Obama, asking him to nominate either SSA Deputy Commissioner Carolyn Colvin or Social Security Works Co-director Nancy Altman as the next commissioner.

Executives at Firms Bailed Out with Public Money Still Get Lavish Compensation: Here comes another reminder that banksters are not like us. After bringing down the entire financial system through their reckless business practices, costing the country nearly $20 trillion and 9 million jobs, Wall Street executives at the bailed-out firms are still enjoying hefty paychecks. According to the Special Inspector General for the Troubled Asset Relief Program (TARP), the Treasury Department last year violated its own guidelines and approved lavish compensation packages for companies that received government bailouts. This was happening while the government and Congress slashed government assistance and benefits for everybody else in the country.

According to the IG, Treasury in 2012 approved pay of $1 million or more for all but one of the 69 executives at American International Group (AIG), General Motors Corp (GM), and Ally Financial Inc. even though the firms were still operating with public funds. Treasury approved pay of $3 million or more for 37 of those executives, and $5 million or more for 16 of them. Meanwhile, the 2011 median household income in the U.S. was about $50,000.

“[We] expect Treasury to look out for taxpayers who funded the bailout of these companies by holding the line on excessive pay,” Christy Romero, the special inspector general for TARP, wrote. “Treasury cannot look out for taxpayers’ interests if it continues to rely to a great extent on the pay proposed by companies that have historically pushed back on pay limits.”

In an act of absolute greed, AIG, which received a $182 billion government bailout during the financial crisis, was considering suing the government for its ‘harsh’ bailout terms, which, under closer examination, were anything but. The government, for example, immediately lowered the interest rate on a big loan, saving the company $1 billion a year. AIG later decided not to pursue the lawsuit.

Virginia Senate Panel Kills Election Rigging Scheme: The Virginia Senate’s Privileges and Elections Committee this week killed Sen. Charles Carrico Sr.’s election rigging bill passed by a subcommittee last week that would replace the state’s winner-take-all method of allocating electoral votes with one that would award one vote to the winner of each district. Under Carrico’s scheme, Mitt Romney would have received nine Virginia electoral votes while Barack Obama would have received only four, even though Obama won the state's popular vote by four percentage points. Virginia Gov. Bob McDonnell had voiced his opposition against the bill.

Election rigging bills similar to Virginia’s are being considered in other states such as Wisconsin and Pennsylvania. Several lawmakers have expressed support for the idea.

Goldman Sachs Wins ‘Shame Award’ in Davos: The Berne Declaration and Greenpeace last week gave their annual Public Eye shame award to Goldman Sachs for the company’s role in helping the Greek government cook the books and mask the nation’s true debt in order to appear to conform to the European Unions’ requirements to adopt the Euro. Goldman later bet against the country’s debt, raking in millions from the crisis it helped create. Greece’s economy crashed, threatening to bring down the euro zone’s banking system and its very existence.

"Goldman's derivative deals, which fudged Greece's way into the Eurozone, pawned the future of the Greek people,” said Andreas Missbach, financial expert from the Berne Declaration, a non-profit organization. “Moreover, the managers of Goldman Sachs are masters of the revolving door: they secure the bank tomorrow's business via changes in political and public offices.”
The award ceremony took place in Davos, Switzerland, to coincide with the World Economic Forum where leaders from the world’s top banks and corporations met. Goldman was a major player in the mortgage transaction scam that brought down the U.S. financial system and drove the financial crisis.

It’s important to note that, contrary to what some lawmakers say about America “ending up like Greece” and how half of Congress have framed their entire message on cutting entitlement programs to lower debt, the U.S. doesn’t even have a debt problem. As the U.S. cannot be forced into default, the borrowing costs are extraordinarily low, reflecting investors’ confidence. If you had to pick any sovereign bond in the world that has the least risk of default, it would have to be a U.S. Treasury bond. U.S. dollar is also the world’s main reserve currency. More than 60% of the world's central bank reserves are held in dollars. There is no risk of default on U.S. bonds. As Nobel Prize winning economist Paul Krugman puts it, “we have our own currency -- and almost all of our debt, both private and public, is denominated in dollars. So our government, unlike the Greek government, literally can't run out of money. After all, it can print the stuff. So there's almost no risk that America will default on its debt -- I'd say no risk at all if it weren't for the possibility that [right wing lawmakers] would once again try to hold the nation hostage over the debt ceiling.”

Ideological Assaults on Unions Lead to Decline in Membership: Union-busting laws and ideological assaults on working people have taken a toll on union membership. According to new numbers from the Bureau of Labor Statistics, the number of workers who belonged to a union went down from 11.8 percent in 2011 to 11.3 percent last year. In 1983, 20.1 percent of workers belonged to a union.

“Working women and men urgently need a voice on the job today, but the sad truth is that it has become more difficult for them to have one, as today’s figures on union membership demonstrate,” AFL-CIO President Richard Trumka said. “Union membership impacts every other economic outcome that matters to all workers – falling wages, rising health care costs, home foreclosures, the loss of manufacturing jobs and disappearing retirement benefits. Collective action through unions remains the single best way for working people to effect change. But our still-struggling economy, weak laws and political as well as ideological assaults have taken a toll on union membership, and in the process have also imperiled economic security and good, middle class jobs.”

The AFL-CIO president said the future of the labor movement depends on how working people respond to the changing economy and these political assaults on them.
The following are highlights from the 2012 data:
  • The union membership rate for public-sector workers was more than five times higher than that of private-sector workers – 35.9 percent compared with 6.6 percent.
  • Even so, the union membership rate for public-sector workers went down from 37 percent in 2011.
  • Within the public sector, local government workers had the highest membership rate—41.7 percent, compared with state government workers (31.3 percent) and federal workers (26.9 percent).
  • Public-sector workers in education, training, and protective service such as teachers, police, and fire fighters had the highest unionization rate. 
  • Private-sector workers in transportation, utilities, and construction had the highest unionization rate. 
  • The union membership rate was highest among workers ages 55 to 64 (14.9 percent) and the lowest union membership rate was among those ages 16-24 (4.2 percent).
  • Full-time workers were more likely to be union members than part-time workers – 12.5 percent compared with 6 percent.
  • New York continued to have the highest union membership rate – 23.2 percent, compared with North Carolina, which again had the lowest rate of 2.9 percent.
  • Eight states had union membership rates below 5 percent – North Carolina (2.9 percent), Arkansas (3.2 percent), South Carolina (3.3 percent), Mississippi (4.3 percent), Georgia (4.4 percent), Virginia (4.4 percent), Idaho (4.8 percent), and Tennessee (4.8 percent).
  • Three states had union membership rates over 20 percent – New York (23.2 percent), Alaska (22.4 percent), and Hawaii (21.6 percent).
  • Union members in 2012 made about $200 more per week than those who were not union members – $943 a week compared with $742. That amounts to $10,400 more a year.
This Week’s Op-ed: Following the recent release of the Federal Reserve’s transcripts of the meetings of its Board of Governors in 2007, Mike Konczal, a fellow at the Roosevelt Institute, argues that the Fed’s assumption that fixing a financial crisis would fix the economic crisis led to policy mistakes down the road as it has become increasingly evident that it’s not enough to rescue just Wall Street and not Main Street.

“When Fed Chairman Ben S. Bernanke told CBS’s “60 Minutes” in March 2009 that he was expecting “green shoots” to appear, he was largely talking about how, with the financial markets no longer in a panic, the economy would be fine to recover. This perspective, shared by many besides Bernanke, led to the pivot that the Obama administration has taken since 2010: prioritizing deficit reduction and deprioritizing economic stimulus. Reading the transcripts from 2007 makes it clear that, even though it didn’t understand the extent of the problems, the Fed was looking at the financial system as the main source of concern.

Households, suffering from the housing-bubble collapse, were a secondary priority. An economic elite more in tune with broader prosperity could have caught the severity of the recession earlier, and made a case for the demand-stimulating monetary policy needed to recover from it.”

This Week in Labor History: Jan. 29, 2009 - Newly-elected President Barack Obama signs the Lilly Ledbetter Fair Pay Act, making it easier for women and minorities to win pay discrimination suits.

This Week’s Tweet: “Now not time to cut public spending. Austerity economics a cruel hoax. … ~@RBReich

Inside Government: Tune in now to AFGE’s “Inside Government” for the union’s response to the threat of sequestration at the Department of Defense. The show, which originally aired on Friday, Feb. 1, is now available on demand. AFGE Defense Conference Chair Don Hale discussed the possibility of sequestration and furloughs at DoD and the impact on service delivery, national security and the war effort. But first, Alliance for American Manufacturing President Scott Paul addressed China’s impact on U.S. manufacturing and steps President Obama can take to create manufacturing jobs. Paul also detailed how a robust manufacturing sector could spur job growth in other areas. Robyn Kehoe, director of field operations at the Federal Employee Education and Assistance Fund, then discussed FEEA’s work with AFGE to aid Superstorm Sandy victims. Kehoe also discussed FEEA’s emergency assistance, scholarship and childcare services programs. Lastly, AFGE Council of Prison Locals President Dale Deshotel then discussed the overcrowding and underfunding crisis in the Bureau of Prisons and the community safety risks associated with understaffing.

Listen LIVE on Fridays at 10 a.m. on 1500 AM WFED in the D.C. area or online at For more information, please visit

Quote of the Week: The Daily Show host Jon Stewart on a complicated theory about government and people:
“What separates conservatives from liberals is that conservatives think government is bad and people are good. Unless the people work in government, then they are bad. But they can leave government, go to a lobbying firm and become good again. It's a complicated theory.”

American Federation of Government Employees, AFL-CIO 80 F Street, N.W., Washington, D.C. 20001 | Tel. (202) 737-8700 | Fax (202) 639-6492 |

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