Week Ending July 22, 2011
Default Crisis Continues Amid Intense Negotiations Between White House and Congress
At press time, AFSCME is extremely concerned about a possible budget deal that President Obama is negotiating with House Majority Leader John Boehner (R-OH) as the White House and Congress race against the clock to come up with an agreement to avert government default by the August 2 deadline. Although details are not available, we understand that it contains major cuts to health care, including possibly raising the Medicare eligibility age from 65 to 67 and cuts to federal support for states’ Medicaid programs, and cutting Social Security immediately through changing the formula for determining cost-of-living adjustments. We hear that revenue increases are much less certain than are spending cuts, and would likely be in the out-years of the deal. The tax exclusion for employer-provided health care is at risk, and state coffers will suffer from likely limitations on the deductibility of state and local taxes. AFSCME has been very public about our concerns about this possible deal as well as others that have been put forward in the past week, including the Senate Gang of Six proposal and a fall-back, short-term plan being developed by Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY). AFSCME will continue to oppose any deal that harms working families while protecting corporations and the wealthy.
Congress Considers Budget Gimmicks
This week, Congress considered the Cut, Cap, and Balance Act (H.R. 2560). The House passed the bill on a mostly party-line vote of 234-190, with Democratic Reps. Boren (OK), Cooper (TN), Matheson (UT), McIntyre (NC), and Shuler (NC) crossing over to support, and nine Republicans opposing the bill, mostly due to concerns that it did not cut enough spending. The Senate defeated the bill on July 22 by a vote of 51-46, falling short of the 60 votes required. Majority Leader Reid called it, “one of the worst pieces of legislation in U.S. history.”
H.R. 2560 would cut critical programs and cripple the economy. And, notwithstanding claims by its authors, this bill would lead to substantial cuts to Medicare and Social Security. The bill would require cutting $111 billion in spending in Fiscal Year 2012 alone, leading to a loss of roughly 700,000 jobs at a time when unemployment exceeds 9%. Even deeper cuts would be required in later years, as the caps on spending are reduced. And the bill would hold hostage the increase needed in the debt limit by August 2, tying it to congressional approval of an extreme version of a constitutional balanced budget amendment which caps spending at a dangerously low percentage of GDP and requires a supermajority to raise revenues. AFSCME strongly opposed this bill.
States Face Deep Cuts and Financial Chaos if Congress Fails to Increase Debt Limit
The federal government provided state and local governments with $478 billion last year, according to a report issued this week by the Pew Center on the States. State governments rely on the federal government for between 25% and 50% of their revenue. These funds are used to pay for health care, education, law enforcement, employment services, transportation, and many other vital services. If Congress fails to raise the debt limit by August 2, the federal government will be forced to immediately cut nearly 40% from its budget. Every state will lose hundreds of millions, if not billions, of dollars in federal funding regardless of how the Treasury Department decides to prioritize payments. Under one scenario developed by the Bipartisan Policy Center, assuming the debt ceiling remains frozen in August and September and the federal government continues to fund Social Security, Medicare, Medicaid, defense, unemployment insurance and nothing else, examples of lost state revenue are: CA: $6.5 billion; IA: $596 million; IL: $2.47 billion; MA: $1.02 billion; NY: $4.34 billion; PA: $1.93 billion; WA: $1.17 billion; and WI: $969 million.
Additionally, states could find it more expensive to issue debt, with some lower-rated states cut out completely from the municipal bond market. Any downgrade in the country’s credit rating due to default could pull down the Triple A rating of five states – MD, NM, SC, TN and VA – Moody’s Investors Services warned this week.
Federal Aviation Employees Face Furlough
As a result of a standoff between lawmakers on Capitol Hill, over 879 workers who work for the Federal Aviation Administration (FAA) who are represented by AFSCME may be furloughed beginning midnight on July 22, the date the current FAA reauthorization expires. Although Congress has extended the law 20 times by passing simple bills allowing the agency to continue functioning, this time the House included two policy changes that are unacceptable to the Senate. These policy changes are unrelated to what should be a simple extension of the FAA’s authority.
The FAA reauthorization bill provides funding to maintain civil aviation safety. If the current extension fails to pass, 4,000 FAA employees in 35 states, D.C. and Puerto Rico will be furloughed without pay.
One of the difficulties in passing a long-term reauthorization involves a provision in the House FAA bill reversing a decision by the National Mediation Board involving labor elections for rail and aviation workers. These short-term extensions have made it difficult for the FAA to begin crucial long-term improvements such as upgrading the air traffic control system.
Raising Medicare’s Eligibility Age Would Increase Costs for Retiree Health Care Plans and Seniors
Raising Medicare’s eligibility age from 65 to 67 in 2014 would result in a net increase of $3.7 billion in out-of-pocket costs for 65- and 66-year-olds and increase employer retiree health care costs by $4.5 billion, according to a new Kaiser Family Foundation projection. Among the five million 65- and 66-years-olds affected, about two out of three would pay an average of $2,000 more for their health care in 2014 than they would have paid if covered under Medicare.
House Panel Advances Bill Curbing NLRB’s Power to Protect Workers
On Thursday, the House Education and the Workforce Committee passed legislation along party lines that would dramatically reduce the worker protections historically covered under the National Labor Relations Act (NLRA) by limiting the rights and obligations of the parties to bargain collectively and seriously impairing the National Labor Relations Board’s (NLRB) remedial authority. The bill (H.R. 2587) was introduced by Rep. Tim Scott (R-SC) on July 19 and proceeded to a committee vote without benefit of a hearing. It is a direct result of a complaint filed by the NLRB Acting General Counsel against Boeing Company. The complaint alleges that Boeing’s decision to open a new production line for construction in South Carolina constitutes an unfair labor practice. Chairman John Kline (R-MN) joined Reps. Phil Roe (R-TN), Joe Wilson (R-SC) and Trey Gowdy (R-SC) in co-sponsoring the bill.
Chairman Kline stated: “The Protecting Jobs from Government Interference Act will prohibit the NLRB from dictating where a private business can and cannot locate jobs in the United States. No government board should have the authority to tell a private employer where it can run a business.” But, in calling for Chairman Kline to cancel the session, Ranking Member George Miller (D-CA) said: “…the Republican bill will make it easier to play American workers against each other in a race to the bottom and even easier to ship American jobs overseas. It would create an open season for CEOs to punish workers for exercising their rights.”
New Consumer Financial Protection Bureau (CFPB) Officially Starts July 21; President Obama Nominates Richard Cordray as Director
On July 21, a year after President Obama signed into law the “Wall Street Reform and Consumer Protection Act” (“Dodd-Frank” financial reform), the Consumer Financial Protection Bureau (CFPB) officially opened for business and assumed its legal authority. This week, President Obama nominated Richard Cordray, former Ohio Attorney General, to be Director of the independent CFPB, which protects consumers’ financial transactions by ensuring a fair, transparent and efficient marketplace for many important financial products, including credit cards, student loans and credit scores. Cordray has long advocated for working families – currently leading CFPB’s enforcement division and previously in Ohio where he helped recover $2 billion from businesses, including pension funds for retirees, and was one of the earliest fighters against abusive home lending practices and mortgage foreclosures. Elizabeth Warren, who was the moving force behind the establishment of the CFPB and led its start-up, recruited Cordray to CFPB, and praised his nomination.
The CFPB is important to working families because it helps protect consumers before a purchase by simplifying legal fine print and requiring easy-to-understand descriptions of financial products’ prices and risks, which enables consumers to easily make product comparisons. This helps consumers both with small daily transactions (e.g. increasing transparency of credit card practices) and with large, once-in-a-lifetime transactions (e.g. streamlining home mortgage disclosure forms). The CFPB also reduces businesses’ ability to employ deceitful, abusive or harmful practices.
President Obama signed the Dodd-Frank Financial Reform into law to solve the problems that caused America’s economic crisis and the worst recession since the Great Depression. President Obama said Dodd-Frank helped in three ways: "First, it made taxpayer-funded bailouts illegal, so taxpayers don’t have to foot the bill if a big bank goes under. Second, it said to Wall Street firms, you can’t take the same kind of reckless risks that led to the crisis. And third, it put in place the strongest consumer protections in history," which refers to the CFPB.
In contrast, congressional GOP leaders are proposing legislation cutting or completely defunding CFPB’s budget, weakening CFPB by expanding its governing structure, and narrowing CFPB’s oversight and enforcement authority. Recently, the White House issued two separate veto threats against these bills. It threatened to veto H.R. 2434, an appropriations bill which would reduce CFPB’s funding, and to veto H.R. 1315 which would weaken CFPB’s powers. On July 21, the House voted on party lines 241 to 173 to approve H.R. 1315 with only 10 Democrats supporting the bill and only one Republican opposed. AFSCME opposes these bills and recently signed on to a letter to Congress opposing H.R. 1315 (to view letter, log on to: http://www.afscme.org/issues/federal-budget-taxes/letters-statements/document/Letter_Opposing_HR1315-20110720.pdf.
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