‘Too Little Too Late’: Bankruptcy Booms Among Older Americans

From today’s New York Times:

For a rapidly growing share of older Americans, traditional ideas about life in retirement are being upended by a dismal reality: bankruptcy.

The signs of potential trouble — vanishing pensions, soaring medical expenses, inadequate savings — have been building for years. Now, new research sheds light on the scope of the problem: The rate of people 65 and older filing for bankruptcy is three times what it was in 1991, the study found, and the same group accounts for a far greater share of all filers.

Driving the surge, the study suggests, is a three-decade shift of financial risk from government and employers to individuals, who are bearing an ever-greater responsibility for their own financial well-being as the social safety net shrinks.

The transfer has come in the form of, among other things, longer waits for full Social Security benefits, the replacement of employer-provided pensions with 401(k) savings plans and more out-of-pocket spending on health care. Declining incomes, whether in retirement or leading up to it, compound the challenge.

Cheryl Mcleod of Las Vegas filed for bankruptcy in January after struggling to keep up with her mortgage payments and other expenses. “I am 70, and I am working for less money than I ever did in my life,” she said. “This life stuff happens.”

As the study, from the Consumer Bankruptcy Project, explains, older people whose finances are precarious have few places to turn. “When the costs of aging are off-loaded onto a population that simply does not have access to adequate resources, something has to give,” the study says, “and older Americans turn to what little is left of the social safety net — bankruptcy court.”

Read the complete article here.

Detroit bankruptcy highlights unfair treatment for America’s workers

Labor leaders from the AFL-CIO called on President Obama and Gov. Rick Snyder to provide financial help to the struggling city of Detroit. The city filed for bankruptcy last week under the cloud of an $18 billion budget deficit, and Gov. Snyder assigned an emergency manager to oversee to austerity measures that call for the reduction of city workers’ wages, health plans, and pensions.

The move to cut the wages and benefits of city workers comes on the heels of a controversial law passed last year in Michigan that curbs collective bargaining powers of public unions. The law was proposed and pushed through a Republican-controlled legislature by Snyder, who then survived a close recall election from Michigan’s traditionally pro-union voters. Similar measures also passed in Wisconsin, despite major opposition among populist Democrats and voters, but failed to pass in Ohio, where voters rejected the attempt to gut the power of public unions in response to the Great Recession.

The move in Michigan highlights President Obama’s failure to address the lopsided treatment of workers and bankers in the panicked climate of austerity measures, and signals that politicians are no longer capable of representing the real economic interests of the majority of their constituents.

Lee Saunders, the chair of the AFL-CIO said, “There is no question there’s a crisis in Detroit, but impoverishing the city’s public service workers and further decimating public services is not the solution. The whole country is watching how this crisis gets resolved. As the nation emerges from the worst of the Great Recession, it is time for Congress and the White House to make it clear they will not turn their backs on our urban centers.”

The contradiction in treatment between middle class Americans and powerful institutions like banks is becoming more apparent as the former are asked to make financial and political sacrifices while the latter are rewarded for their bad behavior with bailouts. On the one hand, the city of Detroit has long been plagued by political corruption and lax oversight, which has contributed to its massive financial problems. On the other hand, the main reason why there is so much corruption is because the city has suffered through several episodes of recession, corporate flight, and declining revenues. The accumulative effect is a dense urban center that still needs to provide services with a jobless shrinking tax base to do it with.

The historical fact is that Detroit’s decimation lies squarely at the feet of American auto corporations in the 1980’s, as well as their response to the 2008 financial collapse. They failed to find workable solutions to financial woes shared by all, choosing instead the easy but short-sighted route of laying off thousands of workers that led to further unraveling of the city’s economic fabric. Despite the ballyhoo of “creative destruction” that is unleashed by predatory capitalism these jobs usually don’t come back and when they do they pay less and provide less secure working conditions.

As Michael Moore so eloquently put it in his classic documentary Roger and Me, about the destruction of American auto manufacturing:  “As we neared the end of the twentieth century, the rich were richer, the poor, poorer. And people everywhere now had a lot less lint, thanks to the lint rollers made in my hometown. It was truly the dawn of a new era.”

The future of America is here folks, and it is ugly, short-sighted, and deeply, radically unfair to American workers in both the public and private sectors.

Hostess, union fail at negotiations

Hostess announced Tuesday night that it failed to reach a new agreement with BCTWGM, and union officials said the company plans to proceed with shuttering its operations after 82 years in business.

18,500 workers will lose their jobs overnight, adding more grist to the grind of the  jobless recovery. Today’s announcement came four days after the company announced that its liquidation, which many observers believed was all but assured by the union’s strike.

The firm filed for bankruptcy last January because its labor costs were unsustainable and that it needed to cut its wage, health and pension costs to continue operating—despite the questionable practice of paying executives gross compensation packages for an otherwise struggling company.

Mediation ordered for Hostess, union

Today in New York a judge for the Federal Bankruptcy Court all-but-ordered mediation between Hostess Brands and the Bakery, Confectionary, Tobacco Workers and Grain Millers Union (BCTGM) in an effort to avoid the demise of the company and one of it quintessential American snack brands, the Twinkie.

In January, the company filed for Chapter 11 bankruptcy protection for a second time, nearly three years after emerging from an earlier stint. The company said it could not meet its debt obligations during the first round of bankruptcy, but BCTGM and the Teamsters were furious that the company continued to pay executives exorbitant compensation while demanding major concessions from them. The company then offered a contract to workers of BCTGM with an eight percent pay cut for bakers and a 32 percent reduction of benefits, while its CEO was given a 300 percent raise above his basic compensation.

In this new round of contract negotiations financial disclosures revealed the company gave its top nine executives 60 to 100 percent raises, even though the company stopped paying its pension obligations to workers. The Teamsters agreed to more steep concessions but the workers of BCTGM refused, citing the egregious abuse of company executives as key factor of its fiduciary problems. When the union refused to accept an additional $100 million in cost concessions, the company’s management announced it was ending operations and liquidating its assets.

Today’s announcement by Judge Robert Drain effectively puts those plans on hold as mediation takes place between management and BCTGM. Although the union refused steeper cuts, the Teamsters agreed to more cuts in their last round of contract negotiations, adding pressure to all parties to come to an agreement and avoid the dissolution of the company.

Note:  The average Teamsters driver makes $20 an hour, and the average baker makes $16, while the compensation of the company’s top executives ranges in the tens of millions. Over 18,000 middle-class workers are on the verge of destitution, while company executives remain insulated from financial hardship.

There is very little oversight of executive compensation in this country, but there is a growing awareness that insolvent companies regularly pay executives exorbitant and unjustified compensation packages that are unlinked from their financial performance. The question is whether Congress has the political will to regulate this form of economic transaction that increases wealth inequality and hampers long-term economic performance. This is doubtful as Congress is increasingly the coordinating committee for an unregulated and predatory form of capitalism that simultaneously encourages wealth maximization and wealth inequality.

Stockton, CA files for bankruptcy

The city of Stockton will file for Chapter 9 bankruptcy protection after it failed to find acceptable terms for restructuring its ballooning debt. In a 6-1 vote the city council voted to adopt a budget that is tied to a bankruptcy plan.

The annual budget beginning July 1 calls for defaulting on $10.2 million in debt payments, as well as cutting $11.2 million in employee pay and benefits under union contracts. Those contracts could be voided by the bankruptcy court, a move likely to aggravate the deepening conflict between the public sector and public employee unions.

The city of Stockton with 292,000 residents becomes the largest U.S. city to go bankrupt, but the ongoing recession, along with right-wing instigated austerity measures, raises doubts about the solvency of the public sector at all levels as cities, counties, and states continue to struggle with declining tax revenues and increasingly expensive employee benefits. The aggravation of this conflict is quickly becoming the single largest struggle for worker rights since the 1967 Civil Rights Act.