Insight

Unions Under Attack

Shared sacrifice doesn’t apply to the rich

If state budgets are as bad as Republican governors warn, then, of course, sacrifice is required. But before we ask public-sector workers to pay the freight, let’s be sure everyone is paying their fair share.

Even as the Great Recession of 2007-09 rolled over the city, a couple of new shops opened right behind the UFT’s building downtown: a Tiffany’s, a Tourbillon and Hermes. A watch at Tourbillon costs $42,000. So someone was making money.

Actually, that kind of money came back into the city so fast you might even say it never left. Wall Street fortunes — the mayor’s is one example — have emerged unscathed, or enlarged, from the recession while 205,000 New York City jobs have been lost, tens of thousands of workers have lost their life savings and across the country hundreds of thousands of people are losing their homes.

While the city’s public-sector work force saw nine rapid-fire rounds of belt tightening in the last three years, banking sector behemoth Goldman Sachs, one of the Wall Street firms that brought the U.S. economy to the teetering edge of collapse in late 2007, recovered remarkably well. In 2008, the year it got a $10 billion taxpayer bailout, Goldman Sachs paid out $11 billion in compensation and benefits to its own people and made a profit of more than $2 billion for shareholders. The next year, 2009, it paid its chief executive, Lloyd Blankfein, a $9 million bonus. For 2010, Blankfein got a $13 million bonus and Goldman Sachs employees averaged $430,000 apiece in salaries and benefits.

When they say ‘budget crisis ...’

So when city and state elected officials say they face a dire budget crisis, this is a problem of distribution, not supply. The city’s and the nation’s wealth has not been lost, but it has been concentrated in fewer hands.

Research by the Economic Policy Institute shows that from 2002 to 2008, average income in the United States grew by $2,388 per person. But all that additional wealth went to the richest 10 percent of Americans; the bottom 90 percent lost money.

A similar concentration of wealth has taken hold in New York State, the state with the nation’s highest income inequality. The share of state income earned by the top 1 percent of New Yorkers grew from 10 percent in 1980 to 35 percent in 2007, while income share declined for the poor and stagnated for the middle class, according to the Fiscal Policy Institute. In New York City, the top 1 percent now get 44 percent of all income.

Who pays, and who doesn’t

Governments can recoup some of that wealth — and balance budgets — through good tax policy. But in the United States only “the little people” pay taxes, as Leona Helmsley famously told us. The current attacks on public-sector unions are going on simultaneously with huge tax giveaways to corporations and the wealthy.

On that $2 billion in profit that Goldman Sachs reported in 2008, it paid just $14 million in taxes, an effective tax rate of less than 1 percent. Two out of every three U.S. corporations pay no federal income taxes at all, according to the U.S. Government Accountability Office, thanks to offshore accounts, lax accounting standards, deferrals, exemptions and loopholes. Meanwhile, George W. Bush’s tax cuts in 2001 and 2003 helped turn a federal budget surplus into a deep deficit by the time he left office. In Wisconsin, Gov. Scott Walker gave out corporate tax abatements worth $117 million just before he called for the public unions to sacrifice their pensions and health benefits.

New Jersey Gov. Chris Christie proposed tax cuts of about $200 million this year even while he wants to cut state workers’ retirement benefits by 11 percent.

And the New York State Senate, Gov. Cuomo and Mayor Bloomberg all wish to end the “millionaire’s tax,” a surcharge on state residents making more than $200,000 (net, not gross) that would bring in $5 billion in extra revenue next year, even as the state confronts an historic budget gap.

Nobody is disputing that many states do face big budget shortfalls. But the cause is not public workers’ wages, pensions and health benefits.

“There is no doubt that government budgets are in trouble,” wrote economist and former labor secretary Robert Reich in a recent blog post (RobertReich.org). “The big lie is that the reason is excessive spending.”

Reich writes, “The truth is if the super-rich paid their fair share of taxes, government wouldn’t be broke. If Gov. Scott Walker hadn’t handed out tax breaks to corporations and the well-off, Wisconsin wouldn’t be in a budget crisis. If Washington hadn’t extended the Bush tax cuts for the rich, eviscerated the estate tax, and created loopholes for private-equity and hedge-fund managers, the federal budget wouldn’t look nearly as bad. … We wouldn’t be firing teachers or slashing Medicaid or hurting the most vulnerable members of our society.”

The budget battle in New York City is shaping up to be ugly this year. Teachers and other public workers will continue to hear about the heavy burden they put on taxpayers and the need for “shared sacrifice.” Step back. The cause of the tough budget climate is not New York City’s average teacher pension of $42,000, after 25 or 30 years in the classroom. But it may have to do with the $42,000 in pocket change that some city bankers can drop on a Tourbillon watch.

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