January 18, 2004
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Posted on Sun, Jan. 18, 2004
IT’S JOBS, STUPID
“Jobless” recoveries aren’t supposed to go on this long.
If the current economic recovery were like most previous ones, businesses would have started hiring again when demand for their products picked up. That hasn’t happened, and more than two years after the economy started turning out more goods and services, Americans find themselves wallowing in the most anemic jobs recovery on record.
Productivity is soaring, but that’s mainly because fewer workers are doing more. At least 150,000 new jobs have to be created each month just to keep up with the growing population of potential workers. We haven’t come close. As we learned earlier this month, the private sector produced a paltry 1,000 new jobs in December.
Not to be ghoulish about it, but this could be good news for Democrats seeking to regain the White House and stem the Republican tide in Congress. There can’t be a genuine recovery until jobs come back; jobs aren’t likely to roar back within the next nine months; and President Bush could have a hard time convincing voters that he’s a good steward of the economy unless Americans feel that the recovery is on solid footing.
But to be credible, Democrats would have to come up with their own plan for how to spur job growth. And that plan has to respond directly to the structural changes in the economy that account for this unprecedented dearth of new jobs — technology and globalization.
The increased reliance on technology and on global operations has given companies two easy ways to delay hiring. They can substitute off-the-shelf software (automated scanners at the supermarket, for example, or e-ticket kiosks at the airport). Or they can outsource to low-wage workers abroad (such as back-office service workers in India, or manufacturing workers in China).
Eventually, demand will pick up enough to restore job growth. There’s still a limit to what software can do and how much work can efficiently be outsourced. But in the meantime, millions of our workers remain unemployed or too discouraged to look for work. Or they have to settle for jobs paying far less than the jobs they lost, or be self-employed “consultants” — essentially, glorified temps. Worse yet, the “meantime” could drag on for years. With so many people facing such uncertainties, consumer demand for goods and services may well stall.
Two of Bush’s major job initiatives are to gut the overtime laws and to allow more “guest workers.” Both will only make the bad situation worse. The requirement to pay time-and-a-half for overtime actually gives employers an incentive to hire more workers. If overtime pay is eliminated, they lose that incentive.
Meanwhile, opening America’s borders and otherwise legalizing “guest workers” will reduce the demand for Americans to fill those jobs. (The administration’s claim that the program will be limited to jobs that “no American worker is available and willing to take” is ludicrous on its face. The only reason a job remains unfilled is that it pays too little. An employer who has to fill it with an American will have to raise the wage.)
Here’s what I think Democrats should propose instead:
First, level the playing field between technology and labor. In other words, give businesses incentives to employ people, not just technology. As it is now, businesses get an investment tax credit for buying technology that substitutes for labor. One option is to repeal the tax credit, but that would be politically difficult. Another is to give businesses a “new-jobs tax credit” (say, 10 percent of the costs) for all net additions to payrolls in the United States. Make it for two years, or until the proportion of employed adults returns to its pre-recession level.
Second, recognize the high social costs of outsourcing during this prolonged jobless recovery. Businesses should still be allowed to outsource; even a temporary ban on the practice would be a nightmare to enforce, would probably violate international trade rules and would drive up consumer prices. But there’s no reason businesses should be able to deduct from their taxable incomes the full costs of outsourcing. Limit the deduction to, say, 50 percent of costs.
If they hire American workers, on the other hand, they can continue to deduct the full costs of their payrolls. Here again, make the incentive temporary, until jobs are restored.
Third, buffer workers against income losses. Given that so many workers are having a hard time finding new work, it’s only fair that unemployment insurance be extended. In addition, many workers have to settle for jobs that pay less than their former wages. They need wage insurance — paying, say, half the difference between the old and new wages, for up to two years.
The White House has it all wrong. Yet Democrats need not be neo-Luddites or protectionists to respond to the most anemic jobs recovery in American history. They can offer these three constructive steps to get jobs back faster and, in the interim, lessen the pain.
ROBERT B. REICH, secretary of labor in the Clinton administration, is Hexter professor of social and economic policy at Brandeis University, and distinguished visiting fellow at the University of California-Berkeley.
January 18, 2004
ECONOMIC VIEW
O’Neill Says Bush Was Set on Cutting Taxes, Too
By EDMUND L. ANDREWS
ASHINGTON
IF there is a phrase that summarizes Paul H. O’Neill’s view of the White House during his two years as
President Bush’s first Treasury secretary, it is his apparent remark that cabinet debates were exercises in “incestuous amplification.”
The comment is made in “The Price of Loyalty,” a new book by Ron Suskind about Mr. O’Neill’s tumultuous tenure before being fired in December 2002. Rather than encouraging policy debates, Mr. O’Neill contended that big decisions were made with almost no discussion and even less debate.
Mr. O’Neill has provoked a political firestorm with his contention that President Bush tilted toward war with Iraq almost as soon as he took office; the administration has vigorously denied that. But the former Treasury secretary described a similar pattern in Mr. Bush’s push to cut taxes by at least $1.7 trillion over 10 years.
Mr. O’Neill was openly skeptical about the need for big tax cuts and expressed concern about frittering away what were then huge budget surpluses.
In hindsight, he may have been too sanguine about the economy’s prospects in early 2001 and too dismissive of the value in cutting taxes as a way to soften the downturn. But Mr. O’Neill may also prove to have been prescient about other issues that are likely to have long-lasting significance. One was the idea of building “triggers” into Mr. Bush’s tax cuts, provisions that would prevent some of the cuts from becoming effective if budget surpluses evaporated.
Behind the scenes, Mr. O’Neill described how he quietly collaborated with Alan Greenspan, chairman of the Federal Reserve, to press for such triggers.
As recounted by Mr. O’Neill, the president and his top advisers wanted no part in such precautions.
Though the Treasury secretary had one-on-one meetings with Mr. Bush almost once a week, Mr. O’Neill said the president listened to him in stony silence. And when Mr. Greenspan testified in favor of making future tax cuts conditional on the government’s fiscal health, the White House balked.
There were questions about whether the triggers would have done any good. Congress, in theory, operated under “pay-as-you-go” rules in the last years of the Clinton administration, under which any spending growth above the rate of inflation was supposed to be offset by budget cuts or tax increases. But tax revenue soared so quickly as a result of the stock market bubble and the booming economy that spending increased much faster than inflation.
Tax-cut advocates like R. Glenn Hubbard, then chairman of the White House Council of Economic Advisers, argued that the tax cuts had to be predictable and permanent to achieve their intended impact. If people thought the cuts would expire, he and others argued, they would have less confidence about spending their extra cash.
Shortly after the tax cuts, the government’s seemingly inexhaustible surpluses evaporated. Revenues plunged as the economy slid into a recession and the stock market endured a three-year plunge that wiped out investment profits. Then came the terrorist attacks on Sept. 11, 2001, followed by huge increases in spending on domestic security and the wars in Afghanistan and Iraq.
Projections by Congress and the Bush administration of surpluses of $5.6 trillion over 10 years, the outlook in 2001, have turned into estimated deficits of at least $1.4 trillion and possibly as much as $5 trillion.
Mr. O’Neill strongly suggests that Mr. Bush worried little about budget deficits and did not want advice about them.
EVEN when the government was flush with money, Mr. O’Neill recounted in the book, White House officials surprised him by unilaterally reducing the goal of paying down the national debt. Instead of proposing to cut it from $3.2 trillion to $500 billion, as Mr. O’Neill favored, the Office of Management and Budget said it would be impractical to reduce it below $1.2 trillion.
Mr. O’Neill also pushed the president to set aside $1 trillion of the projected surpluses to fund one of Mr. Bush’s big ideas during the campaign: the privatization of Social Security. Allowing people to invest Social Security contributions into private retirement accounts would reduce the government’s future retirement liabilities, but the government would need to cover obligations to existing retirees without the money coming in from existing workers.
Mr. O’Neill said that both he and Mr. Greenspan had estimated that $1 trillion over the next decade or so would be enough to finance the transition for everybody then under the age of 37.
But Mr. Bush “seemed to shrug it off,” according to the book.
Today, three years later, the idea is no longer an option.
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January 18, 2004
Workers Assail Night Lock-Ins by Wal-Mart
By STEVEN GREENHOUSE
ooking back to that night, Michael Rodriguez still has trouble believing the situation he faced when he was stocking shelves on the overnight shift at the Sam’s Club in Corpus Christi, Tex.
It was 3 a.m., Mr. Rodriguez recalled, some heavy machinery had just smashed into his ankle, and he had no idea how he would get to the hospital.
The Sam’s Club, a Wal-Mart subsidiary, had locked its overnight workers in, as it always did, to keep robbers out and, as some managers say, to prevent employee theft. As usual, there was no manager with a key to let Mr. Rodriguez out. The fire exit, he said, was hardly an option — management had drummed into the overnight workers that if they ever used that exit for anything but a fire, they would lose their jobs.
“My ankle was crushed,” Mr. Rodriguez said, explaining he had been struck by an electronic cart driven by an employee moving stacks of merchandise. “I was yelling and running around like a hurt dog that had been hit by a car. Another worker made some phone calls to reach a manager, and it took an hour for someone to get there and unlock the door.”
The reason for Mr. Rodriguez’s delayed trip to the hospital was a little-known Wal-Mart policy: the lock-in. For more than 15 years, Wal-Mart Stores Inc., the world’s largest retailer, has locked in overnight employees at some of its Wal-Mart and Sam’s Club stores. It is a policy that many employees say has created disconcerting situations, such as when a worker in Indiana suffered a heart attack, when hurricanes hit in Florida and when workers’ wives have gone into labor.
“You could be bleeding to death, and they’ll have you locked in,” Mr. Rodriguez said. “Being locked in in an emergency like that, that’s not right.”
Mona Williams, Wal-Mart’s vice president for communications, said the company used lock-ins to protect stores and employees in high-crime areas. She said Wal-Mart locked in workers — the company calls them associates — at 10 percent of its stores, a percentage that has declined as Wal-Mart has opened more 24-hour stores.
Ms. Williams said Wal-Mart, with 1.2 million employees in its 3,500 stores nationwide, had recently altered its policy to ensure that every overnight shift at every store has a night manager with a key to let workers out in emergencies.
“Wal-Mart secures these stores just as any other business does that has employees working overnight,” Ms. Williams said. “Doors are locked to protect associates and the store from intruders. Fire doors are always accessible for safety, and there will always be at least one manager in the store with a set of keys to unlock the doors.”
Ms. Williams said individual store managers, rather than headquarters, decided whether to lock workers in, depending on the crime rate in their area.
Retailing experts and Wal-Mart’s competitors said the company’s lock-in policy was highly unusual. Officials at Kmart, Sears, Toys “R” Us, Home Depot and Costco, said they did not lock in workers.
Even some retail industry experts questioned the policy. “It’s clearly cause for concern,” said Burt Flickinger, who runs a retail consulting concern. “Locking in workers, that’s more of a 19th-century practice than a 20th-century one.”
Several Wal-Mart employees said that as recently as a few months ago they had been locked in on some nights without a manager who had a key. Robert Schuster said that until last October, when he left his job at a Sam’s Club in Colorado Springs, workers were locked in every night, and on Friday and Saturday nights there was no one there with a key. One night, he recalled, a worker had been throwing up violently, and no one had a store key to let him out.
“They told us it’s a big fine for the company if we go out the fire door and there’s no fire,” Mr. Schuster said. “They gave us a big lecture that if we go out that door, you better make sure it’s an emergency like the place going up on fire.”
Augustine Herrera, who worked at the Colorado Springs store for nine years, disputed the company’s assertion that it locked workers in stores in only high-crime areas, largely to protect employees.
“The store is in a perfectly safe area,” Mr. Herrera said.
Several employees said Wal-Mart began making sure that there was someone with a key seven nights a week at the Colorado Springs store and other stores starting Jan. 1, shortly after The New York Times began making inquiries about employees’ being locked in.
The main reason that Wal-Mart and Sam’s stores lock in workers, several former store managers said, was not to protect employees but to stop “shrinkage” — theft by employees and outsiders.
Tom Lewis, who managed four Sam’s Clubs in Texas and Tennessee, said: “It’s to prevent shrinkage. Wal-Mart is like any other company. They’re concerned about the bottom line, and the bottom line is affected by shrinkage in the store.”
Another reason for lock-ins, he said, was to increase efficiency — workers could not sneak outside to smoke a cigarette, get high or make a quick trip home.
Mr. Rodriguez acknowledged that the seemingly obvious thing to have done after breaking his ankle was to leave by the fire door, but he and two dozen other Wal-Mart and Sam’s Club workers said they had repeatedly been warned never to do that unless there was a fire. Leaving for any other reason, they said, could jeopardize the jobs of the offending employee and the night supervisor.
Regarding Mr. Rodriguez, Ms. Williams said, “He was clearly capable of walking out a fire door anytime during the night.”
She added: “We tell associates that common sense has to prevail. Fire doors are for emergencies, and by all means use them if you have emergencies. We have no way of knowing what any individual manager said to an associate.”
None of the Wal-Mart workers interviewed said they knew anyone who had been fired for violating the fire-exit policy in an emergency, but several said they knew workers who had received official reprimands, the first step toward firing. Several said managers had told them of firing workers for such an offense.
“They let us know they’d fire people for going out the fire door, unless there was a fire.” said Farris Cobb, who was a night supervisor at several Sam’s Clubs in Florida. “They instilled in us they had done it before and they would do it again.”
Mr. Cobb and several other workers interviewed about lock-ins were plaintiffs in lawsuits accusing Wal-Mart of forcing them to work off the clock, for example working several hours without pay after their shifts ended. Wal-Mart says it tells managers never to let employees work off the clock.
Janet Anderson, who was a night supervisor at a Sam’s Club in Colorado from 1996 to 2002, said that many of her employees were also airmen stationed at a nearby Air Force base. Their commanders sometimes called the store to order them to report to duty immediately, but she said they often had to wait until a manager arrived around 6 a.m. She said one airman received a reprimand from management for leaving by the fire door to report for duty.
Ms. Anderson also told of a worker who had broken his foot one night while using a cardboard box baler and had to wait four hours for someone to open the door. She said the store’s managers had lied to her and the overnight crew, telling them the fire doors could not be physically opened by the workers and that the doors would open automatically when the fire alarm was triggered.
Only after several years as night supervisor did she learn that she could open the fire door from inside, she said, but she was told she faced dismissal if she opened it when there was no fire. One night, she said, she cut her finger badly with a box cutter but dared not go out the fire exit — waiting until morning to get 13 stitches at a hospital.
The federal government and almost all states do not bar locking in workers so long as they have access to an emergency exit. But several longtime Wal-Mart workers recalled that in the late 1980′s and early 1990′s, the fire doors of some Wal-Marts were chained shut.
Wal-Mart officials said they cracked down on that practice after an overnight stocker at a store in Savannah, Ga., collapsed and died in 1988. Paramedics could not get into the store soon enough because the employees inside could not open the fire door or front door, and there was no manager with a key.
“We certainly do not do that now,” Ms. Williams said. “It’s not been that way for a long time.”
Explaining the policy, she said, “Only about 10 percent of our stores do not allow associates to come and go at will, and these are generally in higher crime areas where the associates’ safety is considered an issue.”
Mr. Lewis, the former store manager, said he had been willing to get out of bed at any hour to drive back to his store to unlock the door in an emergency. But he said many Sam’s Club managers were not as responsive. “Sometimes you couldn’t get hold of a manager,” he said. “The tendency of managers was to sleep through the nights. They let the answering machine pick up.”
Mr. Cobb, the overnight supervisor in Florida, said he remembered once when a stocker was deathly sick, throwing up repeatedly. He said he called the store manager at home and told him, ” `You need to come let this person out.’ He said: `Find one of the mattresses. Have him lay down on the floor.’
“I went into certain situations like that, and I called store managers, and they pretty much told me that they wouldn’t come in to unlock the door. So I would call another manager, and a lot of times they would tell you that they were on their way, when they weren’t.”
Mr. Cobb said the Wal-Mart rule that generally prohibits employees from working more than 40 hours a week to avoid paying overtime played out in strange ways for night-shift employees. Mr. Cobb said that on many workers’ fifth work day of the week, they would approach the 40-hour mark and then clock out, usually around 1 a.m. They would then have to sit around, napping, playing cards or watching television, until a manager arrived at 6 a.m.
Roy Ellsworth Jr., who was a cashier at a Wal-Mart in Pueblo, Colo., said he was normally scheduled to work until the store closed at 10 p.m., but most nights management locked the front door, at closing time, and did not let workers leave until everyone had straightened up the store.
“They would keep us there for however long they wanted,” Mr. Ellsworth said. “It was often for half an hour, and it could be two hours or longer during Christmas season.”
One night, shortly after closing time, Mr. Ellsworth had an asthma attack. “My inhaler hardly helped,” he said. “I couldn’t breathe. I felt I was going to pass out. I got fuzzy vision. I told the assistant manager I really needed to go to the hospital. He pretty much got in my face and told me not to leave or I’d get fired. I was having trouble standing. When I finally told him I was going to call a lawyer, he finally let me out.”
One top Wal-Mart official said: “If those things happened five or six years ago, we’re a very large company with more that 3,000 stores, and individual instances like that could happen. That’s certainly not something Wal-Mart would condone.”
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January 18, 2004
Schwarzenegger Budget Denies Some Health Care
By JOHN M. BRODER
OS ANGELES, Jan. 17 — It is nearly impossible for many Californians to comprehend the sum of $14 billion, the current estimate of the state’s budget deficit next year, and the cuts and contortions that Gov. Arnold Schwarzenegger has proposed to make it disappear.
So think about $320 a month, the price for Esther Bush to include her 8-year-old daughter, Natalia, on her employer-paid health plan. She says she cannot afford it. Governor Schwarzenegger says the state cannot afford to insure Natalia, either.
Ms. Bush, a medical social worker at a nonprofit agency in Los Angeles, is not poor — she earns nearly $30,000 a year — but neither has she climbed into the middle class. Ms. Bush, 33, shares a two-bedroom apartment in a dicey Los Angeles neighborhood with her sister and brother-in-law and their three children. She drives a 1989 Ford Tempo, pays $300 a month for after-school care for her daughter and lives, she said, from paycheck to paycheck.
Until last spring, Natalia received medical coverage under Medi-Cal, the state’s Medicaid program. But when Ms. Bush received a small increase in her salary, she no longer qualified for the program and instead was told to apply to Healthy Families, a state-federal health insurance program for the near-poor.
Because of computer and paperwork problems, her application was delayed, as the state’s fiscal situation continued to deteriorate. Governor Schwarzenegger, in his budget presentation last week, proposed capping enrollment in the Healthy Families program at the current level, 732,000 children. An estimated 300,000 additional children are eligible, but could be enrolled only as new slots open under the cap.
New applicants, like Natalia, will be placed on a waiting list, as Ms. Bush put it, “for God knows how long.” In the meantime, Ms. Bush prays that no emergencies befall her. As it is, she spends four hours waiting to see a doctor at a neighborhood clinic when her daughter has an ear infection or stomachache.
In his campaign last fall, Mr. Schwarzenegger, a Republican, praised the Healthy Families program and vowed to do whatever he could to make sure all those who qualified for the program were enrolled. But in his budget, which is certain to be modified by the Legislature, Mr. Schwarzenegger proposed $2.7 billion in cuts in social service programs, including the cap on enrollment in Healthy Families.
Virtually every state safety net program for the poor — including Medi-Cal, welfare and programs for the infirm, the aged, the severely disabled and those living with AIDS — faces substantial reductions under the governor’s spending plan.
Mr. Schwarzenegger also proposed a 10 percent reduction in fees to doctors and other medical providers under the Medi-Cal program, a move some fear will drive many providers out of the overburdened system. A court has blocked a 5 percent reduction in Medi-Cal reimbursements imposed last year, so the $462 million Mr. Schwarzenegger hopes to save from the larger reduction is hypothetical at this point.
The governor’s proposal would cap health care payments for illegal immigrants, reduce state payments for in-home care of the elderly and disabled and suspend the scheduled 2005 cost-of-living increase in the state’s share of the Supplemental Security Income program.
More than 75,000 legal and illegal immigrants and 110,000 children in low-income families would lose health coverage in the first year of the plan, according to Health Access, a nonprofit group that advocates expansion of coverage. The California HealthCare Foundation estimates that the plan would add 350,000 Californians to the ranks of the uninsured over the next two years.
State Senator John Burton, the liberal leader of Senate Democrats, called Mr. Schwarzenegger’s first budget “unworthy” of the progressive tradition of California.
“I don’t think people voted for him to take away money from the elderly, blind and disabled,” Mr. Burton said this week. “I don’t think they voted for him to take health care away from young children.”
Mr. Burton and other Democrats say they believe tax increases will be needed to balance the budget without devastating cuts in programs for the poor. Passage of the budget requires a two-thirds vote of the Legislature, which is dominated by Democrats.
“It seems the only people being asked to share in the pain are those that are the most vulnerable,” said Francisco Estrada, public policy director in Sacramento for the Mexican-American Legal Defense and Educational Fund. “The most affluent are not being asked at all to share in the pain of resolving California’s fiscal crisis.”
Schwarzenegger aides defended the decisions as necessary to correct the state’s troubled finances. They said cuts were not aimed at the poor. They noted that health and human services would consume nearly a quarter of the state’s $99 billion in spending for the fiscal year starting July 1, so it appeared the poor would take a disproportionate hit.
“Anyone who characterizes it as balancing the budget on the most vulnerable is just not accurate,” said Rob Stutzman, the governor’s communications director. “The pain is balanced throughout government.”
Mr. Stutzman said social services cuts were made with “scalpels rather than battle axes” and were designed to slow the growth of expensive programs to bring deeper savings in future years.
According to the Center on Budget and Policy Priorities, a national group that analyzes the impact of government programs on the poor, 34 states have imposed cuts or caps on Medicaid and children’s health plans, causing as many as 1.6 million low-income recipients to lose health coverage. Florida, which froze enrollment in its children’s health program last year, had a waiting list of more than 40,000 children by late fall.
The Florida official who helped Gov. Jeb Bush design his most recent budget, Donna Arduin, is now Mr. Schwarzenegger’s budget director.
“These are not easy decisions, to be sure,” said H. D. Palmer, spokesman for Ms. Arduin, “but we tried to strike a balance between unsustainable rates of growth and going in and removing people who are currently receiving services. We think we found a middle ground.”
In addition to the cuts in state social programs, the governor has proposed a $1.3 billion reduction in payments to local governments. City and county officials warned that those cuts imperiled local health and welfare programs, as well as public safety and other services.
David E. Janssen, the chief administrative officer for Los Angeles County, said that his county, the state’s most populous with 10 million residents, would lose $289 million under the governor’s plan, even as it had to cope with the cuts in services.
“This really represents a frontal assault on health and human services programs,” Mr. Janssen said. He said denying basic health coverage to thousands of low-income residents would drive them to underfinanced community clinics and overcrowded emergency rooms. The counties and cities foot the majority of the bills for those services, he said.
Mr. Janssen also noted that Mr. Schwarzenegger’s budget depended largely on California voters approving a $15 billion deficit-reduction bond on the March ballot. Without that money, the state will run out of cash in June and the budget hole next year will be at least $3 billion deeper.
Mr. Janssen said that borrowing to finance current spending was fiscally irresponsible, but utterly necessary given the state’s plight.
“It’s lousy government,” he said, “but it has to pass.”
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