When it comes to bankruptcy, Congress has one set of rules for workers and one set of rules for big business.
After decades of lobbying by major creditors, the Republicans and their loyal Democratic opposition recently passed the Bankruptcy Abuse Prevention Act (see Justice #43), making it almost impossible for working people to escape the haranguing of bill collectors at a time of record household debt.
Meanwhile, a federal bankruptcy court recently freed United Airlines from ever paying a cent on the pension plans they once promised thousands of workers. This favorable ruling for the bosses at United came just weeks after the company defaulted on a $9.8 billion payment to its employee pension fund – the largest such default in U.S. history.
For years, United was exploiting an accounting loophole in the federal rules, stealing from its pension fund, and hiding it from government regulators. According to the Pension Benefit Guaranty Corporation, when United declared bankruptcy in 2002, two sets of calculations on its pension plan were prepared for different federal agencies.
One set of calculations provided to the Labor Department – which the accounting rules depend on – allowed United to hide the real value of its pension fund by using fuzzy math. Another more precise set of calculations sent to the Security and Exchange Commission – which the accounting rules do not depend on – concluded its pension plan was only 50% funded.
United defaulted because it stole $9.8 billion from workers. But when most workers go bankrupt, it’s because of conditions forced upon them by capitalism. A recent Harvard University study found that excessive medical expenses cause more than half of all household bankruptcies. "Unless you’re Bill Gates, you’re just one serious illness away from bankruptcy," said Dr. Himmelstein, the study’s lead author.
Welfare for Corporate Crooks
When President Bush signed the new bankruptcy bill into law, he declared: “If someone does not pay his or her debts, the rest of society ends up paying them.” And so the new laws make it harder for workers to file for Chapter 7 bankruptcy, forcing them to file for Chapter 13 and make long-term payment plans with creditors.
Following Bush’s logic, now that United is not going to pay its promise on pensions, then the rest of us will, right? Exactly.
The bankruptcy court turned responsibility for United’s pension plan over to the taxpayer-funded Pension Benefit Guaranty Corporation – a $9.8 billion bailout to a Fortune 500 corporation.
Meanwhile, the PBGC puts a cap on pension payments at $45,000, meaning many retired workers will not get the full value of the pension they were promised by United.
On top of this, the Congressional Budget Office predicts the current $23 billion deficit at the PBGC could soon turn into a $71 billion deficit as other companies such as Northwest Airlines, Delta, and GM likely take the same road as United, ripping off workers’ pensions and asking for government bailouts.
A Government Accountability Office study found that the corrupt accounting methods used by United are a widespread practice in Corporate America.
When it comes to bankruptcy, there are two sets of rules, but one agenda, and that is to guard the profits of big business and not the interests of workers. We need to counter this agenda with one that would pull millions of working people out of debt and guarantee job and pension security for all.
A system of cheap credit could be established by taking the biggest banks and credit card companies under public ownership. This is certainly justified by the corrupt practice of selling credit cards to those who can’t pay them, and ripping off customers with high interest rates.
In addition, companies like United and others who claim bankruptcy and ask for government bailouts to save their profits should also be taken under public ownership, and run by workers under democratic workers’ control and management.
Big business and their two parties are organizing to steal our future – we need to organize to take it back.
From Justice, paper of Socialist Alternative, cwi in the US