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Opinion | BAILOUT

Another Free Lunch for Fat Cats

November 04, 2001|GREG GOLDIN | Greg Goldin is a Los Angeles journalist

Call it the 9-11 aftershock. The Bush administration, switching to war footing, is treating the deepening economic crisis as a second casualty of the Sept. 11 attack. Bush rushed through a $15-billion bailout to the airlines, promptly proposed ways the government would help shoulder insurers' losses from future terrorist attacks and quickly began promoting a $75-billion pump-priming package.

The administration's unspoken message is that the government has a duty to protect its citizens from the "collateral" fallout of financial hardship and collapse. The trouble is, the bailouts and stimulus are, like Bush's $1.3 trillion tax cut, a handout to big business and the super-rich. That "amazing spirit of sacrifice" the president has repeatedly commended? That's for the pink-slipped hotel maids standing in line for free groceries. They, like hundreds of thousands of other workers recently put out of work, will be sacrificing all right, getting by on unemployment benefits that are at historic lows. Ultimately, they may have to rely on a greatly scaled-back safety net. Meantime, at the White House and on Capitol Hill, where Wall Street calls the shots, the reigning ethos remains the same: Those with the best-paid lobbyists win.

Shared sacrifice? Consider the shameful distribution of pain in the airline industry. A bailout of these mismanaged companies was no doubt unavoidable, but even as more than 100,000 aviation workers were being laid off, Congress insisted on exactly nothing in return for a hefty taxpayer subsidy. Overpaid CEO's were simply left free to slash more jobs and run. The legislation, supported by both Republicans and a Democratic Party leadership enraptured by fiscal austerity, contained no funds for laid-off workers stripped of health-care benefits. It allocated no money for job training. Airlines were permitted to disregard the standard severance provisions of their labor contracts. Even expanding unemployment insurance from 26 to 39 weeks--a minimal demand at best--was rejected.

At the same time that the bailout abandons workers, it mollycoddles airline executives. To qualify for the $10 billion in loans available under the bill, airlines must freeze current executive compensation at 2000 levels for two years and limit severance pay to twice that amount. This may sound like some kind of sacrifice. But think of Delta Air Lines Chairman Leo F. Mullin, who got $2.1 million last year in salary and bonuses and as much as $34 million when his stock options are counted. Continental's Gordon Bethune raked in $3 million in salary and bonus, and another $4.8 billion in options. Donald Carty of American Airlines had potential earnings of $15.9 million. James Goodwin, until last week CEO of United Airlines, $10 million. To put this in perspective, it would take 1,365 years for the average American worker, making $25,501 annually, to earn Delta chair Mullin's yearly salary, 623 years to earn Carty's and 392 years to earn Goodwin's. And so it goes. If an airline chooses to skip the loan and go straight for the $5 billion in grants awarded by the bill, the sky's the limit on executive salaries and severance.

The airline bailout legislation was crafted within hours of the first impact at the World Trade Center, as industry lobbyists fanned out through the halls of Congress with a wish list leveraged by the claim that the airlines were victims, too, and should not be left to bear the burden of the attack alone. But the bill they sponsored handed a frayed and tattered parachute to workers, who were also victims, while executives continued to fly on gilded wings.

Contrast this bailout to the $1.5-billion U.S. bailout of Chrysler in 1980. Concessions to the ailing car maker were spread among union employees, executives, suppliers, lenders and dealers. Lee Iacocca went to work for $1 a year. The United Auto Workers were given a seat on the company's board of directors. And the government took stock warrants in trade for the Treasury's cash loan--which, by the way, was paid back in full. What's more, when Iacocca volunteered to take his buck a year, the average CEO made 42 times the average blue-collar worker's pay. According to Business Week, last year that spread was a staggering 531 to 1. A typical hourly worker got a 3% raise last year, a salaried employee 4%. The average CEO pulled in $20 million, including nearly 50% more in stock options and 22% more in salaries and bonuses than in the previous year.

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