In this issue:

Bush Administration: Put the Disabled To Work

Without Re-Regulation: U.S. Airlines Face Extinction

Ford, GM U.S. Sales Slide in 2004, Despite Incentives

State, Local Gov'ts Face Crushing Budget Crises

From Volume 4, Issue Number 2 of EIR Online, Published Jan. 11, 2005

U.S. Economic/Financial News

Bush Administration: Put the Disabled To Work

It's sounding more like Nazi Germany every day. A new report titled "The President's Committee for People with Intellectual Disabilities" calls for a change in Federal SSI (Supplementary Security Insurance) programs to make it easier to put the mentally and physically disabled to work.

"They're just thrilled when they get a job," says Madelleine Will, committee chairman.

Nationally syndicated columnist Rich Lowry, carried in the Moonie Washington Times Dec. 5, promotes the reform, pointing out that the program hasn't been indexed for inflation since the 1970s, and under SSI, a recipient begins to lose $1 for every $2 earned, once he makes just $65 a month. Jeb Bush's "innovative" program in Florida is promoted as an answer. He saved money by giving the disabled enough to pay for their transportation, in place of special government-provided transportation.

Without Re-Regulation: U.S. Airlines Face Extinction

American Airlines, the world's largest carrier, announced Jan. 6 that it would largely match the 50-60% fare cuts by third-largest, Delta. Before American's announcement, Continental, Northwest, United, and U.S. Airways only planned to match Delta's cost reductions where they competed directly. One analyst estimates that if the other airlines follow Delta's markdown, it could reduce U.S. carriers' revenue by $2-3 billion/year, while launching "a war of all against all," on top of an expected $5.5 billion loss in 2004, increased fuel, and other costs. In addition, non-union Southwest Air's announcement that it is moving into Pittsburgh, the hub of U.S. Airways, will probably be the final blow that pushes the latter into liquidation, according to industry analysts.

There is no solution but the re-regulation of the airlines that Lyndon LaRouche alone has called for.

Meanwhile, U.S. Airways bankruptcy judge Stephen Mitchell ruled that it could terminate its three main employee pension plans. U.S. Airways will now turn them over the Pension Benefit Guaranty Corporation—already running a $23 billion deficit due to its takeover of steel industry pensions. The PBGC has already taken over the pension of United Airlines' pilots, which, with these three, will mark the beginning of an industry mudslide into the PBGC.

The Bankruptcy Court also ruled that U.S. Airways could throw out the International Association of Machinists (IAM) mechanics' collective-bargaining agreement. Rather than the strike they had postured about, the IAM will now send out the proposed agreement for ratification to its members. On Jan. 5, U.S. Airways flight attendants ratified a new agreement that will save the company $94 million/year. Southwest has also announced that it will set up in Pittsburgh, and thus stop U.S. Air from raising fares there. The Bankruptcy Court did not let U.S. Airways throw out the health benefits of its 11,000 retirees on Jan. 5—as long as it is still in business.

Ford, GM U.S. Sales Slide in 2004, Despite Incentives

Detroit's "Big Three" automakers' share of the American market fell to its lowest level ever, dropping to an unprecedented 58.7% in 2004, down from 60.2% in 2003. General Motors said U.S. sales declined 1.4% in 2004, even though it introduced 29 new vehicles. GM's total sales for December dropped about 7%, with losses on both the car and truck sides. Ford posted a U.S. sales drop of 4.9% for the year, and 3.6% in December—the tenth monthly decline of 2004. For the year, car sales were down 14%, despite Ford's much-touted "Year of the Car" promotion.

State, Local Gov'ts Face Crushing Budget Crises

State and local governments convene amidst unprecedented, multi-billion dollar budget crises. Medicaid tops the list. With California in the lead, under Governator Schwarzenegger (see InDepth for Harley Schlanger's report on the California debacle), the following are some crises in other regions:


* Vermont. A $100 million hole, or worse, looms in next year's budget level of $3 billion. In addition, there is a looming $70 million deficit in the state's Health Access Trust Fund, which pays for Vermont's Medicaid. "We have to come up with a way to fix Medicaid, or else we're nine to ten months away from this thing having some major, major problems," is the description of Michael Smith, Administrative Secretary to Gov. James Douglas. (Times Argus, Jan. 2, Montpelier).


* New York. A $6 billion deficit looms in the state budget; Gov. George Pataki has plans to reduce Medicaid services. (Buffalo News, Jan. 4)


* Ohio. A deficit as high as $5 billion is projected for the state's budget, as lawmakers reconvened Jan. 3. Their "penny" sales tax, enacted two years ago, as a quick-fix revenue recourse, expires this June. The discussion focusses on how to cut Medicaid, fund education, etc. (Akron Beacon Journal, Jan. 4)

* Indiana. A $600 million deficit in the state budget faces the legislature convening Jan. 4 for a four-month session. Proposals are in the air, to find ways to cut Medicaid, and other mandatory services; plus, the state owes $710 million in back payments to schools, universities, and local governments. On the insanity front, Indianapolis Mayor Bart Peterson is galloping ahead with demands for approval of 1,000 electronic gambling machines at both state horse racetracks, and 1,500 machines at off-track betting sites in Indianapolis and Ft. Wayne. Peterson wants this gaming revenue to back up his proposed bond issue of $500 million to build a stadium to retain the Colts football team. (Noblesville Daily Times, Jan. 3)

* Minnesota. At least a $700 million deficit is projected for the next two-year budget, and it could be much worse. Lawmakers are convening this week for the 84th legislature. Among the proposals floating around: Make health-care services cuts, to damp the growth in healthcare costs ahead, from an expected 27% down to 20%; and then, skim off the current, temporary surplus of some $259 million in the Health Care Access Fund, which supports MinnesotaCare. Otherwise, tap into the state's casinos, nominally run by 11 Native American tribes, and demand $700 million over the next two years to defray the state deficit. (Minnesota Public Radio, Jan. 4)


* Colorado. A deficit of over $450 million is projected for the next two year state budget. The legislature convened yesterday, starting out by discussing what to cut. (, Jan. 4)


Detroit. Faces a potential shortfall of $214 million for 2005-2006, and a deficit this current period, of some not-yet-known size. A by-invitation-only conference is took place at Wayne State University Jan. 3-4, convened by Mayor Kwame Kilpatrick, on the subject of municipal finance. On the agenda is the example of Pittsburgh, which, as of 2004, came under de facto bankruptcy—called "financial distress status," and is being subjected to drastic government down-sizing and austerity. For example, last week, an arbitration panel ruled that the Pittsburgh police force should take a two-year pay cut, a big hike in medical costs, and cut holidays. (Detroit News, Jan. 4; WNEP, Scranton, Dec. 30, 2004)

[source: Cleveland Plain Dealer, Jan. 5; Cincinnati Enquirer, Jan. 4; Biloxi SunHerald, Jan. 4, 6 ]


* Ohio. Legislators, facing a $4 billion deficit in the state's two-year budget, are looking to cut Medicaid. New Senate President Bill Harris said, "I think we've got to slow the growth, especially when we look at Medicaid," adding that his top priority is "reforming" business and income taxes.

Cleveland school officials agreed Jan. 4 to huge cuts, slashing $30 million in costs to erase a projected $25 million deficit for the upcoming school year. The plan includes closing 14 schools, layoffs, elimination of extracurricular programs, and even a proposal to go to a four-day school week.

* Mississippi. Lawmakers opened a three-month session, as 50,000 poor, elderly, and disabled patients are scheduled to lose Medicaid benefits at the end of January. Overall, agencies have requested nearly $1 billion more than the $3.8 billion available in the fiscal year starting July 1; the deficit is currently $350 million. Several lawmakers are seeking to raise the cigarette tax in order to close a $268 million deficit in the state's Medicaid program. Lt. Gov Amy Tuck insists on a savage "restructuring" of Medicaid to cut costs, austerity echoed by Senate president pro tem Travis Little. Tuck also supports Gov. Haley Barbour's proposal to eliminate some government jobs, by removing agencies from state Personnel Board supervision.

* Tennessee. As many as 430,000 low-income residents could lose their health insurance if Gov. Phil Bredesen decides to scrap the state's $8 billion TennCare program.

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