From Volume 5, Issue Number 18 of EIR Online, Published May 2, 2006

U.S. Economic/Financial News

Fuel, Fertilizer Hyperinflation Slam Agriculture

Since 2002, farm fuel prices are up a whopping 113%; while fertilizer costs are up 70%, according to a recently released University of Missouri study, by their Food and Agricultural Policy Research Institute. "This extended price increase is something we have never seen before. In the past, if we had an energy price spike, prices would come right back down again. In this baseline, prices stay up," noted the Institute's co-director, Abner Womack. Conservatively, he projects still another 10% rise in farm-fuel costs in 2006 over 2005; and fertilizer costs 10% to 15% above 2005. This is untenable.

UAW Files Legal Counterattack vs. Delphi Bankruptcy

A 55-page legal memorandum filed in bankruptcy court in New York on April 21 by the United Auto Workers, against Delphi's motion to rip up the union contracts, indicates that the UAW believes it has adequate grounds for an all-out court fight to stop Delphi, according to The Automotive Connection April 24. The strategy is a union alternative to a provoked national strike, either against Delphi, bankrupt Tower Automotive, or GM.

The UAW counterattack to Delphi's so-called "rejection motion" takes the broad approach that Delphi is abusing bankruptcy law as a whole; that it is hiding information (particularly of its vast foreign operations) without which its bankruptcy claim for its American operations can't be judged; that so far it has yet to bargain with the UAW as bankruptcy law requires that it do, at least briefly—rather, all its "proposals" have been based on hypothetical bailout actions by GM; and that Judge Robert Drain's only legal course is therefore to pressure both sides to negotiate in good faith. Drain is scheduled to hold two-three days of hearings from May 9.

The union's lawyers also indicated in the memorandum that they are prepared to challenge whether the court has the constitutional jurisdiction to consider Delphi's motion, raising the possibility of a drawn-out fight through the appellate courts.

This strategy, also joined in motions filed the same day against Delphi by the International Union of Electrical Workers (IUE), is not simply a delaying alternative to a strike; it also fits with the Congressional fight begun during this two-week recess by Democratic Senators Ted Kennedy, Debbie Stabenow, Evan Bayh, and others, and Representatives George Miller, John Conyers, et al. These Congressional bills would change existing corporate bankruptcy law by clarifying that the "strategic bankruptcy" frauds being practiced by Delphi and Tower are not legal. Among other things, Delphi would be forced to provide full information about its international operations (180,000 workers, vs. 43,000 in the United States and Canada), before it could claim that losses in U.S. operations justified any actions in bankruptcy court. Business Week recently called the Delphi strategy "globalization by bankruptcy," saying the company would soon have 200,000 workers abroad and only 7,000 here, if allowed by the bankruptcy court.

New Orleans 'Charity Hospitals' Shutdown Leaves Poor Vulnerable

The takedown of New Orleans' state-funded "charity hospital" network leaves the poor with few options. The network of state charity hospitals set up by Gov. Huey Long in the 1930s to serve the poor and indigent, was wiped out, at least in New Orleans, by Hurricane Katrina. Growing numbers of uninsured have flooded those private hospitals still operating in the city, overwhelming their emergency room capabilities. Moreover, Louisiana State University (LSU) medical system, that ran the city's charity hospitals, has had to lease space at a separate medical center from the private Ochsner Hospital to set up a temporary trauma unit to replace the one at the now-closed Charity Hospital.

Ochsner has its own problems. Its total emergency care is up 40% over pre-Katrina levels, but no Federal or state aid has been forthcoming to help pay for the growing patient load. In the absence of financial assistance—it is not eligible to receive state aid—it has incurred $70 million in operating losses. Meanwhile, a private reform group that is an offshoot of the Louisiana Recovery Authority's Public Health and Health Care Task Force, will release a report April 27 recommending that state-funded charity hospitals be eliminated altogether, as private care providers can deliver "more efficiently."

Coastal Insurers Cancel Vast Numbers of Policies

Fearing another catastrophic hurricane, insurers are cancelling hundreds of thousands of homeowner policies. In Florida alone, insurers who say they can't survive big losses, have informed the state that they will cancel 500,000 homeowner policies, USA Today reported April 26. Allstate, the country's second-largest property insurer, is cancelling 95,000 policies in Florida and 28,000 in New York, and announced it will not write any new homeowner policies in 14 coastal Texas counties, New York City, Long Island, or Westchester County.

The crisis in Florida is acute. To qualify for a mortgage, homeowners must have insurance. Those whose policies have been cancelled will have to find other, more expensive insurance. According to USA Today, near the Florida coast annual insurance premiums of several thousand dollars now rival the cost of a mortgage. State-run insurers of last resort in the affected states are already running huge deficits.

Brownsville, Texas Awarded Desalination Project

The Texas Water Development Board approved a pilot seawater-desalination plant on the Brownsville Ship Channel on April 17, the Brownsville Herald reported April 18.

The state awarded a $1.3 million grant to the Brownsville Public Utilities Board for the initial project, which should be desalinating seawater by August. It will initially process just 100,000 gallons per day for a year to test the system. Eventually it will produce up to 25 million gallons per day.

Brownsville had just opened a brackish water desalination plant in 2004, which can desalt 7.5 million gallons per day.

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