Central Falls RI: Bankers get bailed out, workers' pensions get cut

It was during the student movement here in California two years ago that I first heard of Central Falls Rhode Island.  Central Falls is the town that threatened to fire all of its teachers if they refused to take cuts due to the financial crisis.  With $20 million in debt and $47 million in pensions liabilities, Central Falls declared bankruptcy in August this year.

But it seems that a deal might be at hand. Fortunately for the moneylenders and investors, the unelected minority that govern the United States, their political representatives in the Rhode Island legislature passed a law before the financial collapse that ensures that bondholders are first in line “among all creditors of municipalities in the state” the Wall Street Journal reports. 

The deal is that if the retirees support the pension cuts and don’t challenge them in bankruptcy court, the state (the taxpayers) will fork over some $2.6 million over the next five years to ease the burden that reduced pensions will impose on them. So far 82 out of 130 Central Falls workers have agreed to the deal which imposes some 25% cuts in their retirement income.  Without aid from the state’s taxpayers, some of these workers would have been facing 55% reductions in pensions.  You can bet that numbers guys have been helping figure out life expectancy ratios and are hoping that some of these folks die prematurely, something that reduced living standards contributes to.

So what is happening is that workers are taking reductions in pensions (living standards going backwards) in order to bail out the bankers and moneylenders yet again. The bail out comes in the form of reduced pensions in the city and taxpayer subsidies statewide. It’s a great deal for the moneylenders.

Some pensions in Central Falls have been cut from $27,000 a year to $12,000 which is a drastic reduction in income in a country where social services are almost non-existent. But the bondholders, politicians and other movers and shakers have big hearts.  They recognize the strain that cutting one’s retirement income in half places on a person and are offering the five years of state assistance“to give time to former Central Falls employees time to adjust their lifestyles.”

In line with Labor disputes where bosses and Union officials offer workers pay cuts or layoffs, there is nothing else on the table for the pensioners other than cuts or fewer cuts, with time to “adjust” of course.  By accepting the deal, costly litigation can be avoided, the moneylenders get their money and hopefully the taxpayer may end up paying less if the retirees die sooner than later and the $2.6 million isn’t all spent.

Rhode Island, like other states has taken moves that allow state officials to take over the finances of cities in financial trouble.  But passing a law that ensures investors’ get their money above all else is a first apparently.  Mind you, in California it is written in to the constitution that moneylenders get paid above all else.  The bankers always have direct representatives in the legislature beyond the politicians that belong to one of the two Wall Street parties.

The deal is not yet sealed as negotiations are continuing between the teachers Union and the state appointed receiver and if the state legislators don’t OK the $2.6 million taxpayer pension subsidy, the law guaranteeing the moneylenders get preference might be challenged in court.

The bottom line is that investors and their political representatives blackmail entire communities in to accepting a the destruction of social services as well as living standards that are the produce of decades of struggle.  All of the solutions are based on not “spooking” investors. If workers and the middle class refuse to accept a lower standard of living in all aspects of our lives from wages to pensions, health care to education, the investors will charge more for lending money or refuse to lend it completely.  This is economic terrorism. This terrorism fuels the inequality, racism and poverty increasing around us as the richest 1% of Americans have more and spend more than the bottom 40%. Meanwhile, according to Forbes, the 147 people that were at the top of its "World's Richest People" have as much wealth as three billion inhabitant of this planet, that's half the world's population. That's what the capitalist class and their propagandists call freedom, or even worse, civilization.

It raises the necessity of taking in to public ownership the banks, financial houses and the entire financial industry in this country. By taking public ownership of the financial institutions the allocation of capital can be decided in a planned and rational way, allocating this resource to social needs rather than wasting trillions of dollars on speculative ventures, wars or other such things.  Infrastructure, education, health care and the jobs that are necessary for such investment is the alternative.  

Taking over the financial resources of society, the capital that is after all the product of the very Labor of the people who are being sacrificed at the alter of profit, does not mean taking in to collective ownership the savings accounts of workers or the middle class as the coupon clippers and their politicians are doing through their policies. The billions that the corporations or social parasites like the hedge fund and private equity lords stash away is a different matter; even they are entitled to a secure and productive life, but not through the poverty of everyone else.  A democratic socialist society would guarantee them a job, something they refuse to guarantee millions of us who want to work.

The investors who through economic terrorism and violence force workers in to poverty are criminals.  They are driven by the laws of their precious market to do what they do.  They will not change out of the goodness of their hearts. They are forced to make us pay for their crisis which is why there is no alternative on the table but concessions on our part.

Only force will wring anything from them, organized collective working class power.  The Occupy Wall Street movement has shown us one thing, if there are enough of you, laws written and enacted by the politicians of billionaires can be broken, concessions can be won, albeit it temporarily as, like the boss, the moment the ink is dry on the agreement they begin to violate it.  For this reason, only public ownership and control of these resources and a democratic socialist economic and political alternative to the madness of the market is the only ultimate way this conflict can be resolved.