The new American Dream: Serf city, here we come

"As Workers' Pensions Wither, Those for Executives Flourish: Companies Run Up Big IOUs, Mostly Obscured, to Grant Bosses a Lucrative Benefit." This headline comes to us not from the communist Daily Worker but the orderly pages of The Wall Street Journal, the chronicler of capitalism — or, as it used to market itself, "The Daily Diary of the American Dream."

It's not news that American executives have put ordinary workers' benefits on a diet while they go for a fourth helping. What makes this redistribution of corporate wealth special is its brazen and unblushing quality. We are not talking here about some stock option deal where the top guys are rewarded for increasing shareholder value. In this case, the money gushing into the executive suite is simply being siphoned through holes drilled in workers' paychecks. An example, courtesy of The Wall Street Journal:

General Motors has long complained that its "legacy costs" have made the automaker dangerously uncompetitive. By "legacy costs" it means the health benefits and pensions that it promised its workers and retirees. In an effort to ease those "burdens," GM recently announced it would end pensions for 42,000 of its salaried employees.

But guess what The Journal discovered? It found that the fund for those middle-class pensions was actually bulging with $9 billion more than was needed to honor them. The real problem, it turns out, was GM's executive pensions, which management had been supersizing even as it demanded cuts from the lower-downs. GM's executive-pension obligations, we learn, are $1.4 billion.

General Motors is not the only company to have built up extravagant pension deals for the privileged few. Executive-pension liabilities have hit $3.5 billion at General Electric, $1.8 billion at AT&T, and $1.3 billion at ExxonMobil and at IBM. "Sometimes a company's obligation for a single executive's pension approaches $100 million," The Journal reports.

Cleary, the workers whose pension plans have been frozen aren't the only ones losing out. These unfunded executive pensions suck off earnings that are supposed to be going to the stockholders.

Many companies, of course, are genuinely in trouble because they haven't saved enough money. But even these situations present opportunity for stiffing the workers and enriching top executives: It's called a Chapter 11 bankruptcy.

Under this part of the bankruptcy code, a company can say that it's broke but keep operating while it arranges a new schedule for repaying its debt. The way the law is written, banks can be made whole, but the workers are another matter. Companies can simply forget about the pensions they were supposed to pay their workers.

Enter the vulture capitalist. A Wall Street investor named Wilbur Ross showed up to buy LTV Steel after a Chapter 11 bankruptcy had relieved it of pension and health obligations — and after the union had granted the company major wage concessions. Ross bought the machinery and buildings for a song. He then rehired 3,000 LTV workers (already stripped of their previous benefits). The investor did much the same at four other bankrupt steel companies and eventually sold them all at a profit of over $2 billion.

You have to wonder about a country that lets these things happen to its workers. then gives massive tax cuts to the likes of Wilbur Ross. But you also have to wonder about the workers themselves.

It's painful to observe a growing serf mentality among ordinary Americans. Working folk seem afraid to complain about greedy executives or tax cuts for the rich, lest some big-money politician accuse them of waging "class warfare." They fall sway to right-wingers on the radio, who tell them to get on their hands and knees and thank Wilbur Ross for giving them a job.

Workers should understand that this doesn't have to be. The rules of this unfair game are made in Washington. And until they change the rule makers, nothing will get better for them.

Providence Journal columnist Froma Harrop's column appears regularly on editorial pages of The Times. Her e-mail address is fharrop@projo.com