“In 2004, which was touted both by the Bush administration and by Wall Street as a year in which the economy boomed, the median real income of full-time, year-round male workers fell more than 2 percent.” — Paul Krugman, today’s column

Today Krugman’s column focuses on Delphi, once the parts division of General Motors and now an independent company. Delphi has filed for bankruptcy. It is asking workers to take drastic wage cuts and may default on pension obligations. “The rest of the auto industry may well be tempted–or forced–to do the same,” Krugman writes. “And that will mark the end of the era in which ordinary working Americans could be part of the middle class.”

In the case of Delphi,

Why were large severance packages given to Delphi executives even as the company demanded wage cuts? Why, when General Motors was profitable, did it pay big dividends but fail to put in enough money to secure its workers’ pensions?

An editorial in today’s Washington Post looks at pension reform.

The story begins with the hole in the nation’s defined-benefit pension plans, the type that — unlike 401(k) plans — promise a fixed proportion of salary upon retirement. The rules governing these plans are dysfunctional: They allow companies to promise workers lavish benefits while setting aside too little money to pay those benefits when the time comes. Rather than keep workers happy with wage increases, which would have to be paid for with real money, financially pressed firms often bribe them with false promises of big pensions. When these firms go bust, employees get smaller pensions than cynical managers had promised them. And taxpayers, who guarantee pensions up to some $45,000 per retiree, have to rescue the bankrupt pension plans.

For years companies have been padding the balance sheets by shorting employees. Years ago I worked for a division of Simon & Schuster, then part of Paramount Communications. Corporate communications routinely sent letters to employees explaining that profits were stagnant so wages had to be frozen, and by the way we’re upping your health insurance deduction. Then the next day those of us who were also stockholders were told that profits were up and Paramount’s future never looked brighter. The employees, needless to say, developed some attitude.

And government, of course, is lookin’ out for the robber barons instead of us.

In regard to pension reform–giving credit where credit is due, the Bush Administration in January proposed legislation that would require companies to fund pensions properly and to pay the government a fair insurance premium for guaranteeing benefits. But after Congress got done with this proposal it was unrecognizable. The House pension committee watered it down a bit, then the Senate Finance Committee watered it down more, and the Senate pensions committee produced something even more watery.

Then they hit a speed bump. In the Senate, which had already thrashed out two bills, passed them through two committees on a bipartisan basis and produced a “final” compromise, Sens. Mike DeWine (R-Ohio) and Barbara A. Mikulski (D-Md.) upset plans for a floor vote by demanding still more dilutions. These lacked majority backing, so the senators exploited the Senate’s absurd rules to block the legislation indefinitely until their business allies got what they wanted.

All of this diluting was done to please lobbyists, of course.

You get a taste of the relationship between senators and lobbyists from an e-mail sent out by the American Benefits Council on Oct. 7. “With the active support of the Council, Senator Mike DeWine (R-OH), along with Senator Barbara Mikulski (D-MD), continues to press for an amendment,” the group reported to its members. “DeWine called the Council to personally thank us for our steadfast support,” it continued. That same day another business lobby, the ERISA Industry Committee, informed its shock troops: “Sen. DeWine has directly asked for our help in getting cosponsors” for his diluting amendment. Mr. DeWine and other senators will no doubt be rewarded for their efforts. On Thursday the American Benefits Council will host a thank-you lunch for Sen. Mike Enzi (R-Wyo.), the chairman of the Senate pensions committee. The invitation includes a line that reads: “Requested contribution: $1,000 PAC/$500 personal.”

So the enemies of reform bogged down the legislation. Sen. Charles E. Grassley (R-Iowa), one of the authors of the Senate reform bill, complained that the DeWine-Mikulski maneuvers would worsen underfunding and “put more workers’ pensions at risk.” But then something else happened. On Tuesday the Congressional Budget Office published an analysis showing that it wasn’t just the rogue amendment that would do that; both the Senate and House bills were so diluted that they would make the pension crisis worse, just as happened with the legislation that Congress passed last year. The same day Rep. George Miller (D-Calif.), the ranking Democrat on the House pensions committee, leaked an analysis by the Bush administration, which reached the same conclusion. So it turns out that legislation that had once been close to passage does the opposite of what’s intended. Nobody in Congress was told this until it was almost too late.

Although the White House had, for once, done the right thing in proposing the initial legislation, WaPo was critical of its role in the fiasco.

This, unfortunately, says a lot about the Bush administration: about its incompetence in handling economic issues and its cowardice in dealing with Congress. At some point in the past fortnight or so, the administration must belatedly have done enough analysis to understand that the Senate and House bills were going in the wrong direction, but it didn’t breathe a word. The idea of publishing numbers that would have forced it to veto a bill written by Republican committee chairmen appears to have been too much for the Bush team. Remember, Mr. Bush is the first president since John Quincy Adams to have completed a full term in the White House without vetoing a single bill.

Dubya may seen tough on the outside, but he has a soft, chewy center.

So, no pension reform. And wages are being squeezed as well. Back to Krugman–

Now the last vestiges of the era of plentiful good jobs are rapidly disappearing. Almost everywhere you look, corporations are squeezing wages and benefits, saying that they have no choice in the face of global competition. And with the Delphi bankruptcy, the big squeeze has reached the auto industry itself. …

… America’s working middle class has been eroding for a generation, and it may be about to wash away completely. Something must be done.

Last week I wrote about grand themes the Democrats ought to be addressing. A couple of them apply here– Make Work Pay and Protect Retirement Security. And as Krugman points out, national health care would relieve corporations of the burden of providing medical benefits, which would go a long way toward keeping them profitable.

Democrats (excepting Senator Mikulski) should be all over these issues, not only advocating a square deal for workers but also educating voters of the link between our overexpensive mess of a health care “system” and the cost of doing business in the U.S. They should be driving these themes home now in preparation for next year’s election campaigns. So far, I’m not hearing much.