Dave Peterson, president of the United Auto Workers Local 31 in Kansas City, Kan., is nursing a bad case of laryngitis and anxious to regain full use of his pipes.
He figures he’ll need them to join throngs of fellow union men and women planning protests at Charles Schwab Corp. locations across the country at the end of this month, part of a hardball campaign to pressure Wall Street to stop funding the lobbying and marketing for President Bush’s plans to let workers divert Social Security funds into private investment accounts.
“We’ve got a good core group of membership that all we have to do is call them up and say, ‘Be there,’ and they’ll be there,” Peterson, a 53-year-old self-described liberal Democrat half-whispered, half-croaked.
The AFL-CIO, which represents 13 million workers in unions including Peterson’s, has been buoyed by its success in recent weeks in pressuring two prominent financial services companies, Edward Jones & Co. and Waddell & Reed, through letter-writing campaigns, private talks and threatened pickets, to drop membership in a trade association that promotes the private accounts concept.
Dozens more companies, including big names like Wachovia Corp., are in unions’ cross-hairs, and sources close to the campaign said more defections from the Alliance for Worker Retirement Security are expected by early next week, as companies try to limit their vulnerability. It’s not just bad publicity they’re worried about. The AFL-CIO’s union-sponsored pension plans account for about $400 billion, or $1 of every $15, in U.S. retirement savings plans, and brokerages don’t want to lose accounts to competitors as punishment for their political affiliations.
Union leaders say the estimated $2 trillion in transitional costs associated with creating a limited private accounts program would speed up Social Security’s insolvency woes. But they also warn that such a shift is likely to guarantee retirees’ benefits will be permanently reduced.
Some also worry that conservatives hope to one day privatize the program entirely, and say it’s a slippery slope.
Supporters of private accounts say benefits may have to be cut anyhow, and that giving workers the possibility of a slightly higher rate of return on a portion of what they’re tucking away could offset frustration over that.
Bush and his administration have begun a 60-day, 60-city campaign to sell the president’s ideas, but public opinion, at least for now, is firmly against him. Democrats have mounted such a strong resistance on Capitol Hill and the Republican leadership is divided enough over how to proceed that it’s unclear whether debate will go far this year, regardless of union efforts.
Even so, the AFL-CIO says it won’t ease up. Many union organizers see Schwab as a would-be prize among the firms they’ve targeted. While the company has not endorsed a private accounts plan, founder and CEO Charles Schwab sits on an advisory panel to the president and has contributed tens of thousands of dollars to ideological groups backing private accounts. Also, the company is huge, managing more than $1 trillion in assets.
It also may be one of the least likely to bend to union pressure because most of its business is in individual investment accounts.
Spokesman Greg Gable said Schwab joined the alliance not to fund a private-accounts campaign but to stay plugged in to developments on Capitol Hill.
“Our participation in these groups is more intended to give us access to the thinking on the subject matter and to hear various viewpoints on the debate,” he said. “Part of being a business is you anticipate what you can do to help your clients. To make a lot of noise about our supposed support for privatization when that’s not true is counterproductive and does not serve the debate.”
Steven Weingarten in the AFL-CIO’s Office of Investment said he doesn’t buy that explanation.
“Many of their leading member companies are saying publicly that they’re neutral, that they don’t have a dog in the fight. They do have a dog in the fight,” he said. “Financial service companies, Wall Street firms, could make an enormous amount of money off privatization of Social Security. The financial services industry has already been racked by a series of scandals showing they have been putting their private interests ahead of their clients’.”