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Highlights—December 25, 2004
- (Denver) Rocky Mountain News: IBM
worker's number-crunching led to lawsuit against Big Blue, by
Roger Fillion. Excerpt: The IBM pension lawsuit has some roots in Colorado, thanks to Dave Finlay.
In 1999, the former IBM senior engineer painstakingly calculated how much he would lose after
IBM switched to a cash-balance pension plan from a traditional pension. The bottom line: Finlay's
future pension benefits would get slashed more than 30 percent from what he would have received
under -IBM's traditional pension plan. "Every day I went to work I got angrier and angrier," said
Finlay, who retired in 2001 after 29 years at Big Blue, most of them in Boulder. Finlay put his
anger to work. In the end, his thousands of hours of data crunching helped inspire IBM employees
to file a lawsuit in 1999 accusing Big Blue of age discrimination. If link is broken, view Adobe
Acrobat version [PDF--31 KB].
- Rocky Mountain News: Cash
imbalance: Outcome of IBM case could ripple throughout nation, by Roger
Fillion. Excerpts: A court case pitting IBM against about 130,000 current and former employees
is a ticking time bomb — one that could produce shock waves for companies and employees
in Colorado and nationwide. At issue: whether IBM discriminated against older workers when
it replaced its traditional pension plan in 1995 with a new type of pension plan and then changed
it yet again in 1999. A federal judge ruled last year that the changes were discriminatory because
older employees' benefits at retirement would be less than those of younger workers. According
to different studies, Big Blue's new pension plan cut some workers' pensions by up to 40 percent.
Armonk, N.Y.-based IBM, which employs about 6,200 people in Colorado, plans to appeal the ruling.
... Take the case of Dave Finlay, 59, of Boulder. The former IBM senior engineer, now retired,
calculated in 1999 that his future pension benefits would get slashed 31 percent under Big
Blue's cash-balance conversion: to $27,534 a year at retirement vs. $40,102 under IBM's traditional
More than 300 companies with 8 million workers and $334 billion in plan assets have converted
their defined-benefit pension plans to cash-balance plans in the past decade, according to
the Labor Research Association, a nonprofit research and advocacy organization that provides
research and educational services for unions. Since 2000, there have been few cash-balance
conversions because of court fights and regulatory uncertainty. Recently, IBM itself decided
to close its cash-balance pension plan to new employees and to give all new workers a new 401(k)
plan starting in 2005. The overall dispute dates to the 1980s and 1990s, when IBM and other
companies began converting traditional pension plans into cash-balance plans. Court documents
in the IBM case revealed that Big Blue ultimately expected to save billions of dollars in pension
costs through the conversion. For a company, a cash-balance plan can be cheaper than a traditional
pension plan. "They tend to reduce costs because they end up reducing future benefits for older
Norman Stein, a pension law expert who teaches at the University of Alabama School of Law. If
link is broken,
view Adobe Acrobat version [PDF--96 KB].
- Rocky Mountain News: Broken
promises. Underfunded plans may hit retirees, taxpayers hard.
Excerpts: After toiling on the tarmac for nearly 36 years at United Airlines, Jim Anthony finally
received his payoff: a pension of almost $3,000 a month. Now the former ramp supervisor and operations
planner could see that amount cut to $2,000 if the airline moves ahead with plans to end its
pensions next year. The change could force Anthony, who is 60 and hampered by a bad knee and
other ailments, to return to the work force. "What this does is put a hell of a lot of strain
on us," said Anthony, who retired
in 2001 and lives in Centennial with his wife, Barbara. "It's a heck of a lot of money to
have to pick up." Generations of Americans have counted on their pensions to carry them through
the golden age of retirement. Yet increasingly they have discovered an unsettling trend: There
are no guarantees. It's a reality that hit workers at CF&I Steel in Pueblo more than a decade
ago, and one that is now rippling through the ranks of United Airlines.
- Rocky Mountain News: Cuts
mean return to work, retirement dreams put on hold. Excerpt: The likely
pension cut is the latest in a string of financial hits Hall and other United workers have faced.
The company's employee stock ownership plan, launched in 1994, turned into a colossal failure
when the company went into a tailspin in 2001. Workers forfeited part of their wages for about
six years in exchange for the stock. Hall sold his stock for about $1,300 in 2002 because shares
in United parent UAL Corp. had plunged. He said that stock had been worth about $120,000 at one
point. He also said his 401(k) retirement plan is smaller than those of many other American workers
because he was offered the benefit late in his career and was restricted in how much he could
put into it during United's employee stock program. For the pension problem, Hall points a
finger at United management and the U.S. government. He said he will survive the turmoil but "feels
people still working for United. He said he's saddened that rank-and-file workers and retirees
will pay a huge price to help the company stay aloft, while executives, even while experiencing
losses, will be better positioned financially. "These people like me came to work every day,
in the snow, in the rain, in the cold, on Christmas, on Thanksgiving, and busted their a-- to do
their jobs," he said. "And we're
the ones paying the consequences of their mistakes and a government that has let them underfund
these pension plans."
- Rocky Mountain News: Possible
$100,000-a-year loss prompts lifestyle changes. Excerpts: Retired
United Airlines pilot Jimmy Allen is good at math. But when it comes to calculating the impact
of likely lost pension benefits, he'd prefer not to see all the numbers. Take a look at the following
data, and you probably won't fault him. Allen, 62, who flew for United for 38 years, including
high-paying stints flying jumbo jets to Asia and Europe, has been receiving a pension of about
$12,000 a month. That's about $144,000 a year. If the carrier goes forward with plans to shed
its pensions next year, Allen might be looking at less than $40,000 a year, or a cut of more
than 70 percent. He would get his monthly check from the Pension Benefit Guaranty Corp. The pension
insurer's payments to individuals are capped by Congress, and United pilots have qualified for
benefits that, in many cases, are far higher than the caps. ... Allen was more disappointed last
summer when a three-member U.S. government board denied United's final bid for more than $1 billion
in loan guarantees. Shortly thereafter, the carrier signaled it would need to end its pension
plans to raise financing on its own so it could emerge from bankruptcy. As the head of the administration,
President Bush, through the loan-guarantee denial, has effectively taken "the sword of al-Qaida" and
placed it over the heads of United retirees, Allen said. And he stressed he voted for Bush. "The
retirees are defenseless. We have no voice. And we are on our knees with our hands tied behind
our back, our head bowed, and that sword is coming down on our necks. . . . "It's sad to watch."
- Rocky Mountain News: Likely
scrapping of pension plans appalls retiree. Excerpts: With her $2,900-a-month
pension from United Airlines, retired flight attendant Judy Schumacher has just enough money
to cover her mortgage and other expenses. Take away $700 or $800 a month - the change Schumacher
is bracing for - and she estimates she'll be working at least part time the rest of her life.
Schumacher, 57, who is single and lives in Elizabeth, said she's appalled that the company she
served for 37 years can legally get away with scrapping its pension plans. The nation's pension-protection
agency would insure part of the defaulted pensions. "This is a breach of contract," she
I think this is just a sample of how broken our legal system is. Something is seriously wrong
with our culture."
- Rocky Mountain News: 'Now
a lot of us are thinking no retirement'. Excerpts: Last May, 32-year
United Airlines ramp worker Geno Heslin and his wife, Linda, bought their dream home here: a
rustic, $240,000 wood-sided house with a breathtaking mountain view. "I'm finally living the
life I moved to Colorado to live," he
said. ... But now - saddled with a mortgage and a likely termination of his United pension -
Heslin said he might have to hold a full-time job into his 70s. He feels "violated" by
a company he joined when he was 20, following in his father's footsteps. ... Under his plan to
retire from United at 55, he could have expected a pension of about $2,200 a month from the carrier.
Working until 60 would have meant about $3,000. But if United ended its pensions next year and
he went forward with retirement at 55, his payments from the pension insurer likely would be
$500 to $1,000 less per month than those from the airline. He could get more from the agency
by working much longer for United. "I can't get over it," he said. "I've been working
for 30 (plus) years. In my mind, when I'm at the end of my career, there's going to be a quid
pro quo. Now they're turning around and saying, 'Deal's off.' "
- New York Times: Want
to Retire Early, It May Take Some Work. Excerpt: Workers considering early retirement should
crunch the numbers first, financial planners say, to make sure that they will have enough income
- typically about 70 to 80 percent of their preretirement earnings. They should also consider how
they are going to cover their health care. Some buyout offers that are geared toward encouraging
early retirement will offer medical insurance until Medicare kicks in at age 65, and might also
sweeten employee pensions.
- Vault's IBM Business
Consulting Services message board is a popular hangout for IBM BCS employees, including many
employees acquired from PwC.
- In "I
might add...", "jerkbait" points out some of positive points of having
a "road warrior"
job. Excerpt: In addition to the observations from Dose, any Road Warrior job does
have some benefits. If you are assigned to a long term, out of town job, you can drop the
apartment, car loan payments and any other trappings and live off the client. You won't
need them. You bounce around on weekends, living off friends and family. You bank roll
your salary and pile up frequent flyer miles, hotel and credit card points. Diamond club
this, Platinum club that. If you have a per diem, you live like a migrant farm worker with
8 people sharing a two bedroom apartment, sleeping on a futon (aka dogbed) and cramming
into rental cars to sock more away. Perq's galore. Within a short period of time you can
pay off student loans, have a down payment on an abode, or pay for a honeymoon (if you
still have a significant other by the end of it all).
- Citizen's Council on Health Care press release: WAKE-UP
CALL: Technocrats are Taking Over the Practice of Medicine. Full excerpt: A report meant to
challenge current thinking in health care reform was released today by Citizens' Council on Health
Care (CCHC). Extensively documented, the report: "How Technocrats are Taking Over the Practice
of Medicine: A Wake-up Call to the American People," shines a bright light of openness on
the terms "evidence-based
medicine" and "best practices," including the purposes of proponents and the concerns
of critics. "The public needs to understand that evidence-based medicine is an attack on
the patient-doctor relationship. EBM is not individualized care. It is group-think medicine," says
Twila Brase, president of CCHC and author of the report.
Noting the recent and growing inclusion of these terms in state and federal law, Ms. Brase
told news reporters last Thursday at an special press briefing: "If evidence-based medicine
is not understood for what it is, managed care will use it to solidify control over medical
decisions and the practice of medicine. Managed care will become the law of the land."
stresses the following five points: 1)* The term "evidence-based medicine" (EBM)
cannot be taken at face value*. EBM/ is/ managed care. Same game, different name. 2)* Science,
the purported foundation of EBM, is not incontestable*. In research, there are subjective
choices all along the road to creating the "evidence" of EBM. 3)* Practice guidelines,
used to implement EBM, have significant problems*. These include out-of-date, biased, conflicting
with each other, lack of individualization, and single-disease focus. 4)* Under EBM, practice
guidelines are becoming treatment mandates*. Financial consequences are increasingly a possibility
for doctors who do not follow guidelines issued by health plans or government. Computer systems
to track and report physician adherence are being established. 5)* Patient harm can result
from EBM, and its treatment mandates*. Practice guidelines are written based on data collected
from medical records of many patients. They do not focus on the care, or the unique circumstances
and physiology, of individual patients. And, as has been reported in England, they can be
used to implement health care rationing.
"Control over medical decisions is being shifted from doctors to data crunchers; from professionals
at the bedside to bureaucrats in big offices," says Ms. Brase. "The public should not
be fooled by the nifty-sounding names. Evidence-based medicine is managed care masquerading
as science," The CCHC report can be viewed at: http://www.cchconline.org/pdfreport/
- Salt Lake Tribune: Health savings accounts:
Medicine and market forces don't mix. (Editor's note: highly recommended) Excerpts: Once again
we are being told that a new health financing policy will unleash the power of the market in
the health-care system. Because patients have no incentive to conserve health-care dollars, they
overutilize health services leading to excess health costs, or so this market-oriented theory
goes. Accordingly, these market proponents propose converting employee health benefits from indemnity
or managed-care plans to individual health savings accounts (HSA) coupled with high deductible
or catastrophic health insurance policies. ... As an American grateful for the efficiencies of
our market economy, I can understand why there is a desire for a market solution to our health-care
problems. However, we should not let our market experiences induce us to chase a mirage. We have
long had the world's most privatized and investor-owned health economy, and consequently we also
have the world's least-efficient health system. HSAs, like other market-oriented health policies,
will not increase American health-care efficiency, but will cause health-care inflation, reduced
access to needed health services, and rising morbidity and mortality. Here's why: High American
health-care costs are not due to overutilization. ...
Despite our lack of overutilization and our use of co-payments, Americans pay more for health
care by far than do any other citizenry in the world. High American health-care costs are due
to excessive administrative costs, which will worsen with HSAs. Changing employee health benefits
from group insurance or managed care to individual HSAs and catastrophic policies will increase
administrative costs. Bureaucrats will be needed to supervise each dollar spent from each individual
HSA and each individual catastrophic insurance policy. The vast majority of health-care expenditures
are catastrophic costs. Even relatively routine procedures such as appendectomies and gall bladder
surgeries cost more than the few thousand dollars projected for HSAs. Once the HSA money is
spent, the alleged incentive for conservative health-care spending is gone and with it any possible
market forces. Even if HSAs would moderate consumer health spending, they could only do so at
the very thin margins of our nearly $2 trillion health economy. If link is broken, view Adobe
Acrobat version [PDF--14 KB].
- New York Times: Bush
Says Social Security Plan Would Reassure Markets. Excerpts: President Bush
said on Thursday that addressing the long-term problems in Social Security would reassure the
financial markets, offering a rationale to offset criticism that his plan to add personal investment
accounts to the retirement system would require up to $2 trillion in new government borrowing.
... As he did throughout his re-election campaign, Mr. Bush largely avoided talking about the
specific steps to assure the long-term solvency of Social Security. Social Security trustees
estimate that if no changes are made, the system will start running short of money to pay full
benefits to retirees in 38 years. In particular, Mr. Bush never mentioned the near certainty
that without raising taxes, which he has ruled out, any plan to add personal investment accounts
to Social Security and improve its financial condition would include a reduction in the guaranteed
retirement benefit. His aides say there really is no guaranteed benefit in the long run, because
without any changes to the system, Social Security will not be able to afford to meet its promises.
Mr. Bush used the conference, which was intended to build public and legislative support for his
agenda, to begin addressing the likelihood that the plan on personal accounts would require borrowing
hundreds of billions or even trillions of dollars at a time the government runs up large deficits.
A big new borrowing program could bring political and economic risks for the administration.
- New York Times commentary by Paul Krugman: Buying
Into Failure. Excerpts: As the Bush administration
tries to persuade America to convert Social Security into a giant 401(k), we can learn a lot
from other countries that have already gone down that road. Information about other countries'
experience with privatization isn't hard to find. For example, the Century Foundation, at www.tcf.org,
provides a wide range of links. Yet, aside from giving the Cato Institute and other organizations
promoting Social Security privatization the space to present upbeat tales from Chile, the U.S.
news media have provided their readers and viewers with little information about international
experience. In particular, the public hasn't been let in on two open secrets: 1) Privatization
dissipates a large fraction of workers' contributions on fees to investment companies. 2) It
leaves many retirees in poverty. Decades of conservative marketing have convinced Americans
that government programs always create bloated bureaucracies, while the private sector is always
lean and efficient. But when it comes to retirement security, the opposite is true. More than
99 percent of Social Security's revenues go toward benefits, and less than 1 percent for overhead.
In Chile's system, management fees are around 20 times as high. And that's a typical number
for privatized systems.
Privatizers who laud the Chilean system never mention that it has yet to deliver on its promise
to reduce government spending. More than 20 years after the system was created, the government
is still pouring in money. Why? Because, as a Federal Reserve study puts it, the Chilean government
must "provide subsidies for workers failing to accumulate enough capital to provide a minimum
pension." In other words, privatization would have condemned many retirees to dire poverty,
and the government stepped back in to save them. The same thing is happening in Britain. Its
Pensions Commission warns that those who think Mrs. Thatcher's privatization solved the pension
problem are living in a "fool's paradise." A
lot of additional government spending will be required to avoid the return of widespread
poverty among the elderly - a problem that Britain, like the U.S., thought it had solved.
Britain's experience is directly relevant to the Bush administration's plans. If current hints
are an indication, the final plan will probably claim to save money in the future by reducing
guaranteed Social Security benefits. These savings will be an illusion: 20 years from now,
an American version of Britain's commission will warn that big additional government spending
is needed to avert a looming surge in poverty among retirees. So the Bush administration
wants to scrap a retirement system that works, and can be made financially sound for generations
to come with modest reforms. Instead, it wants to buy into failure, emulating systems that,
when tried elsewhere, have neither saved money nor protected the elderly from poverty. If link
is broken, view Adobe Acrobat version [PDF--20
- New York Times commentary by Paul Krugman: Borrow,
Speculate and Hope. Excerpts: How, then, can
privatizers claim that they could secure the future of Social Security without raising taxes
or reducing the incomes of future retirees? By assuming that workers would invest most of their
accounts in stocks, that these investments would make a lot of money and that, in effect, the
government, not the workers, would reap most of those gains, because as personal accounts grew,
the government could cut benefits. We can argue at length about whether the high stock returns
such schemes assume are realistic (they aren't), but let's cut to the chase: in essence, such
schemes involve having the government borrow heavily and put the money in the stock market.
That's because the government would, in effect, confiscate workers' gains in their personal accounts
by cutting those workers' benefits.
Once you realize that privatization really means government borrowing
to speculate on stocks, it doesn't sound too responsible, does it? But the details make it
considerably worse. First, financial markets would, correctly, treat the reality of huge deficits
today as a much more important indicator of the government's fiscal health than the mere promise
that government could save money by cutting benefits in the distant future. After all, a government
bond is a legally binding promise to pay, while a benefits formula that supposedly cuts costs
40 years from now is nothing more than a suggestion to future Congresses. Social Security rules
aren't immutable: in the past, Congress has changed things like the retirement age and the
tax treatment of benefits. If a privatization plan passed in 2005 called for steep benefit cuts
in 2045, what are the odds that those cuts would really happen?
Second, a system of personal accounts,
even though it would mainly be an indirect way for the government to speculate in the stock market,
would pay huge brokerage fees. Of course, from Wall Street's point of view that's a benefit, not
a cost. There is, by the way, a precedent for Bush-style privatization. One major reason for Argentina's
rapid debt buildup in the 1990's was a pension reform involving a switch to individual accounts
- a switch that President Carlos Menem, like President Bush, decided to finance with borrowing rather
than taxes. So Mr. Bush intends to emulate a plan that helped set the stage for Argentina's economic
- Bloomberg.com: Washington
Fiddling While Private Retirement Burns, by John Wasik. Excerpts: Why has fixing Social Security
become the epicenter of the U.S. retirement debate while the easily bolstered private retirement
system is largely ignored? Social Security generously provides inflation indexing of benefits,
which the private system largely lacks. Worse yet, the private accounts that the Bush administration
wants will most likely balloon the U.S. budget deficit, raise interest rates and do nothing
to solve Social Security's long-term funding shortfall. Yet in an era in which inadequate 401(k)-type
plans are the dominant employer retirement program -- plans that you already can own and manage
yourself -- Social Security may be getting a needless shock treatment. "Social Security provides
almost universal coverage," says Zvi Bodie, an economics professor at Boston University and
an authority on pensions, "but (private) defined contribution and defined benefit plans combined
only cover half of the workforce." There's no reason why the private sector can't duplicate
inflation protection within existing retirement plans without dismembering Social Security.
Policy makers, though, are pursuing the wrong beast. ... Over the last quarter century, employers
have not only sponsored fewer traditional pensions, their total contributions have become much stingier.
When 401(k)s were born in 1978, only 11 percent of total contributions in both plans were made
by employees. By 1999, workers were investing 70 percent of the money in 401(k)-type plans
and 51 percent into defined benefit programs, according to the U.S. Department of Labor.
- Washington Post: The
Bigger Problem. Excerpts: The program now consumes one-eighth of the federal
budget; in 10 years that share is expected to grow to one-fifth. It will consume more money
this year than enters the Treasury through payroll taxes. By 2019, if current spending patterns
hold, the trust fund that finances the biggest part of the program will be out of cash. The
program is not Social Security but Medicare. Those frightening figures emerged during what
might be called the Medicare Moment of President Bush's economic summit -- an official pause
to recognize the problem and then crisply move on. "My role is to say: 'Remember health
care, remember Medicare,' " said Dr. William Roper, dean of the University of North Carolina
School of Medicine. Indeed, the figures tell the story. Medicare is a bigger problem than
Social Security: its hospital care trust fund is on track to go bust two or even three decades
before the Social Security surplus runs out; its unfunded liabilities dwarf those of Social
Security -- $27.7 trillion over the next 75 years, compared with $3.7 trillion liability
for Social Security. ...
You wouldn't know it from Mr. Bush, though, and that's the truly
scary part as he presses for Social Security reform. "We did take on Medicare, and it was
the Medicare reform bill that really began to change Medicare as we knew it," he said at
his news conference Dec. 20. "It introduced market forces for the first time, provided a
prescription drug coverage for our seniors, which I believe will be cost-effective. I recognize
some of the actuaries haven't come to that conclusion yet, but the logic is irrefutable." Actually,
none of the actuaries have come to that conclusion; their only disagreement is about how mammoth
the cost will be. And while the president is right that in some cases paying for prescription
medication saves money down the road, we disagree in suggesting that the drug benefit will even
come close to paying for itself overall. Mr. Bush's rosy scenario notwithstanding, Dr. Roper's
admonition -- "remember Medicare" -- is precisely on point.
- Christian Science Monitor:
retirement math: Social Security wins. Excerpts: At the
heart of President Bush's plan to sell Social Security private accounts is a simple notion:
You're always better off investing your retirement money than letting the government do it. By
doing it yourself, you can stow some money in the stock market, and over the long run will
get a better return on that investment than today's Social Security system offers. The idea
is broadly accepted. That's why the administration's plan to partially privatize the system
sounds appealing to many. But that better return won't always happen. Just ask Stanley Logue
of San Diego. For 45 years, the defense-industry analyst paid into the system until his retirement
in 1994. But with all the recent hoopla over reform, Mr. Logue, a Massachusetts Institute
of Technology graduate, decided to go back and check his own records. Would he have done
better investing his money than the bureaucrats at the Social Security Administration?
He recorded all the payroll taxes he paid into the system (including the matching amount
from his employer), tracked down the return the Social Security Trust Fund earned for each
of the 45 years, and then compared the result with what he would have gotten had he been
able to invest the same amount of payroll tax money over the same period in the Dow Jones
Industrial Average (including dividends). To his surprise, the Social Security investment
won out: $261,372 versus $255,499, a difference of $5,873. ...
There are other problems with private accounts. Administration expenses of the present Social
Security system are minuscule compared with the size of the benefits provided. The Bush administration
so far has provided no details on its private accounts plan. But if these are handled by
Wall Street, the fees could be sizable, dissipating some of the return from investing in
stocks. Logue takes no account of such expenses in his analysis. Further, administrative costs
and difficulties for private business could be large as companies, big and small, try to deduct
the right amount from a payroll and put it into a private account in a timely fashion.
- The Social Security Network: Social
Security Privatization: The Reform That Isn't Needed for a Public That Doesn't Want It,
by Ruy Teixeira, The Century Foundation. Excerpts: The Bush administration appears determined
to build on its "mandate" and push Social Security privatization early in Bush's second
term. This seems an ill-advised plan for several reasons. First, there is little compelling
evidence that Social Security is in any kind of crisis and none at all that carving out
private accounts will improve Social Security's fiscal position. In fact, it will almost
certainly worsen that position.
- New York Times: The
Risky Assumption in Social Security Change. Excerpts: The familiar disclaimer
in ads for investment vehicles and money managers of all sorts is: "Past performance is no
guarantee of future returns." It probably sounds obvious to anyone who has ever played the
markets. So why, in proposing changes to Social Security, has the White House ignored that
counsel? ... IF the stock market would do as well as it did in the last 30 years, by the
time people retire, without rebalancing, they might have 90 percent in stocks," Dr. Benartzi
said. Finally, he added, assuring people of a minimum benefit in retirement - another part
of the commission's plan - might also lead them to take excessive risks with their portfolios.
In any case, Dr. Benartzi said, most people would rather have someone else make their investment
decisions, and from an economic perspective, that might make the most sense. "If you have
a medical problem, rather than spending seven years to learn to be a doctor, you might
as well just pay a doctor," he said. "If you need to figure out a portfolio allocation,
then, rather then delegating it, now we're going to force you to spend all the time and learn
how to do it? It doesn't seem to be a very efficient use of people's time."
- Washington Post: If
It's Right, It's Wrong. Social Security Privatization Theories Don't Hold Up, by Michael Kinsley. Excerpts: As I
wrote last week, I'm convinced that Social Security privatization is not merely a bad idea
but a certain failure, and I offered to provide a logical proof, challenging supporters to
find the flaw or give up. More money can come from only two places: increased economic growth
and other people. Increased growth can come only from higher private investment or smarter
private investment. Privatization would deflect some money from the Social Security trust
fund into private investment, but the government would have to borrow an equal amount to
replace it. As for investment decisions, the only change caused by privatization would be a new
role for millions of small, naive investors. There is no credible theory that this would improve
the overall wisdom of capital investment decisions.
- AARP: Social
Security: Where We Stand. An Open Letter to AARP Members. Excerpts: here is a lot of misinformation
about Social Security. We want to make it clear where AARP stands on this issue: We stand with
you. Let's look at the facts. Social Security is the most successful program in our nation's
history. It is a promise our country makes to working Americans and retirees. And a promise
should not have an expiration date. While Social Security is strong now and in no danger of
going broke, it is true that the program needs some changes so it will always be able to pay
full benefits for all generations of Americans-today and tomorrow. The changes needed don't
have to be drastic, and the guarantee Social Security provides is one worth strengthening,
not replacing. ... Taking some of the money that workers pay into the system and diverting
it into newly created private accounts would weaken Social Security and put benefits for future
generations at risk. AARP is opposed to private accounts that take money out of Social Security.
In addition, private accounts are expensive. Just to switch to this new system could require as
much as $2 trillion or more in benefit cuts, new taxes or more debt. Most of us would then have
to pay twice to gamble on this new plan-first to keep our commitments to current retirees and
again to pay into these private accounts. Some critics of these personal accounts think that Wall
Street, not retirees, would be the real beneficiaries.
- Economic Policy Institute: Private
accounts: The 'spicy sauce' to sell deep benefit cuts. Excerpt: Like a cafeteria selling a
cheap cut of meat by serving it in spicy sauce, proponents of deep cuts in Social Security
benefits are masking their sour taste with the artificial sweetener of private accounts. The
possible long-term shortfall in the Social Security system as it currently stands would require
modest increases in revenue or cuts in benefits. However, the President has stated he will
not increase revenues, leaving only benefit cuts to balance the system. Indeed, in its primary
plan, President Bush's commission on Social Security proposed to slash the guaranteed portion
of Social Security by 16% for people who retire in 2022 and who had previously opted for private
accounts; the cuts would increase to 40% for those who retired in 2042 and by 62% for those
in 2075. To sell those deep cuts, the commission touted the benefits of private accounts, which
would require the federal government to borrow several trillion dollars over the next three or
four decades. (The additional borrowing would stop once benefit reductions exceeded the new funds
going into private accounts.) Even with the commission's overly optimistic projections of returns
on private accounts, future retirees would lose big under the commission's plan. The combined
income from guaranteed benefits and these new private accounts would fall 7%, 12%, and 23% short
of the benefits scheduled under current law for 2022, 2042, and 2075, respectively. By their own
admission, the commission's privatization proposal would cut benefits significantly.
- Forbes: IBM
deal builds up China Great Wall. Excerpt: IBM will outsource its server manufacture
after sealing a joint venture deal with China Great Wall Computer Corporation. The agreement
will create a new company, International Systems Technology (IST), of which 80 per cent will
be owned by IBM and 20 per cent by China Great Wall. The joint venture will initially produce
IBM's eServer xSeries, but is also expected to produce the forthcoming OpenPower Linux-only
- New York Times: Chinese
Buyer of PC Unit Is Moving to I.B.M.'s Hometown. Excerpts: To further
globalize the company, however, Lenovo will do something even bolder: it will move its headquarters
to Armonk, N.Y., where I.B.M. is based, and essentially hand over management of what will
become the world's third-largest computer maker, after Dell and Hewlett-Packard, to a group
of senior I.B.M. executives. American multinational companies outsource manufacturing to
China. Why can't a Chinese company outsource management to the United States? Executives
at Lenovo - which gets about 98 percent of its $3 billion in revenue from China - are, in
effect, acknowledging that they do not have the necessary global experience to run the new
most valuable asset we have acquired through I.B.M.'s PC business is its world-class management
team and their extensive international experience," says Liu Chuanzhi, chairman
of Lenovo and one of the company's founders. Indeed, few executives at Lenovo seem disappointed
by the move. In fact, many seem pleased to be buying into a blue-chip American corporation.
After all, Lenovo - formerly known as Legend - may be the biggest computer maker in China, but
the company is still virtually unknown outside of Asia.
- San Jose Mercury-News: A
look back at the IBM PC saga, by Dan Gillmor. Excerpts: The $1.75 billion deal, which vaults
China into the top tier of PC sellers worldwide, will be cited by opponents of globalization
as yet another example of the withering of U.S. manufacturing. The qualms are legitimate, but
China's rise as a manufacturing power has been a trend for years. IBM hasn't manufactured its
own PCs for some time. But IBM's latest move away from PCs is a coda on an almost operatic
business saga. Big Blue took big risks and suffered from epic blunders. In bringing the PC
to the market, it did something very un-IBMish at the outset, by creating a relatively open
architecture. I remember seeing the first IBM PC, a clunky box with a screen that had green
ASCII characters and no graphics. But IBM's computers were open in ways that helped create
a vibrant industry. You could add plug-in hardware, and use a variety of software. An ecosystem
developed. A legendary mistake helped create the ecosystem, and will be remembered as long as
business journalists and professors have jobs. IBM gave Microsoft the rights to sell operating
systems on non-IBM computers. Whoops.
expresses gratitude for the benefits received from his spouse's union membership.
I have also stated several times on this board the benefits of my
spouse's 32-year membership in a union. Because of that union, we
receive a very generous pension check every month, very good health
and dental benefits at the same cost as active employees (a little
over $100/month), along with a myriad of other excellent benefits --
all thanks to that union. I can dig up the prior posts if you would
like more details.
- CFO.com: Judge
Rules for Halliburton Retirees. Excerpt: For a change, score this round for retirees. As more
and more companies try to cut back on the benefits promised to their former employees, a federal
judge ruled that Halliburton Co. cannot trim the medical benefits received by retirees of Dresser
Industries Inc., which merged with a Halliburton subsidiary in 1998. "The merger agreement
obliged Halliburton to continue Dresser's benefit programs for its employees and retirees unless
the benefits were similarly changed for active employees," wrote U.S. District Judge Lynn
N. Hughes, according to the Associated Press. Halliburton had wanted to end coverage for 4,000
Dresser retirees who are eligible for Medicare by the end of the year and cap its monthly prescription
drug contribution at $22, according to the Houston Chronicle. Last year the paper reported
that the company planned to cut the coverage so benefits offered to Dresser employees and retirees
were in line with those offered under Halliburton's other plans.
- Miami Independent Media Center: Ed
Asner's Speech during the Umbrella Movement Meeting on Sunday, November 21st. Excerpts: Now for those of you here today that are not terribly concerned
with the slashing of your basic civil rights - what about your basic right to keep Uncle
hand out of your pocket? I’m talking about corporate pickpockets. Do you know that the CEO
paycheck vs. the worker paycheck is approaching 301 to 1!!! Twenty some years ago the ratio
was more like 42-1. What this means is the ‘average Joe’ out
there --- took home last year around $517 a week, while your not so average CEO socked
away more than $150,000 a week! According to Business Week, if the minimum wage had increased
as quickly as CEO pay since 1990, today it would be $15.71 per hour instead of $5.15 an hour.
According to ‘Citizens for Tax Justice‘: Between 2001 and 2006, Florida taxpayers
will receive $69 billion in tax cuts - sounds pretty good - but you will also face $216
billion dollars in added Federal debt. Even my own dismal attempt at bookkeeping translates
that to forking over $147 billion to Washington for $69 billion dollars in tax cuts. Could this
have anything to do with the fact that corporations paid 40% of the federal tax bill in 1940,
but by 2002 they have reduced that number to 7.1%?
According to the Population Health Forum the U.S. spends more hours at work than any other
country Almost 40 percent of Americans are now working more than 50 hours a week. In fact,
we're working more than medieval peasants did, and more than the citizens of any other industrial
country. Working Americans average a little over two weeks of vacation per year, while Europeans
average five to six weeks. Many of us (including 37% of women earning less than $40,000 per
year) get no paid vacation at all. Generally we are working almost 3 months more than European
workers AND…. we are doing
the impossible without even knowing it: working longer than the legendary Japanese worker!
We haven’t worked this hard and long since the 1920’s and as a result we are experiencing
stress, burnout and personal sacrifice that undermines the fabric of our society. According
to the website: poclad.org – giant corporations govern, even though they are
mentioned nowhere in our Constitution or Bill of Rights. So when corporations govern, democracy
is nowhere to be found. When people live in a culture defined by corporate values, common
sense evaporates. We stop trusting our own eyes, ears, and feelings. Our minds become colonized
and we wake up one morning greeted by George Bush’s CEO government (which now officially
owns our representatives and runs this land), calling the shots and shifting the tax burden off
investments and onto wages - and America’s low and middle income citizens twitch about -
vaguely sensing a thieving hand ever deeper inside their drawers - pockets picked!
- CNET: Internet
hoax hoodwinks McNealy. Excerpt: At a keynote address here at the Oracle OpenWorld show, McNealy
displayed a picture supposedly from the magazine "Popular Mechanics" showing how people
in 1954 envisioned the home computer. His point was to show how far computing has advanced
beyond what was expected. Alas, in reality the photo he used is a doctored picture of a nuclear
submarine control room mock-up, according to the myth-debunking site Snopes.com.
The black-and-white photo, which has circulated by e-mail and Web postings, shows a man in
an Eisenhower-era suit standing before a long panel studded with dozens of gauges and a single
steering wheel. A bulky monitor looms above, and a keyboard is placed in front.
|Coverage on H1-B and L1 Visa and Off-Shoring Issues
- DMReview: The Death
of Domestic Programming. (Editor's note: This article is highly recommended). Excerpts: The
demeanor and outlook of the domestic programming landscape is one of deep pessimism.
The aforementioned statement may be substantiated by three main components that include:
A) The weak overall domestic IT environment B) The outsourcing of programming jobs to
foreign counties such as China, India and Russia C) The lack of domestic computer science graduates
entering the job market. One cannot blame American business for the weak economy, but one can
certainly hold American business responsible for giving away jobs, and not properly promoting
computer science as a future career path. Some exceptions may exist for the latter, but
they are few and far between. In a nutshell, America is losing a key asset (programmers)
and a future talent pool (computer science graduates) because of shortsightedness by
both the government and private sectors. ...
American businesses (companies conceived and incorporated within the United States) are
allowing foreign competitors to eat their lunch. Case in point: In 2000, GM had approximately
35 percent of the domestic auto market. Its market share has since dwindled down to 28 percent
in Q3 of 2004. A good example of how Detroit is stacking-up against foreign competition can be
related to engine volumetric efficiency. The 2005 Honda Accord pushes out 240 hp from 3.0 liters,
while the recently introduced Pontiac G6 makes 200 hp from 3.5 liters. Higher output from the
Honda offering maybe directly attributed to technological innovations such as advanced engine
management systems and variable valve timing (VVT). In a nutshell, Asian and European auto manufacturers
have surpassed the United States in automotive technological prowess. The United States is now
in a "catch-up" position rather than a "leadership" position. ...
During the last four years many American businesses have put their IT departments in
precarious positions by shedding valuable employees, while accelerating the pace of offshore
outsourcing. As a result of this shortsighted approach, anxiety is the "buzz" across
the IT community. While pundits push the ROI mantra, reality dictates that job cuts and offshore
outsourcing promote unease and disloyalty among staff members that remain with businesses and
organizations, which promote this type of approach. In a nutshell, job cuts and offshore outsourcing
will severely impact American businesses ability to organically grow the future application developer,
project manager and systems analyst of tomorrow. ...
Where will the application developers, project managers and systems analysts of tomorrow
come from? With American businesses cutting key employees and the acceleration of offshore outsourcing,
the United States will have no choice, but to look at countries such as China, India and Russia
to fill its future IT needs. Accordingly, expect foreign nations to nurture in-house talent by
sending these individuals to domestic schools as well as colleges and universities based in the
United States. Case in point: In a recent official report, figures state that India produces
approximately 250,000 IT engineering graduates annually verses 60,000 for the United States.
This line of attack will allow foreign nations to organically grow their domestic labor pools
to satisfy the global demand for future IT services. Unfortunately, history does have a habit
of repeating itself. America will soon again be relegated to a consumer, rather than a producer
status nation in another important industry it once dominated.
- WashTech News: Oasis
of Hope in a Job Desert. Workers’ Rights Board Panelists Hear Testimony in Tacoma.
Excerpts: WashTech member and laid-off programmer, Steve Gentry, portrayed the human
cost of offshoring at a recent Workers’ Rights Board hearing in Tacoma’s Hilltop
neighborhood, held this month. He was joined by other workers in the audience who gave
testimony, as well as by Ashim Roy, an Indian union activist who soundly debunked the
assumption that offshoring to India has helped Indian workers. ... Recent call-center
wages in India are not significantly higher than what Indian workers would get elsewhere
in their country. While they do provide new college graduates with immediate employment,
many call-center workers are getting only 60 days of work a year, and one third do not have
enough money to live on. For Indian workers, economic globalization means that 250,000
people now have dead-end jobs. Not only that, but these jobs are often abusive, with 60-hour
weeks and excessive demands. Many workers must complete their calls within one minute, unlike
the average of five minutes in the United States. Many do not get adequate bathroom breaks.
Indeed, some are working in sweatshop-like conditions, and their jobs are always at risk of
being sent to yet another shore. Washtech/CWA Local 37083 hopes to build a relationship with
Indian union organizations, such as the NTUI, to further our common interest in keeping and
developing both of our economies for workers’ benefit.
on the Alliance@IBM Site:
- Forbes: Lenovo's
Corporate Culture a Key Issue As It Absorbs IBM. Excerpt: Can a company molded in the
tradition of socialist state-owned enterprises, and which still holds twice-daily exercise
sessions and company sing-alongs, transform itself into a global computer powerhouse? With
its purchase last week of IBM Corp.'s PC business, China's Lenovo Group Ltd. is betting
that it can. ... The merged company will combine Lenovo's staff of 10,000 employees, almost
all in Beijing, with the IBM PC division's staff of 10,000 _ about one-fifth in North Carolina,
nearly one-half in China and the rest scattered around the world. One of the most formidable
obstacles will be integrating the corporate cultures. "The cultural challenges are
going to be big. (Lenovo is) traditional, in the state-owned enterprise style," said
Duncan Clark, managing director of BDA China Ltd., a Beijing-based consulting firm. "Lenovo
hasn't had a particularly successful track record of partnerships with foreign companies." Lenovo
went to Silicon Valley in 2002 to recruit middle managers. A handful of U.S.-educated Chinese
were hired, most of them taking huge pay cuts for the excitement of working for a Chinese
company with worldwide ambitions. But about a year later, almost all of them had quit,
said a U.S.-educated Chinese man who worked at Lenovo for a little more than a year until
early this year. He insisted on anonymity because he is working at another multinational
high-tech firm in Beijing. The former employee described its culture as so Chinese, and
so strange, that most employees who had been educated abroad soon left.
- IBM Human Resources Transition Questions & Answers
(U.S.) HR Q&A,
Employees Affected by the Announced Sale of the IBM Personal
Computing Division, December 8, 2004 (for U.S. use only). [PDF] (Editor's
note: This is the official IBM Q&A, posted on the Alliance@IBM site. It consists of 59
questions and answers).
- IBM PC Division Employees Alert! Full excerpt:
- PC Division Sold - Although virtually unknown in the United States, Lenovo, China's largest
PC maker and the world's fastest growing one, has bought the IBM PC Division for
$1.75 billion. The sale brings the end of an era in an industry that IBM helped invent.
- What of the PC division employees? The impact on employees, their families and communities
is still to be determined.
Nearly 10,000 IBM employees will become Lenovo employees, doubling their workforce.
In RTP alone there are an estimated 1900 PC division employees.
- The fight for a voice in the workplace continues. The Alliance@IBM/CWA Local 1701 is deeply
concerned about the impact that this sale will have on current IBM employees. We
want to make it clear that we will not abandon our members or co-workers. We intend
to keep organizing and representing employees as they move into Lenovo.
In fact, we will actively pursue the formation of a new Alliance chapter at Lenovo.
We encourage IBM PC division employees to contact us.
Let us not be victims in this sale, but active participants in this transformation.
Let us all do our part to ensure that the employee's voices are heard, as employees
of IBM become employees of Lenovo.
- Contact the Alliance@IBM/CWA Local 1701 via phone at 607-658-9285, fax us at 607-658-9283,
email us at EndicottAlliance@stny.rr.co