HP's UK workforce cuts, Unite claims, "mainly involve" the company moving jobs out of Britain and into locations in other countries. "Lax employment protection in the UK compared to other European countries means that the UK is bearing the brunt of cuts," Skyte added, "as it's quicker and cheaper to sack UK people and export their jobs abroad."
Given the weak domestic economy, why hasn't this already happened? The answer is clear: U.S. tax policies penalize the repatriation of so-called "foreign source income," essentially the profits earned by foreign subsidiaries of U.S. corporations. The corporate cash pile is not being hoarded or held on the sidelines, as many pundits have suggested. It is being kept offshore by our tax structure. ...
Recently Microsoft opted to sell billions of dollars in debt to fund its dividend payments, even though it has approximately $37 billion in cash and short-term investments on its books. Since most of the cash is overseas, borrowing makes better economic sense than repatriating it because the cost of borrowing is far lower than paying tax would be. Microsoft is not alone. Cisco Systems, whose Chief Executive Officer John Chambers is a vocal critic of U.S. tax policy, has an estimated $30 billion in cash outside the U.S. Other leading tech companies with significant cash overseas include Dell, Hewlett Packard, International Business Machines, and Intel. Pharmaceutical giants Johnson & Johnson, Merck, and Pfize also have billions in unrepatriated foreign profits.
Among the new complaints, the report highlights alleged over-reliance on and misuse of interns, students and recent graduates who fill the same jobs as entry-level staffers. The company saves money by hiring workers as interns rather than full employees, using third-party employment agencies and avoiding insurance and other benefits required under Chinese labor law, the study said. Still, thousands of interns — who are supposed to be limited to eight hours’ work per day — are expected to work long hours of overtime. In one example, an intern lost more than 20 pounds in a month on the job from stress. ...
Foxconn has been under intense scrutiny already this year for a spate of worker suicides this year at its China facilities — 11 at the company’s two Shenzhen plants. The report said there have been 17 suicide attempts at Foxconn facilities so far this year, with three survivors. Additionally, the study found, Foxconn has not implemented promised pay raises following intense media scrutiny after the suicides, and that critical problems for workers continue unabated.
Many large employers are telling retirees the same thing. They include Alcatel-Lucent and Verizon Communications Inc., as well as state and federal government plans and those for military families and unions. Thanks to a little-noticed clause in a 1996 law, retiree-only health plans are exempt from the Patient Protection and Affordable Care Act that went into effect last month. That means the rule requiring health plans to extend dependent coverage to age 26, regardless of financial dependency, student status, employment or marital status, doesn't apply to millions of retirees' health benefits.
Medicare Advantage plans enroll one-quarter of the 46 million Medicare beneficiaries. Medicare subsidizes these plans — paying them more on average than what the same services would cost in traditional Medicare. As a result, beneficiaries pay less or get extra benefits, such as dental coverage or even health club memberships. The extra cost is paid by taxpayers and through higher premiums for enrollees in traditional Medicare.
Health care reform will phase out these unjustified subsidies starting in 2012 and use the savings, $132 billion over the next decade, to help finance coverage of the uninsured. Enrollments are projected to fall as some plans drop out and others raise their charges or reduce benefits. There will still be plenty of private plans available, and any older Americans who can’t find one to their liking will still have access to traditional Medicare. ...
Over time, the best Medicare Advantage plans will survive and the least efficient will close. That is what should happen. These subsidies are inequitable and far too costly for the American taxpayer.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
Ask yourself: What major new federal programs have started up since Mr. Obama took office? Health care reform, for the most part, hasn’t kicked in yet, so that can’t be it. So are there giant infrastructure projects under way? No. Are there huge new benefits for low-income workers or the poor? No. Where’s all that spending we keep hearing about? It never happened.
To be fair, spending on safety-net programs, mainly unemployment insurance and Medicaid, has risen — because, in case you haven’t noticed, there has been a surge in the number of Americans without jobs and badly in need of help. And there were also substantial outlays to rescue troubled financial institutions, although it appears that the government will get most of its money back. But when people denounce big government, they usually have in mind the creation of big bureaucracies and major new programs. And that just hasn’t taken place.
Consider, in particular, one fact that might surprise you: The total number of government workers in America has been falling, not rising, under Mr. Obama. A small increase in federal employment was swamped by sharp declines at the state and local level — most notably, by layoffs of schoolteachers. Total government payrolls have fallen by more than 350,000 since January 2009. ...
The answer to the second question — why there’s a widespread perception that government spending has surged, when it hasn’t — is that there has been a disinformation campaign from the right, based on the usual combination of fact-free assertions and cooked numbers. And this campaign has been effective in part because the Obama administration hasn’t offered an effective reply. ...
And a side consequence of this awkward positioning is that officials can’t easily offer the obvious rebuttal to claims that big spending failed to fix the economy — namely, that thanks to the inadequate scale of the Recovery Act, big spending never happened in the first place. But if they won’t say it, I will: if job-creating government spending has failed to bring down unemployment in the Obama era, it’s not because it doesn’t work; it’s because it wasn’t tried.
The basic problem is that US business has abandoned this country, sucking cash out of employees, vendors, customers and the tax man, -and spending it in overseas investments. It has gotten away with it through favorable legislation over the 1992-2008 period, and by incenting Americans to borrow, in order to maintain an unrealistic standard of living.
Their motivation at that time was that economic activity, for good or bad, increases shareholder value.
The result was that 78% of US GDP was (and is) supported by the consumer. That consumer also supports the GDP's of China, Japan, India, Malaysia, Singapore, Indonesia, Brazil, Vietnam, Taiwan, and a few ex-SSR's.
That worked until the merry-go-round slowed.
The large corporations panicked, and sucked up as much cash as they could, exacerbating the problem. They stopped investing in new plants, programs and products. Banks foreclosed without mercy and without proper procedures. US citizens started to lose their homes and found themselves without jobs, -or with reduced working hours and benefits.
Then, the big problem hit. Scared shitless, the American family stopped spending foolishly and started saving!!! The result has been a contraction of economic activity. The businessmen, having extracted as much as they can from employees, vendors and customers, want to extract more from the public sector, so their battle cry is for lower taxes and less government.
The Fed has been providing a temporary patch, by literally throwing free money at business, and asking it to start investing. It hasn't worked. Why not?
My conclusion is that Wall Street and the corporate executives have decided to shove a cork up the ass of the economy, and they've threatened to keep it there until the government gives them what they want.
And, what's that?
Much lowered taxes for the rich and the reduction of such programs as Social Security, Medicare, Medicaid and infrastructure building.
Your suggestion that we're heading into 1933 again is probably correct. It was preceded by just the activities that I outlined above. --Mike.
The American Future Fund, organized under a tax code provision that lets donors remain anonymous, is one of dozens of groups awash in money from hidden sources and spending it at an unprecedented rate, largely on behalf of Republicans. The breadth and impact of these privately financed groups have made them, and the mystery of their backers, a campaign issue in their own right. Through interviews with top Republican contributors and strategists, as well as a review of public records, some contours of this financing effort — including how donors are lured with the promise of anonymity — are starting to come into view. ...
Stoking the flow of dollars has been the guarantee of secrecy afforded by certain nonprofit groups. Mel Sembler, a shopping mall magnate in St. Petersburg, Fla., who is close to the Republican strategist Karl Rove, said wealthy donors had written six- and seven-figure checks to Crossroads GPS, a Rove-backed group that is the most active of the nonprofits started this year. Republicans close to the group said that last week, the group received a check for several million dollars from a single donor, whom they declined to identify. ...
The U.S. Chamber of Commerce, which does not identify its corporate members, spent $10 million over the last week on advertisements, mostly against Democrats, records show. The chamber will most likely meet its fund-raising goal of $75 million, more than double what it spent on the 2008 campaign, Republican operatives say.
Yet some Americans who have secure jobs and rather high incomes are feeling very sorry for themselves because it’s possible that they might have to pay somewhat higher taxes next year if the temporary reductions made during President George W. Bush’s tenure in office are allowed to expire for the wealthy.
Take, for example, an unnamed person mentioned in a recent online post by economist J. Bradford DeLong. This person supposedly makes $450,000 a year, has a family of five and after paying bills, loans, taxes and everything else (including private school tuition for three children and the costs of a $1 million house), is left with only a few hundred dollars a month of discretionary income. Mr. DeLong says this person strongly feels that he should not have to pay more taxes — “It is unfair: he is not ‘rich.’”
As Mr. DeLong puts it, “Is it pathetic that somebody with nine times the median household income thinks of himself as just another average Joe, just another ‘working American’? Yes.”
By using the Tax Policy Center’s online tax calculator, I have determined that the aforementioned sorry-for-himself person might indeed end up paying higher taxes next year — there is some uncertainty linked to our lack of knowledge about the details of his family situation — but probably not more than 2 percent of his income. So, Mr. DeLong points out, this person is angry — and not at financiers, but at “Barack Obama, who dares to suggest that the U.S. government’s funding gap should be closed partly by taxing him.”
The bigger problem is that Social Security's payout is so meager, which is problematic since it has been thrust into this new role as a de facto national retirement plan. Currently, it replaces only about 33 to 40 percent of a worker's average wage from the year prior to retirement (compared to Germany, where it replaces 70 percent). That is simply not enough money to live on when it is your primary - perhaps your only - source of retirement income.
Doubling Social Security's individual payout would cost about $650 billion annually for the 51 million Americans who receive benefits. Here are some ways to pay for it.
First, lift Social Security's payroll cap that favors the wealthy. Currently, Social Security only taxes wages up to $106,800 a year, and any income earned above that is not taxed. The net result is that poor, middle-class and even moderately upper middle-class Americans are taxed 12.4 percent (split between employee and employer) on 100 percent of their income, but the wealthy pay a much lower percentage. Millionaire bankers effectively pay a paltry 1.2 percent. Making all income levels pay the same percentage - that's how Medicare works - is popular with Americans and would raise about $377 billion.
Second, with all Americans receiving Social Security Plus, employer-based pensions would be redundant, so businesses no longer would need the substantial federal deductions they currently receive for providing employees' retirement plans. These deductions total a whopping $126 billion annually. ...
An expansion of Social Security - one of the most successful and popular social programs in American history, currently celebrating its 75th year - would be good for the macro economy as well because it would act as an "automatic stabilizer" during economic downturns, keeping money in retirees' pockets and stimulating consumer demand. Benefits would be portable when changing from one job to another.
It also would help American businesses trying to compete with foreign companies that don't provide pensions to their employees, since those countries already have generous national retirement plans. And it would be broadly fair, since even those higher income Americans who are losing their tax deductions would see part of it returned to them in the form of a greater Social Security payout.
While the bad news of the Euro crisis makes headlines in the US, we hear next to nothing about a quiet revolution in Europe. The European Union, 27 member nations with a half billion people, has become the largest, wealthiest trading bloc in the world, producing nearly a third of the world's economy -- nearly as large as the US and China combined. Europe has more Fortune 500 companies than either the US, China or Japan. ...
In his new book, Were You Born on the Wrong Continent?, Thomas Geoghegan makes a strong case that European social democracies -- particularly Germany -- have some lessons and models that might make life a lot more livable. Germans have six weeks of federally mandated vacation, free university tuition, and nursing care. But you've heard the arguments for years about how those wussy Europeans can't compete in a global economy. You've heard that so many times, you might believe it. But like so many things, the media repeats endlessly, it's just not true.
According to Geoghegan, "Since 2003, it's not China but Germany, that colossus of European socialism, that has either led the world in export sales or at least been tied for first. Even as we in the United States fall more deeply into the clutches of our foreign creditors -- China foremost among them -- Germany has somehow managed to create a high-wage, unionized economy without shipping all its jobs abroad or creating a massive trade deficit, or any trade deficit at all. And even as the Germans outsell the United States, they manage to take six weeks of vacation every year. They're beating us with one hand tied behind their back." ...
Americans don't know how things actually work in European countries. For many people the fact that Germany is neck and neck with China as the number one exporting country -- give or take the rise and fall of currency - must be mind blowing. Even progressives in America don't look overseas for models that work. I find it almost pathological that our exceptionalism infects even those who assume they don't believe in it. ...
McNally: You point out that as globalization grew, the US chose to compete on the basis of cheap labor by outsourcing. We kept the marketing and executives here and moved the manufacturing elsewhere. We've been playing that game for 20-30 years now. Germany chose to play the opposite game. Geoghegan: 30 years later the Germans are making money off of China, and China is making big time money off of us. One thing I really try to get across in the book: Many Americans think that we've got a trade deficit because we can't compete with China. We've got a trade deficit because we can't compete with Germany in selling things to China. Until people wake up and look at the kinds of things that the Germans are doing to keep their manufacturing base, we're going to continue to run deficits which leave us in the clutches of foreign creditors and compromise our autonomy as a country. ...
McNally: Let me finish with a quote of yours that really struck me: Without an industrial base a democracy dies. Geoghegan: My own favorite ending line would be: Countries like Germany do both capitalism and socialism better than we do.
This stems from the public's simmering anger over the fact that the Wall Street barons who crashed our economy are back to paying themselves multimillion-dollar bonuses, while the corporate CEOs who keep downsizing and offshoring our middle class opportunities are grabbing bigger paychecks than ever for themselves. The wealthy swells are upset by our anger and feel picked on by us riff-raff – they don't like being blamed for our economic distress, even though they are to blame, and they certainly don't like the rising populist fervor for more economic fairness in our country. So they're mad at us for being mad at them, claiming that they are victims of our "wealth envy."
I'm sure you feel as badly as I do about this, so you'll be glad to know that those living in luxury seem to have found a way to soothe their bad mood: they've gone shopping! Yes, while workaday Americans are scrambling just to cover the rent and buy groceries, the well-heeled are reported to be splurging again, indulging their consumer whims with such pricey pretties as exotic automobiles.
One analyst of trends in the luxury car market concedes that sales of Bentleys, Lamborghinis, Maseratis, and other ultra-priced autos had been down the past couple of years. He explained that, "It didn't feel right buying a $300,000 Rolls-Royce when people were being foreclosed out of their homes." But this year, the elites are saying, "To hell with what the public thinks, I'm gonna get me a new Ferrari 458 Italia, the people be damned!"
How nice for them. But I don't think their conspicuous consumption is going to make anyone feel better about their greed – nor will it quell the public's rising populist fervor.
Step 1: Check your conscience at the door. You must be able to live with the knowledge that while you were making $900,000 an hour, more than 29 million other Americans had no job at all or were forced into part-time work. Also you'll have to live with the uncomfortable fact that your sector -- high finance -- crashed the economy, leaving eight million Americans jobless in a matter of months. ...
Step 2: Remember: None of this is your fault! Yes, a few tiresome critics will keep pointing the finger at you, saying that the financial sector crashed the economy. Ignore them and put the blame where it belongs - somewhere else. When in doubt, seek guidance from the pros on Wall Street. ...
Step 3: Proclaim that you are the solution: It's not enough to dodge the blame. You've got to convince academics and journalists to anoint you as the savior. You see, it's you and your fellow high finance moguls who will save us from ever having to endure a crisis like this again. Fortunately for you, they've already bought the story. For example, in More Money than God, Sebastian Mallaby writes...
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