Throughout the IBM Pension heist, Ellen E. Schultz, a Pulitzer Prize winning investigative reporter with the Wall Street Journal, exposed IBM's and other companies shenanigans that have cost retirees millions and millions of dollars, while enriching corporate executives.
Ms. Schultz has just published a book that every IBMer should read: Retirement Heist: How Companies Plunder and Profit From the Nest Eggs of American Workers. Many IBMers are aware of the "cash balance heist" of 1999. However, IBM has been stealing money from the pension plan dating back to 1991, well before the Gerstner era. Read more...
Why do profitable companies freeze their pension plans or close them to new workers? The retirement crisis was not an accident. The retirement crisis was caused by actions of the companies. They had incredibly overfunded plans and chose to cut benefits and ultimately freeze the plans, even though there was plenty of money in them to pay the benefits. Initially people didn’t understand that the benefits were being cut because companies hid it.
How is pension plan accounting used to boost shareholder value? Cutting the benefits actually gives companies a boost to profits. It’s an accounting effect. If you promise to pay $100 million to retirees, that’s a debt on the books. If you cancel that debt, then you get to keep the profit. Freezing the plan not only let them keep the money in the plan, but gave them a boost to profits.
Do companies need to cut retirement benefits to stay competitive? When companies began cutting benefits it wasn’t to remain competitive because the plans had a huge surplus and there was no cost to the company. What they were doing is taking the plan and finding a way to convert some of the assets into a benefit for the company and also to boost their profits. It’s not accurate for them to say they had to do this to remain competitive.
How are pension plans for ordinary workers and executive compensation related? People have to realize that when companies say their costs are spiraling, maybe it’s the executive’s costs that are spiraling. In many cases the additional pension costs and boost in liability are just because of the executive pensions. The plans for regular workers are tax advantaged and subsidized by taxpayers. If you offer a pension plan, it is supposed to be for everyone more or less. Plans for executives don’t get special tax breaks, but companies have found ways of trying to get the same tax breaks as the plan for regular employees and have found strategies to get money from the regular plan to pay executives. They have been cutting the benefits for the rank and file employees and boosting the pay for the executives.
If your company has promised you a pension and retiree health benefits, should you count on getting them in retirement? If you do have a pension, companies can cut it going forward, but they cannot take away something you have already earned. Under law that is protected. You also have to be able to recognize that your pension is being cut because it’s easy to present the information in a way that looks as if nothing has changed. You cannot count on a pension being retained going forward. If you’ve been promised retiree medical, in most cases the promises are not enforceable unless you are in a union. A lot of companies will say they will let you continue your health coverage until you are eligible for Medicare, but then later say they can’t afford that and are going to need to charge you a whole lot more than they did. The people who are better protected are those who are in a union and are in a collectively bargained agreement. You really have to be self-reliant. If your company has a pension or retiree medical, you really cannot bet the farm on that. These are things that are under assault and companies are trying to take them away.
And it's not over! Ellen agrees! I suggest you pick up this book and give it a good read, come back here, and we can chew on it together. I bought mine from Amazon. (not an endorsement, just a fact) Thank you Ellen!!!
Reviews from Amazon:
It's no secret that hundreds of companies have been slashing pensions and health coverage earned by millions of retirees. Employers blame an aging workforce, stock market losses, and spiraling costs- what they call "a perfect storm" of external forces that has forced them to take drastic measures.
But this so-called retirement crisis is no accident. Ellen E. Schultz, award-winning investigative reporter for the Wall Street Journal, reveals how large companies and the retirement industry-benefits consultants, insurance companies, and banks-have all played a huge and hidden role in the death spiral of American pensions and benefits.
A little over a decade ago, most companies had more than enough set aside to pay the benefits earned by two generations of workers, no matter how long they lived. But by exploiting loopholes, ambiguous regulations, and new accounting rules, companies essentially turned their pension plans into piggy banks, tax shelters, and profit centers.
Drawing on original analysis of company data, government filings, internal corporate documents, and confidential memos, Schultz uncovers decades of widespread deception during which employers have exaggerated their retiree burdens while lobbying for government handouts, secretly cutting pensions, tricking employees, and misleading shareholders. She reveals how companies:
Though the focus is on large companies-which drive the legislative agenda-the same games are being played at smaller companies, non-profits, public pensions plans and retirement systems overseas. Nor is this a partisan issue: employees of all political persuasions and income levels-from managers to miners, pro- football players to pilots-have been slammed.
Retirement Heist is a scathing and urgent expose of one of the most critical and least understood crises of our time.
If IBM were to offer such a thing ... is there a minimum amount of time from a legal perspective that employees must be given to consider the offer? I've heard 60 days tossed around ... meaning an announce by Nov. 1st, but no hard facts.
The NetBenefits pension calculator DOES show a reduction in lump sum value of ~4.5% comparing the values of the lump leaving 12/1/11 vs. 1/1/12.
Still IBM benefits if they can get many people to take the lump-sum or partial lump sum, because there is less of a future liability, and it's easier to close the plan and sell it to an insurance company or equivalent to administer. It's pointless to worry at any rate... but if you are fully eligible and have not taken your enhanced annuity pension, and especially if you are 60+, I would (if I were over-60 and eligible) start my pension distribution now.
I do understand and agree that if a significant percentage of new retirees elected to take the lump sum it could impair the funds ability to provide for the annuitants.
This year may be the best time to "run away" as market interest rates are low, and the last salvo in the lump reduction has not yet hit. By 2013 I would expect that "market" interest rates will have to rise...reducing the lump sum.
I'm wondering if IBM might be planning an early Xmas present.... they sure seem to be interested in cutting salary expense... the contractors are getting beat up badly from what I understand.
Several IRS and PBGC filing requirements as well as participant notices much each be timely filed and sent. Primary requirements:
- PBGC Notice of Intent To Terminate (NOIT) - This informs participants of plan sponsor's intent to terminate plan. It is issued to all affected participants (employees, retirees beneficiaries and labor organizations) at least 60, but not more than 90, days in advance of proposed termination date.
- IRS Notice to Interested Parties - This informs participants of plan sponsor's intent to file termination with IRS. It is issued to all affected participants (employees, retirees beneficiaries and labor organizations) at least 7, but not more than 21, days prior to filing IRS form 5310.
I'm trying to remember how it went the last time IBM had a retirement "incentive" folks that had retired just before the incentive was announced were understandably upset.... anyone remember how that worked? I'm thinking that sending a written request to the pension administrator asking if there are any pending changes forces them to disclose anything that is planned to happen in next 60 days?
In IBM UK, IBMers were given a chance - actually quite a bit of time - to take their retirements before their was a change in the plan. Even so, they were publicly rebuked in an official session of the UK Parliament. That would never happen in the US Corporate-Congress, IMHO.
The pension expert I spoke to was from the Pension Guaranty Corporation, I believe. Barring a major change to the laws, you will get your annuity. One thing that is not guaranteed is the early-retirement incentive of 3% a year for those who retire before age 60. Normally each year you retire before 60 would reduce your pension by 6%, but that is lowered by 3% per year as an incentive to retire early. That has been in place for almost 20 years. Even there you would be given a chance to retire during the notification window. As with anything, these things can change over time.
Cons: Where do I begin, I have 10 reports, in the last 4 years each has had one wage rise of less than 1 percent, some more junior staff are struggling financially. Staff ratings are frankly inequitable and driven by quotas, and microscopic budgets. While IBM has great diversity & equality guidelines, in practice they are utterly ignored and people spend considerable effort finding creative ways to bypass them.
People who work to bypass IBM's gargantuan, unwieldy bureaucracy, to aid the client are p15sed on. We had some guys that reduced the time to completion for projects from 6 months to 2 weeks. The customer was deliriously happy. The guys that did this, put in 100 hours a week for 6 months, were rewarded with a cinema ticket. No wage rise and a poor PBC rating (personnel rating).
People who are good at their jobs are surreptitiously blocked from moving accounts. There is a list of staff that are considered essential to the account. No-one will admit to the existence of this list. If someone from this list attempts to move from the account, the manager trying to get the resource , is told, you don't want them, he, she is a trouble maker. This extends to people who apply for work with a customer. This is the tip of the iceberg in terms of sleaze.
Up until an account is signed nothing is too good for the customer, however once they are on board, resources are bled from the account till its barely operational, this continues until the customer complains, or its time to renew the account, when the circus begins again.
There is zero budget for tools. Any automation is cobbled together by a variety of scripts, that are unsupportable. Collaboration tools are a spreadsheet and a mail folder. Hideous.
Advice to Senior Management: If I ever met an IBM manager that cared for their staff, I would say "great, keep up the good work." 95% of managers at IBM manage up, & this is at all levels. I guess my advice would be losing your humanity is not something to be proud of. Please try to find some.
IBM Corporate HQ and Senior Exec's in the US are brilliant at setting out an executing effective business strategy and driving results. The US is the place to be if you are ambitious. There is plenty of opportunity to contribute which creates a feeling that you are part of driving world wide opportunity.
There is freedom to manage you own schedule and negotiate priorities - although management expectations are high and you can expect this "flexibility" to eat into your weekends and vacations.
There is a clear sense of Corporate purpose in IBM. Progress is steady and continuous.
Cons: Compared to the US Exec's local UK management are an irrelevant laughing stock. They voice the same expectations and pressure for performance without any consideration for employee rewards. The result is that in the UK confusion is common place, compensation and benefits are well below the average, morale is very low and there is a lot of employee churn. Its a top heavy organization.
There is little investment in employee development.
Control of costs/expenses is unreasonably strict - there is an expectation that the employee pays for business necessities such as cell phones and local travel.
Advice to Senior Management: Recognize the value of your employees knowledge, skills and commitment to the business objectives - reward them and objectives will be achieved: continue to starve them and you'll face a further continued decline.
Those who are on track, and know it, scored an average 7.2 (out of 10) on a financial wellness index created by research and education firm Financial Finesse. Those who had no clue if they were on track scored about the same (4.7) as those who knew they were not (4.2).
There is not a week that goes by that one of us does not read about the "resource action" that is taking place. Each time it happens we all worry it will be us next time, but.. we don't join the union, we do nothing, we get what we deserve. Working for IBM and allowing and participating in its activities makes us all complicit. Without our help, the company could not do what it does today. Are we any different than the good little Germans, who did not speak up, who worried about their own jobs and well being as the Holocaust occurred around them?
I recently worked on a project, the result of which was to offshore the workforce of the client company to IBM Global Resources in India. The new word for India resources is "GR".. they are euphemistically called "Global Resources". My work, my labor, took the jobs of American workers, and put it in the hands of people in India- I DID THAT...not IBM.
Do not let anyone tell you about the Great Global Economy and how these newly enriched countries are going to give back all the money we lose from the destruction of American Labor in trade. India just gave their largest (10B$) military contract to, well, not us!
The country that profits the most from US financial aid and a free license to undercut American Workers.. did not give us their business.. Remember.. government spending turns into paychecks for workers- that money goes into bank accounts and funds something called M1- M1 is multiplied and becomes the money supply.. We pay taxes, the government spends money and that money circulates and helps drives the economy. We are leaking M1- the money leaves us.. goes to workers in India and drives their economy- we don't get the trade in return, it is flatly a lie.
The time is now.. before its to late.. to take the risks.. to come out.. to do the hard thing.. Write to your congressman, grow a spine, stop the tax benefits to IBM and others who offshore and eliminate American Jobs.. Band together, join a union, do something! If you don't.. then be quiet, be a good little IBMer and each week.. as the layoff happens.. be glad its not you.. but.. eventually. it will be. -Anonymous-
It's interesting we all sign agreements every year to accurately and truthfully report the time (that's the actual work hours in duration as well as start and stop times) and we are even reminded failure to comply is sufficient grounds for 'discipline' and that it's illegal at both the federal and state levels. Yet, some of these heroic individuals do exactly what is illegal while the management teams are completely aware and encourage the practice while there are others who have been terminated because of expense reporting violations (embezzlement?)
It would be nice if the respective states; county; city and federal governments would do a complete audit of time records reported versus the data recorded from the badge entry systems to see exactly how things align then realize how much revenue the government entities are not receiving because of misreporting by the employees. I suspect from a tax law prospective this could be construed to be "Tax Evasion".
The other big misnomer these "heroes" put forward is how many people aren't required to perform the necessary work. Some of these "heroes" are working well in excess of 60 hours a week on a regular basis which in reality is reducing the necessity to either acquire another FTE or contractor which harms us all during this period of economic devastation. I can't advise anyone to "go forward and report" the illegal activities to anyone as we all know the "whistle blower" laws don't seem to adequately protect the anonymity of the person doing the reporting. Meanwhile, none of us get raises (including the "heroes") we all get financially behind every single day and these "heroes" have had their spines removed likely because they are frequently threatened with termination if they don't succumb to the management mandates regarding the illegal hourly reporting practices.
So my question is this: What does the Alliance think they could do to stop this kind of abuse. I simply suspect what would happen would be people get fired. --Financially Strapped --
Alliance Reply: If you and all your co-workers were able to get together, join the Alliance, and publicly reveal how IBM is abusing their employees; you could turn the tide against IBM's abuses. No one person can walk into an IBM location, and declare a union to be representing the employees. It's the employees, the workers who must organize and form committees to expose IBM's abuses and underhanded tactics, publicly, through the Press. This takes courage and perseverance; all of which you have, but are not using it, yet. Nothing is easy. We've never said so, either. The hard work is ahead; but joining the Alliance and forming groups of workers that get the word out about how IBM is really operating under the radar, is what needs to be done. Grow the numbers of your co-workers that can do this as a group. It's the only answer.
Alliance reply: IBM's CEO has been "exposed" already; by his own actions and his underlings actions, many times over. IBMers need to concentrate on organizing their way toward a contract and a strong force to be reckoned with. Spending time chasing Sam Palmisano's misadventures is wasting time. Spread the word that IBM employees have an organization that can and will represent them; if they want to be part of it. Get them to join Alliance@IBM.
Many critics of the federal health law raised fears that Medicare Advantage benefits would shrink and premiums would rise because the overhaul reduced federal payments to the plans by $136 billion for the next decade. “Instead, we are seeing just the opposite,” Health and Human Services Secretary Kathleen Sebelius said. “Medicare plans are stronger than ever and beneficiaries continue to have access to affordable options.”
The depressing facts are laid out in the Commonwealth Fund’s latest biennial health insurance survey. An analysis of the data found that nine million working-age adults who lost their jobs between 2008 and 2010 became uninsured. Most of those could not find affordable coverage from insurance companies, and some were turned down when they applied. ...
Nearly three-quarters had problems paying medical bills when they did visit a doctor or a hospital. They used up their savings, struggled to pay medical debts over time, took out loans when they could, declared bankruptcy or ended up unable to pay for other basic necessities like food or housing.
Substantial help will not arrive until 2014, when the major provisions of the national health care reforms kick in. The reforms will provide subsidies to help millions of Americans buy insurance on new exchanges and will greatly expand Medicaid coverage for the poor.
But that was then. Today, “free to choose” has become “free to die.”
I’m referring, as you might guess, to what happened during Monday’s G.O.P. presidential debate. CNN’s Wolf Blitzer asked Representative Ron Paul what we should do if a 30-year-old man who chose not to purchase health insurance suddenly found himself in need of six months of intensive care. Mr. Paul replied, “That’s what freedom is all about — taking your own risks.” Mr. Blitzer pressed him again, asking whether “society should just let him die.”
And the crowd erupted with cheers and shouts of “Yeah!”
The incident highlighted something that I don’t think most political commentators have fully absorbed: at this point, American politics is fundamentally about different moral visions.
Now, there are two things you should know about the Blitzer-Paul exchange. The first is that after the crowd weighed in, Mr. Paul basically tried to evade the question, asserting that warm-hearted doctors and charitable individuals would always make sure that people received the care they needed — or at least they would if they hadn’t been corrupted by the welfare state. Sorry, but that’s a fantasy. People who can’t afford essential medical care often fail to get it, and always have — and sometimes they die as a result.
The second is that very few of those who die from lack of medical care look like Mr. Blitzer’s hypothetical individual who could and should have bought insurance. In reality, most uninsured Americans either have low incomes and cannot afford insurance, or are rejected by insurers because they have chronic conditions. ...
In the past, conservatives accepted the need for a government-provided safety net on humanitarian grounds. Don’t take it from me, take it from Friedrich Hayek, the conservative intellectual hero, who specifically declared in “The Road to Serfdom” his support for “a comprehensive system of social insurance” to protect citizens against “the common hazards of life,” and singled out health in particular.
Given the agreed-upon desirability of protecting citizens against the worst, the question then became one of costs and benefits — and health care was one of those areas where even conservatives used to be willing to accept government intervention in the name of compassion, given the clear evidence that covering the uninsured would not, in fact, cost very much money. As many observers have pointed out, the Obama health care plan was largely based on past Republican plans, and is virtually identical to Mitt Romney’s health reform in Massachusetts.
Now, however, compassion is out of fashion — indeed, lack of compassion has become a matter of principle, at least among the G.O.P.’s base.
Ron Paul’s Campaign Manager Died of Pneumonia, Penniless and Uninsured ...As it turns out, Paul was not speaking purely in hypotheticals. Back in 2008, Kent Snyder — Paul's former campaign chairman — died of complications from pneumonia. Like the man in Blitzer's example, the 49-year-old Snyder...was relatively young and seemingly healthy when the illness struck. He was also uninsured. [The Kansas City Star quoted his sister at the time as saying that a "a pre-existing condition made the premiums too expensive."] When he died on June 26, 2008, two weeks after Paul withdrew his first bid for the presidency, his hospital costs amounted to $400,000. The bill was handed to Snyder's surviving mother (pictured, left), who was incapable of paying. Friends launched a website to solicit donations.
Somehow, Paul managed to turn Snyder's death into an opportunity to spout off about "freedom" -- you know, the freedom we have to die and leave our families with massive piles of debt.
After Snyder's death, Paul posted a message to the website for his Campaign for Liberty — a pre-Tea Party organization which served Paul as both presidential marketing tool and platform to promote his non-interventionist, free market ideals.
"Like so many in our movement, Kent sacrificed much for the cause of liberty. Kent poured every ounce of his being into our fight for freedom. He will always hold a place in my heart and in the hearts of my family."
This was the essence behind Obama's health care reform.
And although Republicans exploited the "individual mandate" in Obamacare to gain populist credentials, they wholeheartedly agree with the deeper philosophy of the plan, which aspires to control health care costs - for corporations and governments - by providing less health care services to those who need it. This agreement to "ration" health care aligns the two parties over the coming cuts to Medicare in Obama's bipartisan "Super Congress," while also binding the two parties' approach to health care on a state and business level.
Most workers now understand that there is a difference between apparently having health care and actually having health care: if you are technically "insured," but cannot afford doctor visits due to high deductibles and co-pays, you really aren't insured. ...
The above health care policies are the natural result of a health care system based on the principles of private profit. Corporate profits demand that companies provide the least amount of health care services at a minimal cost. From this vantage point, health care is a commodity that is bought by those who can afford it, instead of it being the human right of every person, as the UN Universal Declaration of Human Rights asserts. Europe has already proved that a nationwide, single-payer system is vastly superior when it comes to quality, cost, availability and results.
The percentage of Americans covered by private health insurance continued its decade-long decline, and the percentage covered by employment-based policies, the bedrock of the insurance system for working people, dropped to 55 percent. Job-related coverage has been eroding because employers have shifted costs to workers, making insurance less affordable, and because workers have lost their jobs.
The only consolation was that government insurance programs were able to mitigate some of the damage. The percentage of people covered by these programs increased for the fourth consecutive year. Medicaid and a related children’s health insurance program have actually enrolled more children in recent years than were dropped from employer coverage.
"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.
For the very richest Americans, low tax rates on capital gains are better than any Christmas gift. As a result of a pair of rate cuts, first under President Bill Clinton and then under Bush, most of the richest Americans pay lower overall tax rates than middle-class Americans do. And this is one reason the gap between the wealthy and the rest of the country is widening dramatically.
The rates on capital gains — which include profits from the sale of stocks, bonds and real estate — should be a key point in negotiations over how to shrink the budget deficit, some lawmakers say.
“This is something that should be on the table,” said Rep. Chris Van Hollen (D-Md.), one of 12 members on the congressional “supercommittee” tasked with reducing the deficit. “There’s no strong economic rationale for the huge gap that exists now between the rate for wages and the rate for capital gains.” ...
Most Americans depend on wages and salaries for their income, which is subject to a graduated tax so the big earners pay higher percentages. The capital gains tax turns that idea on its head, capping the rate at 15 percent for long-term investments. As a result, anyone making more than $34,500 a year in wages and salary is taxed at a higher rate than a billionaire is taxed on untold millions in capital gains.
While it’s true that many middle-class Americans own stocks or bonds, they tend to stash them in tax-sheltered retirement accounts, where the capital gains rate does not apply. By contrast, the richest Americans reap huge benefits. Over the past 20 years, more than 80 percent of the capital gains income realized in the United States has gone to 5 percent of the people; about half of all the capital gains have gone to the wealthiest 0.1 percent.
“The way you get rich in this world is not by working hard,” said Marty Sullivan, an economist and a contributing editor to Tax Analysts. “It’s by owning large amounts of assets and having those things appreciate in value.” ...
Billionaire Warren Buffett has become one of the loudest and most frequently cited proponents of the wealthy paying more in taxes. “The truth is, I have never had it so good in terms of taxes,” Buffett said in an interview with Charlie Rose. “I am paying the lowest tax rate that I’ve ever paid in my life. Now that’s crazy, you know. And if you look at Forbes 400, they are paying a lower rate, counting payroll taxes, than their secretary or whomever around their office, on average.” ...
“Now I agree with Steve Moore and Alan Greenspan that the correct rate is zero if you want maximum economic growth,” House Speaker Newt Gingrich (R-Ga.) said at the Cato Institute on July 16, 1998. “If you really wanted the most wealth created over the next 20 years, you would have a zero rate for the capital gains tax, which is a tax on job creation.” Other GOP lawmakers formed the Zero Capital Gains Caucus, with 92 House members and 15 senators. The group’s chairman, Rep. David Dreier (R-Calif.), said on his Web site: “Federal Reserve Chairman Alan Greenspan has said we should reduce it. So what are we waiting for?” ...
These changes drove down the overall tax rate paid by the wealthy. In 1996, before the capital gains cut under Clinton, millionaires paid an effective rate of 30.8 percent. By 2007, it was 22.1 percent. ...
Many tax experts contest the benefits of a low capital gains rate. Jane Gravelle, a tax expert at the Congressional Research Service, says a rate cut could generate more government revenue for a year or two as investors take advantage of lower rates or a rising stock market, but she says that initial bump in tax revenue would fade. And the government, over time, would collect more overall if it kept the rate higher. ...
“Lower capital gains [taxes] are a mixed bag even if you’re just looking at efficiency,” said Leonard Burman, a professor at Syracuse University and former head of tax analysis at the Treasury Department. “It might encourage more risk-taking, but it also creates huge opportunities for tax shelters aimed at converting ordinary income to capital gains. People would make investments only because of the tax benefits.” Moreover, he notes, given the recent financial crisis, it’s not clear that an absence of risk-taking is what’s ailing the economy. ...
This summer, Sen. Patty Murray (D-Wash.) bashed Republicans for defending “the most generous tax rates wealthy Americans have enjoyed in 60 years.” Yet last year she joined three other Senate Democrats — Mark R. Warner (Va.), Robert P. Casey (Pa.) and Jeanne Shaheen (N.H.) — and GOP Sen. Scott Brown (Mass.) in fighting to exempt venture capital firms from any capital gains tax increase, saying in a joint letter that it would hurt “job creation and innovation.” The bill, which would have spent the added revenue in part to extend unemployment benefits, later failed. ...
Leading Democrats have also repeatedly defended a class of investment managers who get special benefits from the tax rate on investment profits because their income, known as “carried interest,” is counted not as wages but as capital gains. Instead of paying a 35 percent rate, these executives pay 15 percent. Private-equity managers from firms such as Apollo, Blackstone and the Carlyle Group save billions of dollars every year in this way — and lobby fiercely to keep it that way. Some GOP lawmakers have been even more aggressive. In 2007, Rep. Eric Cantor (R-Va.) formed the Coalition for the Freedom of American Investors and Retirees to block legislation that would raised taxes on private-equity profits. Dozens of lobbyists rushed to join up. ...
“Leader Cantor believes in lower taxes across the board for workers, small-business people and job creators,” said Cantor’s spokeswoman, Laena Fallon. Last year, his two fundraising committees hauled in nearly $2 million from securities and investment firms and real estate companies. Cantor has also received substantial campaign contributions from private equity firms. KKR was his fifth-largest contributor in the last election cycle, giving $52,600. ...
“Wall Street loves the preferential capital gains rate. All of America’s 20- or 30 million wealthy small investors love capital gains rates,” Sullivan said. “It’s just a tremendously popular item with political contributors. It’s something that directly impacts every wealthy household in America.” ...
The 400 richest taxpayers in 2008 counted 60 percent of their income in the form of capital gains and 8 percent from salary and wages. The rest of the country reported 5 percent in capital gains and 72 percent in salary. The result, Hacker says, is that the lobbying winds up being lopsided, too. “The amount of lobbying that takes place on tax policy from the deep-pocketed interests that have the most at stake is enormous,” Hacker said. “There’s very little representation on the other side.” “Don’t forget,” he added, “that members of Congress themselves, particularly senators, are well off and they’re more likely to be sympathetic to the argument for low capital gains.”
In our system the income gained from these investments by these wealthy few is therefore taxed at a special very, very low rate, because they have the wisdom and intelligence to have large sums of money available to invest, and the rest of us do not. This low rate is considered an "incentive" to those who have these large accumulations of money, to try to persuade them to make these huge profits. They require these "incentives" to make huge profits, because otherwise they might not be interested in making the huge profits that can result from owning most of the property and stock and race horses (and yachts and private jets and multiple homes and million-dollar cars.) So that is why they must be given the incentive of these very special low tax rates - to persuade them to make investments that reap huge profits that they otherwise would not want to make.
Of course, the wealthy usually complain when government gets involved in creating "incentives" and "picking winners and losers" in ways that help We, the People, saying government interference distorts decision-making. But when the "incentive" is special low tax rates to persuade the wealthy to invest and make huge profits, that's different. Because it is, that's why. Shut up. Hey, look over there!
This reaping of huge profits from "efficiencies" like downsizing, laying people off and making the remaining workers do 2 jobs each in the same amount of time, outsourcing, buying companies and firing everyone and then selling off the pieces, offshoring, force reductions, firing people and then bringing them back as "contractors" at half the pay, relocating factories out of the country where people don't have the protections of democracy, replacing workers with machines, etc. is called "creating jobs."
In 2001 these special low tax rates for the very rich "job creators" were made even lower. This was done in order to provide even more incentive for them to make even more profits from their large accumulations of property, houses, cars, yachts, private jets and race horses, so that these "producers" - the "job creators" - would produce even more and create even more jobs. (Click here for more on who and what really creates jobs.) The result of these 2001 tax cuts was spectacular: eight years of the lowest economic growth and lowest job-creation rate since WWII, followed by the collapse of the entire financial system and mass layoffs of millions of us.
That means that the gap between its poverty rate and the national average now stands at its highest level since 2001. This marks a sharp reversal for the South after four decades of progress in closing the poverty gap with the rest of the US.
But blah-blah-blah, Bucko, this does not excuse your refusal to do your duty as an American consumer. CEOs say that they won't start hiring until you consumer slugs get out there and spend, spend, spend.
And don't use the whiney excuse that you're out of work or mired in debt -- Federal Reserve Chairman Ben Bernanke says that he has looked at macro economic statistics and concluded that you're just being irrationally negative about the health of our economy. "Households seem exceptionally cautious," declared the perplexed Fed chairman recently, suggesting that your lack of confidence in the economy is a psychosis that's fueling a larger depression. Yes, chimed in another Federal Reserve banker, "it's hard to have a robust recovery when Americans are so dispirited."
So, hey -- perk up, America! Stop waiting on Wall Street, Washington and corporate chieftains to do something. Forget economic reality -- just pull out your credit cards, put on a smile, and march to the mall. ...
The president's pep talk came the day after he made his "bold" jobs proposal to Congress. But Obama's plan is more Walter Mittyish than Rooseveltian. While it does include some useful provisions to help stem the loss of still more jobs (especially those teachers, firefighters and other public employees being offed by Republican governors), it essentially consists of more corporate tax breaks -- a form of bribery to induce enormously rich corporations to hire American workers. This is the same old same old that Washington keeps throwing at the problem and -- hello, Washington -- it's not working. Sure enough, corporate chieftains say they'll gladly take the latest handout, but we should not expect them to go on a big hiring spree. Mostly, they'll use the money to cover the few people they were going to hire anyway -- and pocket the rest.
That fatal arc of betrayal was captured by a headline in Tuesday's New York Times: "Soaring Poverty Casts Spotlight on 'Lost Decade.'" The Census Bureau reported that there are now 46.2 million Americans living below the official poverty line -- the highest number in the 52 years since that statistic was first measured -- and median household income has fallen back to the 1996 level. As Harvard economist Lawrence Katz summarized this dreary news: "This is truly a lost decade. We think of America as a place where every generation is doing better, but we're looking at a period when the median family is in worse shape than it was in the late 1990s."
The late 1990s, it should be noted, is when President Clinton, working with Phil Gramm, the Republican head of the Senate Banking Committee, pushed through two critical pieces of legislation ending effective regulation of the banks. The Gramm-Leach-Bliley Act smashed the wall between high-flying Wall Street investment firms and the once staid commercial banks entrusted with the deposits and mortgages of America's innocent souls. The next year Clinton signed the Commodity Futures Modernization Act, banning any effective regulation of the rapidly expanded trade in the collateralized debt obligations and credit default swaps that have since haunted the world's economy.
As they struggle with the worst economic crisis in decades, governments of developed countries are casting around for new sources of revenue that won't crimp growth or impose undue hardships on their populations. Taxes targeted at the most wealthy are easier to sell to general voting public, and some civic-minded tycoons including Warren Buffett of the U.S. and France's Liliane Bettencourt have indicated their willingness to pay more. France has already announced a new, temporary tax on its wealthiest citizens. ...
In an effort to shield middle-class savers from the measure, the new tax's minimum threshold of €700,000 is much higher than the €120,000 threshold it had previously.
It is time for Mr. Obama to think about what Lyndon Johnson would do. Mr. Johnson did not flinch from confronting his caucus when he needed to, and neither should Mr. Obama.
The president has started appealing for public support for his jobs plan, and denouncing Republicans who are opposing it. John Boehner, the House speaker, gave a speech on Thursday in which he promised to consider the plan, and then all but rejected it by saying that regulation, taxes and federal spending caused the lack of jobs. In other words, government should do less, not more. He also said the deficit should be cut only by reducing spending, without any tax increases.
Republican opposition is bad enough, but The Times’s Jennifer Steinhauer reported that many Congressional Democrats are hanging back, saying they could support one or another of the components of the jobs plan, but not the whole package. Senator Mary Landrieu of Louisiana wants to protect the oil companies to which she is beholden from losing outdated and overly generous tax breaks. Harry Reid, the Senate majority leader, seemed to be preparing to bury the jobs program in Senate rigmarole. Senator Bob Casey and others threatened to slice and dice the program to death.
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