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Highlights—September 24, 2011

Retirement Heist:

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.

"Ellen Schultz documents the biggest heist in history, all the more horrifying because it is legal. Accounting tricks, perverse tax incentives, and bonus- hungry executives have taken the retirement money American workers have saved over decades. Meticulously researched and as gripping as a crime novel, this is essential reading for anyone who has, had, or hopes to have a job." -Nell Minow, co-founder of The Corporate Library and author of Watching the Watchers: Corporate Governance for the 21st Century

Read more...

  • Salon: The theft of the American pension. In the last decade, the country's biggest companies have raided worker benefits for profit. An expert explains how. By Thomas Rogers. Excerpts: America is in the midst of a retirement crisis. Over the last decade, we've witnessed the wholesale gutting of pension and retiree healthcare in this country. Hundreds of companies have slashed and burned their way through their employees' benefits, leaving former workers either on Social Security or destitute -- and taxpayers with a huge burden that, as the baby boomer generation edges towards retirement, is likely to grow. It's a problem that is already affecting over a million people -- and the most shocking part is, none of this needed to happen.

    As Ellen E. Schultz, an investigative reporter for the Wall Street Journal, reveals in her new book, "Retirement Heist," it wasn't the dire economy that led these companies to plunder their own employees' earnings, it was greed. Over the last decade, some of the biggest companies -- including Bank of America, IBM, General Motors, GE and even the NFL -- found loopholes, abused ambiguous regulations and used litigation to turn their employees' hard-earned retirement funds into profits, and in some cases, executive compensation. Schultz's book offers a relentlessly infuriating look at the mechanisms they used to get away with it.

    Selected reader comments concerning this article follow:

    • A persistent myth. One of the most persistent myths begun by the "Greatest generation" was the fundamental nature of the "Baby Boom" generation as they saw them. Having cheered young Americans on during the last great strategic war of necessity, WWII, they were outraged when a significant number of Baby Boomers questioned the legitimacy of a purely political war of no strategic significance, and they were pissed about it for the next few decades. It wasn't Baby Boomers who started our long slog of supply-side theory which has steadily destroyed the lives of American workers. It was Ronald Reagan and his band of self-glorifying war mongers.

      And now, the final blows come raining down. As Baby Boomers, we saw our parents in their later years taking advantage of pensions from their secure life-long jobs. We don't get pensions. We don't get retirements. We're a pain in the ass for younger workers mostly because many of us simply cannot retire. Xers and Millenials are NOT the first generation to have it worse than their parents. Baby Boomers are. We were pulled by force out of our college classes and sent to a jungle to die on the other side of the world. We met a working world of continual booms and busts with no job security. Our working years were characterized by a long downward slide in buying power which was brought on by the "bait and switch" scam they call "supply-side" economics. And now many of us will work till we drop.

      Yes, I know some around here will call this "whining." You can call it whatever you want. I call it an explanation and a clarification. And I would ask X-ers and Millenials to stop demonizing us and blaming us for their problems. Bill B.

    • The Vicar has succumbed to the mythology. The Vicar: "I have to admit to a bit of schadenfreude; for once, the Baby Boomers were largely responsible for a financial problem which hurts them more than anyone else." First, just a little critical thinking is in order here - why would Baby Boomers destroy their own futures?

      Again, the architects of the modern Supply-side dogma which has ruined the futures of working-class Americans were either members of the "Greatest Generation" or they were the kinds of Boomers who cheered their daddies on while they pulled us out of our classrooms to fight a war on the other side of the globe for no apparent reason. If you check back, you'll find out the vast majority of us didn't agree and we've been paying for it in one way or another ever since. Bill B.

    • Remind me again... why the lower 95 percent of the population pays taxes, because we sure as hell get no representation if this kind of theft is legal. Damn the legalities, we mustn't let this stand. What's the next step? gborg
    • Too old to fight. They'll get away with it because by the time each generation realizes that the new retirement plan/healthcare plan is as useless as the prior one, they'll be too old and too sick to fight the blackwater thugs guarding the gated community. Jpentacost.

  • New York Times: When Retirees Are Shortchanged. By Bryan Burrough. Excerpts: The world needs more newspaper reporters like Ellen E. Schultz of The Wall Street Journal. For nearly a decade, Ms. Schultz and her colleagues have been rooting through the minutiae of accounting regulations, government filings and corporate retirement plans to expose how many of the largest American companies have systematically plundered their employees’ pension funds, at once robbing their workers of hard-won benefits and enriching their own profits. Her work has led to Congressional hearings, to a Washington investigation or two and to numerous journalism awards. ...

    It’s hard to distill the book’s far-flung elements into a single narrative, but it appears to come down to this: After the huge run-up in stocks during the 1980s, American corporations were sitting on billions of dollars in pension funds that weren’t going to be paid to retirees anytime soon. They began pushing to use the money themselves, an effort that resulted in a series of new accounting guidelines and federal regulations that, in time, allowed them to put pension monies to all sorts of uses never before envisioned. Financing corporate restructurings. Paying for retiree health benefits. Paying for golden parachutes. Some companies simply eliminated the pension plan altogether and took the money themselves. At the same time, Ms. Schultz shows, companies like I.B.M. steadily cut back on pension and health benefits while assuring employees that it was making the plan more “modern.”

    The mind-boggling complexity of many pension statements prevented most employees from understanding what was going on; a notable exception came at I.B.M., where a handful of older workers figured it out and began protests. Corporations, of course, rarely if ever acknowledged that they were shortchanging their retirees. Everything they were doing, some pointed out, was not only completely legal but also a boon to shareholders.

  • BankRate: Pension abuse widespread. By Barbara Whelehan. Excerpts: But what about the pension abuses that occur routinely in the private sector -- abuses that benefit the sponsoring companies but hurt their workers? I'm referring to the abuses exposed in "Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers" by award-winning Wall Street Journal reporter Ellen Schultz.

    Schultz says the gradual decline of traditional pension plans has little to do with the pig-in-the-python demographic trend of baby boomers all retiring at once. She blames the retirement crisis on top executives, benefits consultants and others in the retirement industry who "played a huge and hidden role in the death spiral of American pensions and benefits."

    They have not been held to account for it, she says, and, "if anything, they are viewed as beleaguered captains valiantly trying to keep their overloaded ships from being sunk in a perfect storm. In reality, they're the silent pirates who looted the ships and left them to sink, along with the retirees, as they sailed away safely in their lifeboats." Her provocative words are backed by scathing accounts of how hundreds of large companies deliberately and deceptively cut back the pension and retiree health care benefits of the rank and file while improving their own bottom lines and the pension benefits of company executives. ...

    Schultz goes into detail about what happened to specific employees at such companies as Cigna, IBM and AT&T, and how the benefits consultants and actuaries behind the scenes designed their marketing campaigns to deflect the truth with broad claims about the new plans' enhanced features. She then explains how pension cutbacks and surpluses as well as retirement health liabilities can be used to manipulate a company's earnings. Even financial analysts couldn't tell that the increase in income had nothing to do with widget revenues.

    But that's only the tip of the iceberg. "Retirement Heist" shows how pension benefits for the privileged few have skyrocketed in recent years at the expense of the proletariat. It is a must-read for everyone who has a pension as well as their spouses.

  • Wall Street Journal: Who Killed Private Pensions? How Companies Helped Hasten the End of Retirement Plans and Benefits. By Ellen E. Schultz. Excerpts: Gary Skarka had a rewarding middle-management career at AT&T, along with some of the best retirement benefits in the country. But instead of enjoying a comfortable retirement, he is working as a security guard. "I know I will have to work at menial jobs until I die," he says. Mr. Skarka's financial predicament isn't the result of investment losses or runaway spending. He is among millions of Americans who encountered an unexpected risk to their retirement: their employer. ...

    Cutting benefits provided employers with an additional windfall: income. Because the benefits are recorded as debts on a company's books, reducing the debt generates paper gains, which are added to operating income right along with income from selling hardware or trucks. Thanks to these accounting rules, which all companies adopted in the late 1980s, retiree plans have become cookie jars of potential earnings enhancements: Essentially every dollar owed to current and future retirees—for pensions, health care, dental, death benefits or disability—is a potential dollar of income to a company. ...

    Employers' ability to generate profits by cutting retiree benefits coincided with the trend of tying executive pay to performance. Intentionally or not, top officers who greenlighted massive retiree cuts were indirectly boosting their own compensation. As their pay grew, executives deferred more of it. Supplemental executive pensions, which are based on pay, also ballooned. These executive liabilities account for much of the "spiraling" pension costs many companies complain about.

    Selected reader comments for this article follow:

    • Over the past 3 decades, Corporate CEO's and Officers have seen their compensation rise from a 40:1 factor (as compared to the average workforce) to almost 400:1. Corporate benefits at the general workforce levels continue to decline while benefits and perks at the executive level remain unchanged.

      Today many companies are instituting health care benefits that include deductibles that require the employee to pay the first $3K, $4K, or $5K of medical expenses including child birth. In other words, the young employee making minimal salary will have to pay huge payments to have a child while the expense has no impact on corporate officers making 7 figure salaries or more. These same executives are not fired when they perform badly, they are given a soft landing representing millions in termination benefits. The low salary employee will get a modest termination severance.

      As this nation addresses it's economic crisis we read of class warfare and taxes but this article is just another example of how and why such warfare exists. for 3-decades the top has squeezed out everything they can from the bottom while adding more and more company paid personal perks to their own arsenal (Club memberships, private jets for travel, vacation laden "office" space to write off vacations as a business expense, etc. ...)

    • Yet amazingly, in none of these mergers, acquisitions, monetization, etc... has EXECUTIVE pension plans ever been underfunded, transferred, or simply cut. It seems these companies knew how to manage a pension plan to deliver on promises - as long as the beneficiaries were the ones with direct influence on how the plans are managed. When pension plans are managed by people who will gain personally by cutting down on benefits paid out, this is what happens.

  • Yahoo! IBM Employee Issues message board: "Ellen Schultz appeared on Dylan Ratigan Show (video)" by "fhawontcutit". Full excerpt: http://www.youtube.com/watch?v=JKJyT_GDKmw During this interview, Ellen makes the point that pension funds are supposed to be for the sole benefit of the plan participants and the law is not being enforced.
  • Yahoo! IBM Employee Issues message board: "Where The Heck Is IBM?" by "teamb562". Full excerpt: snippet: Surprisingly, I don't find IBM listed on any of the popular "Best Places To Work" surveys. I read that they have a loyal and happy workforce. But I also read that they offer less benefits than the competition. Being the Internet, I'm not sure what to believe. But it's disappointing that a company as large and old and respected as IBM is not consistently on the top of all of these lists. They should be. They're not doing enough.
  • Yahoo! IBM Employee Issues message board: "Re: Where The Heck Is IBM?" by "Webchiiz Guru". Full excerpt: You are surprised IBM is not on the "best places to work" list! They are a sweatshop period!. People are putting 60+ hours - with absolutely NO recognition or compensation either - and all levels of management completely suck. They are in for a very rude awakening when (if?) the economy turns around. I guess that's why Sammy is outsourcing like hell so he can keep his U.S. employees on edge. Speaking of Sammy and gang, it is obscene that they are able to walk away with millions of dollars in bonuses and 100 of millions in sweet heart stock deals. How's that benevolent $1000 grant (to vest in 3 years) working out for you?
  • Yahoo! IBM Employee Issues message board: "Re: Where The Heck Is IBM?" by "orsonbear". Full excerpt: IBM has not made the better part of the list in a long time. Going back in time, IBM in 1984 was 8th, 1993 was 40th, 2003 was 38th, 2004 was 72nd. This is from the Great Place to Work Institute's website. They are the ones who compile the list.
  • The Register: Celebrating the 55th anniversary of the hard disk. The platters of Big Blue spawn that changed the world. By Chris Mellor. Excerpts: ll anniversaries are special, and so is this one. It's particularly special because a billion or more people have been and are being affected by it every day. They switch on their PCs and take advantage of Intel processors and Microsoft's Windows, or Mac OS, thinking nothing of it. But before these, and providing a foundation for them, came spinning disks, rotating hard disk drives, the electromechanical phenomenon that the world of computing has depended on for decades: 55 years to be precise. Like much else in our pervasive IT world the disk drive's roots were laid down by IBM, and first appeared in a product called the 305 RAMAC, The Random Access Method of Accounting and Control, launched this week 55 years ago. Ah, those were the days. ...

    Inside RAMAC there were two independent access arms which moved vertically up a stack of 50 disks, 24-inches in diameter, to the right disk, and then sideways across the target disk's surface to read and write data from the destination track. It took, we understand, 600ms to find a record in a RAMAC. The data capacity was 5MB (8-bit bytes, 7-bits for data plus a parity bit) and it would cost a business $38,400 a year to lease it. There was no popping out to your local Fry's to buy one...

  • Associated Press, courtesy of Forbes: Indiana, IBM blame other for suit costs. By Ken Kusmer. Excerpts: Indiana's legal bill in its lawsuit with IBM Corp. over a canceled welfare outsourcing contract could grow by more than half its original value, but representatives for the administration of Republican Gov. Mitch Daniels defended the costs Tuesday. The administration of Republican Gov. Mitch Daniels will pay as pay as much as $8.05 million through June 30 to the well-connected Indianapolis law firm of Barnes & Thornburg to represent the Family and Social Services Administration in the lawsuit with IBM under an amended contract approved Aug. 30 by the attorney general's office. The original contract approved a year ago paid the firm $5.25 million over the same term. ...

    FSSA is suing IBM to recover more than $400 million it paid before Daniels canceled the 10-year contract in 2009 amid complaints about the automated welfare system IBM installed. IBM argues FSSA owes the company about $100 million for costs including computer equipment the state has held onto.. Indiana House Minority Leader Patrick Bauer, D-South Bend, called the higher costs ""wasted money, good money after bad." Indiana Senate Minority Leader Vi Simpson, D-Bloomington, said FSSA should be spending the money to help vulnerable people who have seen their benefits cut because of budget cuts. FSSA spokesman Neal Moore said Armonk, N.Y.-based IBM "is doing all it can to run up the costs in hopes the state will give up."

  • Yahoo! IBM Pension and Retirement Issues message board: "I Wonder How Badly I Took it on The Chin" by "kevin". Full excerpt: Way back in June of 1999, I was 49 years old, soon to be 50. Like so many others I knew back then, I wasn't giving too much thought to retirement. And like many of my IBM peers, I really didn't understand what all the pension changes meant to me personally, nor could I even relate to what life being a retiree would be like. I guess about all I understood was that my monthly pension check would be less than it otherwise might have been had there not been any pension plan changes.

    At the time, due to my particular family situation, (I had kids in elementary, junior high and high school) I assumed that I'd probably work until age 66. And my assumption was correct. I just turned 62, and I'm still working, but of course, I'm not employed by IBM. Fortunately for me, I had 32 years of service in March of 2009 when my manager informed me that I had been "selected to participate in today's Resource Action."

    So now it 2011, I've been receiving a pension check for more than two years, and lately I've been wondering what my check might have been had The Heist not happened. Does anyone know if that can even be calculated, much less how the hell to do it? Maybe I'm better off NOT knowing, because there ain't much love for IBM left in my heart.

    One other thing, and then I'm done. I recently read that some corporations had (unbeknownst to their employees) purchased life insurance on their employees, naming the corporation as the beneficiary, and plowed any death benefits received into a fund used to pay out executive pensions. Does anyone know if IBM did that?

  • Yahoo! IBM Pension and Retirement Issues message board: "Re: I Wonder How Badly I Took it on The Chin" by "alwaysontheroad4bigblue". Full excerpt: See RetireQ_2006A_123.ZIP in the files area of this page or http://www.ibmemployee.com/Sheets/RetireQExcel.zip
  • Yahoo! IBM Pension and Retirement Issues message board: "Re: I Wonder How Badly I Took it on The Chin" by "madinpok". Full excerpt: You can use the RetireQ spreadsheet that is in the Files section of this group to calculate exactly what your pension would have been.

    I assume you were a second choicer and stayed with the PCF pension plan. Based on your age and years of service, then pension you are receiving should be about 30% of your 5 year final average salary.

    Had IBM not discontinued the old Service and Earnings plan in 1995, your pension would have been 1.35% times your years of service, times your 10 year final average salary, or about 40%. The switch to the PCF plan took away about 25% of your pension. Had you chosen to go with the Cash Balance plan and selected the annuity option, your pension would be even less.

  • New York Times: Data as Art, as Science, as a Reason for Being. By Edward Rothstein. Excerpt: Now, with the opening of I.B.M.’s “Think” exhibition to the public, visitors can walk down the drive, consult text panels with explanations of these patterns and others, and obtain free timed tickets to a subterranean space where 40 seven-foot-high media panels stand like miniature pillars, showing a 12-minute film about “making the world work better.” The screens then turn interactive, offering additional information and sensation, before visitors exit along an illuminated wall that offers a chronicle of 100 milestones in I.B.M.’s history, for this show is being mounted in honor of that corporation’s centennial. The exhibition is visually striking, and its information is often compelling. But it also requires some deciphering and examination.
  • Glassdoor IBM reviews. Selected reviews follow:
    • IBM Anonymous in San Jose, CA: (Current Employee) “Varies from site to site and department to department.” Pros: Good work/life balance. Reasonable workload. Good people to work with in my immediate area. First-line management is supportive. Flexible hours. The ability to work from home. You don't have to dye your hair to keep your job. Cons: Upper management makes screwy decisions in how it handles working conditions. Several examples: No coffee or tea is provided. Period. Many jobs are offshored, including in-house support to less-than-competent folks in Bangalore. Remote groups try to dictate what tools (hardware and software) folks must use to get their work done -- whether or not it makes sense. Some of these tools lower productivity. Direction regarding product design, marketing, and documentation styles is scattered and ambiguous. There are so-called "official" sites, and there are just as many sites that co. Office space varies from private offices to microscopic (6ft x 6ft) cubicles, depending upon your site (Almaden vs First St). I'm stuck in one of the microscopic cubicles in the First Street office, and it's really hard to get any work done in a workspace that is simultaneously cramped (no room for a guest chair or a whiteboard) and way too open (everyone walking by can see into your work area). Supposedly this is "IBM's new standard." If you work from home, you can't interact with anyone, but if you work on site, no one is there to interact with because THEY'RE working from home. Advice to Senior Management: Listen to the folks in the trenches. If someone says "We need help," hire more employees. If they say "These tools don't work for us," let them use the tools that DO work for them. If they say "We want these contractors converted to employee status," convert them. Also, bring back free coffee and tea service. This would boost morale big-time.
    • IBM Anonymous in Sydney (Australia): (Current Employee) “Slow moving and lot of bureaucracy.” Pros: Some very clever people working at IBM. Very broad portfolio of software, hardware and services. Long standing relationships with some very large customers. Cons: Does not pay well compared to competitors and very hard to get pay rises and bonuses. Hard to get things done (due to lots of red tape). Lots of emphasis on controlling expenses. Advice to Senior Management: Less emphasis on cost control as it's turning a lot of people off and you're losing some very good staff as a result.
    • IBM Client Representative in Washington, DC: (Current Employee) “Well managed organization with a fostering culture.” Pros: IBMers are eager to help each other and share knowledge about best practices and how to be effective in your job role. There is a culture of teamwork, where people will take the time to help even if they are not getting directly measured on the issue at hand. IBM also have a good work/life balance where they promote working at home and managing one's own time as long as the job is getting done. IBM management has done a very good job of adjusting the business based on the projections for the future coming out of research. We spun off our PC business in 2004 (?), way before the PC market became soft, and invested in software products that help customers reduce their operating costs by "doing more with less." These decisions have enabled IBM to grow revenue and profit in a tough economy. Cons: IBM used to be a sales led organization. Now it is very much led by finance. All decisions and systems that support compensation, expense, investment, etc. are designed to closely manage costs and tie the employees hands when it comes to travel, customer entertainment, sales commission/bonus, and other costs of doing the job. Advice to Senior Management: Ease up on the expense controls that make it difficult for staff to do the job. Travel expenses, reimbursement for home office expenses, etc. are way too tight and places a burden on employees just to get their jobs done.
    • IBM Healthcare Consultant: (Past Employee - 2009) “Not a place for a healthcare consultant.” Pros: Global opportunities. Remote work possibility. Good for starter job. Cons: Company does not have a clear understanding of healthcare market. Lack of clear direction and strategy for growth in healthcare area. Advice to Senior Management: Be brave and think beyond each quarter.
    • IBM Anonymous in Washington, DC: (Current Employee) “They don't promote from within...” Pros: Variety of career options, but limited abilities to progress to senior management. Cons: Very limited and confusing strategy for industry alignment. Lack of deep industry expertise. Advice to Senior Management: Walk the talk.
    • IBM Project Manager: (Past Employee - 2009) “Mixed but certainly worthwhile” Pros: Hours, pay, stock options and excellent educational resources. I trusted my managers and knew that the best work was being done daily. Cons: Red tape, intransigence. Sometimes the top leadership doesn't engage when it needs to. I would recommend the walls be broken down better. Advice to Senior Management: I would recommend the walls be broken down better. There's a lot of talent in the company but not nearly enough efficiency to benefit from those resources.
    • IBM Project Manager in Mumbai (India): (Current Employee) “If you are looking at first 5 to 6 years of your career start - BooM (you at the right place).” Pros: - Awesome Flexibility (work from any where, nobody cares as long as work is done); - Great learning opportunities; - Flexibility to choose the domain/technology after you have spent some time in your current role. Cons: - If you are growing internally/moving laterally, no band change; - Basic benefits to the minimum, Although this is stupid: no tea/coffee, no subsidized food, bad canteen areas, at many sites it is usually in parking lot or basement; - BAD COMPENSATION. Advice to Senior Management: - First Line & Second Line - you have nothing in your control, do you ? So Senior Exe - Fair Compensation & Right Banding of your employees will save Attrition & a Lot of Money. Have some recreational activities - Funded by IBM, your employee's work very Hard to Keep you on TOP.
    • IBM Project Manager: (Current Employee) “Working here gives mixed feeling as certain things are extremely good but there are things extremely bad as well.” Pros: Benefit is great, flexibility and self-reliance are great too. Cons: Promotion and salary increment (which unfortunately tied to title/role/promotion instead of work performance) are hard to come by. Advice to Senior Management: Reward great performer with promotion and salary increment, instead of just giving one time little bonus. Promotion and salary increment is to show that the great performance and skill obtained are appreciated.
    • IBM Sales Specialist in Paramus, NJ: (Past Employee - 2009) “very political atmosphere.” Pros: talented peers, especially pre-sales engineers, good benefits package. Cons: sales compensation lacking, lower salaries, territory assignments very political.
    • IBM Business Analyst: (Current Employee) “Great place to start your career.” Pros: So many opportunities to pursue what your interested in. Cons: Goal setting and job performance rating will silo you into one area. Once there the other opportunities disappear. Advice to Senior Management: Emphasize mentorship to new hires. It is important to find one early on.
  • Wall Street Journal: Even Hints of Layoffs Decay Morale. By Joe Light. Excerpts: Morale quickly turns ugly after a company warns about layoffs—even if the job cuts won't happen for a while. Just announcing the intent to "reduce head count"—as Bank of America Corp. and some other financial firms have done recently—can distract workers, hurt recruiting efforts and prompt top performers to head for the exit. Bank of America Chief Executive Brian Moynihan told employees in an internal email last week that "overall employment levels" at the bank would come down by 30,000 over the next few years. Rumors of massive layoffs had been rippling through the ranks for months, according to one senior analyst at Bank of America. "A lot of people are really scared about what's going to happen," he said. "I don't know anybody who's not looking [for another job]."

    Selected reader comments follow:

    • Seems like the rowers on the slave ship have been told that several of them will be tossed overboard in the next few voyages. Row harder! Floggings will continue until morale improves!
    • Back in 1985, when the oil industry was contracting and mergers were putting tens of thousands out of work, I was assured by my bosses that I was not on "the list" of staff who would be cut. Guess what? I was out the door with everyone else. Employees should NOT trust their managers when layoffs are coming. Cover your butts and get out there and try to secure something before you get rammed up the poop chute! NEVER TRUST MANAGEMENT!
    • At my last job I received a 60-day layoff 'warning' along with several other folks. I walked directly from my manager's office back to my desk and started making phone calls. Had an interview set up for the next day. Ultimately my layoff notice got cancelled, but the damage to my morale and my perception of the company were permanent. Over the next several months I took my time finding a job, turning down several mediocre offers before accepting a good one.
    • Interesting article. I worked for Sun. They were constantly in layoff mode. Then I worked for a bank that was much less so. To me it's kind of a communication thing. If the company communicates that you won't be laid off arbitrarily, you can focus on your job and feel good about the company you work for. If it's a layoff every year, you really have to spend some time protecting yourself, deliberately spend your time on things that have value to other employers (I'm a software developer) and really spend time paying attention and feeding the political machine that directly affects you. That said, I do think if a company never lays anyone off (the bank was actually pretty good, they worked some non-performers out of the organization) for 10 or 15 straight years, you are going to have some dead wood. It's a difficult situation to get right. Some of these other comments point to another side of layoffs. If you like say, the top 50% of your employees, and you do layoffs regularly, will you lose them because they are nervous? One thing I learned from my experience at Sun, layoffs fit the political needs of the managers making the decisions. And funny as it might sound, they don't always layoff the worst person in the organization first. Just as an example, maybe laying you off will placate some important user, so that's what gets done.
    • More and more companies are run by professional managers with compensation packages that focus on short-term results. At least in some cases it seems as if having companies run by founders and/or owners creates a longer term perspective about layoffs that also leads them to treat their workers like people rather than replaceable parts. I don't have a shred of scientific evidence for this view but it does seem to create better overall results when you have managers who have some real skin in the game. For instance, rather than just laying people off to make the numbers better how about working to figure out better products and services? It's a lot harder but everybody wins
    • More and more companies are run by professional managers with compensation packages that focus on short-term results." See, for example, the destruction of Hewlett-Packard..
  • Forbes: Million-Dollar 401(k): Fantasy Or Reality? By Robert Laura. Excerpts: In this day and age of retirement planning most people realize they will need at least a million dollars in savings to maintain a suitable standard of living throughout their golden years. A sizable sum to save when you consider the limits placed on 401(k) and 403(b) annual contributions; not to mention the poor market returns over the past decade. Investors and financial professionals alike deserve to know if accumulating $1 million dollars inside an employer-based retirement plan is the stuff of fantasy or reality?

    I’ll spare you the suspense. Amassing $1 million in an 401(k) plan is possible, but up to this point not very probable. Recently, I contacted both Fidelity and Vanguard retirement plan services to determine how many individual 401(k) account balances exceed $1 million dollars. While Vanguard was unable to provide any definitive statistics, Fidelity noted that, while million-dollar qualified account balances do exist, they make up less than 1% of all their accounts.

  • Plan Sponsor: Study Reveals Global Work-Life Imbalance. Excerpts: According to Kathie Lingle, Executive Director of WorldatWork's Alliance for Work-Life Progress, “The good news is that 80% of employers around the globe avow support for family-friendly workplaces. The bad news is they are simultaneously penalizing those who actively strive to integrate work with their lives.” Employee respondents reported repercussions that included:
    • Overtly or subtly discouraged from using flexible work and other work-life programs,
    • Received unfavorable job assignments,
    • Received negative performance reviews,
    • Received negative comments from supervisor, and
    • Denied a promotion.
  • Forbes: Nonprofits are Optimistic about Hiring. Are You Ready to Make the Switch? By Kerry Hannon. Excerpts: Looking for a nonprofit job? The outlook is somewhat promising. The other day I received an upbeat e-mail from David Garvey, director of Encore!Hartford, a job-retraining program that specializes in helping unemployed midcareer and traditional retirement-aged corporate professionals find nonprofit jobs. Garvey had a reason to crow. Four recent graduates of the program had scored full-time positions with three Connecticut nonprofits: Fidelco Guide Dog Foundation, Our Piece of the Pie, and the YWCA Hartford Region. ...

    Amid the pervasive job market blues, this is the kind of report that gets my attention. Doing good has a real appeal to career changers over 50. Garvey’s announcement backs up what a new Idealist.org survey heard from 3,000 U.S. nonprofit organizations who responded to their poll this past summer. The nonprofit jobs web site concluded: “while the economy is still fragile, and while the whole sector is being very careful with its spending…there is reason for optimism about hiring.” In other words, organizations are planning on hiring more people. Of those who replied, forty-two percent plan to hire new positions and nearly half will fill positions that become vacant. Program or service staff are top of the list. But if you’re a go-getter fundraiser and can whip up creative and diverse funding streams, they want you. Administrative, communications, accounting and finance personnel, and technology experts are on the to-be hired scrolls too. The Idealist.org site, too, has had a significant jump in job postings in 2011.

New on the Alliance@IBM Site
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  • Job Cut Reports
    • Comment 9/16/11: So, when's the next RA? Appraisals are unfairly dropping on US resources in IGS as jobs continue to move overseas or are replaced by Liquid Portal competitions. What is Liquid Portal, you ask? It's basically IBM's version of topcoder.com - i.e., work done on the cheap by freelancers, most of whom are in India/China. IBMers can check it out here - http://liquidportal.boulder.ibm.com So, the game is to continue to drop the appraisals on the US workforce and continue waves of RAs in favor of short-term freelancer and/or overseas labor. The outlook could not be more dismal in my IGS organization, and people could not be more demoralized. How are things for the rest of you IBMers out there? -Anonymous-
    • Comment 9/17/11: re: So, when's the next RA? They don't need to, the new strategy as you mention is to have lower appraisals, if you get 2 3s you will be let go, with a reduced severance package (13 wk max), saving them money. So expect the carnage to occur e/o Jan. If you got a 3 last year, you are on borrowed time. -qtr_century-
    • Comment 9/18/11: I was part of the great remix several years back, my shift premium and weekend pay was taken away, and now I am being told no OT yet I still work over 40 hrs. I (along with many of my colleagues in ITS) would vote in favor of forming a union. This site seems to only be a forum for complaining with no bite behind the bark. Instead of constantly asking for new paying members, why not first call for a vote. I'd be happy to join if I was confident that an election was going to be held sometime in the near future.-call4election- Alliance reply: We have explained this numerous times over the years. The Alliance can NOT simply ask for a vote. We have to PROVE to the Federal Government that there is sufficient support for a union election. There is a process involved, by law. We do this by having IBMers sign up with the Alliance in any of our 3 membership categories. The subscriber/supporter category is free. The others contribute voluntary dues to help keep this campaign and web site going. So far we are not even close or anywhere near enough support to petition for an election The bite comes from you. You want an election, then sign up and get your co-workers signed up.
    • Comment 9/18/11: re: "So, when's the next RA?" Interesting question, especially since there was so much talk about a 3Q RA planned for end of August. According to my manager (IGS-GTS div.07) we are in such a tight financial condition that they can't afford an RA right now. That seems strange considering how strong the 2Q earnings report was, but it sounds like parts of IGS-NA did not do so well, and are under huge cost pressures. What they are saying is it costs money to RA people. Well of course it does, but I thought corporations had accounting tricks to balance the severance costs against future savings. -CJ-Roc-
    • Comment 9/19/11: RA's will come, and with the super-productive US workforce, management probably figures instead of paying 6 months severance, work people to death over the rest of this year, lower their appraisal, and then pay them 3 months severance. So you got them to work for those 3 months severance instead of sitting around. And you only had to fund their 401K and medical an extra 3 months to get 3 months of extra work. Also most of next year's 3's have already been threatened with a "3", so they're working like demons. I support this union, and will continue to do so. Many in my department were unaware that there is a union. I've tried to enlighten them. I wonder if people are so beaten down, they don't want to improve their lot and join the union. Social Media is currently fueling some interesting nascent movements in the USA. I wonder how it could be used to raise awareness about the existence of this GREAT employees union that would improve their lives and their families' lives. -Anonymous-
    • Comment 9/22/11: A server team member in India reported 3000 contractors cut this month. Cannot be independently verified. -Anon11-
    • Comment 9/22/11: Get off the fence. I joined the Alliance in 1999. The next day I told my fist line that I was an organizer. I have given the same message to the next three first lines I reported to. I have 30 years as of this year and plan on working plenty more. Sure I know my phone calls are tracked, my lap top and notes are tracked. My performance has been rated from 1, 2+ and 2 depending on the manager. If you play by the rules you are no more likely to be ra'd. Piss off your manager or break the rules and you will be gone no matter your union stance. -Biker1mike-
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
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  • CCH Aspen Publishers: Health Reform Could Eliminate Most Of The Uninsured And Underinsured. Excerpts: Two recent reports suggest that the Patient Protection and Affordable Care Act (ACA) could reduce the majority of uninsured and underinsured. A Commonwealth Fund study found that provisions in the ACA to increase health insurance affordability could reduce the number of underinsured by 70%.

    The number of underinsured adults—those with health insurance, but high medical expenses relative to income—rose by 80% between 2003 and 2010, from 16 million to 29 million, according to the Commonwealth Fund. The study defined underinsured adults as those who reported at least one of the following conditions:

    • family out-of-pocket medical care expenses (not including premiums) that are 10% or more of income;
    • among low-income adults (those with incomes below 200% of the federal poverty level (FPL)), medical expenses that are 5% or more of income;
    • or per-person deductibles that are 5% or more of income.

    Nearly half (44%) of U.S. adults, or 81 million people, were either underinsured or uninsured in 2010, up from 75 million in 2007 and 61 million in 2003. Low-income families were most at risk of being underinsured, according to the Commonwealth Fund. Seventy-seven percent of those with incomes below 133% FPL, and 58% of those with incomes between 133% and 250% FPL were either underinsured or uninsured. If the ACA succeeds in reaching these individuals (those with incomes lower than 250% FPL), the number of underinsured could be reduced by 70% once the law is fully implemented.

  • New York Times: Young Adults Make Gains in Health Insurance Coverage. By Kevin Sack. Excerpts: Young adults, long the group most likely to be uninsured, are gaining health coverage faster than expected since the 2010 health law began allowing parents to cover them as dependents on family policies. Three new surveys, including two released on Wednesday, show that adults under 26 made significant and unique gains in insurance coverage in 2010 and the first half of 2011. One of them, by the Centers for Disease Control and Prevention, estimates that in the first quarter of 2011 there were 900,000 fewer uninsured adults in the 19-to-25 age bracket than in 2010.

    This was despite deep hardship imposed by the recession, which has left young adults unemployed at nearly double the rate of older Americans, with incomes sliding far faster than the national average.

    The Obama administration, intent on showcasing the benefits of a law that has been pilloried by Republicans, attributes the improvement to a provision of the Affordable Care Act that permits parents to cover dependents up to their 26th birthdays. Until that measure took effect one year ago this week, children typically had to roll off their parents’ family policies at 18 or 21 or when they left college. ...

    Because entry-level jobs frequently do not have health benefits, and individual policies can be unaffordable on a starting salary, the rate of young adults without coverage is nearly double the national average. A Commonwealth Fund survey found that 45 percent of young adults reported delaying medical care because of cost in 2010, up from 32 percent in 2001.

News and Opinion Concerning the "War on the Middle Class"
Minimize "It is a restatement of laissez-faire-let things take their natural course without government interference. If people manage to become prosperous, good. If they starve, or have no place to live, or no money to pay medical bills, they have only themselves to blame; it is not the responsibility of society. We mustn't make people dependent on government- it is bad for them, the argument goes. Better hunger than dependency, better sickness than dependency."

"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.

  • ThinkProgress: Multi-Millionaire Rep. Says He Can’t Afford A Tax Hike Because He Only Has $400K A Year After Feeding Family. By Alex Seitz-Wald. Excerpts: Rep. John Fleming (R-LA) appeared on MSNBC with Chris Jansing this morning to attack President Obama’s new deficit reduction plan, which includes some tax increases on the wealthy. Taking up the typical GOP talking point, Fleming said raising taxes on wealthy “job creators” is a terrible idea that kills jobs because many of these people are small business owners who pay taxes through personal income rates.

    Fleming is himself a businesses owner, so Jansing asked, “If you have to pay more in taxes, you would get rid of some of those employees?” Fleming responded by saying that while his businesses made $6.3 million last year, after you “pay 500 employees, you pay rent, you pay equipment, and food,” his profits “a mere fraction of that” — “by the time I feed my family, I have maybe $400,000 left over.” ...

    And how hard does the congressman work to make the equivalent of eight median household incomes? Fleming told the Wall Street Journal that “he spends very little time on day-to-day management, though he weighs in on broad strategy decisions.” “I monitor the reports. I’m certainly in communication with the managers,” he told the paper.

  • New York Times: Obama Tax Plan Would Ask More of Millionaires. By Jackie Calmes. Excerpts: President Obama on Monday will call for a new minimum tax rate for individuals making more than $1 million a year to ensure that they pay at least the same percentage of their earnings as middle-income taxpayers, according to administration officials. ...

    The millionaires’ tax is among several changes Mr. Obama will propose in urging Congress to overhaul the federal income tax code next year, both to raise revenues for reducing deficits and to make the tax system simpler and fairer, said the administration officials, who agreed to speak in advance of the president’s announcement on the condition of anonymity. The millionaires’ rate would affect only 0.3 percent of taxpayers, they said. That would be fewer than 450,000; 144 million returns were filed for 2010.

    Mr. Obama’s proposal comes a month after Mr. Buffett began reviving his long-standing objection that he and “my megarich friends” pay a significantly lower percentage of their income in federal taxes — income and payroll taxes — than everyone else, thanks to the tax code’s favoritism toward the rich, and especially toward investors like him. “My friends and I have been coddled long enough by a billionaire-friendly Congress,” he wrote in an opinion article in The New York Times, a complaint he has repeated in talks and media interviews since. “It’s time for our government to get serious about shared sacrifice.” ...

    The marginal tax rate is the percentage paid on the last dollar a person earns. The current system has six marginal tax rate percentages — 10, 15, 25, 28, 33 and 35 — and each applies to a progressively higher amount of income. In theory, a wealthy filer pays the lower rates on income within each bracket, but the bulk of their income is taxed at the top 35 percent rate. Middle-class taxpayers generally pay marginal rates of 15 percent or 25 percent.

    But investors like Mr. Buffett pay no more than 15 percent on most of their income because that rate applies to capital gains, dividends and “carried interest,” which is the compensation paid to hedge fund partners and investment managers like Mr. Buffett.

    Another reason many wealthy Americans pay a smaller share of their income in federal taxes is that the Social Security payroll tax does not apply to income above $106,800; most people do not reach the cutoff and pay the tax on all their income.

    Counting income and payroll taxes, Mr. Buffett has said he paid an effective tax rate of 17.4 percent for 2010 compared with an average 36 percent rate for many employees of his company, Berkshire Hathaway.

    Under Mr. Obama’s proposal, Mr. Buffett and others with taxable income of more than $1 million would pay a minimum tax rate closer to his employees’ rates. But Mr. Obama will leave the details of how such a rate would be calculated — whether to focus on the overall federal tax burden of middle-income individuals generally, or their marginal rates — to the debate over rewriting the tax code.

  • Washington Post: Obama to call for new minimum tax rate for millionaires. By Lori Montgomery. Excerpts: Obama plans to call Monday for a new minimum tax rate on millionaires as part of a comprehensive rewrite of the U.S. tax code to force the wealthiest Americans to pay the same share of income in taxes as middle-class families. In a twist on Obama’s long-standing assertion that the wealthy should do more to tame the soaring national debt, the proposal would target the top 0.3 percent of taxpayers, many of whom currently reap huge benefits from lower rates on capital gains and dividends, which form the bulk of their earnings. ...

    Appearing on CNN’s “State of the Union,” Sen. Lindsey Graham (R-S.C.) echoed Ryan’s characterization of the plan as class warfare, adding that it was “political move” that would do little to reduce the debt. “The tax code should be reformed for one purpose: to generate more revenue to help run the government and create jobs,” Graham said. “When you pick one area of the economy and you say, ‘We’re going to tax those people because most people are not those people,’ that’s class warfare.”

    Democrats, meanwhile, defended the idea and criticized House Speaker John A. Boehner’s (R-Ohio) absolute refusal to consider any tax increases. “I wonder if Boehner knows what it sounds like when he continues to say the position of the Republican party in America is that you can’t impose one more penny in taxes on the wealthiest people. I wonder if he understands how that sounds in Ohio to working families who are struggling paycheck to paycheck.”

  • New York Times editorial: A Tax Others Embrace, U.S. Opposes. By David Kocieniewski. Excerpts: President Obama’s proposal for a new tax on millionaires echoes a call in many countries struggling with budget deficits and overwhelming debts to make the wealthy pay more. Britain and France have imposed new taxes on their highest earners — and Italy, Spain, Greece and Japan are considering similar moves, despite some protests.

    Whether the taxes on the rich in Europe raise enough money to close much of their budget shortfalls, they are being promoted as a step toward economic fairness at a time when governments are cutting spending on social programs like pensions, health care and education. Mr. Obama — whose millionaire’s tax would probably raise a modest amount of revenue over the next 10 years by collecting more from several hundred thousand Americans — has also framed his plan as a way to make the system more equitable.

    Specifically, the proposal would counteract decades of tax reductions for most Americans that have given the wealthy the most benefit. But the idea being embraced by much of the world faces strong opposition in the United States from Republicans and other conservatives who say it would harm the economy and cost jobs. ...

    Until the recent financial crisis and worldwide economic downturn, individual tax rates had fallen substantially in most developed countries over several decades. In 1980, the top federal rate on Americans was 70 percent, and most European countries were above 60 percent. Today most European countries have rates below 50 percent. The United States has a top rate of 35 percent, but many wealthy Americans pay considerably less because their earnings are derived from dividends or capital gains, which are taxed at no more than 15 percent.

  • New York Times editorial: How the Big Money Finds a Way In. By Eduardo Porter. Excerpts: In 2007, the Supreme Court blew aside spending restrictions (weak as they were) by ruling that corporations, unions and other groups could spend unlimited amounts up to Election Day on “issue” ads that mentioned a candidate’s name, as long as they did not explicitly urge a “vote for” or “vote against” a candidate. Soon after that, 501(c) groups (like trade associations, unions and social welfare advocacy groups) became the vehicle of choice; unlike other types of groups, they are allowed to collect unlimited anonymous donations.

    In 2007, the Supreme Court blew aside spending restrictions (weak as they were) by ruling that corporations, unions and other groups could spend unlimited amounts up to Election Day on “issue” ads that mentioned a candidate’s name, as long as they did not explicitly urge a “vote for” or “vote against” a candidate. Soon after that, 501(c) groups (like trade associations, unions and social welfare advocacy groups) became the vehicle of choice; unlike other types of groups, they are allowed to collect unlimited anonymous donations.

    The legal changes of the last decade have contributed to the flood of money in the political process. Corporate campaign donations through 501(c)s and Super PACs hit around $140 million in 2010 from zero in 2006, according to estimates by the Center for Responsive Politics. For interest groups and wealthy individuals, the shifts have meant more direct influence in elections. For American democracy, the effect may well be disastrous.

    As a result, the effective federal tax rate, including payroll taxes, for the wealthiest 0.01 percent of earners fell to 31.5 percent in 2005, from 42.9 percent in 1979, according to data from the Congressional Budget Office. Over the same time, effective rates for taxpayers in the center of the range fell to 14.2 percent, a decrease of just 4 percentage points.

  • Huffington Post: Middle-Class Americans Often Fall Down Economic Ladder: Study. Excerpt: The promise of the American dream has given many hope that they themselves could one day rise up the economic ladder. But according to a study released Tuesday, those already in financially-stable circumstances should fear falling down a few rungs too. The study, by the Pew Charitable Trusts, found that nearly a third of Americans who were part of the middle class as teenagers in the 1970s have fallen out of it as adults. Though Pew examined only a certain demographic swath of participants, its findings suggest the relative ease with which people in the U.S. can end up in low-income, low-opportunity lifestyles -- even if they started out with a number of advantages.
  • New York Times op-ed: Our Hidden Government Benefits. By Suzanne Mettler. Excerpts: DON’T take at face value the claims that Americans dislike government. Sure, a recent ABC News/Washington Post poll found that 56 percent of Americans said they wanted smaller government and fewer services. Tea Party activists, the most vocal citizens of our time, powerfully amplify those demands. Yet the reality is that the vast majority of Americans have at some point relied on government programs — and valued them — even though they often fail to recognize that government is the source of the assistance.

    A 2008 poll of 1,400 Americans by the Cornell Survey Research Institute found that when people were asked whether they had “ever used a government social program,” 57 percent said they had not. Respondents were then asked whether they had availed themselves of any of 21 different federal policies, including Social Security, unemployment insurance, the home-mortgage-interest deduction and student loans. It turned out that 94 percent of those who had denied using programs had benefited from at least one; the average respondent had used four. ...

    Individuals’ political views partly account for their perceptions. In the Cornell poll, a respondent who self-identified as “extremely liberal” was 20 percentage points more likely to acknowledge using a government program than someone who used the same number of programs but was “extremely conservative.” Also, those who believed that the nation spent too much on welfare were less likely to admit that they had used a “government social program,” perhaps because that term had pejorative connotations. ...

    Until political leaders reveal government benefits for what they are by talking openly about them, we cannot have an honest discussion about spending, taxes or deficits. The stipulation in the new health care reform law that W-2 forms must indicate the value of untaxed employer-provided health care benefits is a step in the right direction. The government should also provide “receipts” that inform people of the size of each benefit they get through the tax code.

  • AlterNet: Real Class War Is Working to Keep Those Below You Down. Contrary to popular belief, the United States is not a meritocracy, and amid cries of class warfare, Americans are getting the worst of both worlds. By Joshua Hollan. Excerpts: That conservatives are greeting the deficit reduction package Barack Obama presented on Monday – one that includes a new minimum tax on millionaires – with howls of 'class warfare' is as predictable as the sun rising in the east. It's a poll-tested talking point, after all.

    But it obscures a far more pernicious form of “class warfare” being waged from above – a war of attrition against the upward economic mobility of ordinary working people. We live in a country where most people believe their opportunities are limited only by their innate talents and appetite for hard work, but over the last four decades, while decrying a wholly imaginary class war from below, conservative policies have undermined many of the ladders by which working people once achieved a middle-class lifestyle. Taking pot-shots at another class isn't war, nor is imposing a modest tax increase on those who have been showered with tax cuts for the last decade. Genuine class warfare is those at the very top working to keep everyone else far beneath them. ...

    It's an undeniably true statement: in 1979, those in the top 10th of 1 percent of the American economic ladder took in 1.11 percent of the nation's income, but by 2008, they were grabbing 5 percent. Those extremely wealthy few didn't become five times smarter and aren't working five times harder than they were in the late '70s, and the seismic shift in our economic structures wasn't an accident: the upward redistribution of wealth in this country has been a direct result of policies for which those at the top have lobbied hard – labor policies, trade deals, cuts to the social services that lifted some of those at the bottom out of poverty and a tax structure that shifted a big chunk of the burden from corporations and the wealthiest to ordinary working families. ...

    But, contrary to that popular notion, the United States is not a meritocracy, and Americans are getting the worst of both worlds—not only is a significant portion of the middle class hanging on by the narrowest of threads, not only do fewer working people have secure retirements to look forward to, not only are nearly one in seven Americans uninsured, but working people also enjoy fewer opportunities to pull themselves up by their bootstraps than do the citizens of other advanced countries.

    In reality, the United States’ much-ballyhooed upward mobility is a myth, and it appears to be getting worse with each new generation. Several studies released in recent years suggest that Americans enjoy significantly less upward mobility than do the citizens of a number of other industrialized nations. German workers have 1.5 times the upward movement of Americans, Canada’s economy is nearly 2.5 times as mobile, and Denmark is three times as mobile. Norway, Finland, Sweden, and France (France!) are all more upwardly mobile societies than the United States. Of the countries included in the studies, the United States ranked near the bottom; only in the United Kingdom was it tougher to shake off a low social status one had been born with. ...

    There’s a similar dynamic in terms of health care: people with access to paid sick leave and other health benefits switch jobs less frequently than those who don’t enjoy those bennies, and as a result, they have longer average tenure and higher earnings. In these areas, the United States has felt Jacob Hacker’s “great risk shift.” Hacker described how the U.S. “framework of security has unraveled, leaving Americans newly exposed to the harshest risks of our turbulent economy: losing a good job, losing health care, losing retirement savings, losing a home—in short, losing a stable, financial footing.” All of those hardships offer unique opportunities to fall out of the middle class—opportunities for downward mobility that simply don’t exist for the Canadian or French worker, people who can rely on a more progressive state to help preserve their income levels when disaster strikes.

  • New York Times op-ed: Are We Going to Roll Up Our Sleeves or Limp On? By Thomas L. Friedman. Excerpts: The Republicans have come nowhere near rising to our three-part challenge because the G.O.P. is no longer a “conservative” party, offering a conservative formula for American renewal. The G.O.P. has been captured by a radical antitax wing, and the party’s leaders are too afraid to challenge it. What would real conservatives be offering now? They would understand, as President Eisenhower did, that at this crucial hinge in our history we cannot just be about cutting. We also need to be investing in the sources of our greatness: infrastructure, education, immigration and government-funded research. Real conservatives would understand that you cannot just shred the New Deal social safety nets, which are precisely what enable the public to tolerate freewheeling capitalism, with its brutal ups and downs.

    Real conservatives would understand that we cannot maintain our vital defense budget without an appropriate tax base. Real conservatives would understand that we can simplify the tax code, get rid of all the special-interest giveaways and raise revenues at the same time. Real conservatives would never cut taxes and add a new Medicare entitlement in the middle of two wars. And real conservatives would understand that the Tea Party has become the Tea Kettle Party. It is people in real distress about our predicament letting off steam by trying to indiscriminately cut everywhere. But steam without an engine — without a strategic plan for American greatness based on spending cuts, tax reform and investments in tomorrow — will take us nowhere. Countries that don’t invest in the future tend to not do well there. Real conservatives know that.

  • New York Times editorial: Taxes, the Deficit and the Economy. Excerpts: Republicans, predictably, are denouncing President Obama’s proposal to raise taxes on wealthy Americans and corporations to help wrestle down the nation’s budget deficit and pay for his job creation plan. There was the usual silly talk about class warfare against the rich. But the politicians insisted that their real concern was for middle-class Americans and the economy. Rick Perry said the president’s plan “penalizes investment when it is needed most.” Mitt Romney blasted the plan’s “crushing impact on economic growth.” A spokesman for John Boehner, the House speaker, called it a collection of “job-killing small-business tax hikes.”

    Americans need to take a close look at what Mr. Obama is calling for: a broad tax reform that raises $1.5 trillion over a decade but allows for lower rates on businesses and individuals by cutting tax breaks and loopholes for special interests, and that restores some fairness to a system in which millionaires and billionaires pay lower tax rates than middle-class families.

  • AlterNet: Elizabeth Warren Puts the Kibosh on GOP's "Class Warfare": Nobody in This Country Got Rich on His Own". Excerpts: I hear all this, you know, “Well, this is class warfare, this is whatever.”—No!

    There is nobody in this country who got rich on his own. Nobody.

    You built a factory out there—good for you! But I want to be clear.

    You moved your goods to market on the roads the rest of us paid for.

    You hired workers the rest of us paid to educate.

    You were safe in your factory because of police forces and fire forces that the rest of us paid for.

    You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

    Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.

    But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

  • Washington Post Writer's Group, courtesy of truthOut: When Socialism Saves Capitalism. By E.J. Dionne, Jr. Excerpts: Have you noticed that one of the Obama administration's most successful programs is also its most "socialist" initiative? OK, the bailout of General Motors and Chrysler was not socialist in the classic sense: the government was not looking to hold onto the companies over the long run. Their turnaround was accomplished in significant part by tough, capitalist management steps.

    But, yes, this was socialism -- or, perhaps, "state capitalism" -- because the government temporarily took substantial ownership in the companies when no one in the private sector was willing to put up enough capital to prevent them from going under. Today, the companies are thriving. More than that: the auto industry exemplifies how unions can do their best to protect the interests of their members while also ensuring the prosperity of the companies that employ them. ...

    Franklin Roosevelt described the other way in 1932: "Our Republican leaders tell us economic laws -- sacred, inviolable, unchangeable -- cause panics which no one could prevent. But while they prate of economic laws, men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings."

    Once human beings throw off the chains imposed by the idea that all economic laws are "natural," they discover the capacity to change things and can use the tools of democratic government to do so when all else fails.

  • Forbes: Replacing FDR's New Deal With The GOP's Version Of The Great Society. By Lawrence Hunter. Excerpts: It’s not bad enough Wall Street gets bailed out by taxpayers; its mouthpiece at the Wall Street Journal also wants to stiff middle-class workers even more by reducing the pitiful rate of return they can expect from Social Security when they retire. As the WSJ recently boiled down Social Security’s fiscal straits: “the problem is that current seniors get more than they put in. . .”

    How about applying that same standard to Wall Street? How about we pass a law allowing the federal government to raid 15% of Wall Street’s investment capital over and above corporate taxes to help fund the government and then give that exact same, inflation-eroded amount back to it in 35 years without interest? That’s what the WSJ is suggesting to “fix” Social Security. Or better yet, how about the federal government pays the expropriated investment capital back to investment firms with a negative rate of interest—i.e., pays them back less than it raided—because that is exactly what SS already does in many cases and will do even more so in future, especially if the Journal gets its way. ...

    Conservatives like to pretend that Social Security is an extravagant welfare program so even these pitiful rates of return are inexcusably high. Despite the low, even negative rates of return workers realize from their payday contributions to the program, the conservative establishment in Washington considers Social Security benefits excessive as long as they comprise a real rate of return on investment in excess of zero, and even that rate of return is considered unwarranted for any retirees GOP politicians deem “too rich to deserve” them. The position of the Republican establishment in Washington is not to convert Social Security from a financial house of cards into an actuarially sound retirement program that would improve everyone’s retirement income, but instead to scrub its rolls and transform it into a real welfare program by means testing it, reducing benefits and making people work longer.

    The conservative establishment can call Social Security whatever it wants to now but for decades, don’t forget, they participated with every other politician in Washington telling workers they were investing in their own retirement every payday. It is, therefore, not surprising that American workers perceive Social Security as a public retirement plan they pay into each and every payday. It is, in their eyes, forced saving in a government retirement plan, which precludes them from using their money to save and invest in a private retirement plan. That’s not welfare, and to get there from here Republicans will have to pull the biggest bait-and-switch scam in political history.

  • truthOut: The Truth About "Class War" in America. By Richard D. Wolff. Excerpts: Republicans and conservatives have done us a service by describing federal policies in terms of "class war." But by applying the term only to Obama's latest proposals to raise taxes on the rich, they have it all backward and upside down. The last 50 years have indeed seen continuous class warfare in and over federal economic policies.

    But it was a war waged chiefly by business and conservatives. They won, as we show below, and the mass of middle-income and poor Americans lost. Obama's modest proposal for tax increases on the rich does not begin a class war. On the contrary, it is a small, modest effort to reduce the other side's class war victories.

    Big business and conservatives have worked to undo the regulations and taxes imposed on them in the wake of the Great Depression of the 1930s. Then, an upsurge in labor union organization (the Congress of Industrial Organizations sweep across basic US industries) and in membership in both the socialist and communist parties gave Franklin Delano Roosevelt the support and the pressure to tax business and the rich. He took their money to pay for the massive federal hiring program (11 million federal jobs filled between 1934 and 1941) and to start the Social Security Administration etc. He regulated their business activities to try to prevent devastating capitalist depressions from recurring in the nation's future.

    Since the end of the Great Depression - and especially since the 1970s - the class warfare waged by business and its allies (most conservatives in both parties) was successful. For example, at the end of World War II, for every dollar Washington raised in taxes on individuals, it raised $1.50 in taxes on business profits. In contrast, today, for every dollar Washington gets in taxes on individuals, it gets 25 cents in taxes on business. Business and its allies successfully shifted most of its federal tax burden onto individuals.

    Over the same period, the tax rates on the richest Americans fell from 91 percent in the 1950s and 1960s, and 70 percent in the 1970s to the current low rate of 35 percent. The richest Americans won that spectacular tax cut. Middle- and lower-income Americans won no such cuts, while paying a higher proportion of their income for Social Security that the rich were required to do.

  • New York Times op-ed: The Social Contract. By Paul Krugman. Excerpts: This week President Obama said the obvious: that wealthy Americans, many of whom pay remarkably little in taxes, should bear part of the cost of reducing the long-run budget deficit. And Republicans like Representative Paul Ryan responded with shrieks of “class warfare.”

    It was, of course, nothing of the sort. On the contrary, it’s people like Mr. Ryan, who want to exempt the very rich from bearing any of the burden of making our finances sustainable, who are waging class war.

    As background, it helps to know what has been happening to incomes over the past three decades. Detailed estimates from the Congressional Budget Office — which only go up to 2005, but the basic picture surely hasn’t changed — show that between 1979 and 2005 the inflation-adjusted income of families in the middle of the income distribution rose 21 percent. That’s growth, but it’s slow, especially compared with the 100 percent rise in median income over a generation after World War II.

    Meanwhile, over the same period, the income of the very rich, the top 100th of 1 percent of the income distribution, rose by 480 percent. No, that isn’t a misprint. In 2005 dollars, the average annual income of that group rose from $4.2 million to $24.3 million.

    So do the wealthy look to you like the victims of class warfare? ...

    And one consequence of the shift of taxation away from wealth and toward work is the creation of many situations in which — just as Warren Buffett and Mr. Obama say — people with multimillion-dollar incomes, who typically derive much of that income from capital gains and other sources that face low taxes, end up paying a lower overall tax rate than middle-class workers. And we’re not talking about a few exceptional cases.

    According to new estimates by the nonpartisan Tax Policy Center, one-fourth of those with incomes of more than $1 million a year pay income and payroll tax of 12.6 percent of their income or less, putting their tax burden below that of many in the middle class. ...

    Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an “existential threat” to America. Yet they are insisting that the wealthy — who presumably have as much of a stake as everyone else in the nation’s future — should not be called upon to play any role in warding off that existential threat. Well, that amounts to a demand that a small number of very lucky people be exempted from the social contract that applies to everyone else. And that, in case you’re wondering, is what real class warfare looks like.

If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

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