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.
"Retirement Heist uncovers one of the most significant threats to the American worker of our time. Ellen Schultz's reporting is expansive, smart, and will have you shouting for someone to be held accountable. Anybody who works and is worried about their future should read this book." -Lewis Maltby, president of the National Workrights Institute and author of Can They Do That? Retaking Our Fundamental Rights in the Workplace. 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.
Remember, it was those at IBM in 1999 who agreed with the poster below who tried to shut down those who found their voice against the theft of their annuity pension and retiree medical benefits.
Remember Janet and shuff et al against Socks Bouchard and how awesome was the Senate hearing that made IBM 'give back' what they stole.
Remember, by positioning the theft of the annuity pension against those whom they knew had an age discrimination defense, they manipulated the employees to ignore the REAL thefts -- the annuity pension for those under 40 and the retiree medical for all employees not yet 50.
Ignore those corporate apologists who say it will do no good to talk about the thefts and the thieves who perpetrated them. We who lived through the thefts and broken promises from one of the richest companies in the world will never forgive and never forget.
Again, thanks to people like Ellen Shultz who also doesn't believe those who pat themselves on the back for screwing their own employees should EVER be forgiven or forgotten.
May she get as rich as the corporate thieves who ruined thousands of lives in 1999.
As long as you got yours? And it's more than others? IS THAT IT?????
Journalist Ellen Schultz has been writing about such shameful behavior for a long time, mostly in The Wall Street Journal. Now she has pulled together the copious, irrefutable evidence between the covers of a book. It is shocking, and demoralizing. But will members of Congress and federal agency regulators stop what Schultz calls "retirement heists"? Probably not, unless voters make it clear the incumbents will lose their jobs unless something changes. Unfortunately, voters are rarely if ever that organized, no matter how much they have been cheated by corporate chieftains.
The book is crammed with heartbreaking anecdotes of retirees suffering (and in some cases probably dying) because of pension-related corporate greed. But the perpetrators have not been charged with any crimes. In most cases documented by Schultz, the perpetrators have escaped widespread blame — except in her investigative pieces and now in this book. ...
Immelt and other corporate spokespeople have suggested that pension plan shortfalls are caused by out-of-control factors such as the large number of retirees, declining stock market investment returns and competition from foreign competitors that eschew good benefits for laborers.
Schultz knows better from her extensive research. She is a reporter who has become an expert in a relatively narrow subject matter. As she writes, "What Immelt didn't mention was that, far from being a burden, GE's pension and retiree plans had contributed billions of dollars to the company's bottom line over the past decade and a half, and were responsible for a chunk of the earnings that the executives had taken credit for. Nor were these retirement programs — even with GE's 230,000 retirees — bleeding the company of cash. In fact, GE hadn't contributed a cent to the workers' pension plans since 1987 but still had enough money to cover all the current and future retirees."
Then Schultz delivers the clincher: GE was indeed burdened by a pension plan — the plan for top executives. The obligations of that plan, for a minuscule number of individuals compared with the 230,000 lower-level retirees, totaled $4.4 billion and had drained about $573 million from the corporate treasury over the past three years.
Other than confirming what we here have known since 1999, what will change after Ellen is no longer the sound bite of the day? Will IBM do anything to amend what they did to retirees? Will IBM do anything to amend what they did to their current employees? Will IBM retirees do anything? Will IBM employees do anything? Will the corporate apologists cease their lies? Will the politicians do anything? So, so what?
As donshuper said: "Find out just what any people will quietly submit to and you have the exact measure of the injustice and wrong which will be imposed on them."
Sadly, the IBM employees and retirees, with the exception of a few (of course, Kathi, I applaud you for suing and no, there aren't many others who will) went away quietly and thus IBM was able to perpetrate the thefts that they did. Even today, when I talk to those who were screwed, they whisper that all they want now is to keep collecting their pension checks, reduced though they are and further reduced by paying for medical they SHOULD have gotten for life, understandably for a fee. Some are actually surprised when they read about the level of thefts in Ellen's book, can you imagine? Where have they been since 1999? You tell me.
Kathi, I place the blame on the employee who said to me: "I got mine". I place the blame on the employees who sat in the auditoriums and asked polite little questions while I asked about the inequity of the cash balance plan and the other 'gotchas' that were hidden in the takeaways of 1991 and 1995 and 1999. I place the blame on the employees who were overwhelmed by the corporate apologists on the boards and the subliminal (some not so subliminal) threats at their workplaces, so that many did not even SPEAK of Lee Conrad, much less demand a union.
Yes, Kathi, I do place the blame on the employees who were cowed and frightened and threatened and fired into silence.
But of COURSE, I place the majority of the blame on the politicians and the CEOs and the consulting firms and the justice system and the managers and the team leaders who did what they did, and made it possible to silence a work force that, if marshalled and collected, had a voice that would have been heard around the world in 1999.
Again, so what? It's too late now.
According to a former colleague who, until very recently, was one of the most senior IBM corporate executives, Vermont was the company’s first choice for the expansion because of the Vermont plant’s excellent manufacturing performance and its fine record of innovation. IBM didn’t even ask for or expect the kind of outlandish incentives the company got from New York state to entice it to invest in Fishkill, N.Y. ...
According to Moody’s review of a city of Burlington bond issue, IBM employed 5,400 at the IBM-Burlington site in 2009, down from a peak of 8,500 in the mid-1990s. More ominously, IBM downsized its engineering staff at the site and has been allowing the plant to obsolesce. It now produces mainly lower-cost commodity chips instead of the high-value custom chips it made in its heyday. ...
Meanwhile, PC World reports that since 2000 IBM has invested more than $10 billion in New York state where IBM chose to make its future. New York state investments, capped by IBM’s recent $3.6 billion commitment to a new nanoscale process facility there, are the largest IBM has made anywhere in the world. With the initial $2.5 billion investment in Fishkill, N.Y., more than a decade ago, knowledgeable observers predicted the fate of IBM-Burlington was sealed. The only question is how rapidly the Essex Junction facility will phase down. ...
n the 1990s, then-Congressman Sanders launched a very public campaign criticizing IBM for changing its 1960s-era pension plan to remain competitive with nimbler, newer entrants into the semiconductor business. I am told by the same source that IBM’s then-CEO, Louis Gerstner, reacted to Sanders demagoguery with a statement something like: “Don’t the politicians in Vermont realize there are more than a dozen other states vying for our business?”
Those worries were exacerbated Monday by a disappointing number of signed service contracts, an indication of future business, and a sequential decline in the company's backlog, which measures the current value of work under contract.
IBM on Monday reported new service contracts worth $12.3 billion, up 12% from the previous year, but below $14.3 billion in the second quarter. Meanwhile, IBM's services backlog slipped to $137 billion from $144 billion in the second quarter.
Selected reader comments concerning this article follow:
According to documents filed in the case, Ms Spiteri was given suggestions like “get those boobies out” to get more sales. She is seeking more than $AU1 million from IBM over the harassment, which she says lasted from 2007 to 2009. Her claim also alleges that the manager put his hand under her dress and would yell abuse at her in the office.
There is nothing wrong with a lump sum plan if the lump sum IS A FAIR AMOUNT. What IBM did was lump together two actions at the same time to obfuscate the truth from employees and they exceeded beyond their wildest imaginations. IBM was struggling financially then and needed to cut hundreds of millions from their pension costs. At the same time, they hated the traditional pension plan and wanted to end it. So, by combining the lump sum method and only paying about half of what the amount should have been (to be a fair present value), they got the change they wanted and they saved the money they were looking to save.
For those that remember, it was at least three months later until they told employees how much the lump sum would be. I knew it would be grossly inadequate, but almost every other employee was optimistic this was a good thing, since IBM's presentation "lied" by saying this was a big "win" for all employees. Everything hit the fan when the actual amounts were disclosed since they were about half of what most people would expect as a fair present value.
If they did not combine the two actions and just converted to the lump sum system, no one would have had a complaint because the amount they would have offered would have allowed you to take the lump sum and buy an annuity exactly equal to the pension you were expecting. So, while everyone blames the lump sum system as this horrible rip-off, it is not the lump sum system that is a problem, but IBM's cost cutting disguised as a pension change.
Alternatively, if they did not change the system, but simply cut the old pension plan formula in half, people would have been equally outraged. A benefit cut is a benefit cut and a system change that is fair in concept is not to be blamed. In fact a lump sum system is BETTER, if the amount is fair because it would give you the option of taking all the cash or buying an annuity equal to the old pension amount. So, put the blame where it is -- IBM's continued erosion of employee benefits as they converted from a "special" company to just another high tech firm among all the others.
Cons: The downsides of IBM Consulting is that you are almost never at home. I spent the majority of 8 years on an airplane twice a week. From this, I gained career experience that few others outside of consulting would be able to have. During my career at IBM I was significantly underpaid compared to consultants working at other consulting companies. It took me a while to understand, but IBM is a sales company, not a delivery company. If you excel in delivery, you will not be rewarded financially or with career advancement. If you have technical abilities, translating those skills to be used in a sales capacity would be where you would see the largest financial returns.
Advice to Senior Management: Executive management at IBM is excellent at creating a winning strategy for the company. The middle management leaders often don't provide a lot of value to your career or direction of the firm.
When that came out I wrote a blog entry about it, for two reasons. First, I thought it was a wonderful idea that all employee contributions were valued; second, I could see from within my own division (GBS) these values were not followed by a substantial percentage of directors. My own management structure felt I was not putting full effort into my own job because I participated in cross-IBM programs like HackDay, SocialBlue, and data privacy, and told me as much (please note my manager supported me, it was upper management who held this view). Participation in these programs was the secondary reason for my being laid off (the primary reason being lack of seniority); I got this information second-hand on request of anonymity, which I maintain.
As to the idea that IBM values "customer service", just before the RA in 1Q2010 (when I was selected) my manager put in for three more people as we were (all of us) falling behind in work despite working 60-hour weeks. Instead of permitting him to hire three new people he was told to lay off three. The consensus among us (and our immediate supervisors) was that IBM had become "just another business" as far as their outsourcing clients were concerned, and the bottom line of GBS was more important than our customer service.
I am referring only to GBS; other areas of the company (such as the Smarter Planet crew) were much more modeled on the older culture the IBM veterans are used to... but shouldn't a company's culture be reflected across the company, rather than selectively applied? That was the point of my blog entry. It may still be on Blog Central, possibly Lotus Connections; you can perhaps find it by doing an IBM Intranet tag search on "danodea".
Granted IBM Basic Beliefs were used inappropriately by too many to mean life time employment @ any cost. This was a flaw in IBM Management in 70s, 80s. Employees needed to reinvent themselves, transform themselves to continue to be a valued contributor.
BM stood for something in 70s, 80s. Today it means "I'm by myself"; which says it all. There is no corporation, no division, no group, no department, no unit. ONLY the individual and individuals care only about himself/herself. IBM created this culture over past 15 years and it will be the death of it.
People learn from it's leaders. Leaders are into short term goals, achievements, e.g., $15 or $20 EPS by 2015 the translation to individual contributors is do whatever it takes to WIN, move (transfer to another department) when road gets too hard, and agree with 1st line manager no matter what. IBM is no longer people focused. Even IBM HR professes the mantra; employee centric, self-directed, self-service. A shame.
Also, remember all great "ages"; agriculture, manufacturing, industrial all had 50 year life span. The IT age is technically in its 60th year. It's a mature market, consumer based, commodit ized and hence technology replaces people. Cheers
RBC will move to a defined contribution plan for new hires in January. You wonder how Canada's largest bank (with great money management skills) can't keep its own defined benefit plan alive. IBM Corp. made the switch in 2006. Now it's asking Canadian employees and retirees to approve another proposal to shore up the pension plan.. The company sent out letters in September, asking to extend the time to pay off any new deficits from the usual five-year period to a 10-year period. "If more than one-third of eligible members and former members of the plan object. to the proposed extension, we cannot proceed with this option," it said.
Several retirees contacted me. They felt the company was botching its communications in an effort to get enough support to approve the change. "I didn't receive a ballot at first," says Gary Rogers. "When I phoned the call centre, I discovered that it had been sent to an old address. Many other pensioners have the same problem. "Since I receive company tax slips, medical/dental benefits, newsletters and charity solicitations, IBM must have my correct current address." When he finally got the letter, he found that there was no postage-paid addressed return envelope for the ballot. ...
Tony Medici, another retiree, felt the company was not including a post-paid return envelope to discourage people from mailing in their ballots. Also, it was using a form of negative option billing. If the 10-year option is acceptable, "no further action is required on your part, and you will be deemed to have consented to IBM's implementation of the plan," the letter said. ...
I have a friend who spent 40 years at IBM before recently retiring. She voted against the proposal. "There is nowhere to go for advice," she said. "I haven't called the support number offered, but I understand from others that they were not too helpful." IBM moved its human resources to another company, which outsourced its call centre offshore. "I think the call centre is located in Costa Rica," Rogers said. "People are unable to provide answers when a pensioner calls. Phone calls to IBM are referred back to the call centre number." The deadline is fast approaching. Notices of objection have to be received by Oct. 28.
The relocation and reductions at InfoPrint's former headquarters mark a milestone in the history of IBM's Boulder campus, which has housed printing operations for more than 45 years. Ricoh acquired a majority interest in the IBM printing systems division for $725 million in 2007, fully acquiring the outfit during the subsequent three years. Ricoh leases about 400,000 square feet in four buildings at IBM's Boulder campus. Mike Stratton, a spokesman for IBM-Boulder, said Ricoh's lease remains in place and the square-footage has not changed.
If you didn't' receive a letter, or if you want to see other IBM Canada DB retirees reaction to the letter, go to the Rewind site at http://www.bigblueretirees.com/ for more information. It is the IBM Canada retiree site.
If you want to object to the company's plan to extend the repayment of the shortfall, you need to mail in the form you received, anonymously...i.e. don't put your name on it and don't put a return address on the envelope, or it won't count. But you MUST send in the form if you want to object to the IBM plan.
The objection must be received by Towers Watson by October 28, 2011. Towers Watson must receive these forms from at least 1/3 of the Plan members; otherwise IBM Canada will implement a 10 year deficit funding plan.
If you moved since you retired, IBM may not have your new address, the letter they sent won't reach you and IBM will assume that you have agreed to their plan to prolong making the pension plan whole for 10 years! So it is up to you to be proactive.
Note this note only applies to IBM Canada pensioners and those current employees who are vested and only to Defined Benefit plans.
Please send a email prior to Tuesday, October 18th to email address at email@example.com. In your reply, please include the following:
Note: You are not being asked for your position (agree or object to the IBM Canada proposal) The only issue they are trying to address is whether or not you received your letter. So if you are in the IBM Canada DB pension plan or still working but eligible, please help out by sending in your email. Note this is for IBMers from IBM Canada only!
To stem potential losses among younger employees, International Business Machines Corp. has launched rotation-based training programs that expose young staffers to diversity in geography, job responsibilities and co-workers. Those new experiences can keep the employees from getting bored too quickly, experts say. ...
Selected reader comments concerning this article follow:
I like right to work, it makes it easy for the employer to take a chance on somebody new. If the company wants to move beyond that type of relationship where you can walk or be fired instantly, they need to pony up something to let me know that. Otherwise I'm a free agent, (and doing quite well).
Otherwise it would seem they are expecting a trade that's far to much in their own favor. They go to sleep knowing I won't quit, but I live in fear of when my pay checks stop coming?
Get real. I spent my 20's acquiring skills. You want them, you pay what I call the market clearing rate. The more you pay over that, the more likely I want to stay in your employ. You want to not worry about me leaving, link my financial success to yours.
According to a press release, 16% of those 55 to 64 consider themselves “Pre-Retirees,” primary household breadwinners within five years of retirement. The Pre-Retiree lifestage group is comprised of diverse age groups. Slightly more than half of Pre-Retirees are 55 to 64.
But we need your help. As many of you know, the Alliance struggles to stay afloat. Our dues paying membership at 200 members is not sufficient to have an aggressive organizing campaign. That needs to change. A victory at IBM's delivery centers can have positive effects for all IBMers.
So while you have heard this pitch before, we are once again asking you to help support the Alliance by becoming a full member at only $10 a month, or an associate member at $5 a month. There has been concern that IBM would know who you are if you join. The Alliance membership is confidential. IBM will not know if you are a member unless you tell them. The link to join is here: https://afl.salsalabs.com/o/4004/donate_page/alliance-join, Or you can go to our web site at: www.allianceibm.org There is also a paypal donate link on this web page.
To those that are members and associate members your financial support is greatly appreciated. If you work at a GDF and want to be part of the network, contact us at firstname.lastname@example.org The following is an email being sent to IBM GDF employees:
Join the IBM GDF Worker Network at: http://www.endicottalliance.org/allianceibmglobaldelivery.htm.
Did you know that Dubuque IBM GDF employees are paid an average of $20,000 LESS per year than GDF workers in Fishkill? Are you concerned about working conditions at your delivery center?
Working hard and did not get a pay raise July 1st as IBM makes billions in profit? Wages in the new GDF's are much lower than other locations. GDF workers in Boulder got a 15% pay cut. Your concerns are not addressed by management. If you were "selected" to move to a GDF your choice was move or quit. IBM did not pay moving expenses. Transfers are being blocked by management. Band levels are lower. Verbal promises made by IBM become promises broken Don't you think it is time to join with your co-workers at all the GDF's to improve working conditions and wages? Isn't it time you were treated as a professional?
Well that time is now! Make your voice heard!
Based on information and concerns from GDF workers, the Alliance@IBM CWA Local 1701 is starting a campaign to organize GDF workers, including contractors. To do this the involvement of IBM GDF workers in the Alliance needs to increase and information gathered.
If you work at one of IBM's GDF's in the US please contact the Alliance at: email@example.com. Information we need from you: Name and contact info. GDF location. Job title. Employee or contractor Information will be held in confidence.
Help build a better future for GDF workers!
Statement of Principles: Alliance@IBM/CWA Local 1701 is an IBM employee organization that is dedicated to preserving and improving our rights and benefits at IBM. We also strive towards restoring management's respect for the individual and the value we bring to the company as employees. Our mission is to make our voice heard with IBM management, shareholders, government and the media. While our ultimate goal is collective bargaining rights with IBM, we will build our union now and challenge IBM on the many issues facing employees from off-shoring and job security to working conditions and company policy. -Alliance-
There are other reasons beyond that for the RAs. If the executives are not going to meet their numbers, or they failed to meet their numbers, you can bet that RAs are coming. The days of competing with employees are long gone having been replaced by competing against employees. This is the way it works now and a Union is the only way to combat it. Otherwise you are at their mercy.
If you get a RA letter, make sure you get a copy of it. It protects you from later claims that your release was your fault. They may put a lotus notes lock on the letter that prevents it from being printed or sent anywhere, but it's easy to defeat. (Do a search.) If you were represented by a Union, you wouldn't have to deal with such nonsense. -RA'd in June 2011-
Citing rising costs, Wal-Mart, the nation’s largest private employer, told its employees this week that all future part-time employees who work less than 24 hours a week on average will no longer qualify for any of the company’s health insurance plans.
In addition, any new employees who average 24 hours to 33 hours a week will no longer be able to include a spouse as part of their health care plan, although children can still be covered. ...
In Wal-Mart’s 2012 health offerings, premiums will increase for some plans by more than 40 percent, although many of their workers pay relatively low premiums in comparison to more generous plans offered by other employers. But many Wal-Mart employees complain that their low premiums are accompanied by high deductibles that sometimes exceed 20 percent of their annual pay. ...
Barbara Collins, a sales associate at the Wal-Mart in Placerville, Calif., said that the premiums for the H.M.O. plan for herself and her 5-year-old son would rise to $18 every two weeks from $10. Her big concern, she said, was that her deductible would jump to $5,000 a year, from $1,000 — a daunting amount considering she earns $19,000 a year. “I don’t know how I’ll be able to afford it if I go to a doctor or to physical therapy,” she said.
After trying to mollify its critics in recent years by offering better health care benefits to its employees, Wal-Mart is substantially rolling back coverage for part-time workers and significantly raising premiums for many full-time staff.
Citing rising costs, Wal-Mart, the nation's largest private employer, told its employees this week that all future part-time employees who work less than 24 hours a week on average will no longer qualify for any of the company's health insurance plans.
In addition, any new employees who average 24 hours to 33 hours a week will no longer be able to include a spouse as part of their health care plan, although children can still be covered.
Guess what's another good way of cutting costs? Hire two part-time workers to work 20 hours a week instead of one worker to work 40 hours a week. Then you don't have to pay for any healthcare benefits at all! Wheeeeeeeeeeeeee!
"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.
As you can see from the accompanying slideshow of America’s 25 Highest-Paid CEOs, while the stagnant economy continues to hurt those at the bottom of the American workforce, there’s plenty of money for the .0001% at the top. (The totals, compiled by Forbes’ stats guru Scott DeCarlo, include salary, bonuses, perks and the value of exercised stock options through Sept. 6. Sources are CompuStat ExecuComp and SEC filings).
Compensation for the chief executives of America’s biggest corporations is way up in 2011, 28% higher than last year on average, according to GovernanceMetrics International. If you were already in the top quartile of high-paid plutocrats, your comp nearly doubled. Cash bonuses are triple what they were before the recession.
Ms. Warren talks about the nation’s growing income inequality in a way that channels the force of the Occupy Wall Street movement but makes it palatable and understandable to a far wider swath of voters. She is provocative and assertive in her critique of corporate power and the well-paid lobbyists who protect it in Washington, and eloquent in her defense of an eroding middle class. ...
Ms. Warren, a law professor at Harvard, helped to design the new Consumer Financial Protection Bureau. Because of her fierce advocacy on behalf of consumers, Senate Republicans and the financial industry made clear they would never allow her to run it.
She is a remarkably eloquent and appealing Senate candidate. “Washington is well wired for big corporations that can hire armies of lobbyists,” she said last month, soon after joining the race. “But it’s not working very well for middle-class families, and that’s what I care about.”
She is both knowledgeable and accessible when she explains the destructive credit-swap and subprime mortgage games that created the financial crisis. She draws a detailed map back to the early deregulation of the 1980s that began to rip the nation’s economic fabric — the same deregulatory fervor the Republicans are preaching today.
Not coincidentally, the era of an ever-growing financial industry was also an era of ever-growing inequality of income and wealth. Wall Street made a large direct contribution to economic polarization, because soaring incomes in finance accounted for a significant fraction of the rising share of the top 1 percent (and the top 0.1 percent, which accounts for most of the top 1 percent’s gains) in the nation’s income. More broadly, the same political forces that promoted financial deregulation fostered overall inequality in a variety of ways, undermining organized labor, doing away with the “outrage constraint” that used to limit executive paychecks, and more.
Oh, and taxes on the wealthy were, of course, sharply reduced.
All of this was supposed to be justified by results: the paychecks of the wizards of Wall Street were appropriate, we were told, because of the wonderful things they did. Somehow, however, that wonderfulness failed to trickle down to the rest of the nation — and that was true even before the crisis. Median family income, adjusted for inflation, grew only about a fifth as much between 1980 and 2007 as it did in the generation following World War II, even though the postwar economy was marked both by strict financial regulation and by much higher tax rates on the wealthy than anything currently under political discussion.
Then came the crisis, which proved that all those claims about how modern finance had reduced risk and made the system more stable were utter nonsense. Government bailouts were all that saved us from a financial meltdown as bad as or worse than the one that caused the Great Depression. ...
Money talks in American politics, and what the financial industry’s money has been saying lately is that it will punish any politician who dares to criticize that industry’s behavior, no matter how gently — as evidenced by the way Wall Street money has now abandoned President Obama in favor of Mitt Romney. And this explains the industry’s shock over recent events.
You see, until a few weeks ago it seemed as if Wall Street had effectively bribed and bullied our political system into forgetting about that whole drawing lavish paychecks while destroying the world economy thing. Then, all of a sudden, some people insisted on bringing the subject up again. And their outrage has found resonance with millions of Americans. No wonder Wall Street is whining.
One of the core problems animating the Occupy movement around the country is the fact that when it comes to Washington, to paraphrase what former Sen. Christopher Dodd of Connecticut said last year during the financial reform debate, corporations "own the place." And they continue to pay big money to make Washington bend to their interests.
Consider what's on the list of the top five lobbyists in Washington. Here's what the Center for Responsive Politics is reporting so far in 2011:
Just the top two of those corporations have spent more money on lobbying so far this year than organized labor did in all of 2010. No wonder the voice of working people is drowned out in the halls of Capitol Hill by the golden microphones and oversized amplifiers of Wall Street lobbyists.
If anyone you know still doesn't understand what the Occupy Wall Street protesters are angry about, please point him to this.
Bottom line: The average individual now has $1,315 less in disposable income than he or she did three years ago at the onset of the Great Recession – even though the recession ended, technically speaking, in mid-2009. That means less money to spend at the spa or the movies, less for vacations, new carpeting for the house, or dinner at a restaurant.
In short, it means a less vibrant economy, with more Americans spending primarily on necessities. The diminished standard of living, moreover, is squeezing the middle class, whose restlessness and discontent are evident in grass-roots movements such as the tea party and "Occupy Wall Street" and who may take out their frustrations on incumbent politicians in next year's election.
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