Here are seven major instances in the tech industry of employees facing the brunt for their employer's misfortunes.
1. IBM (1993): 60,000 jobs Yes, you read that right. In July 1993, IBM announced that it would lay off about 60,000 of its employees, a number of jobs that most companies won't be able to create in their entire lives. Out of that number, 35,000 were laid-off directly while 25,000 were offered early retirement, a move, the company claimed, cut annual costs by $4 billion.
Oh, he blames it on the government not giving a $30,000,000,000 handout. Sam of course had no plan to create or add USA jobs (unless it is upper management jobs and boardroom appointments). If he did have a real and true plan wouldn't we see some real jobs created in the USA other than terminated or offshored jobs?
So what did Sam do? Did he try to prove the government or President wrong? No. He continued to destroy USA jobs. And Ginny continues to make more IT workers extinct in IBM. There will be lots of fossils by 2015 and beyond.
An IBM spokesman says Mr. Palmisano's travel benefit climbed nearly 60% last year because of increased fuel and maintenance costs.
That’s in sharp contrast to what happened in the first half of the decade, when poverty rates fell for almost all age groups over 50 – then increased since 2005 for every age group, according to EBRI’s analysis of the University of Michigan’s Health and Retirement Study. ...
One in 10 Americans who were at least 65 also were living in poverty. The main reasons: Older adults are using up their nest eggs as medical expenses rise, says Sudipto Banerjee, the report’s author.
Somewhere in the late 1960's this started to change in the business schools where the belief that only the return to the stockholder was important. This tended to maximize stockholder returns but also affected the long term stability and in a number of cases viability of companies. This was the beginning of the commoditization of a company's workforce.
Skipping to the late 70's or early 80's business schools and executive consultants decided that company executives needed to be aligned. The way to do this was stock options. By making the executives stockholders they would now be driven to maximize stockholder value. This made for even more instability and an even shorter term outlook on running the business. Now that executives were paid in stock it was in their best interest to maximize the day to day value as opposed to 5, 10 or 20 years down the road. After all they won't be around when things fall apart and will have already gotten their piece of the pie. This further shifted the employee down the road to being a "resource" to be used and discarded as we see today.
If you look at IBM today and at an interview that Sam did a while back you will that the stockholder was number one on who to satisfy. Customers were 4th or 5t on the list as I recall. Employees weren't even on the list. This is maximizing stockholder value but has stagnated revenues and is slowly losing customers. As IBM essentially breaks promises to their employees and removes incentives to excel they end up with a poorer product. This causes customers to look elsewhere for products and services. The only way to make up earnings is to cut more which further erodes employee satisfaction and so on.
What needs to be brought back is the balance that existed through much of the early 20th century. This would bring back a longer term perspective that has been lost.
When Tom Watson Jr. set out to build the S/360 The IBM was losing market share dramatically, they had an outdated product line and with the investment in the S/360 IBM came within weeks of missing payroll. They wow, of all things, "issued" stock to cover the bills until they could win in the market place. Your characterization of no competition is ridiculous and just the repetition of nonfactual information hoping it will be accepted as fact.
Let's also be clear that Lou Gerstner took over at the beginning of one of the longest bull market runs that current history has seen and started at the end of one recession and left before the next one hit. I will give him credit for good timing and keeping the company together rather than splitting it up. Watson Sr. saw 9 recessions and the Great Depression. Jr. saw three recessions and the biggest investment that almost bankrupted the company with the S/360.
Let's not confuse growth CEO's with those that are of the new mold - financial manipulators and extractors of wealth from the corporation and its employees.
To see the growth numbers mapped to recessions and CEO's look here: IBM's Greatest CEO Ninety-Seven years of revenue growth.
To see when this financial manipulation started in the 80's and setting unrealistic corporate five year plans (100 billion corporation by 1990) setting us up for the quote unquote Gerstner rescue, look and read here. Cheers, Pete.
What do you see? You see employees who longer have a passion to see the company succeed by winning the next contract, coming up with creative ideas, or ways to save money even if it eliminates their job. In the past, when you came up with creative things that improved the company's earnings and product, you knew you would not lose your job but be given another in a wonderful friendly environment. Not in today's IBM environment. Today, you have managers and executives who are not creative but yes men. IBM used to teach in management school "you can train wild birds not to fly but you cannot train tame birds to fly". Employees were the life blood of the corporation and now they are slowly being poisoned and there are telltale signs.
Today, the only way IBM is surviving is by buying other companies for their creative thinking/products and overpaying since they cannot develop these things themselves. The creative employees of these companies see what has and is happening and they also leave. The things a "yes man" knows how to do is reduce employee expenses but not how to be creative or motivate creative employees by winning their trust. This is not a winning business model for a company. IBM and some of the IBM supporters try to put a spin on what it is doing to employees by singing the same song as in the past or justifying it - but words are one thing, action is another. They are trying to put passion back in employees but cannot having destroyed trust.
So just watch what is happen and be very careful about investing your money in IBM stock. If they did not have a stock buy back program or destroying employee moral by focusing employee expense reductions, ask yourself what would the stock price be today. It is not a product or service company driven by a passionate workforce. Management has lost focus - not focusing on employees who contribute and add value to the life of a company but shareholders who contribute nothing to the survival of a company.
Think about it and let's focus this site on sharing information that improves our lives rather than the current focus of for or against IBM.
Regards. From a retired neutral who does not believe life is great or bad - but that everyday above ground is a good day.
If the employees feel cheated, they do talk and vocalize their sense of the company's unethical behavior toward their employees to all they encounter, which includes the customers who interact with the employees sales, service, and technology folks. Now this translates to lower trust which translates into lower sales.
The employees either condemn or praise the company they work for based on whether or not they feel they have been treated fairly. The customer's employees, some of who make recommendations and/or decisions relative to wether to buy or not, may start to mistrust the company who they have heard has chosen to be unfair to their employees.
Customers may think if the supplier's company is unethical to save a buck when it comes to their employees then they might also be less then ethical when it comes to making a buck off their customers.
Simply put if you see a man cheating another man then are you foolish enough to think he is not cheating you!
This is why the U.S. General Services Administration’s move this week to put IBM in charge of its smarter building projects makes sense. If things go right, it could save more than $15 million annually — working toward the GSA’s goal of reducing energy usage across federal buildings at least 30 percent by 2015.
Horan admits that this may seem extreme. "We're just extraordinarily conservative... It's the nature of our business." Besides Siri, public file sharing tools like iCloud and Dropbox are disabled, and employees are banned from forwarding IBM email to external webmail services. As Wired points out, Apple's terms of service state that users of Siri or Dictation consent to "Apple’s and its subsidiaries’ and agents’ transmission, collection, maintenance, processing, and use of this information, including your voice input and User Data, to provide and improve Siri, Dictation, and other Apple products and services." For IBM, this means that data collected by Siri is out of its control. We've reached out to Apple and IBM for comment, but for now we doubt the two companies will come to an agreement.
Cons: IBM only cares about earnings per share. Don't for a second believe that any of their core values or social responsibility, work-life etc policies will apply to you if you work there! There is a reason that IBM is highest profit IT services company but doesn't appear in any "best company to work for" list.
In order to be on top of 80% of your work, you'll put in 10 to 14 hrs/day in my region. 100% on top of things means an extra 6 to 8 hours on the weekend. To be proactive on more than a few of the totally critical issues, you'll spend 14+ hrs of the weekend working.
The critical projects/tasks you work on will be totally under-resourced so you can't take leave as if you miss delivery date it will be career limiting. Then you'll be told that you haven't taken your leave by year end so you will lose the leave - not get paid out or anything, it just disappears! So you will delay leave in order to deliver for IBM, you'll be exhausted, lose your social life, be stressed to breaking point so that you can be recognised and move up, but instead your efforts will be unrecognised in any meaningful way, and your leave will be taken away when you need it most.
...and it's getting worse because IBM's new belief is that the cheapest resource is best resource, so when an experienced colleague leaves, they are replaced with the cheapest option usually at an India or Eastern Europe hub. Fine to train up new people on your team, but when *every* new person is a totally new to the workplace, their role and IBM, and doesn't stay long as there is no increase... it places a huge support burden on the dwindling experienced team members (who are still doing their own 10 hr/day job!) When you explain this to your manager, he/she will ignore it as most managers are mostly politicians so don't want to take up a cause unpopular with Execs, and the few that do speak up "coincidentally" don't progress in their careers.
In addition to educating most of your team, you will have hopeless internal services support as those service hubs are similarly staffed & have a massive rate of attrition. In some cases, their responses are so far off the mark that it is easier to take the time to ask colleagues in your network if they had this issue and how to solve it (now You're taking time from your colleagues that they can't afford). If there was any real focus on retaining resources in the hubs so we had experienced support, everyone could be more productive in their own roles.
Maybe when IBM implodes and can no longer maintain the facade of an innovative caring company, the execs will realise that the idea of cheap resources and only caring about the $$$ CAN be taken way too far
Advice to Senior Management: Focussing on the earnings per share is good... until the cost to IBMers becomes too high. This is not sustainable...the more experienced staff you lose, the lower your service delivery will be. Maybe some clients are stuck in watertight contracts NOW, but as the services gets worse because you're not retaining experienced IBMers, do you think those clients will renew? A bit of focus on SUSTAINABILITY and RETENTION are critical now...show us that you have some common sense and are not living in ivory towers.
Cornyn's bill, the Securing the Talent America Requires for the 21st Century (STAR) Act, would allocate 55,000 green cards to foreign students enrolled in graduate level STEM programs at U.S. institutions. To offset those visas, the so-called diversity lottery would be eliminated. The latter program is intended to boost immigration from underrepresented countries. ...
Presumed Republican presidential nominee Mitt Romney also supports liberalization of immigration rules for tech specialists. "I'd staple a green card to the diploma of anybody who's got a degree in math, science, a Master's degree, PhD," Romney said during a debate in November.
But critics of Cornyn's bill say it ignores the fact that there are thousands of unemployed, U.S.-born tech pros still looking for work after having been laid off in recent years, whether because of the economic downturn or other reasons, like outsourcing. "If Senator Cornyn wants to secure talent in the U.S. he should be more concerned with the vast number of U.S. tech workers losing their jobs as work is offshored," said Lee Conrad, national coordinator for Alliance@IBM, a group that advocates on behalf of IBM workers.
Selected reader comments follow:
It's really a simple case of supply and demand. Consider an analogy. Consider, for example, what would happen if H1B were applied to plumbers instead of engineers.
Pick any city, let's say, Denver, Colorado. Now, bring in 100 bus loads of freshly graduated plumbers (4,000 new plumbers), who want to enter into the plumbing business in Denver, and make a living.
The result? Wage rates for plumbers will become depressed. The existing 960 plumbers in Denver, once busy every day, and making a good living, will now have much less work, or no work at all.
Who can compete with impoverished hordes of plumbers from India who will work for any price. India has 1.17 BILLION people, and many of them are coming here, flooding our labor markets.
The H1B visa law was created, written and lobbied for by large American corporations as a means for decreasing their engineering labor costs. Indeed their corporate profits have zoomed up, up, up -- while the wage rates paid to their American engineers have gone down, down, down.
This is what the H1B visa has done to the American engineering profession. H1B brings bus loads of foreign engineers to America, thus driving down wages, closing American engineering schools, and discouraging American kids from majoring in engineering.
Senator Cornyn, tell me, if you ran a small business and you could make 90+k profit per employee, wouldn't you be hiring like crazy? It is clear, our current economic stagnation is being caused by the single-minded pursuit of increasing profits.
If you are a CEO, you know you don't get a bonus by keeping profit levels the same, you get them by increasing profits. The Board of Directors at Yahoo looked around and saw that other Tech companies were making even more profit, per employee, than Yahoo (Apple for example at 400+k per employee), and hence the layoff.
Even when ordinary, Main-Street-Common-sense, would tell anyone such a layoff is a sure test for insanity.
Further these same companies have huge off-shore bank accounts, and the only way that money can get back into country is through T-Bills. Hence huge government debt, fed by those T-Bills.
Stop wasting time senator Cornyn with an issue dear to your highest campaign contributors. Get to work on fixing the real problem, you can do it, and most Republicans are for it. Find a way to get the trillions that are out their, in foreign bank accounts back into the U.S.. Find a way to get a tax amnesty for the repatriation of funds for the just-right-and-correct purpose of getting 10+ million Americans (who are proven workers, and we don't need to import) back to work.
These visas are issued to REPLACEMENT workers not highly skilled workers, replacement workers primarily from India.
The author of this bill Senator John Cornyn founded the "Friends of India" Senate Caucus with Hillary Clinton. Currently there are over 35 US Senators who are members of that caucus. While Cornyn, Clinton, ant the other 34 Senators may be Friends of India, it is important to note that India is NOT a friend of the US. India is a friend of Iran. India is a friend of Syria. India was a friend of the Soviet Union until the Soviet Union collapsed.
When the United Nations votes on issues, India is more likely to vote with China and Russia than the United States. When Cornyn, Clinton et al are called "Friends of India", that means they are friends of Indian campaign contributors who are funneling millions of Indian dollars into the pockets of US Senators who are betraying the US and US working people.
Cornyn is a Friend of India and an enemy of US STEM workers and US workers in general.
Clearly, I agree with Mr. Conrad's remarks adding that both Obama or Romney would do well to focus on making these advanced degrees as affordable to US citizens as they are to the free/subsidized foreign students and see how that will affect availability of a qualified national workforce. If the problem is the latter (capability) then perhaps the educational system is flawed in requesting and accepting substandard levels of performance. Certainly, not a week passes without news of students disciplined for "non standard hair color", artfully sculpting their favorite basketball star in their hair, youngsters missing one day too many while working and caring for terminally ill parents even while maintaining grades above par, ... the list can go on and on. I know, weekly exceptions that do not reflect the larger norm of our system. But is the educational system focusing on what's important or locked in on regimented attitudes of mass production? If anywhere needs out-of-the-box thought, isn't it the STEM programs?
Why are greedy billionaires/corporations whining that they can't find qualified Americans? Simple they don't want to and thanks to $$ influence they don't need to legally.
Go to YouTube, type in USINPAC (the only foreign PAC on Capital Hill) and you will see interviews with senators and congressmen glowing about the the wonderful work of their benefactor - all of the Indian outsourcing companies.
H-1b fraud and abuse is a bipartisan disease and elected officials on both sides of the aisle including the Prez and VP are in on the game. Vote them all out. Please
The computing giant is concerned that Siri, the voice-activated assistant exclusive to Apple’s iPhone 4S, could allow Apple to snoop on its customers’ queries and potentially let industrial secrets out of the bag. IBM chief information officer Jeanette Horan told MIT’s Technology Review that the company is “extraordinarily conservative” about computer security, and disabled Siri because the company is worried that the “spoken queries might be stored somewhere.”
When asked why they are committed to offering a DB plan to new hires, more than seven in 10 (71%) respondents cited promoting employee attraction and retention as the key reason, followed by maintaining employee morale, cited by 50% of respondents. The survey noted that only one-fourth of respondents with active DB plans are not firmly committed to their DB plan, and a small percentage (7%) plan to close or freeze their plan over the next two to three years.
Selected reader comments follow:
I bet you the majority of these layoffs are going to be people over 55. Got to prevent them from being qualified for any retirement package.
Let's see how much the C-level, CEO, and the board are going to compensate themselves for such strategy while leaving a trail of blood behind.
This is how it has always played out: fire bunch of actual "job creators," a.k.a. engineers, innovators, balance the budget, give 10's of millions of bonuses to the higher ups. it's the norm, and it has been a norm for the past 3 decades. I love it.
The $10.3bn deal in August was the biggest acquisition of a European IT company and heralded by Leo Apotheker, HP’s chief executive at the time, as a chance for HP to gain leadership in searching unstructured data with Autonomy’s “well-regarded management team and talented, dedicated employees”.
Citing weak sales and poor management at the subsidiary, Meg Whitman, HP’s current chief executive, on Wednesday announced the departure of Mike Lynch, Autonomy’s founder, amid a broader shake-up to cut 27,000 jobs and restructuring of the company’s struggling computer business.
It emerged on Thursday that an estimated 25 per cent of Autonomy’s staff had preceded Mr Lynch out of the door. Former employees said the departures included all of its senior management and a large number of developers.
That’s a lot of money to turn down. True, Cook is very well compensated — deservedly so, considering Apple’s performance — so he can obviously afford to forgo it. But, as best I can tell, he didn’t have to.
So Cook truly did just walk away from $75 million. Which is remarkable for an executive of his standing in an era when entitlement, greed and arrogance are so often part of the job description. Which is not to say that he’s not reaping some benefits here. There’s a lot of mileage for Apple in a symbolic gesture like this, and Cook profits when Apple’s overall value increases.
Barry’s study calculates that subsidizing private insurance premiums will cost taxpayers $557 billion through 2020, while the Medicaid expansion will cost the federal government $669 billion. The two provisions account for 98 percent of new spending in the law. About 58 percent of that spending would pass through insurers. They would get another $322 million from consumers’ share of premiums.
That all, however, changes today. This morning a new nonprofit called the Health Care Cost Institute will roll out a database of 5 billion health insurance claims (all stripped of the individual health plan’s identity, to address privacy concerns). Researchers will be able to access that data, largely using it to probe a critical question: What makes health care so expensive? ...
Now that all the data is in one place, researchers can start to tackle questions like: Where is health care expensive? Are certain procedures driving up prices? Is health care becoming more costly because of higher prices or volume? HCCI’s own economists have tackled that last question, in a report out today, the first to use the new database.
It finds that higher prices charged by hospitals and other prices have driven health care cost growth during the recession, rather than Americans using more medicine. Medical prices grew three times faster than the Consumer Price Index, a measure of price inflation, between 2009 and 2010. This confirms similar trends seen in the National Health Expenditures report as well as in Medicare data, both of which show people using less health care as the economy slowed.
“The Waiting Room” developed from stories my wife, a speech pathologist at Highland Hospital, told me about the struggles and resilience of her patient population. And a few years ago, as the contentious vote for health care reform got louder, it occurred to me that the people who were not participating in the debate were the very people we were fighting over: those stuck in waiting rooms at underfunded public hospitals all over the country. How would the patients in the waiting room at Highland Hospital respond to President George W. Bush’s statement, echoed by many others, that we already have universal health care in this country because, by law, nobody can be turned away from an emergency room for lack of ability to pay?
By following the caregivers and patients as they passed through the waiting room, we felt we could shed some light on the challenges of delivering primary health care in an environment designed for emergency medicine. What we found was that the uninsured were more likely to be hospitalized for avoidable conditions because there is virtually no continuity of care; no regular doctor to get a detailed medical history and then a follow-up visit to make sure the prescribed treatment is working. And because the wait times are so long — both in the emergency department and to see a doctor in the clinics — simple conditions like high blood pressure and diabetes can escalate to severe life-threatening emergencies like strokes or kidney failure. These true emergencies end up back in the emergency department but at a much higher personal and financial cost.
When President Lyndon B. Johnson signed Medicare into law in 1965, he noted that its benefits to older Americans were not only medical, but financial: “No longer will illness crush and destroy the savings that they have so carefully put away over a lifetime.”
Fifty years later, Dr. Amy Kelley, a geriatrician at Mount Sinai School of Medicine in New York, has amassed disheartening evidence that L.B.J. was wrong. Her team’s study of health care expenditures during the last five years of life, drawn from the national Health and Retirement Study, tracked people over age 70 who died between 2002 and 2008. ...
Almost half the 3,209 people in the sample, she reported, had heart disease; a quarter had diabetes; 20 percent had dementia. They started with average assets of $107,000, including their homes. In the year before their deaths, about 20 percent were nursing home residents. Their average age at death: 84. During their final five years, 18 percent of these old people ran up out-of-pocket expenses greater than their total assets. If you exclude their houses (the kind of asset you can’t easily use to pay for drugs or doctors), a full 33 percent owed more in medical expenses than they had in assets. ...
“As a geriatrician, I can’t say I’m surprised,” Dr. Kelley said. “I’m aware of what Medicare doesn’t cover” — eye care and glasses, dental care and dentures, hearing aids, insurance costs, nursing homes and most other long-term care, co-payments for doctors, drugs and hospitals. Families, unlike geriatricians, often are surprised — shocked, in fact — by what Medicare doesn’t cover. For the elderly in this sample, out-of-pocket costs over five years totaled an average $38,000 (the median was $23,000).
When the results came back, we found that people who have a serious medical condition or who've been in the hospital in the past year tended to have more concerns about costs and quality than people who aren't sick. No big surprise there.
But what was notable: 3 of 4 people who were sick said cost is a very serious problem, and half said quality is a very serious problem. Nearly half of those with recent serious illness say they felt burdened by what they had to pay out of their own pocket for care. ...
If you want to dive deeper, here's a summary of the poll findings, plus the topline data and charts. And you can meet some of the real people who shared their experiences of being sick in America with NPR in this post.
Medical expenses are even taking their toll on families with comprehensive insurance plans. Insurance premiums are increasing, but offering less coverage. An ordinary family under a job-based health plan will spend more $20,000 in healthcare costs this year. That's about 40 percent of the average household's income.
"Mini-meds appeal to large employers in industries such as retail, food service and temporary staffing agencies who want to be able to tell their employees, 'I have something for you.' But in reality, these plans are extremely limited in their coverage," says Nancy Metcalf, senior program editor of Consumer Reports.
The American Cancer Society has been sounding the alarm over such plans for several years after hearing from newly diagnosed cancer patients that these policies don't cover expensive treatments. ...
The 2010 Patient Protection and Affordable Care Act prohibited the sale of these low-coverage plans. However, the Obama administration has been issuing waivers to employers and insurers that let them continue offering these plans until 2014. At that time, insurance companies will be barred from denying anyone coverage based on a pre-existing condition.
Insurers would be required, for example, to limit how much people pay toward their own medical bills, even if they have a chronic and expensive condition. Insurers would also have to provide a comprehensive set of benefits, like maternity coverage that is now excluded by some policies, and cover pre-existing medical conditions, which may be excluded under certain policies. ...
The study found that some families who have very high medical expenses can pay $27,000 or more in out-of-pocket costs toward their care. The federal law caps both what people have to pay a year in medical bills and what they have to pay over their lifetime.
But the study also showed that people now covered through an employer were already in plans that met the federal standards. Those plans are likely to continue to be more generous than individual plans available through the state insurance exchanges required by the law, according to Jon R. Gabel, the study’s lead author and a health researcher at NORC at the University of Chicago.
...many are also grappling with the fact that overturning the law would eradicate certain benefits that are popular among voters. These include a provision that allows parents to keep adult children on their insurance plans until the age of 26 and one that protects patients with pre-existing conditions from being denied health coverage. ...
The White House has argued that the mandate in the Affordable Care Act that forces all citizens to buy health insurance, which is at the heart of the high court deliberations, is economically necessary if insurance companies are to accept patients with pre-existing conditions.
John Barrasso, a Republican senator from Wyoming, who is leading the party’s policy discussions on the issue, says there is “uniform agreement” that if the entire bill is not struck down, Republicans will first focus on repealing the remainder of the law.
The law says that plans sold on public exchanges must cover at least 60 percent of the costs of treating a typical patient, a figure known as “actuarial value.” Most of the policies the researchers analyzed covered less than that, meaning the possibility of high out-of-pocket costs for patients.
Despite my more conservative politics, I join the other physicians in proposing single-payer health-system reform.
The Affordable Care Act fails to address the cost of American health-care delivery because the central feature of Obamacare is the forced reliance on the private health-insurance-industry business model, known as the individual mandate. Private health insurance is the most wasteful way to pay for health care ever invented, with excess administrative costs in the United States of about $400 billion per year. In addition, the private health-insurance business model distorts incentives in health-care delivery. This induces mediocre care — it pays for inappropriate care and ignores patient safety, while failing to consistently use clinically proven interventions. These poor-quality problems in the United States health-care system cost an additional $700 billion per year in wasted payments.
The virtue of this index lies in its inclusion of out-of-pocket spending in total health spending. Just tracking premiums for employment-based health can be misleading, if employers shift more and more of the cost of health care out of their benefit package into deductibles or coinsurance paid by employees, exclude certain benefits altogether or otherwise limit coverage.
For 2012, the nationwide average of the total health spending for a typical family of four was estimated by Milliman to be $20,728. On a regional basis, that average varies from a low of $18,365 in Phoenix to $24,965 in Miami. ...
On average, according to Milliman, employers contributed 58 percent, or $12,144, to the total cost of $20,728, through contributions to their employees’ health insurance premiums. The family itself contributed another 25 percent, or $5,114, toward the premium via direct payroll deduction. In addition, it spent 17 percent, or $3,470, out of pocket for health care. ...
This point on backward cost-shifting was driven home recently in a paper in Health Affairs by David Auerbach and Arthur Kellerman. The authors present data showing that a decade of health care cost growth in employer-based health insurance “has wiped out real income gains for an average U.S. family” from 1999 through 2009. Health care has come to chew up American household budgets like Pacman. ...
Americans are fond of the idea that individuals and families should be self-reliant. But a question confronting the American public and their political representatives is how they imagine households with money income of, say, $30,000 to $50,000 will tolerate the ever-larger bites the health care Pacman seeks to take out of their budgets.
"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.
So, how have the Republicans managed to persuade Americans to buy into the whole “Obama as big spender” narrative?
It might have something to do with the first year of the Obama presidency where the federal budget increased a whopping 17.9% —going from $2.98 trillion to $3.52 trillion. I’ll bet you think that this is the result of the Obama sponsored stimulus plan that is so frequently vilified by the conservatives…but you would be wrong.
The first year of any incoming president term is saddled—for better or for worse—with the budget set by the president whom immediately precedes the new occupant of the White House. Indeed, not only was the 2009 budget the property of George W. Bush—and passed by the 2008 Congress—it was in effect four months before Barack Obama took the oath of office. Accordingly, the first budget that can be blamed on our current president began in 2010 with the budgets running through and including including fiscal year 2013 standing as charges on the Obama account, even if a President Willard M. Romney takes over the office on January 20, 2013.
That's why a strong Volcker rule firewall is so critical. We have to ensure that when Wall Street's bad bets blow up, you and I don't get burned again.
For two years, Wall Street's legion of lobbyists have been working overtime trying to build giant loopholes into the financial reform law. Regulators will soon decide whether to enact the "JP Morgan loophole" into the rules.
Nine bills that would roll back the derivatives reforms created in the wake of the financial crisis are moving in Congress. These proposals, most of which have already passed in committee, have been put forth in the name of furthering the competitiveness of U.S. companies and creating jobs for Main Street. These are quite brazen claims, since deregulating derivatives arguably did more to harm economic competitiveness and job creation than anything Congress has done for a very long time. ...
Of the bills seeking to punch holes in Dodd-Frank, a few are comically ridiculous—and dangerous. One, H.R. 3283, cedes regulatory authority to foreign governments for the overseas activities of U.S. firms. Ask yourself, when was the last time Congress advocated submitting to foreign control of anything? Only Wall Street’s influence could convince lawmakers to favor such a thing.
Another bill is the cleverly titled Swaps Bailout Prevention Act. It does the opposite of what its title suggests. It would repeal Dodd-Frank’s prohibition against bailing out of major derivatives participants and, thus, allow federally insured banks to remain major derivatives players.
Its chairman, Jamie Dimon, has admitted that the firm was “sloppy” and “stupid” in making trading bets that lost $2 billion. But Republicans on the Senate Banking Committee wouldn’t hear of it; they preferred to blame government.
As the panel held the first hearing on the JPMorgan losses, Sen. Richard Shelby (Ala.), the committee’s ranking Republican, glowered at federal regulators and charged that they “didn’t know what was really going on.”
“When did you first learn about these trades?” Shelby inquired.
Gary Gensler, head of the Commodity Futures Trading Commission, admitted that he had learned about them from press reports.
“Press reports!” Shelby echoed, with mock surprise. He smiled. “Were you in the dark?”
Gensler tried to explain that his agency does not yet have authority to regulate the bank, but Shelby interrupted. “So you really didn’t know what was going on . . . until you read the press reports like the rest of us?” he asked again.
“That’s what I’ve said,” Gensler repeated.
But Shelby wanted him to keep saying it. “You didn’t know there was a problem there until you read the press reports?”
Shelby’s performance was worth every bit of the $72,950 JPMorgan Chase and its employees have given him in the past five years, making the bank his second-largest source of campaign cash. It was a remarkable bit of jujitsu: The trading scandal at JPMorgan highlighted the urgent need for tougher regulation of Wall Street, but Shelby’s harangue was part of a larger effort to use the scandal as justification to repeal regulations.
Dimon himself has speculated that the firm’s misbehavior would increase pressure for more regulation. But Republicans decided to defend the industry with a strong offense. Republican National Committee Chairman Reince Priebus set the message when he said this month that the JPMorgan episode showed “Dodd-Frank didn’t work.” This is richer than John Pierpont himself ever was.
It’s true that Dodd-Frank, the legislation responding to the 2008 economic collapse, hasn’t worked — because it hasn’t been put in place. At the heart of the proposed reforms is the “Volcker rule,” named for a former Federal Reserve chairman, which attempts to separate banks’ gambling from their government-backed deposits. This mimics the situation before the Depression-era Glass-Steagall law was repealed in 1999.
Wall Street has responded — predictably, I suppose — by whining and throwing temper tantrums. And it has, in a way, been funny to see how childish and thin-skinned the Masters of the Universe turn out to be. Remember when Stephen Schwarzman of the Blackstone Group compared a proposal to limit his tax breaks to Hitler’s invasion of Poland? Remember when Jamie Dimon of JPMorgan Chase characterized any discussion of income inequality as an attack on the very notion of success?
But here’s the thing: If Wall Streeters are spoiled brats, they are spoiled brats with immense power and wealth at their disposal. And what they’re trying to do with that power and wealth right now is buy themselves not just policies that serve their interests, but immunity from criticism. ...
So, no, financial wheeling and dealing did not do wonders for the American economy, and there are real questions about why, exactly, the wheeler-dealers have made so much money while generating such dubious results.
Those are, however, questions that the wheeler-dealers don’t want asked — and not, I think, just because they want to defend their tax breaks and other privileges. It’s also an ego thing. Vast wealth isn’t enough; they want deference, too, and they’re doing their best to buy it. It has been amazing to read about erstwhile Democrats on Wall Street going all in for Mitt Romney, not because they believe that he has good policy ideas, but because they’re taking President Obama’s very mild criticism of financial excesses as a personal insult. ...
Think about where we are right now, in the fifth year of a slump brought on by irresponsible bankers. The bankers themselves have been bailed out, but the rest of the nation continues to suffer terribly, with long-term unemployment still at levels not seen since the Great Depression, with a whole cohort of young Americans graduating into an abysmal job market.
And in the midst of this national nightmare, all too many members of the economic elite seem mainly concerned with the way the president apparently hurt their feelings. That isn’t funny. It’s shameful.
Am I exaggerating? Well, according to the Corruption Perception Index, we rank 24th in the world (only slightly better than Qatar) for public sector corruption. We rank 25th (way behind our peer group) in the OECD for math scores among 15-year-olds. ...
If the above statistics don't convince you, visit the New Delhi International Airport, then compare it with our JFK or Newark International Airports. In many areas, our infrastructure is an embarrassment, already inferior to that of many third world countries.
These facts (and many others) have escaped Romney, Santorum and our current group of Republican leaders. Obama and the Democrats aren't doing significantly better at confronting these challenges. ...
Today, many of us suffer from what Thorstein Veblen called "trained incapacity" and John Dewey described as "occupational psychosis." We filter the world through our own ideological training, believing only what fits our story. Or, as Stephen Colbert, cultural commentator and 2008 Peabody Award winner commented:
It used to be, everyone was entitled to their own opinion, but not their own facts. But that's not the case anymore. Facts matter not at all... What is important? What you want to be true, or what is true?... Truthiness is 'What I say is right, and [nothing] anyone else says could possibly be true.'
Many Americans still have an almost cult-like belief that America is the greatest nation on earth. They systematically reject evidence suggesting we have significant room for improvement.
Sounds overly-dramatic? When opposing President Obama's health care reform proposals, Speaker of the House John Boehner repeatedly proclaimed (with passionate intensity) that America has the "best health care system in the world." Boehner is correct only if you exclude the entire developed world from the comparison. The U.S. ranks 50th for longevity and 49th for infant mortality, where we're barely ahead of Belarus, Croatia and Lithuania.
I defy anyone to name a single important health care metric where the U.S. is considered a best-practice example as a nation. The only thing we lead the world in... is cost of health care. We have the world's most expensive health care system. For example, our health care system costs almost twice Canada's, but we produce inferior results.
For Boehner to say we have the best health care system in the world, and not be laughed out of office, is at best 'trained incapacity' or 'occupational psychosis.' Boehner doesn't have to support Obama's health care reform plan. Obama's reforms might make things worse. But, let's have an actual debate grounded in facts, without inventing (and propagating) falsehoods about the current system.
"Well, a gray-haired senior staffer responded, "Wall Street and banks are contributing mightily to get the act repealed." Then she paused, shot a knowing smile at her colleagues, and continued. "So, who do you suggest would be willing to contribute to retain the act?" After that Democrats and Republicans worked hand-in-hand and repealed Glass-Steagall. Bill Clinton signed the repeal into law. The result was the 2008 crash and all that has followed.
Today, even as JP Morgan/Chase is caught up to the same old, same old... members of congress, and even the White House, continue to defend the indefensible. Because money not only talks, but governs. America has finished its transformation from a popular democracy to a checkbook democracy. We are continued to be encouraged to vote, but unless you can match your vote with at least a 5-figure check, "they" could care less about what you think, what you need or what you want.
Here are two stories hot off the press today. Do you think there's a connection?
This past April, for his final act as Citigroup’s chairman, Dick Parsons made sure that Citi’s top executives were handsomely rewarded for their failures. He arranged a pay package for CEO Vikram Pandit amounting to $53 million despite the fact that Citi’s stock plummeted 44% last year, and has woefully underperformed other bank stocks even by their low standards. Citigroup, as you might recall, got the largest bailout of any banking institution, larger than BofA’s– $50 billion in direct funds, and over $300 billion more in “stopgap” federal guarantees on the worthless garbage in Citi’s “assets” portfolio. Those are just the most obvious bailouts Citi received—this doesn’t take into account the flood of free cash, the murky mortgage-backed securities buyback programs, the accounting rules changes that allowed banks like Citi to decide how much their assets “should be worth” as opposed to what they’re really worth on their beloved free-market, and so on…
So just as Dick Parsons stepped down as Citigroup chairman last month, shareholders finally rebelled, suing Parsons, CEO Pandit and a handful of executives for corporate plunder”. Again, with Parsons, it’s the same story every time: Three executive jobs, three disasters, each worse than the previous one.
The largest effect is that of Fox News: all else being equal, someone who watched only Fox News would be expected to answer just 1.04 domestic questions correctly -- a figure which is significantly worse than if they had reported watching no media at all. On the other hand, if they listened only to NPR, they would be expected to answer 1.51 questions correctly; viewers of Sunday morning talk shows fare similarly well. And people watching only "The Daily Show With Jon Stewart" could answer about 1.42 questions correctly.
Other networks also did badly in some sections; MSNBC viewers and Fox News viewers both fared worse in answering international questions than people who watched no news. ...
Fox News hit out at the school responsible for the study on Thursday. A spokesperson for the network told The Hollywood Reporter, "Considering FDU’s undergraduate school is ranked as one of the worst in the country, we suggest the school invest in improving its weak academic program instead of spending money on frivolous polling – their student body does not deserve to be so ill-informed."
Whether you're a conservative or a liberal or a progressive, a Democrat or a Republican, everybody can be and should be concerned about this: the constant consolidation of media, particularly national distribution of media, with a few companies -- no more than six, my count is four -- now control more than 80 percent of the true national distribution of news. These large corporations, they have things they need from the power structure in Washington, whether it's Republican or Democrat, and of course the people in Washington have things they want the news to be reported. To put it bluntly, very big business is in bed with very big government in Washington, and has more to do with what the average person sees, hears, and reads than most people know.
Unfortunately, there’s not much to show for the effort, that is, if one uses as the criteria a proven ability to shoot down incoming missiles in simulated experiments, which some have likened to hitting an incoming bullet with another bullet. Despite partial deployment of land-based anti-missile missiles in California and Alaska and at sea on Aegis class cruisers and destroyers, the majority of experiments involving shooting down single missiles have ended in failure. ...
Yet, the Republican-led House of Representatives earlier this month earmarked more money for missile defense in their $642.5 billion defense authorization bill, which could add another $3.6 billion to overall defense spending through 2017, according to the Congressional Budget Office. They want the Pentagon to start building batteries on the East Coast – what some have dubbed the Snooki defense because it could wind up along the Jersey shore – even though the West Coast-based system covers the entire continental U.S. ...
But if the Pentagon isn’t for it, who is and why? In Washington, the easiest way to answer that question is usually summed up by the phrase, “follow the money.”
In a budgetary environment where many defense contracts are being cut and some are even on the chopping block, big defense firms are more than happy to sign on to a program that will shovel additional billions to keep employed the small army of engineers, designers, and computer programmers who write the millions of lines of code required to successfully intercept something moving faster than a speeding bullet. It’s just one of the reasons that defense contractors spend millions of dollars in campaign contributions and lobbying fees on Capitol Hill. ...
That view gets support from long-time Pentagon analysts who suggest that Republican politics and the pork-barrel aspects of a program, which distributes dollars and jobs in numerous Congressional districts, are the most likely culprits behind the program’s charmed life. Their fear is that the program will expand despite its technical shortcomings should Republicans win control of the White House and Congress next year. “This program has become an ideological litmus test for the Republican Party,” said Gordon Adams, a professor of international relations at American University and former Office of Management and Budget official in the Clinton administration. “Reagan invented it and every Republican who runs for office has to sign up for this puppy.”
The richest 1 percent of Americans save about half their incomes, while most of the rest of us save between 6 and 10 percent. That shouldn't be surprising. Being rich means you already have most of what you want and need. That second yacht isn't nearly as exciting as was the first.
It follows that when, as now, the top 1 percent rakes in more than 20 percent of total income -- at least twice the share it had 30 years ago -- there's insufficient demand for all the goods and services the economy is capable of producing at or near full employment. And without demand, the economy doesn't grow or generate nearly enough jobs. ...
The Street has turned a significant part of the economy into a giant casino involving mammoth bets with other peoples' money. When the bets go well, the rich owners of the casino (Wall Street executives, traders, hedge-fund managers, private-equity managers) become even richer. When the bets go sour, the rest of us bear the costs.
The casino also requires continuous transfers of wealth from ordinary taxpayers. Some are built into the tax code. One is the preference of debt over equity (interest on debt is tax deductible), which awards Wall Street banks like JPMorgan for risky lending and awards private-equity firms like Bain Capital for piling debt on the firms it buys. Another is the "carried interest" rule that, absurdly, allows private-equity managers (like Mitt Romney) to treat their income as capital gains even when they haven't risked any of their money.
The biggest of all is the invisible guarantee that if the biggest banks get into trouble, taxpayers will bail them out. This subsidy reduces the big banks' cost of capital relative to other banks and fuels even more risky lending.
In the days leading up to the company’s initial public offering last week, the Wall Street Journal has reported, the underwriting banks told major institutional investors that Facebook’s share price would be set way too high — the pricing was “ridiculous,” according to one phone call on which the Journal reported. Facebook’s ad revenue, the big-time investors were told, wasn’t keeping pace with its growth on platforms such as mobile phones, which appear to be less ad-friendly than computers. No one conveyed this information to individual investors, however, many of whom rushed to buy the stock last Friday. By Thursday, Facebook shares had fallen 13 percent from their initial price.
Such “selective disclosure” may be grotesquely unfair, but it’s perfectly legal. The law requires corporations and brokers to inform the public of any information that could affect the value of their stocks — except in the case of IPOs, when securities firms are forbidden from reporting such information to the public until 40 days after the initial offering.
This isn’t a widely known law; the Journal called it “one of Wall Street’s best kept secrets.” It seems to be secret even from some U.S. senators with direct jurisdiction over securities statutes. Republican Bob Corker (Tenn.) told The Hill that he’s been focused more on the $2 billion trading-loss scandal at JPMorgan Chase than on Facebook “because we have regulation that it’s going to affect.” Charles Grassley (R-Iowa) told the same paper that this was a matter for the Securities and Exchange Commission, not Congress. It is indeed a matter for the SEC, but it should be on Congress’s plate as well.
The Facebook affair provides one more bit of confirmation — not that any should be needed — that our economic system, when left to its own devices and when regulated by rules that powerful interests have shaped, tilts grotesquely toward the rich and their institutions. The JPMorgan Chase debacle has highlighted the fact that chief executive Jamie Dimon sits on the board of the Federal Reserve Bank of New York, his company’s primary regulator. Vermont’s Bernie Sanders, the Senate’s sole socialist, and California’s Barbara Boxer (D) introduced a bill this week that forbids such arrangements — a long-overdue reform, as the Fed’s regional banks have always been controlled more by private bankers than public regulators.
Listen to what Newt Gingrich said in January: “The Bain model is to go in at a very low price, borrow an immense amount of money, pay Bain an immense amount of money and leave. I’ll let you decide if that’s really good capitalism. I think that’s exploitation.”
Or what Rick Perry said that same month: “There is something inherently wrong when getting rich off failure and sticking it to someone else is how you do your business. I happen to think that that is indefensible.”
When Democrats say things like that, they’re accused of being Bolsheviks who want to destroy capitalism. But even in the context of the GOP primary battle, where “moderate” was the ultimate epithet, Romney’s actions at Bain were seen as raising a legitimate and important question: Shouldn’t free markets serve the American people, rather than the other way around? ...
There’s nothing inherently wrong with private equity, which plays an important role in the economy. And, of course, there’s nothing wrong with wealth; those who risk their capital in private-equity ventures should be rewarded when those deals pay off. No one begrudges Romney his offshore investment accounts, his mansions or his wife’s Cadillacs. ...
But as Romney himself acknowledges, free markets need rules and regulations in order to function. Some kinds of dealings are prohibited or even criminalized — insider trading, for example, because of the way it benefits a select few at the expense of other investors.
It is reasonable to ask whether some highly leveraged buyout deals, of the kind that Bain and other private-equity firms often conduct, should fall into the same thumb-on-the-scale category as insider trading.
Suppose a company is failing and appears beyond rescue. Suppose a private-equity firm buys the company with borrowed money, burdens it with more debt, and then spends the next few years firing workers, selling assets, eliminating pension plans — all while collecting handsome “management fees.” Then the company fails anyway, as it was fated to do. What higher economic purpose has been served? Why is this not what Perry memorably called “vulture capitalism”? ...
This is what Rick Santorum said in March: “I heard Governor Romney here called me an economic lightweight because I wasn’t a Wall Street financier like he was. Do you really believe this country wants to elect a Wall Street financier as the president of the United States? Do you think that’s the kind of experience we need? Someone who’s going to take and look after, as he did, his friends on Wall Street and bail them out at the expense of Main Street America?” Good question. I’d like to hear Romney’s answer.
Romney is simply following the lead of Republicans in Congress who have abandoned American conservatism’s most attractive features: prudence, caution and a sense that change should be gradual. But most important, conservatism used to care passionately about fostering community, and it no longer does. This commitment now lies buried beneath slogans that lift up the heroic and disconnected individual — or the “job creator” — with little concern for the rest.
Today’s conservatism is about low taxes, fewer regulations, less government — and little else. Anyone who dares to define it differently faces political extinction. Sen. Richard Lugar of Indiana was considered a solid conservative, until conservatives decided that anyone who seeks bipartisan consensus on anything is a sellout. Even Orrin Hatch of Utah, one of the longest-serving Republican senators, is facing a primary challenge. His flaw? He occasionally collaborated with the late Democratic senator Edward M. Kennedy on providing health insurance coverage for children and encouraging young Americans to join national service programs. In the eyes of Hatch’s onetime allies, these commitments make him an ultra-leftist.
I have long admired the conservative tradition and for years have written about it with great respect. But the new conservatism, for all its claims of representing the values that inspired our founders, breaks with the country’s deepest traditions. The United States rose to power and wealth on the basis of a balance between the public and the private spheres, between government and the marketplace, and between our love of individualism and our quest for community. ...
That’s why today’s conservatives can’t do business with liberals or even moderates who are still working within the American tradition defined by balance. It’s why they can’t agree even to budget deals that tilt heavily, but not entirely, toward spending cuts; only sharp reductions in taxes and government will do. It’s why they cannot accept (as Romney and the Heritage Foundation once did) energetic efforts by the government to expand access to health insurance. It’s why, even after a catastrophic financial crisis, they continue to resist new rules aimed not at overturning capitalism but at making it more stable.
For much of our history, Americans — even in our most quarrelsome moments — have avoided the kind of polarized politics we have now. We did so because we understood that it is when we balance our individualism with a sense of communal obligation that we are most ourselves as Americans. The 20th century was built on this balance, and we will once again prove the prophets of U.S. decline wrong if we can refresh and build upon that tradition. But doing so will require conservatives to abandon untempered individualism, which betrays what conservatism has been and should be.
In the three years since the depths of the downturn in 2009, total national income has rebounded smartly in the U.S. as it has in most of Europe. But national income has two components: wages, salaries and non-salary income (interest, capital gains and stock compensation); and profits to business.
While profits are up everywhere, total labor compensation has increased in every leading economy except four: the United States, Greece, Ireland and Spain, the IMF outlook showed. If one looks at the change in relative share of total income going to labor, it has fallen sharply in the U.S. since the trough of the downturn, while rising slightly in Europe as a whole. Nine of 15 countries in the Eurozone showed a rise in labor’s share of total income.
The trend now threatens to overturn some long-standing elements of the American social compact. Workers’ share of national income historically has been much higher in the U.S. because of its lower tax rates and fewer public services. What you don’t get from the government you buy for yourself. But now the relative share of income going to labor is approaching parity with Europe. Yet American workers still don’t have many government-provided benefits. Most Europeans have a much more generous benefits package from the government, including in many countries, national health care. ...
Politics on both sides of the Atlantic will play a major role in determining the future direction of income distribution. If Europe turns left, as the recent elections suggest, and the November election in the U.S. results in a Republican takeover and the imposition of austerity, one likely outcome is that the pattern that existed throughout the last decade will continue. If it does, the two lines will cross in the next few years.
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