Indiana initially sued IBM for the $437 million it paid the provider for what it said was a failed welfare system overhaul, an amount that was later reduced to approximately $170 million. IBM countersued for $100 million that it claimed it was owed by the state. Judge Dreyer awarded Big Blue $12 million for the equipment retained by the state. ...
It was a rare judgment in favor of an outsourcing provider that should serve as a wakeup call for all IT leaders. "Buyers have a tendency to select big-box service providers, because they feel more secure operating under the notion that if something goes wrong they can always sue [them] and recoup their losses," says Paul Pinto, managing partner at outsourcing consultancy Sylvan Advisory. "Buyers believe that the larger service providers will not be willing to endure the bad publicity associated with a law suit. The result of this case clearly displays the contrary." ...
Pinto isn't surprised that IBM walked away unscathed. "IBM prides itself on its ability to write and negotiate onerous contract terms. They have developed this skill through many years of experience, and wield it artfully," he says. " Even though IBM did not perform in alignment with the intent of the agreement, they were deemed to have satisfied the letter of the law."
IBM was able to avoid material breach of the contract by meeting somewhere between 50 and 80 percent of its service levels. "Surprisingly, the court minimized problems that many IT managers would find unforgiveable, including a 48 hour call center outage, and readily gave IBM a pass for the difficult and politicized environment in which it was working," Parks says.
Selected reader comments follow:
3. IBM Executives are out of Touch. IBM has gone through major transformations before, and the last major transformation was designed to make the company more lean, more efficient, and able to make better decisions. One of the stated objectives of that reorganization was to reduce bloat, simplify management, and connect the company to the decision makers so they would make better business decisions faster and more effectively. Today, IBM has more layers of management than it did before these efforts, and that executive bloat has not only cost the organization more money, it has further insulated top decision makers from developing a real understanding of the business, and therefore their decisions are not as good as they can be. What’s worse; there is no real accountability for these bad decisions because they don’t see the real field impact, and are not able to decipher what’s working and what isn’t, rendering them as useless politicians that merely manage their careers. ...
4. IBM’s Sales Culture is Poison. IBM’s sales culture has nearly ruined the company as many of its executives have no real knowledge about the products and services they sell, rather an obsessive desire for more “high margin” sales. IBM’s sales aspirations, and its plan to achieve those objectives, will ruin the company if not revised. IBM has developed growth objectives for earnings, and all indicators of the plan to achieve these aggressive targets seem to come at the expense of jobs, primarily jobs based in the USA – in favor of shipping them overseas, as this is thought to be ‘less costly’. The scale of a reduction required to achieve the aggressive growth targets for earnings suggest that while executives and sales folks will stay, most everyone else will need to go. The staff changes will require massive cuts in technical folks. ...
5. IBM’s Executive Compensation is Misaligned. IBM has aligned executive compensation to its earnings per share targets, and if the executives achieve their targets, again, primarily by downgrading skilled workers in the USA, and moving labor from the USA to lower cost countries, which will be a move that kills the ability of the company to innovate and solve complex problems, they get stock incentives. This executive compensation misalignment continues to drive behaviors towards activities that are killing the organization, yet the strategic plan hasn’t changed, nor has the executive compensation arrangement changed since Ginni’s arrival. ...
6. IBM’s Rape, Pillage & Burn Acquisition Strategy. This is an area where IBM deserves some credit. At least they get the sequencing right. If they were to burn first, they wouldn’t be able to rape & pillage, so at the very least, let’s give them credit for knowing how to ruin a company properly. One of the ways IBM has cloaked its demise is to continue to buy highly profitable businesses with the hoards of cash the company controls. Once they do buy a new company, however, as a matter of routine, they saddle those organizations with bloated IBM processes, force them through standards processes that strip out much that was special, unique and cool about the acquired entity, they increase charges back to the mother ship to siphon off profits, and ultimately, they make the company no longer able to satisfy its customers, who eventually leave. Once IBM has sucked out all the blood, they leave the body for dead and go find another new company to buy (and subsequently ruin). ...
7. IBM’s Offshore Model will kill its Services Business. I hear a lot of people say that IBM is a services company. Well if that’s the case, they are actively trying to commit suicide by killing off their services business. Over the last five years, IBM has aggressively pursued an offshore staffing model, seemingly believing that more unskilled workers are a more effective way to do business than having fewer higher skilled workers. Apparently, IBM doesn’t understand that you can’t outsource making a baby in a month to nine women in India. Not only does this create problems with logistics, language, communications and other issues, it eliminates the organization’s ability to solve complex problems. Many of our clients who subscribe to this model are dramatically disappointed with IBM’s lack of effectiveness on resolving issues, and amazed at how long it takes, and how many people it requires to get resolution. The aggressive offshore model particularly affects IBM Global Services, which represents a disproportionate share of revenue and employee head count, so the impact here will be severe. In the last 18 months, NET(net) has noticed a sharp increase in the number of disenfranchised clients who have terminated their agreements with IBM and sought arrangements with other suppliers. If Ginni allows the IBM Offshore model to continue in Global Services, the company will further convolute its ability to execute, become less able to solve complex problems, and will continue to lose more business at a faster rate. ...
10. IBM Seems to be Preparing to Sell is Services Business. Like IBM jettisoned the PC business years ago, citing a highly commoditized market and the inability to make enough profit, IBM’s services business is under similar pressure and may be being secretly prepared for sale. Feedback from insiders suggests that the cuts are so deep in recent months, that there is really no other viable explanation other than the services business is being prepared for sale.
Selected reader comments follow:
I wish there was a watchdog organization or a technology group that could arrest IBM's self-serving current executive team, send them to jail till they have their day in the court for crimes against humanity, technology, and also against America. Ginny is just like rest of them, she grew up in IBM. She doesn't think there is anything wrong, or she would have fixed it by firing these leaches to bring in a team of intelligent, competent leaders who care for IBM, its clients, and its high skilled employees who are either leaving to competition or escorted out by IBM security. All is left is these career politicians/prostitutes who want nothing but EPS for obvious reasons, they are worst than blood suckers.
Thanks for your article, so I am not the only one who sees it this way. I am sure the market and clients think the same, or a huge list of clients including multi billion dollar Disney wouldn't have left IBM just a short while ago. I am very worried for IBM!!!
Separately, I have been preparing a case in which discrimination against Americans in favor of foreign workers is a factor. As part of the preparation I have been collecting advertisements from companies that say they only want foreign workers.
The companies that publicly advertise illegal recruitment tend to be small. Many of these small companies publish lists of companies they supply workers to. I compiled the advertisements and customer lists in a database and found a striking feature in the data. The median percentage for companies showing up as customers of companies making foreign-workers-only advertisements was 1 percent. However, at the high end there is a small cluster of customer companies that show up much more frequently. IBM leads the pack here, being claimed as a customer by 35 percent of the companies only seeking foreign workers. Let me rephrase that. Among advertisements seeking only foreign workers that had lists of companies it supplied these workers to, over one-third listed IBM (With Verizon and JPMorgan Chase close behind).
The frequency with which IBM appears suggested that I should return to my IBM collection and write about it. One item in the collection seemed particularly appropriate for showing how H-1B abuse takes place in big corporations behind the scenes.
An American IBM employee sent me an e-mail chain among the employee, IBM hiring managers, and IBM HR that shows how IBM flagrantly violates the law in regard H-1B usage and immigration status discrimination. ...
Now let me set the stage for the e-mail chain. An American IBM employee in the United States had been working on a software development project for a customer that had recently ended. The employee needed to find another project to avoid being laid off, as it is easier to lay off people who are not working on projects.
The American IBM employee was on an internal IBM mailing list for employees who were available for a new project. The IBM employee received a timely mass e-mail through this list from IBM HR with a job description that started out:
We are urgently seeking Business Analyst resources with Test experience for two positions on the Alcatel-Lucent account (emphasis in original).
A lengthy job description and instructions on how to apply followed this introduction. (IBM uses the term "resource" throughout to refer to employees.) The job was located in the United States and the American IBM employee lived close to the project.
The American IBM employee responded to the job posting with a cover letter explaining how the employee's qualifications matched the posted job requirements, the additional information requested in the job posting, and a resume.
This is the IBM hiring manager's complete response to the American IBM employee's application (The IBM employee provided translations of acronyms that I have indicated in square brackets.):
Thank you for your interest in the eBusiness Analyst position on the Alcatel-Lucent account. We are in the process of gathering resumes for this position and will send you a follow-up response once we have had an opportunity to review your qualifications.
Please understand the clients first preference is IGSI [IBM Global Services India] landed resource, then local US candidates, then remote, so these candidates will be in the second group to be considered. (sic)
This manager was forcing Americans to get in line for jobs behind "landed resources" from IBM India. In case you are wondering — yes, this is illegal.
So how can IBM so flagrantly violate the law?
The reason IBM can get away with this disgraceful behavior is that discrimination enforcement requires a complaint. An employee considering a complaint has to weigh the probability of the government prosecuting the case and winning adequate compensation against the risk of retaliation and damage to his or her career. Many companies make severance packages contingent upon employees signing away rights to file such a complaint.
So once again IBM is going back to UK, Australia - any country with high wages and no unions - to do more R/A's. It's the same countries over and over. Of course IBM would salivate over layoffs in the EU, but many of these employees are unionized and severance packages are mandated to be large. The long-term savings of laying off an IBM Italy employee and paying them 2 years pay as severance for a long-term employee - these do not interest IBM Senior management. It's all about destroying a career to show increased profit in 6 months.
Only an employees union will stop management thuggery. It will also help IBM keep more USA and Canadian customers. Win-win, unless you are Ginny, Sam, Randy.
Cons: 1. Poor Salary -- IBM takes people at lower salary, and then pushes them even lower every year. The annual increment is marginal (if at all) and much below the inflation levels. If you work for IBM for a few years, you would have a salary way behind market parity, thanks to years of being undercut. 2. Slow career progression -- goes hand in hand with salary. Don't be surprised to see your friends and peers outside IBM in much senior positions, while you have hardly made any progress in your career ladder at IBM. 3. Stifling bureaucracy -- one of those companies where 1 employee has 3-4 managers, each bringing additional complexity and reporting.
Advice to Senior Management: 1. Integrate first inside, before trying to integrate outside to clients 2. Treat employees to a little more than mere words - they work because they need to put food on the table, and do the things their friends and peers outside IBM are doing. It costs money, money that an IBMer doesn't get paid today.
Cons: Lack of investment in the US - Most of the new talent is being hired abroad, which means tomorrow's future leaders will be in these growth markets (China, India, Russia, Brazil).
A large portion of US technical talent is wasted on educating cheaper later in the growth markets. The end result is poor quality products developed by a large number inexperienced developers. A better quality product could be achieved with a smaller, more experienced team. There needs to be a finer line established between the people responsible for training and the people responsible for delivering good products. Almost no one has demonstrated the ability to do both at the same time.
IBM is not as selective as they should be in terms of technical talent. Instead of hiring the top technical talent selectively, they hire a large number of less talented individuals. Occasionally this works out OK as people can grow. However, this often results in poorly designed products that do not meet customer expectations.
It takes too long to fire incompetent engineers due to legal risks. Thus these engineers drag down product quality and the productivity of teams. Or, sometimes these individuals hide in the system by moving from one product to the next. Since it is so hard for managers to get rid of incompetent individuals, the managers resort to transferring them to some other team to become some other manager's problem.
Advice to Senior Management: Stop all cross boarder virtual training All development of growth markets needs to be in person in the growth market. Provide incentive to lower level US engineers to take temporary assignments in the growth markets to develop the skill. Allow US engineers to work on producing excellent products without constantly having to retrain some replacement team.
Cons: Although IBM has excellent benefits, over the years they have diminished. Exempt employees are expected to work a minimum of 20% overtime with little or no comp time. Everyone is constantly expected to do more and more and many people are getting burned out. IBM has also been moving a large number of jobs offshore (India, Brazil, Argentina, etc.) and this puts additional burden on those who remain in the US to train and support the offshore resources. IBM has been moving a lot of its IT support to US Global Data Centers in Dubuque, Springfield and Columbia and a lot of the US jobs have moved to those locations. Recently IBM announced that there would be no salary increases this year in the Global Technology Division.
“One of the mistakes is to think about this as a break-even proposition,” Mr. Thaler said. “How many years do I have to live for this to pay off? That’s not a particularly helpful frame for this problem.”
But Nastro, 50, admits he's torn about police officers' pay and retirement benefits. "I'd be lying to you if I said I wasn't conflicted," he said. "I want good police work, but I'm a taxpayer too. There's got to be a middle ground."
Work Reimagined will offer access to openings with the nearly 120 employers "who have taken the Work Reimagined pledge, publicly committing to treat all employees equally regardless of age," according to an AARP press release. They include more than two dozen employers. At its launch, the site listed more than 2,600 openings at AT&T and just two available slots at Dollar General. Other employers listing immediate openings include tech firms such as Google, retailers such as Toys R Us and Lowe's and insurance firms including United HealthCare and New York Life.
"We are really pleased with our revenues but our goal isn't to make money. It sounds a little flippant, but it's the truth. Our goal and what makes us excited is to make great products. If we are successful people will like them and if we are operationally competent, we will make money," he said.
He explained how, in the 90s, Apple was very close to bankruptcy and that "you learn a lot about vital corporations through non-vital corporations". When Steve Jobs returned to the company in 1997, his focus was not on making money -- "His observation was that the products weren't good enough. His resolve was to make better products." This was a different approach from other attempts to turn the company around, which had focused first and foremost on cost savings and revenue generation.
"I refute that design is important. Design is a prerequisite. Good design -- innovation -- is really hard," said Ive, explaining how it is possible to be both a craftsperson and a mass manufacturer with discipline and focus. "We say no to a lot of things that we want to do and are intrigued by so that we only work on a manageable amount of products and can invest an incredible amount of care on each of them." ...
I've closed by reiterating the Apple mantra that "we don't do market research". "It will guarantee mediocrity and will only work out whether you are going to offend anyone." He said it is a designer's responsibility to understand potential opportunities and be familiar and fluent with technologies that could enable the creation of products that fit with those opportunities.
By assigning such tasks to people in emerging economies, MobileWorks hopes to get good work for low prices. It uses software to closely control the process, increasing accuracy by having multiple workers perform every task. According to company cofounder Anand Kulkarni, the aim is to get the crowd of workers to "behave much more like an automatic resource than like individual and unreliable human beings." ...
Jessica Mah, inDinero's CEO, says she couldn't easily run her business without a crowd of assistants. "The alternative would be to have high-school students do it ... but there's no redundancy, and there's no built-in workflow management," she says. "The price of having MobileWorks have five people look over a receipt is cheaper than the cost of hiring a high-school student at minimum wage to do the task once."
"It’s something that is very dear to people's hearts. If you live here, you will end up there, it does not matter how rich or powerful you are. ... We got hundreds of volunteers from the National Health Service. All the volunteers made a special sacrifice to be with us and to be rehearsed, but these guys are extraordinary.” – Danny Boyle on celebration of the U.K.'s NHS during London Olympics
Just 8 percent of those with Medicare rated their insurance “fair” or “poor,” compared with 20 percent of those with employer-based insurance. And 13 percent of those with Medicare reported a financial problem due to a medical bill, compared with 27 percent of those with employer insurance. Less than a quarter of Medicare patients reported a problem obtaining access to care due to cost, compared with 37 percent of those with employer insurance.
Over three-fourths of uninsured Tennesseans work in the civilian economy, according to a 2010 U.S. Census Bureau survey. Employers and labor unions should not wait around for lawmakers to figure out their political response to the Affordable Care Act, but should extend health insurance benefits to non-insured workers in the state. Extending health insurance to these workers will improve the health and well-being of Tennesseans and increase the competitiveness of many Tennessee workplaces.
Who are Tennessee’s 900,000 uninsured? Over 90 percent of Tennesseans who lack health insurance are of working age (16-64). The majority of the working-age uninsured are male, white and U.S. citizens, and most work for an employer rather than for themselves, according to the U.S. Census Bureau. ...
Historically, labor unions have created decent jobs for workers by negotiating for health insurance benefits, beginning with the sickness and death benefits provided by the building trades, railroad unions and other skilled craft unions in the 1800s. On its 50th anniversary in 1964, the Amalgamated Clothing Workers union proclaimed that its pioneering employer-financed health insurance programs “assist the workers by protecting their health and prolonging their lives; they aid the employers by reducing absence from work because of illness.”
Today, more than 90 percent of unionized, private-sector workers have access to employment-based health insurance, according to a 2011 U.S. Department of Labor survey.
When our health care costs are completely out of control. Do you realize what health care spending is as a percentage of the GDP in Israel? 8 percent. You spend 8 percent of GDP on health care. And you’re a pretty healthy nation. We spend 18 percent of our GDP on health care. 10 percentage points more. That gap, that 10 percent cost, let me compare that with the size of our military. Our military budget is 4 percent. Our gap with Israel is 10 points of GDP. We have to find ways, not just to provide health care to more people, but to find ways to finally manage our health care costs.
Romney’s point about Israel’s success in controlling health care costs is spot on: Its health care system has seen health care costs grow much slower than other industrialized nations
How it has gotten there, however, may not be to the Republican candidate’s liking: Israel regulates its health care system aggressively, requiring all residents to carry insurance and capping revenue for various parts of the country’s health care system.
Israel created a national health care system in 1995, largely funded through payroll and general tax revenue. The government provides all citizens with health insurance: They get to pick from one of four competing, nonprofit plans. Those insurance plans have to accept all customers—including people with pre-existing conditions—and provide residents with a broad set of government-mandated benefits.
"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.
The report was authored by the former Chief Economist of McKinsey and Company, James Henry. Its findings advance our understanding of tax havens and demonstrate that typical estimates of wealth inequality are significantly understated.
The major finding is that offshore financial holdings now come to some $21-32 trillion, compared with the estimate in TJN's 2005 report of $9.5 trillion (this excludes non-financial wealth, such as real estate). James makes a very conservative estimate of how much governments lose in taxes of $189 billion a year, based on earning just 3 percent on this $21 trillion, taxed at 30 percent. ...
On the inequality of financial wealth, Henry says: "By our estimates, at least a third of all private financial wealth, and nearly half of all offshore wealth, is now owned by world's richest 91,000 people, or just 0.001 percent of the world's population. The next 51 percent of all wealth is owned by the next 8.4 million, another trivial 0.14 percent of the world's population."
But it is a good bet that Mr. Romney’s vetters have picked through more than two years of returns of his vice-presidential contenders. And the Senate typically requires more for confirmation to a cabinet or even a subcabinet post. Until Mr. Romney recognizes the right of voters to understand the finances of their leaders, all we are left with is speculation. ...
After all, the one year’s tax returns that he has released raise doubt about his campaign’s claims that his offshore accounts did not save him one penny of tax. Putting business assets into an individual retirement account invested in a Cayman Islands corporation allows Mr. Romney to avoid the “unrelated business income tax” — a 35 percent levy — on at least some of his I.R.A.’s earnings, a tax that he would have had to pay if his I.R.A. were held directly by a financial institution in the United States. With an I.R.A. account of $20 million to $101 million, the tax savings would be more than a few pennies. ...
Mr. Romney’s Cayman Islands and Bermuda corporations also probably allowed him to avoid limitations on deductions for investment expenditures that would otherwise apply. So we don’t need any more tax returns to know that Mr. Romney is an Olympic-level athlete at the tax avoidance game. Rich people don’t send their money to Bermuda or the Cayman Islands for the weather. ...
Moreover, we have no clue whether Mr. Romney paid any gift tax on transfers, now valued at $100 million, to a trust he set up in 1995 for the benefit of his five sons. Until this year, the federal gift tax had a lifetime exemption of $1 million, and it taxed gifts in excess of that amount at rates between 29 and 44 percent. A gift of $100 million to one’s children could, therefore, require paying a tax of as much as $29 million to $44 million.
But every good tax professional knows that gift tax returns are rarely audited, except after the transferor’s death. And normally the I.R.S. cannot challenge such a return after three years from its filing. But if the values of the gifts were not properly appraised and disclosed on Mr. Romney’s gift tax returns, a challenge may still be possible. If he did not file any gift tax return, he would still be liable for the tax, plus interest and penalties. ...
To settle these questions, Mr. Romney should release his gift tax returns, or other documents showing how he valued his transfers to his family’s trust and to his I.R.A., and at least three additional years of income tax returns.
No one should begrudge Mr. Romney or his family the wealth they have earned. But if he has not paid the taxes that apply to transfers of such wealth, this should concern us all. After all, who do you think pays for the shortfall?
Traditionally, investment analysis on Wall Street had been fairly well trusted as an independent opinion on which investors could rely. But there was a shift during the speculative boom of the 1990s, when analysts were directly compensated by their firms for promoting the sale of shares and the purchase of bonds for investment banking and loan clients.
This happened across Wall Street, not just at Citigroup. As one well-known analyst, Ronald Glantz, told Congress in 2001, “Now the job of analysts is to bring in investment banking clients, not provide good investment advice.” In the late 1990s, according to the former Harvard Business School professor D. Quinn Mills, only 1 percent of analysts’ recommendations were to sell a stock. ...
Observers who have been arguing that banks should be broken up shouldn’t especially cheer Mr. Weill’s conversion to their views. Mr. Weill no longer has anything to lose. And he hasn’t come to terms with the damage the financial giants did on his watch, which would have been a true test of his sincerity. Indeed, if he were still running Citigroup, he would almost certainly be singing a different tune.
Yesterday the Senate voted on a Democratic proposal to extend the Bush-era tax breaks for all income below $250,000 per year. Everybody would get that tax break, even billionaires. Taxes would go up for anything earned above that amount, and for some kinds of investment income. The bill would also preserve a number of tax breaks for middle class and lower-income working people.
Forty-eight Senators voted against the Democratic bill. Forty-four of them then promptly voted for the Republican proposal, which would keep the Bush tax cut for earnings above $250,000 - a cut which provides greater and greater tax breaks as you climb the earnings scale toward "millionaire" status and eventually ascend to the rarefied atmosphere of the billionaires' club. ...
The Republicans want to impose these new tax burdens on the struggling middle class while giving an average cut of $160,000 in income and estate tax cuts for households that earn a million dollars or more. And if those households earn a billion or more, the breaks could run into tens of millions annually.
But tax deductions so a working family can send their kids to college, which is already all but impossible? No can do. Perhaps they feel that parents who want a better life for their kids should "know their place" instead.
Much of the public thinks unemployment is worse now than when President Obama took office. They think the stimulus "didn't work." But in fact the economy lost 815,000 jobs in Bush's last month. The stimulus turned that around, and now the economy is gaining jobs. Not enough jobs, but it is gaining jobs, not losing jobs. But the right's disinformation machine blasts out the lie that unemployment is worse, and the country's major media does almost nothing to correct the lie.
Much of the public thinks that President Obama raised taxes. In fact the stimulus was 1/3 tax cuts, and the Social Security "payroll tax" was cut by 1/3. But the right's disinformation machine blasts out the lie that the President has raised taxes, and the country's major media does almost nothing to correct the lie.
Much of the public thinks thinks President Obama increased the country';s budget deficits. In fact the last Bush budget left us with a $1.4 trillion deficit. But the right's disinformation machine blasts out the lie that the President caused the deficits, and the country's major media does almost nothing to correct the lie. ...
Another lie: President Obama said business leaders didn't build their own businesses. The President said business owners did not build their businesses alone, that we all pitched in, that the roads, bridges and other infrastructure that enable our businesses require a cooperative joint effort.
“We uncovered two very big problems in for-profit higher education,” Harkin said in a statement. “One, billions of taxpayer dollars are being squandered. And two, many for-profit schools are doing real, lasting harm to the students they enroll.” ...
But for-profit colleges have failed to support those students, the report states, by prizing recruitment over retention. The colleges studied spent 23 percent of their revenue on marketing and recruiting, the report found, and 17 percent on instruction. ...
The publicly traded companies that operate for-profit colleges yielded an average profit margin of 20 percent in 2009 and paid an average $7.3 million to their chief executives, the report found.
The companies are successful largely because they charge high tuition. Associate-degree programs at for-profit colleges cost at least four times as much as comparable programs at public community colleges, $34,988 vs. $8,313, the report found. Internal company documents showed tuition hikes were enacted “to satisfy company profit goals,” rather than to cover increased costs of educating students, the report states.
While Pearlstein clearly sees these backroom meetings of corporate chieftains in positive terms (he refers to them as "grown-ups" who have been noticeably absent from the conversation about the budget), the rest of us might view this plotting a bit differently. As Pearlstein openly acknowledges, this corporate coup is an end-run around the electorate. As corrupt as the political process may have become, at least we will get a vote in the election. Pearlstein's plotters are not inviting the rest of us into the conversation.
Many of the same folks who brought the economy to ruin just a few years ago are now going to come up with a plan that is supposed to set the budget and the economy on a forward path. At the center of their proposal are big cuts in Social Security and Medicare. ...
The other way we are paying for this corporate effort to cut our Social Security and Medicare is by virtue of the fact that we allow the CEOs to pay for their campaign with pre-tax dollars. If most of want to give $100 to a political candidate or political cause we have to first pay taxes on our income and then make the campaign contribution out of what we have left.
However, if you are a CEO who wants to cut Social Security and Medicare, the Supreme Court says you can make your contributions with pre-tax dollars, in effect deducting this contribution as if you were giving money to charity. According to Pearlstein, the CEOs "charitable" contribution for cutting Social Security and Medicare will be on the order of $278 million.
For most of us, that sum would be real money, but not for CEOs who control trillions of dollars. And, with the rest of us subsidizing through our tax dollars this effort to cut our Social Security and Medicare, how can the CEOs not take up Pearlstein's call?
This is a result reported by every poll every conducted on these issues. Both Social Security and Medicare enjoy extremely high approval ratings across the political spectrum. There is almost nothing that unites the public as much as support for these programs. Well over 70 percent of Republicans, Democrats and Independents indicate strong support for Social Security and Medicare.
The same holds by ideology. There is little difference between people who call themselves liberals and conservatives, both groups overwhelmingly support Social Security and Medicare and are opposed to cuts in these programs. Even self-described supporters of the Tea Party overwhelmingly support Social Security and Medicare. ...
People should also be aware that politicians are true masters of evasion on these questions. A response like, "I support Social Security and Medicare," should be taken to mean that they are prepared to support cuts for these programs. All of the people running for office are smart enough to know how to say that they oppose the cuts being put on the table, and they undoubtedly would say that they oppose the cuts, if it is true.
Similarly, a statement like, "I oppose the privatization of Social Security and Medicare" should also be taken to mean that they are prepared to support cuts to these programs. Again, they are not being asked about privatization, it's not immediately on the table, why would they give an answer about privatization except to avoid admitting their support for cuts? ...
The whole effort here must be focused on smoking out politicians on where they stand on cuts to Social Security and Medicare. The CEOs want to do this behind closed doors because they know that politicians who have to answer to their constituencies will never be able to get away with these cuts. The key is to force the debate into the sunlight.
Beyond Michigan, the AFL-CIO finds that older workers who lose their jobs have the highest rate of long-term unemployment, which in turn means significantly reduced retirement income. Plus, they often have to tap into what savings they have to get by.
So how are compassionate conservatives at the national level responding to the needs of aging Americans? Congressman Paul Ryan’s (R-Wis.) proposed budget is a full-out, concerted assault on old folks. According to the Service Employees International Union (SEIU), he would cut Medicaid by $1 trillion over the next decade and convert it into a block grant to the states, which would result in deep cuts to vital services for seniors. Medicaid, according to SEIU, “is the nation’s main source of payment for long-term care, covering a million nursing home residents and paying for 41 percent of all long-term care expenditures in the country.” Clearly, those folks will be much more comfy living in a refrigerator box under an overpass.
Also, under Ryan’s plan, starting in 2022, Medicare would no longer exist. Instead, people currently in their early 50s would, when they retire, get a voucher to purchase private health insurance, thus transferring control of Medicare to the health insurance industry. Citing a Congressional Budget Office estimate, SEIU predicts that under this plan 20 million retirees won’t have Medicare when they retire, and that such a voucher program will double healthcare costs for seniors. It also notes that Ryan’s plan proposes to “cut future Social Security benefits for everyone who is earning more than $22,000 a year right now.”
According to government data, compiled by the Treasury Department at the request of SmartMoney.com, the federal government is withholding money from a rapidly growing number of Social Security recipients who have fallen behind on federal student loans. From January through August 6, the government reduced the size of roughly 115,000 retirees' Social Security checks on those grounds. That's nearly double the pace of the department's enforcement in 2011; it's up from around 60,000 cases in all of 2007 and just 6 cases in 2000. ...
Many of these retirees aren't even in hock for their own educations. Consumer advocates say that in the majority of the cases they've seen, the borrowers went into debt later in life to help defray education costs for their children or other dependents. Harold Grodberg, an elder law attorney in Bayonne, N.J., says he's worked with at least six clients in the past two years whose problems started with loans they signed up for to help pay for their grandchildren's tuition. Other attorneys say they're working with older borrowers who had signed up for the federal PLUS loan -- a loan for parents of undergraduates -- to cover tuition costs. Other retirees took out federal loans when they returned to college in midlife, and a few are carrying debt from their own undergraduate or graduate-school years. (No statistics track exactly how many of the defaulting loans fall into which category.) ...
Unlike other consumer debts, student loans typically can't be wiped out in bankruptcy. And changes in the law over the last couple of decades have given Uncle Sam more power to pursue defaulters, says William Brewer, president of the National Association of Consumer Bankruptcy Attorneys. The Debt Collection Improvement Act of 1996 empowered the federal government to offset Social Security payments of defaulted student-loan borrowers. An earlier law, the Higher Education Technical Amendments Act, essentially removed any time limits on the government's ability to collect from the defaulters. The Supreme Court upheld both provisions in a 2005 ruling.
An accelerated write-off for owners of NASCAR tracks: That has to stay.
An economic development credit for a StarKist tuna cannery in American Samoa: That stays, too.
A rum-tax rebate for Puerto Rico and the U.S. Virgin Islands worth millions of dollars a year to one of the world’s largest distillers: Check.
A $2,500 credit for electric motorcycles and other low-speed vehicles: That stays. But “in the spirit of tax reform,” its sponsor, Sen. Ron Wyden (D-Ore.), said he agreed that electric golf carts would no longer be eligible. ...
The provisions are instead regularly renewed for a year or two “in the dark of night,” as Hatch put it, often as an amendment to must-pass bills. In 2008, for example, the Senate tacked them onto the Troubled Assets Relief Program bank-bailout legislation.
After paying cash for the Mediterranean-style house with 61 feet of beach frontage, they asked San Diego County for dramatic property tax relief.
Romney, the presumptive GOP nominee for president whose wealth is estimated at $250 million, has rejected calls from Democrats and Republicans to release his income tax returns prior to 2010. But San Diego County assessor records shed light on one sliver of the couple's personal taxes during that time: a months-long effort to reduce their annual property tax bill.
Initially, the Romneys asked that their 2009 assessment, $12.24 million, be reduced to $6.8 million, maintaining that their home had lost about 45% of its value in the first seven months they owned it.
Thirteen months later, after hiring an attorney to guide them, the Romneys filed an amended appeal, contending the home had suffered a less-dramatic fall of 27.3%, to $8.9 million.
They also filed an appeal for the 2010 tax year, claiming the house had dropped further, to $7.5 million, 38.7% less than the home's assessed value. ...
Referring to their initial claim, Peterson said he did not know how the Romneys determined that their house value had fallen so dramatically, but he thought they may have been reacting to dismal news reports. In any case, he said, they were not required to file documentation at the beginning.
That’s because Bain Capital, under Romney as chief executive officer, made about $1 billion in a leveraged buyout 12 years ago that remains controversial in Italy to this day. Bain was part of a group that bought a telephone-directory company from the Italian government and then sold it about two years later, at the peak of the technology bubble, for about 25 times what it paid.
Bain funneled profits through subsidiaries in Luxembourg, a common corporate strategy for avoiding income taxes in other European countries, according to documents reviewed by Bloomberg News. The buyer, Italy’s biggest telephone company, now has a total market value less than what it paid Bain and other investors for the directory business.
In Italy, the deals have spurred at least three books, separate legal and regulatory probes and newspaper columns alleging investors made a fortune at the expense of Italian taxpayers. Boston-based Bain wasn’t a subject of the inquiries, which didn’t result in any charges.
The sale of the government’s directory business is “a dark chapter in the country’s privatization history, one that has hurt Italians deeply,” said Bernardo Bortolotti, an economics professor at Turin University who advised the Italian Treasury on asset sales from 2002 through 2005. “It was a mistake from the start, damaged by a lack of transparency and the use of offshore funds.” ...
Romney himself probably earned more than $50 million, and possibly as much as $60 million from the Italian directory sale of Seat Pagine Gialle SpA, according to a person familiar with the matter. The deal turned into one of the biggest windfalls of his tenure. ...
As Bain’s CEO from 1984 to 2001, Romney was personally involved in the deal at various points, including the initial decision to invest. He attended at least one meeting about it in Boston, according to a participant. When Bain sold the directory business in 2000, Romney, while still holding the title of CEO, was in charge of preparations for the 2002 Winter Olympics in Salt Lake City. Romney has contended that he gave up management control of Bain in February 1999 to run the games.
“Mitt Romney and Bain played the role of successful financial speculators at the peril of the Italian government and the small stock-market investors who were burned by the sharp decline in Seat (PG) shares,” said Giovanni Pons, a journalist for la Repubblica and co-author of “L’Affare Telecom” (2002), which recounts details of the Bain deal.
Republican lawmakers demanded the cuts last year as part of their brinkmanship over the debt ceiling, and business lobbies have generally supported slashing the deficit. But now that the cuts are imminent, corporate executives seem to have realized that the last thing the economy needs is a large budget cut across the board.
They’re right about that. According to the Congressional Budget Office, the combined impact of the automatic spending cuts plus the scheduled expiration of the Bush-era tax cuts — the so-called fiscal cliff — would cause the economy to contract in the first half of 2013. Some business leaders seem to think the solution is for Congress to act as soon as possible to avert the spending cuts and to extend all of the tax cuts. That would avoid an economic downturn next year, but it would also mean no progress toward long-term deficit reduction.
The best approach is to delay the blow of lower federal spending, thus shielding businesses from a sudden drop in support, and, at the same time, temporarily extend the Bush-era tax cuts for most Americans and let them expire for those making more than $250,000 a year, as President Obama has proposed. That would raise revenue and be a credible step toward long-term deficit reduction, without harming the recovery, because high-end tax increases do not cut deeply into consumer spending. ...
That is crucial because higher taxes for top earners is necessary for the nation to begin to raise the revenue it needs. And until the rich pay more, there will never be a national consensus for tax increases on middle-income Americans, which will eventually be needed to further curb long-term deficits.
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