Starting next year, IBM's contributions, which generally range from 6% to 10% of pay, will take place Dec. 31. Workers who leave the company before Dec. 15 won't qualify for the match, unless they retire. ...
For IBM, the latest move could help save millions of dollars a year in compensation expenses, and keep valued workers who want to ensure they receive the match more tethered to their jobs—at least until the end of a given year. ...
Financial planners say the lump-sum contributions undermine one big advantage of 401(k) plans: "dollar-cost averaging," in which investors are buying stock and bonds at multiple prices over time, leveling out risk and return.
It is a particular concern for older workers who are closer to retirement and have less time to make up for short-term losses, said Jason Chepenik, a certified financial planner and retirement-plan consultant in Winter Park, Fla.
Some IBM employees are unhappy.
"It's a huge change," said Andy Maher, a 59-year-old IBM customer engineer in Victorville, Calif. Mr. Maher, who started at the company in 1976, was an early adopter in the company's retirement offerings, eventually increasing his savings to 12% of pretax pay while raising five children.
Now, he said, he is concerned that "you lose a whole year's worth of interest on that money. And if they lay you off Dec. 1, you don't get anything. It adds a whole other level of unnecessary uncertainty." ...
Ms. Madrian added that Labor Department and U.S. Treasury officials "could be very interested in [IBM's move] and if they're concerned about it, they could say, 'You can't do that.' "
She said the agencies could devise rules precluding IBM and other companies from depriving employees who leave before a set date of their matching contributions.
For now, the risk for employees in 401(k) plans is that other companies will follow IBM's lead. ...
When companies are looking for ways to cut the cost of their benefits, shifting to an annual match is often an idea that consultants suggest, though it is "unusual for a company to make this move," Ms. Borland said.
Note: If you are unable to read the full article on the Wall Street Journal site, see this post on the Yahoo! IBM Pension and Retirement Issues message board.
IBM announces that it will no longer make 401(k) contributions to employees once a year rather than on a semi-monthly basis starting in 2013.
Plus, employees must be employed by Dec. 15 of each year in order to receive the company's match. ...
Still, the moves angered IBM some employees, and Alliance@IBM said it wants the decision reversed. "We are calling on IBM to reverse this decision," Lee Conrad, the national coordinator for the union, told WRAL News. "It hurts employees and their families who might be faced with an RA [resource action, IBM's term for layoffs] during the year. "As we all know IBM continues to fire workers through the year and this just takes more money out of their pocket."
Employees who are laid off won't get matching contributions. If IBM lays off a worker prior to Dec. 15, IBM will not match the 401(k) contribution at all, spokesperson Doug Shelton told WRALTechwire.
IBM has promised investors it will deliver earnings per share of $20 by 2015, according to its Roadmap 2015 plan. And it's fine that the company has a bold goal to make money. But some employees feel that the cost cuts IBM is making to help achieve this earnings growth have fallen most heavily on long-term workers, the people who have built a lot of value for IBM and its shareholders.
IBMers also say the company has been reducing their pay in other ways. For instance, this summer, employees in IBM's North American Global Technology Services were told not to expect pay raises in 2012. Some IBM salespeople have complained that the company finds ways to not pay them their commissions. ...
Employees say that IBM has been reducing its North American workforce and replacing them with lower-cost workers overseas. While these employees recognize the need for IBM to keep its costs competitive with rivals, they question whether the replacement workers can do the job as well and whether this is the smartest way for the company to meet targets. ...
IBM stopped reporting its workforce numbers in 2010, but a recent report by Computerworld showed that IBM has more employees in India than it does in North America today: 92,000 workers in the U.S. and Canada compared to 112,000 workers in India. That's a big shift in just the past three years.
We contacted IBM and IBM declined comment.
You must be employed on December 15 of each year to receive your IBM contribution for that year. For eligible IBMers, the IBM match and automatic contribution will be deposited to your account on December 31, 2013 (and on the last business day of each subsequent year). Your personal contributions are not affected by these changes. IBMers who retire at any time, including those participating in the Transition to Retirement program, will receive their match and automatic contribution upon retirement, based on the eligible pay received during that calendar year.
Sincerely, Randy MacDonald
If this is also implemented in the 3rd world, it can be used as a short-term retention tool... but the real goal is theft of earned income from fired people. They could also use this as a sweetener for any future "transition to retirement" programs.
If I knew 25 years ago what I know about IBM today I would have never applied for a position with this company.
But the truly evil, miserly, inhumane change is firing someone and then taking away whatever 401K match they had already earned for that year. That could be substantial money. So while being stripped of your job, your 401K match is also ripped right out of your pocket. Even those who retire during the year still lose the appreciation.
Their only consolation is they eventually get that 401K match, because they did what IBM hopes every well-paid 1st world employee will do: Retire or die, or preferably both. And if you die, please wait until you are home, and don't do it on company business.
The 401(k) was originally developed so executives can tax defer millions for their supplement retirement planning. You think ANY executive would buy into the changes if ti affected them this way that Randy the evil HR director just announced to the troops???
Hey Randy how is this 401(k) change still a 401(k) PLUS plan when employees can LOSE invested money gains?
So now effective next year the IBM plan is officially a 301(k)- plan: They accrue the interest you are investing in with your contribution and then they decide if you are worth on 12/15 to receive it.
Next to go will be the IBM matching funds. Trust me. I've been around for quite awhile being the dinosaur I am.
How much is it gonna take for employees to unionize and get a contract to protect the thievery that is prevalent in this IBM?
IBM is becoming a giant rotting carcass of a company. I've heard from Citigroup employees and they echo the same concerns...that they work for a badly mismanaged company whose many bad decisions were the result of extreme greed. 4th quarter is going to be interesting!
With 9 years to 65 that comes to a total of $ 13,995 or in other words I will need to work and contribute for at least 6 more months to retire with the same cash balance. I guess the only positive here is that if the market is losing money you could be a winner because you would not suffer a loss on the IBM match, but if that is the case we all have much bigger issues.
Randy can counter and say employees can always LOSE invested money gains at any time by the volatility of a 401(k). That's true. But even a certified dummy knows that. But IBM employees who contribute who don't receive the matching grants twice a month can lose more since they have less money in the balance of their 401(k) through the year if their investment choice selections gain value given ways that IBM can calculate the balance with the matching grants (Or should I say IBM 401(k0 matching GRANT since it done on 12/15/13?).
So how is IBM going to calculate with the 12/15 match and automatic contribution all the accruals to a 401(k) since 1/1/2013?
Will they continue to calculate like it is now, do the hold back until 12/15, and then give you your 401(k) balance as if the matching contributions were done twice a month in your last yearly paycheck? What I'm saying is will employees see the now potentially notional 401(k)account 2013 balance (with the notional matching funds) twice a month on their pay stubs? Or will they do a quarterly calculation? Or a calculation as of 12/15/13 and then just add in the matching and automatic 401(k) contribution to the 401(k) balance? Or just do another change in 2013 and abolish the matching grant(s)?
This 401(k) change is as rash and as ill thought out as the 1999 pension change. The uproar and action taken against it should be the same.
Don't believe anything else this HR director says to try to smooth this change over! He is a master of delivering FUD to his underlings. Just ask anyone who worked in GTE when he was their HR guy.
It is clear any benefit change in IBM will hurt the employee in some way. It is also clear benefits as we know them in IBM are slowly becoming extinct as much as my dino friends have become.
This latest move by IBM to devalue the 401K benefit is particularly discouraging for me. It comes at the end of a year during which I witnessed morale decline to levels I have not seen during my career, which includes four companies.
The problem for me is that I actually enjoy my work; it's challenging and interesting, and now for the first time in a decade I am considering moving on, mostly because I somehow feel obligated to do so.
Nowicked's observation about the US headcount may be a contributing factor but I cannot believe it is the only explanation for this type of behavior. I am puzzled.
BTW – nowicked, what do you mean by "road-kill 2015". I tend not to pay attention to my environment and I am typically the last to know about these things…not because I'm stupid; it's just that I generally don't care.
Now reducing 1st world head count is nothing new, it isn't particularly IBM related, it is a simple concept that water under the affect of gravity finds it's lowest point. 1st world countries being around 15% of the population, maybe less (the US being 6%) is competing with the other 85% for jobs. In all of these other countries humans are cheaper to hire. So the employment goes to "fill" that area so to speak.
My personal take is that if your job can be done without being in front of a customer on a regular basis it is ripe for movement to anywhere but the US and Europe. Again, nothing new.
Although IBM and any management would deny the next topic I personally believe it is part of the unspoken plan. By holding down wages, bonuses, raises, reducing benefits and generally making the work environment miserable, IBM not only saves money but they get people to walk out without paying them any type of severance package. I believe this is short sighted and poor judgement but then again I don't run a multibillion dollar company with 400,000 employees. It isn't my money so I can't tell them how to spend it.
Like you I evaluate my status, my pay, benefits regularly and make plans for leaving. When the tipping point is reached, I'll say goodbye to IBM and hello to someone else. As you indicated, morale is low, I believe especially so in services due to many factors that I believe border on abuse. Hope this was helpful.
It's one thing if the company wasn't making money, but to continue to take away from us after years of record profits is what gets me...and it sure doesn't seem to affect those huge stock options.
We were told earlier this year in these economic times we just cant give out any raises. The next thing we know Ginny takes 8 million in options first month on the job. I haven't checked much after that, but if she is anything like the last leader she is probably over 20 million by now. This idea might get her another 10 million...please adjust company savings accordingly.
If the company was doing bad (I don't think that's far off the way things are being run right now) I could understand. It's almost as if the road map to 2015 is just to run the company out of business, reap the rewards they got while doing it and what do they care what happens to anyone else or the company.
By the way if they go under or get rid of you before 2015 you won't get that big 1000 bucks in stock they gave everyone either :)
I have been there 32 years now.. I still remember orientation and them going on and on about how great our benefits were. I just can't recall them saying before we signed on "Oh by the way we can take that away from you anytime we feel like it" nor did they say make sure to read the fine print in about your benefits booklet.
Then when our salaries were not going up in the bad times in the 90's they said but look at your benefits you get!
Now the answer to every question to management is just be lucky you have a job.
I turned down 2 state jobs because of the benefits in IBM at that time. Oh if I only knew. My neighbor's state pension alone is more than my current salary. People out in the world might think we are over dramatizing things on this once a year payment thing, but after over 15 years of things being taken away it gets to you.
I feel a lot worse for those that will be around longer than I plan to be. If they left things alone on the pension for people that had been there 20 years I would already be gone.
This expansion will entail hefty investments and a significant increase in current headcount, officials said, but declined to give details. ...
She said new jobs would be created in the company’s analytics outsourcing operations, high level customer support for the firm’s social business, and a new Philippine Systems & Technology lab being established in partnership with the Department of Science and Technology.
Meanwhile, IBM's work force in North Carolina is now well below 10,000.
And across the Triangle, where Big Blue employed more than 10,000 just a few years ago alone, the headcount has dropped to some 7,300.
IBM won't talk about where it employees people geographically. So people trying to figure out what's up with job numbers have to rely on sources and the occasional document that might be leaked. ...
IBM's headcount keeps dropping in N.C. and across the U.S. even as the ranks of Big Blue keep growing in India. According to Computer World, IBM has 112,000 workers across India. Meanwhile, the U.S. workforce is down to 92,000, says the union seeking to represent Big Blue employees.
Cons: IBM has lost its shine. I am certain that Thomas Watson continues to turn in his grave as to what has happened to his company. IBM has long moved away from gaining new ideas and starting businesses from scratch to one of acquisitions. As products move through their life cycle, the work is outsourced to places like India where IBM can reduce its labor cost. The net affect is that the employees are discarded as the products they have built and supported are no longer generating the revenue they once were. New opportunities exist only in locations where companies that were acquired are located. Unless you have experience with the products from the companies acquired and are willing to relocate, your future at IBM is limited. IBM is a pro at reducing its labor through layoffs while minimizing the publicity of downsizing and outsourcing. Once you see the death spiral begin at your site (especially sites that have been around a long time), be proactive and find a new opportunity elsewhere. It may seem daunting at first, especially the longer you have stayed at IBM, but in the long run you will be better off (and much happier too).
Advice to Senior Management: I have been at IBM long enough to have numerous middle managers. None of them do a decent job with people management and their technical skills degrade to a point where they are close to useless. Upper management should take a hard look at their middle managers and their contributions. On numerous occasions my employees rightly escalated their annual performance appraisals due to middle managers playing favorites. Nothing I could say/demonstrate would change the middle manager's view (despite the middle manager having little interaction with these individuals). It took an outside (of the organization) review to fix the situation. The middle manager remains at IBM while the majority of the 60+ person organization was laid off across 2 RIFs. This middle manager and his executive who also is still at IBM were unsuccessful in building/maintaining/re-missioning the team.
Cons: Some areas, depending on the executive/department, are still in the 1950s management style ruled by fear (this is limited more to the Headquarters area and not general business/regional/country areas), the constant loss of experience in the name of "cost savings" which ultimately costs more while new people "learn what others knew in their sleep", the recent changes to 401k (we only match your payments once a year in December as opposed to the previous every payday) and the never-ending cost cutting and expectation of staff to work longer hours, do more whilst cutting staff and now fund basic work expenses themselves has diminished the general level of employee satisfaction.
Advice to Senior Management: If your employees are largely unhappy in vast numbers (time for an employee satisfaction survey), and don't have time or inclination to help/praise/say thank you to their co-workers it won't be long before talented employees go elsewhere to positive, affirming places. Pay attention to the culture, it's disintegrating and ultimately, it does affect the company brand based on what people don't say to their family and friends that they used to positively rave about.
A major player in the national debt debate, the “Fix the Debt” campaign, is arguing that cuts to Social Security and Medicare are necessary to avoid economic disaster. Meanwhile, the corporations leading this campaign are contributing to Americans’ retirement insecurity by funneling enormous sums into their CEO retirement accounts while underfunding their employee pension funds.
And we do see some headlines about early retirement – although not as many now as we did before the housing bubble burst. When I mention early retirement, the first thought is typically of those incredibly fortunate, well-prepared Boomers whose kids are out of college, who own their houses free and clear, and who will be able to afford pre-Medicare retirement plans. But we should be discussing another element of early retirement with all of our pre-retiree clients: an early retirement that may not be their choice.
In its 2012 Retirement Confidence Survey, the Employment Benefit Research Institute (“EBRI”) finds that nearly “half of current retirees surveyed say they left the work force unexpectedly”. The prospect of an unplanned early retirement is real, and is happening more frequently since the US economic downturn. (This is consistent with results from prior surveys, where the percentage ranged from a low of 37% in 2007 to a high of 52% in 1991.) Advisors need to discuss with their clients the risk of early retirement as much as the desire for early retirement.
We, the petitioners want IBM to keep the automatic contribution at semi-monthly and NOT an annual contribution.
IBM, by moving the automatic contribution from semi-monthly to an annual contribution effectively denies employees who are terminated in resource actions up to the cut off of December 15 of the given year, the matching contribution from IBM. Furthermore, the movement of the automatic contribution to the end of the year denies interest generated for the employees 401(K) account. Sign this petition to tell IBM to REVERSE this decision, immediately!
And if you are an active IBM employee, please Join Alliance@IBM CWA Local 1701.
Web site: http://www.allianceibm.org; Twitter ID: @Allianceibm; Facebook: Allianceibm CWA
And ALL THIS NOT because this company is in danger of bankruptcy, BUT because a handful of greedy executives want to buy that new yacht, personal jet, or vacation mansion and they don't care what they do to employees to get it. (Their compensation is already in the millions folks). Who is running this company now anyway, the Genovese crime family? The Colombo crime family? Actually, I think the Mafia looks at IBM with awe, admiration, and envy as they continue to come up with new ways to shaft their employees that they wouldn't have thought of even with THEIR degenerative morals. -Corrupt Planet-
Alliance Reply: I wonder what IBM management would have said if someone stood up in that "all-hands" meeting and said "What would happen if everyone here at this meeting joined Alliance@IBM, right now?"
US employees picking up the mess made by off shore personnel who can't even solve a problem without a predefined script. Face it, IBM now has a very small window to complete their march to 2015 so those still with IBM, hold on you're in for an even bumpier ride. I am usually neutral about Unions, but at this point, those left need to seriously consider organizing and bringing in the Alliance. If I recall the employees in Argentina Unionized so maybe it is time for those still at IBM US do the same thing -Ex-IBMer-
"Among workers with retirement plans, the percentage covered by pensions fell from 83% to 30% from 1980 to 2006, according to CRR [Center for Retirement Research at Boston College]. Meanwhile, those in 401(k) plans, originally meant to be supplementary only, rose from 40% to 92%. The cost savings of the switch were big: IBM said at the time it expected to slash as much as $3 billion over five years from its worldwide retirement revamp? Source: IBM Reinvents the 401(k) by Amy Feldman on July 02, 2009.
During the same time, high tech employers like IBM clamor and lobby the government about the lack of available high-tech workers asking the government for more H1B visas (IBM has filed 18876 H1B visa applications and 1481 green card applications since 2001, ranked 3 among all visa sponsors, with 4751 H1B visa applications in 2012), increased STEM education investments, while colluding with other employers not to 'poach' rival firm's employees keeping wages artificially low and while laying off thousands of employees.
And corporate employers complain about high taxes. IBM paid an effective US Federal tax rate of 3.8% over last three years." (source: Study finds many corporations pay tax rate of effectively zero by Bernie Becker on May 31, 2011) and arguing that increasing taxes will kill job growth. Corporate taxes are 1.3% of GDP, the lowest in history. (source: Tax Policy Center - The Numbers: What are the federal government’s sources of revenue?). Record profits (and stagnant revenue growth).
At the same time, these same companies (including IBM) continue to ask (no, demand) for increased government spending on R&D, STEM education, tax credits, while using government protection of intellectual capital and patents from other competitors and countries. One might ask, given these historically low federal taxes where is all of the "job growth"?
Ironically, IBM's "Smarter Planet" showcases their uncanny insights into consumer behavior or even "Black Friday" sales and use as a poster child to convince governments (and others) to buy IBM services and offerings . Yet with all of these sophisticated "Smarter Planet" capabilities, IBM cannot (publicly) answer a seemingly simple question: 'what is IBM's US employee population?" ... not very compelling or insightful.
So now with this new 'enhanced'401K plan, IBM has eliminated a major "portability" aspect of the 401K, eliminated the employee benefit of 'compounding' and "dollar cost averaging", skewed payouts to 4Q flooding ~ $875M into the stock market (a Wall Street bonanza), artificially depressing 4Q profits while "juicing up" the preceding 3 quarters by roughly $220M per quarter. Financial engineering at its best!
Something stinks here, reminiscent of the IBM Moffat / Wall Street Galleon insider trading. Is it really a surprise that people are upset? Whether the anger is from the "TEA party" (Taxed Enough Already) about ever increasing government and paying more taxes (to offset corporate "handouts" amidst declining corporate federal tax revenue); or the anger from the 99% / 'Occupy' movement about how the game is rigged against the "the rest of us" in favor of big corporate interests - they are symptomatic of the same problem and represent different sides of the same coin.
What if customers unilaterally changed their payment schedule to IBM pending the successful completion of the project - how would IBM react?
And the timing of this latest 401K 'enhancement' during the US 'Fiscal Cliff' debate, ensures that this will get little media / public attention ... letting IBM, like a thief, slip silently into the night (again).
I feel like I am coming down with a major case of the BLUE FLU ... question is what date should WE pick? -BLUE_BARF-
When IBM rolled this out in 2008, the story was that this program was the replacement for the pension program. That's right, one of the largest IT companies in the world no longer provide pensions to their employees. This new policy raises several more questions: How will keeping the employer match help IBM? Will they invest it and earn the profit (or loss) on the money?
If IBM files bankruptcy on December 14th in a future year, what happens to the employer contribution? Does it go to creditors or is the pro-rated amount given to employees?
IBM constantly "refines" staffing levels and "skills" through the course of the year.
A more apt way of saying this is that IBM lays off employees in favor of cheaper offshore labor, all at the detriment to the end clients IBM supports (cheaper means less skilled labor). IBM will only pay the employer contribution to the employee if they are an active employee as of December 15th. An employee could be laid off on December 14th and they would not be eligible to receive the employer match. This money would be retained by IBM.
Would IBM use this information as selection criteria for the reductions?
Why should IBM be permitted to keep the employer contribution?
The Wall Street Journal points out in the Friday, December 7th article that IBM spent $875 million dollars in matching and automatic contributions. The real question is: How much did IBM save since stopping the pension program?
I wonder how board members and shareholders feel about IBM watering down this program. I hope that the US Department of Labor and the U. S. Treasury officials investigate and force IBM to restore the program. What's next Big Blue? Requiring employees to pick up more of the cost of medial and dental coverage? Oh wait, that's already in place. -bogus-
"That’s not a good value proposition for the people of Virginia or any other state," Virginia Gov. Bob McDonnell told Fox News last month.
But Democrat-controlled California, which will run the country’s largest insurance market, will do so without taking a cent from the state treasury. Instead, operations of the market, also called an exchange, will be financed by a surcharge on the billions of dollars in insurance premiums sold in the exchange.
That’s the same way most state and federal exchanges will be funded, according to government officials and health consultants working with states.
Under the policy, slated to take effect in January, Walmart also reserves the right to eliminate health care coverage for certain workers if their average workweek dips below 30 hours -- something that happens with regularity and at the direction of company managers.
Walmart declined to disclose how many of its roughly 1.4 million U.S. workers are vulnerable to losing medical insurance under its new policy. In an emailed statement, company spokesman David Tovar said Walmart had “made a business decision” not to respond to questions from The Huffington Post and accused the publication of unfair coverage.
Labor and health care experts portrayed Walmart’s decision to exclude workers from its medical plans as an attempt to limit costs while taking advantage of the national health care reform known as Obamacare. Among the key features of Obamacare is an expansion of Medicaid, the taxpayer-financed health insurance program for poor people. Many of the Walmart workers who might be dropped from the company’s health care plans earn so little that they would qualify for the expanded Medicaid program, these experts said.
“Walmart is effectively shifting the costs of paying for its employees onto the federal government with this new plan, which is one of the problems with the way the law is structured,” said Ken Jacobs, chairman of the Labor Research Center at the University of California, Berkeley.
The rules from the Office of Personnel Management would set standards for multi-state plans on the exchanges, which are to be available starting in calendar year 2014. ...
The rules aim to maintain a level playing field with other health-care plans to be offered through the exchanges, officials said. A multi-state insurance issuer could follow standards set by each pertinent state or could instead base an offering on one of the three largest nationwide FEHBP plans — two of Blue Cross-Blue Shield and one of the Government Employees Health Association — although they still would have to adhere to certain state requirements. ...
The law meanwhile requires members of Congress and their personal staff, both in Washington and in their home states, to leave the FEHBP and get their health insurance through the exchanges when they become available. The rules do not address the status of the employer contribution for them.
The new customers will mostly shop for and buy their own insurance -- a different and harder-to-reach group than the industry’s traditional employer clients. So insurers are seeking novel ways to reach them -- online, in shopping centers, even when they're preparing their taxes. ...
All this is happening in anticipation that an estimated 9 million people will buy their own insurance in 2014 -- about 50 percent more than do so now. That's when the law goes into full effect and virtually all Americans will be required to have health insurance. Those not covered through their jobs will be able to buy policies online, through so-called exchanges that will be run by the states or the federal government. ...
The law shakes up the industry's old business model by removing one of the key ways it currently limits financial risk: rejecting individual applicants with health conditions. Instead, starting in 2014, insurers can’t reject anyone, or charge more based on health history. They can, however, vary rates based on age, tobacco use and where applicants live.
Believe it or not, dollar for dollar, the most tax revenue the federal government forgoes every year is from not taxing the value of health insurance that employers provide their workers.
Yet most people don't even realize that they don't pay taxes on the value of those health benefits. That's too bad, says MIT health economist Jonathan Gruber, because it represents a whole lot of money.
"If we treated health insurance the same way we treat wages," says Gruber, "we would raise about $250 billion per year more." That not only makes the health insurance exclusion the federal government's largest tax break, but it's also "the third largest health care program in the U.S., after Medicare and Medicaid." ...
One big reason economists from across the ideological spectrum don't much like the insurance tax exclusion is that it's regressive. That means those it helps the most are the richest people with the most generous health plans.
"So if you're uninsured, you get nothing," says Ron Pollack of the consumer group Families USA. "If you're a low-wage worker, you get a very little tax break. If you get a lousy health care plan you get a very little break out of this."
"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.
In this new video, former Labor Secretary Robert Reich breaks down the fiscal choice in 2 minutes and 30 seconds—with pictures, too. He also explains what Democrats must do to make sure the rich pay their fair share and get the economy working for everyone.
A financial transaction tax would apply to purchases and sales of derivatives, options and stocks. The tax would be small, half a penny or less on each dollar of the transaction value, depending on the product. This idea is often called a “speculation tax,” because it would hit hardest at frothy high-volume trading as opposed to sober long-term investment.
Wall Street might object, but taxing its sales is hardly a radical idea. Americans in all but five states pay state sales taxes, ranging as high as 7 percent, every time they buy a car, an appliance, a pair of pants or piece of furniture, but a trader on Wall Street can buy and sell millions of dollars’ worth of financial products each day without paying a cent in sales taxes. A teacher or police officer who buys a $100 pair of shoes in the District or Maryland pays $6 in sales taxes. Meanwhile, if a financial speculation tax were applied to stock trades at a rate of 0.25 percent, a day trader would pay just 25 cents on every $100 worth of stock bought. ...
As if its deficit-reducing potential weren’t enough, a financial transaction tax could reduce risky speculative trading that diverts resources from productive economic activity and can be very destabilizing, as the 2008-2009 crash demonstrated. In fact, this summer, more than 50 financial industry professionals, including past and present executives from Goldman Sachs, JPMorgan Chase and Morgan Stanley, signed a letter to the Group of 20 and European leaders supporting a speculation tax. They pointed out that financial market activity has skyrocketed in the past few decades: The value of transactions is now 70 times greater than the size of the real global economy. Trading volume has grown exponentially, skyrocketing from 188 billion shares of stock traded on the Nasdaq and the New York Stock Exchange in 1995 to nearly 1 trillion in 2011. Each year, the notional value of over-the-counter derivatives traded worldwide totals trillions more.
What I haven’t seen pointed out here is the longer arc of GOP strategy. Does anyone recall how the Bush tax cuts were passed? The 2001 cut was passed based on the claim that the government was running an excessive surplus; the 2003 cut on the claim that it would provide an economic boost. Then the surplus went away, and the economy did not, to say the least, perform very well.
So now we face a substantial long-run deficit largely created by those tax cuts:
And the GOP says that because of that deficit we must raise the Medicare age and cut Social Security! Oh, and for all the seniors or near-seniors who voted Republican because you thought they would protect Medicare from that bad guy Obama: you’ve been had.
This isn’t just cognitive dissonance. It’s irresponsible reporting. Mainstream media outlets don’t want to look partisan, so they ignore the BS hidden in plain sight, the hypocrisy and dishonesty that defines the modern Republican Party. I’m old enough to remember when Republicans insisted that anyone who said they wanted to cut Medicare was a demagogue, because I’m more than three weeks old.
I’ve written a lot about the GOP’s defiance of reality–its denial of climate science, its simultaneous denunciations of Medicare cuts and government health care, its insistence that debt-exploding tax cuts will somehow reduce the debt—so I often get accused of partisanship. But it’s simply a fact that Republicans controlled Washington during the fiscally irresponsible era when President Clinton’s budget surpluses were transformed into the trillion-dollar deficit that President Bush bequeathed to President Obama. (The deficit is now shrinking.) It’s simply a fact that the fiscal cliff was created in response to GOP threats to force the U.S. government to default on its obligations. The press can’t figure out how to weave those facts into the current narrative without sounding like it’s taking sides, so it simply pretends that yesterday never happened.
The part of the negotiations relating to capital gains and dividends, which are currently taxed at 15 per cent, are being watched closely on Wall Street, where anxiety is growing about the possibility of a tax hike.
Peterson's Hydra-headed operation has gone by many names over the years, including the "Comeback America Initiative," "The Can Kicks Back," and the Committee for a Responsible Federal Budget, to name just a few. But while the guises have been many, the message has always been the same: Gut Social Security and Medicare. Shrink government. And absurdly, reduce tax rates for millionaires and corporations in the name of deficit reduction.
Sporting a shock of white hair and the Brooklyn accent of his working-class childhood, the irrepressible Sanders launched right into the political topic of the moment, the "fiscal cliff." He declared that the deficit was a result of the Bush tax cuts, a Wall Street-driven recession, and two unfunded wars initiated by George W. Bush. The principled stand for progressives, he insisted, was to defend Social Security, Medicare and Medicaid from any cuts. Social Security, he emphasized, "has not contributed a nickel to the deficit." Sanders also called for progressives to end red state/blue state regional divisions and embrace a new 50-state strategy. "There are good people in Mississippi," Sanders reminded the audience, and "we need to stand with them." Sanders also focused on the travesty of income inequality and poverty in the United States, a global embarrassment, and announced his hope that in two years, he will preside over a single-payer healthcare system in Vermont. The primary problems facing the country, he said, were unemployment, infrastructure and climate change -- not the deficit.
Hint: It wasn’t because rates were too high. It was because the surplus was too big.
Yes, too big.
President George W. Bush laid out this reasoning in his first address to Congress, in February 2001. “Many of you have talked about the need to pay down our national debt. I listened, and I agree,” he said, vowing to eliminate $2 trillion in debt over the next decade.
Likewise, he said, the nation, like “any prudent family,” should have a “contingency fund” for emergencies. And so, Bush assured the nation, he would set aside another sum, nearly $1 trillion over 10 years.
“That is 1 trillion additional reasons,” he said, “you can feel comfortable supporting this budget.”
Even with that rainy-day fund, and the budget growing at a comfortable 4 percent, Bush argued, “we still have money left over” for a tax cut. ...
Smart people in both parties understood, even then, that the projected surplus was uncertain; that the rosy estimates did not adequately account for the long-term needs of Medicare and Social Security; and that the true cost of the tax cut, obscured through budget gimmickry, was greater than advertised. They were right.
As it turned out, the people of America — in particular, the rich people of America — hadn’t been overcharged, they were undercharged. They received an unaffordable tax cut premised on the false notion of affordability.
Don’t take it from me, take it from Arizona Republican Sen. John McCain — that is, McCain circa 2001 and 2003.
“I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us,” McCain said in 2001.
The Campaign to Fix the Debt is a huge, and growing, coalition of powerful CEOs, politicians and policy makers on a mission to lower taxes for the rich and to cut Social Security, Medicare and Medicaid under the cover of concern about the national debt. The group was spawned in July 2012 by Erskine Bowles and Alan Simpson, architects of a misguided deficit reduction scheme in Washington back in 2010. By now, the "fixers" have collected a war chest of $43 million. Private equity billionaire Peter G. Peterson, longtime enemy of the social safety net, is a major supporter.
This new Wall Street movement, which includes Republicans and plenty of Democrats, is hitting the airwaves, hosting roundtables, gathering at lavish fundraising fêtes, hiring public relations experts, and traveling around the country to push its agenda. The group aims to seize the moment of the so-called "fiscal cliff" debate to pressure President Obama to concede to House Republicans and continue the Bush income tax cuts for the rich while shredding the social safety net. The group includes Goldman Sachs’ Lloyd Blankfein, JPMorgan Chase’s Jamie Dimon, Honeywell’s David Cote, Aetna’s Mark Bertolini, Delta Airlines’ Richard Anderson, Boeing’s W. James McNerney, and over 100 other influential business honchos and their supporters.
Simply put: if we did not share in the prosperity, then we should not be asked to share in the sacrifice. Period. The New America spoke on Election Day and we want the 2 percent to make sure they hear us now.
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