For more than five decades, Rochester's IBM facility has manufactured products from personal computers to network equipment. But in recent years, the company has downsized its workforce.
On Tuesday, IBM officials gathered employees in small groups and told them the company will start assembling servers at a facility in Guadalajara, Mexico, according to one worker who expects to be laid off. The worker did not wish to be identified by Minnesota Public Radio News but said cuts will begin in September and affect both full-time and contract employees.
The worker is concerned that he will be cut from the company sooner if he is caught speaking out. The 10-minute meeting was followed by "stunned silence," he said. ...
"It'll be a sea-change in terms of Rochester, relative to what we're known about and that's been IBM and Mayo," said state Sen. Dave Senjem, R-Rochester. IBM has been one of the city's leading corporate partners, he said. ...
IBM officials declined to say exactly how many jobs will be cut or how many people it currently employs in Rochester. A labor union called Alliance at IBM estimates 2,800 people work for the company in Rochester.
So when Ginny Rometty, chairman and chief executive officer of IBM, opened her mail last week and saw the letter signed by Bernard Sanders and Patrick Leahy, she had to at least read its contents with interest.
The two Vermont senators are upset with IBM about recently made changes in 401(K) plans for employees. ...
One page filled with criticism of IBM and its personnel policies toward U.S. workers. It notes that IBM has cut its U.S. work force "by nearly half" over the last decade. ...
Here's the letter, dated Feb. 25:
"Dear Mrs. Rometty:
"We are writing to express our strong concerns with recent changes in IBM's match and automatic contribution to employees' 401(K) Plus and Excess 401(K) Plus plans. We respectfully request that IBM review this decision and reinstate matching funds on a biweekly basis as soon as possible.
"Over the last decade IBM has greatly reduced pension benefits for tens of thousands of loyal and hardworking employees, despite the fact that the same period yielded 40 consecutive quarters of growth in earnings per share from the previous year. Given IBM's reported earnings in 2012, this most recent decision to terminate biweekly contributions in favor of one annual payment at year's end seems severe.
"In the last decade IBM has cut its U.S. workforce by nearly half. Due to this policy change, employees who leave for any reason other than retirement or who are laid off before December 15 will not receive any annual contribution from IBM to their 401(K) plans. As is consistent with dollar-cost averaging, employees will also lose a year of interest which could have been gained by these contributions.
"If this change remains, we are concerned that IBM will benefit greatly at the expense of thousands of loyal employees in Vermont and across the country. When a company makes a promise to its employees regarding their pension, it must not renege on those commitments by cutting or deferring their retirement benefits, especially when employees who have worked at IBM the longest have already seen their benefits reduced. Given that reality, we respectfully request that you reconsider this policy.
Thank you for your attention to this important matter. We look forward to receiving your prompt response."
The Skinny wonders if any IBMers in North Carolina have reached out to their senators for support. Maybe if IBMers across the country could convince their senators to join Leahy and Sanders in bringing pressure on the company the policy could be reversed.
Selected reader comments follow:
For employees that do stay, there is not much of a cost difference. The savings comes into effect when employees leave (either voluntarily or involuntarily). Since the match has not been paid, it reduces the costs to let someone go.
And, with creative accounting, you could probably even negate the costs of terminating someone since the 401k match is cash that is now back in IBM's pockets. In other words, IBM budgets for the 401k match on a per-pay-period basis, but then realizes that as savings against severance costs. Thus making it easier to do layoffs (oh, I'm sorry, Resource Actions) as it doesn't affect quarterly results as much. Note, I don't know accounting laws, so don't know if this is even a legal approach.
So yes, IBM is definitely using questionable tactics on American workers.
The shock set in for people working at IBM's sprawling campus in northwest Rochester Tuesday, as IBM executives shared a decision in meetings with workers that hundreds of manufacturing jobs are moving to Guadalajara, Mexico. ...
Because the creation, manufacture and support of the eServer iSeries and pSeries lines has its roots deep inside the massive IBM Rochester facility, this shift may actually signal an end to computer manufacturing in Rochester. Recent IBM descriptions of itself and its Rochester organization allude to 4,400 employees aligned with 30 different IBM organizational units inside the high-security complex. But it has become impossible to verify the accuracy of this summary since a wave of change inside IBM the past four years. One IBM insider estimates that current employment at IBM Rochester is now at 2,200. If that's accurate, the new round of cuts would drop the total to below 2,000. ...
IBM told its Rochester employees that manufacturing of PowerPure Systems and PureFlex systems are both moving to Guadalajara, Mexico. In addition, the used and refurbished power system manufacturing is going to be shifted to the IBM complex at Poughkeepsie, New York. These production lines are for mid-range computers for business applications.
Selected reader comments follow:
Rometty's 2012 compensation package included a $1.5 million salary, $3.9 million bonus, stock awards worth $9.3 million, and $823,002 attributed to changes in the value of her pension and retention plans, according to documents filed this week with the U.S. Securities and Exchange Commission.
Rometty also received $687,725 in perks and other compensation. Her perks included: $304,376 for personal travel on company aircraft; $21,551 in tax reimbursements; $297,000 for company contributions to benefit plans; and an undisclosed amount for financial planning, personal use of company cars, personal security, annual executive physical, and family attendance at company-related events.
Palmisano, who had been IBM's CEO for a decade, served as a senior adviser to the company after retiring as chairman. He received a total 2012 package valued at $22.3 million, by AP's calculations. That's slightly less than the $24.2 million he received in his final year as CEO, but more than the roughly $21 million that he made annually from 2007 through 2010. ...
If IBM calls on Palmisano’s expertise after his retirement, he will be paid $20,000 in in consulting fees for days he provides more than four hours of service and $10,000 for days he provides less, IBM said.
Advice to Senior Management:
Advice to Senior Management: Create processes to support your employees; help them grow their career as it will be beneficial to the business in the long run by keeping retaining their knowledge. Look at work life balance—while some employees may want to travel and not have a social calendar, others do want this. Be honest and truthful on how the employee finds work for themselves or be on the bench. Explain the bench and how this affects utilisation and career opportunities if you're on it too long
Advice to Senior Management: Invest in training and budget it yearly. Employees cannot be expected to have 100%+ utilization and train on their "off" hours. If Monday is a holiday, don't demand employees work the following Saturday. You should be able to forecast better than that. Utilization should be calculated after vacation, holidays, and training. Employees should not be penalized for time off. The offshore model has failed. On site resources can do the job better and faster.
Cons: Slow advancement. Mediocre salary. The upper technical ranks are clogged with old school engineers that have little exposure to modern innovations or methodologies. This leaves little room for new, exceptional talent to innovate, create fresh product value, or bring new offerings to the marketplace.
Advice to Senior Management: IBM will fail to keep pace with younger, more agile companies that are able to bring innovative and more easily adopted solutions to market if it continues to grant such deference to its antiquated senior technical staff. Unless IBM finds a way to accelerate the careers and influence of talent with more modern approaches to problem solving and engineering in general, IBM will increasingly be seen as a relic of a bygone era.
As I observed in my book, "America, Welcome to the Poorhouse," Ted Benna, the consultant who "invented" the 401(k) plan in 1980 intended it to add security to an existing defined benefit plan--not to replace it. When the Wall Street Journal published a ridiculous article in 1997 claiming that the accounts made some people millionaires he wrote an article attacking it, insisting "the major concern of most knowledgeable individuals is that we may be facing a serious retirement crisis."
Many workers today don't know of a world without layoffs. But they haven't always been common. I was in New York attending a disaster recovery conference in 1992 when IBM announced its very first layoff. I remember the shock among the IBMers attending that conference. The Big Blue rug had been pulled out from under them, and they told me they would never feel the same way about IBM again. ...
Large corporations, labor, and government all realized job security was in their mutual best interests, beginning in the late 1800s, he said. When layoffs did happen in the 1930s, the government stepped in. Politicians of all stripes agreed that job security was important -- and job security increased over time until the mid-1970s. Since then, "we've been going away from it."
The corporate movement away from job security coincided with the advent of big executive bonuses and the rise of global competition. Consulting firms seized the moment and devised practices to teach companies how to eliminate staff.
But the recommendations of the consulting firms are not agnostic. They rarely, if ever, recommend cutting the heads of those who hired them.
Compensation also insulates most executives from layoff shocks. Executive compensation has changed dramatically since the mid-1970s. Today, top executives receive huge bonuses that they can stash away, shielding them from any layoff distress should it strike them. In contrast, the workers most subject to cuts are unable, given their wage rates, to scrape together that level of financial freedom. ...
HP's Meg Whitman has a net worth of $1.7 billion, according to Forbes (as of September 2012). And the company is in such bad shape, it seems, that it needs to cut nearly 30,000 employees. So the HP board used its own "pay for performance philosophy" to justify annual compensation of over $15 million for Whitman for 2012. While her 2012 office may have been small (you can see it here), the accounting showed she traveled in grand style last year. Her paycheck included $200,000 for personal aircraft use. (That alone is the equivalent of a job or two.)
What happened to the idea of shared pain? One of the most insincere signs I see hanging in some corporate offices is the poster that says, "TEAM – together everyone achieves more." Boards should make sure they live up to that sign -- or take it off the wall.
We do indeed need to boost DPY. And we need to rein in medical costs by shifting away from the fee-for-service model of billing and paying. But as for changing the way we calculate cost-of-living adjustments for seniors to keep us from overpaying them — an idea beloved of Bowles, Simpson, Republicans and, apparently, the White House — this may not be such a hot idea, for one simple reason: An increasing number of seniors can’t afford to retire.
Nearly one in five Americans age 65 and over — 18.5 percent — were working in 2012, and that percentage has been rising steadily for nearly 30 years. In 1985, only 10.8 percent of Americans 65 and older were still on the job, and in 1995, that figure was 12.1 percent. ...
What advocates for reducing Social Security adjustments fail to consider is that corporate America’s shift away from defined-benefit pensions to defined-contribution 401(k) plans — or to no retirement plans at all — has diminished seniors’ non-Social Security income and made the very idea of retirement a far more risky prospect. Today, more than half of U.S. workers have no workplace retirement plan. Of those who do, just 35 percent still have defined-benefit pensions. In 1975, 88 percent of workers with workplace retirement plans had defined-benefit pensions. ...
The shift from traditional pensions to 401(k)s is one of the main reasons most seniors aren’t able to set aside enough income to guarantee a secure retirement. A 2010 survey by the Federal Reserve found that the median amount saved through 401(k)s by households approaching retirement was $100,000 — not nearly enough to support those households through retirement years, as seniors’ life expectancy increases. And as most Americans’ wages continue to stagnate or decline, their ability to direct more of their income to 401(k)s diminishes even more.
With the eclipse of the defined-benefit pension, Social Security assumes an even greater role in the well-being of American seniors. But advocates of entitlement cuts don’t even discuss the waning of other forms of retirement security: Listening to Alan Simpson, you’d never know that America’s elderly aren’t getting the monthly pension checks their parents got.
And it’s not as if those employers are suffering. Just as U.S. businesses have been able to raise the share of corporate profits to a half-century high by reducing the share of their workers’ wages to a half-century low, so, too, their ability to reduce pension payments has contributed not just to their profits but also to the $1.7 trillion in cash on which they are currently sitting.
Many retirement experts tell the same tale. If everyone works and saves until 70, most of the retirement income problem does go away.
That's a big "if." In 2011, only 32.3 percent of men and 18.7 percent of women age 70 or older were still employed in some capacity, the Bureau of Labor Statistics reports.
"It's terrible public policy to advise people that they can plan on solving their financial problems by working longer," says Jack VanDerhei, research director of the Employee Benefit Research Institute (EBRI). "You should take control of your retirement now, while you have the chance." That means reducing expenses and pouring everything you can into savings during the time you have left to work.
You might be able to stay employed until 70 if you're healthy, lucky, well-off, work for a company that keeps older employees, or run a business of your own. But the more familiar story is that of older workers forced out of jobs they'd hoped to keep.
Half of the people retired today say they left work early and unexpectedly, most because of health problems, disability or changes such as downsizing, according to an EBRI survey. Those aren't great odds, if you're counting on working to pay the bills.
Conventional wisdom says you can take 4% from your savings the first year of retirement, and then that amount plus more to account for inflation each year, without running out of money for at least three decades.
This so-called 4% rule was devised in the 1990s by California financial planner William Bengen and later refined by other retirement-planning academics. Mr. Bengen analyzed historical returns of stocks and bonds and found that portfolios with 60% of their holdings in large-company stocks and 40% in intermediate-term U.S. bonds could sustain withdrawal rates starting at 4.15%, and adjusted each year for inflation, for every 30-year span going back to 1926-55.
Well, it was beautiful while it lasted. In recent years, the 4% rule has been thrown into doubt, thanks to an unexpected hazard: the risk of a prolonged market rout the first two, or even three, years of your retirement. In other words, timing is everything. If your nest egg loses 25% of its value just as you start using it, the 4% may no longer hold, and the danger of running out of money increases. ...
"The mind-blowing aspect of retiring is all these years you're accumulating and accumulating, and then you need to start drawing down, and you have no idea how to do that," says Al Starzyk, a 66-year-old retired printing executive in Williamsburg, Va.
The United States came in 19th place for retirement quality in a new study released today by Natixis, a global investment management company. The study looked at a number of publicly available data points for 150 countries, including health (e.g. physicians per 1,000 people), material well-being (e.g. unemployment and income equality), finances (e.g. inflation index) and quality of life (e.g. pollution rates and recorded happiness). Norway, Switzerland and Luxembourg took the top three spots. ...
Health care is one area the United States didn't perform so well in, ranking lower on available hospital beds and physicians per 1,000. While the U.S. is just getting started on having policy discussions on how to reduce the cost of healthcare, the countries who bested the U.S. are much further along.
Health care expenses can cripple one's retirement savings. According to a Senate report, there is a $6.6 trillion gap between what people need for retirement and what they have saved. "The reason why people have underfunded retirement is because health care needs get incrementally more expensive as you get into your retirement years.
For many Americans, unfortunately, reality doesn't match fantasy, and a life of retirement isn't necessarily a life of bliss. Particularly for men, retirement can lead to feelings of isolation, depression or low-esteem as their identity as provider for the family changes. A lack of funds can make frequent travel difficult or off limits. Couples who have stuck together through decades of work and child-rearing may find their marriages suffer too when one spouse is suddenly around ALL THE TIME!
Established in 1990, the federal H-1B visa program allows employers to import up to 65,000 foreign workers each year to fill jobs that require "highly specialized knowledge." The Senate's bipartisan Immigration Innovation Act of 2013, or "I-Squared Act," would increase that cap to as many as 300,000 foreign workers. "The smartest, hardest-working, most talented people on this planet, we should want them to come here," Sen. Marco Rubio, (R-Fla.) said upon introducing the bill last month. "I, for one, have no fear that this country is going to be overrun by PhDs." ...
But in reality, most of today's H-1B workers don't stick around to become the next Albert Einstein or Sergey Brin. ComputerWorld revealed last week that the top 10 users of H-1B visas last year were all offshore outsourcing firms such as Tata and Infosys. Together these firms hired nearly half of all H-1B workers, and less than 3 percent of them applied to become permanent residents. "The H-1B worker learns the job and then rotates back to the home country and takes the work with him," explains Ron Hira, an immigration expert who teaches at the Rochester Institute of Technology. None other than India's former commerce secretary once dubbed the H-1B the "outsourcing visa."
Of course, the big tech companies claim H-1B workers are their last resort, and that they can't find qualified Americans to fill jobs. Pressing to raise the visa cap last year, Microsoft pointed to 6,000 job openings at the company.
Yet if tech workers are in such short supply, why are so many of them unemployed or underpaid? According to the Economic Policy Institute (EPI), tech employment rates still haven't rebounded to pre-recession levels. And from 2001 to 2011, the mean hourly wage for computer programmers didn't even increase enough to beat inflation.
The ease of hiring H-1B workers certainly hasn't helped. More than 80 percent of H-1B visa holders are approved to be hired at wages below those paid to American-born workers for comparable positions, according to EPI. Experts who track labor conditions in the technology sector say that older, more expensive workers are particularly vulnerable to being undercut by their foreign counterparts. "You can be an exact match and never even get a phone call because you are too expensive," says Norman Matloff, a computer science professor at the University of California-Davis. "The minute that they see you've got 10 or 15 years of experience, they don't want you."
A 2007 study by the Urban Institute concluded that America was producing plenty of students with majors in science, technology, engineering, and math (the "STEM" professions)—many more than necessary to fill entry-level jobs. Yet Matloff sees this changing as H-1B workers cause Americans to major in more-lucrative fields such as law and business. "In terms of the number of people with graduate degrees in STEM," he says, "H-1B is the problem, not the solution."
The real culprit here is fee-for-service payment to doctors.
We cannot control runaway medical spending without changing how physicians in this country are paid — currently the single most significant driver of health care costs. We pay physicians according to the number of services they provide. The skewed financial incentives inherent in a fee-for-service model promote fragmented care and encourage doctors to provide more — and more costly — care, regardless as to whether those services improve the health of patients. ...
The current system places an emphasis on high-technology care and interventions, such as imaging and surgery. Services provided by surgeons, radiologists and other procedural specialists are reimbursed at a much higher rate than critical wellness visits with a primary care physician or office visits to discuss diabetes care. This reimbursement model discourages doctors from spending time with patients, particularly those with complex chronic illness, and has fueled the widening pay gap between specialties and the nation’s primary care shortage. ...
his same pay structure is influencing the number and type of services that physicians recommend and even where those services are done. Under Medicare, medical services performed in outpatient facilities are reimbursed at a lower rate than the same services provided in hospitals. For example, Medicare pays $450 for an echocardiogram done in a hospital and $180 for the same procedure in a physician’s office. That makes no sense. ...
Bill Frist, a physician, is a former Republican senator from Tennessee and Senate majority leader, and Steven Schroeder is a professor of health and health care in the department of medicine at the University of California, San Francisco. The two men co-chair the National Commission on Physician Payment Reform, which has issued a report providing recommendations aimed at controlling health spending by changing the way doctors are paid.
Brill examined seven medical bills in his story to make this point. A new, NIH-funded study takes the idea even further: A team of four researchers looked at medical expenditure bills that represented more than 8,303 emergency room visits.
They found, essentially, two things. First, huge variation in prices: Bills sent out for sprained ankles ranged from $4 to $24,110. Second, overall, really high prices: The average emergency room visit now costs 40 percent more than a month’s rent. ...
A headache could cost $15 — or $17,797. There was a difference of more than $70,000 between the most and least costly treatments for a urinary tract infection.
The slowing of the rate of health care cost increases comes amid a sluggish economy and a period of high unemployment that has made it easier for companies to reduce benefits of their workers. And like other surveys, the Towers Watson report shows employers are continuing to shift the cost of the total premium onto their workers with the employee share of the costs rising to 37 percent this year from 34 percent in 2011. ...
In the meantime, employers will continue to deal with health care costs by raising the share of total costs on workers. More than 80 percent of the survey’s respondents said they will continue to increase the share of company-paid premiums onto their workers.
Employers still bear most of the cost of workplace health plans. But employees contribute 42 percent more for heath plan coverage than they did five years ago, as against a 32 percent increase for employers, according to the study from the benefits consultant Towers Watson and the National Business Group on Health, a nonprofit industry group whose members are large employers concerned rising about health care costs. (This change is shown in the graphic above.)
Meanwhile, though, the share of the total cost of health care borne by employees, including both premiums and costs paid out-of-pocket, climbed to 37 percent in 2013, from 34 percent in 2011, the report found.
Annual salary increases, meanwhile, have averaged less than 2 percent percent over the last three years, so workers are losing ground. “From a total rewards perspective, ” the report concludes, “rising health care contributions are taking their toll on employee take-home pay.” ...
Employees paid, on average, about 23 percent of total premium costs last year, and are expected to pay nearly a quarter in 2013, as companies take steps to control their costs. In terms of paycheck deductions, this translates into an average employee contribution of $2,658 to premiums in 2012. That is expected to rise to $2,888 in 2013 — an increase of nearly 9 percent in one year.
"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.
A Wall Street Journal analysis of 60 big U.S. companies found that, together, they parked a total of $166 billion offshore last year. That shielded more than 40% of their annual profits from U.S. taxes, though it left the money off-limits for paying dividends, buying back shares or making investments in the U.S. The 60 companies were chosen for the analysis because each of them had held at least $5 billion offshore in 2011.
The practice is a result of U.S. tax rules that create incentives for companies to maximize the earnings, and holdings, of foreign subsidiaries. The law generally allows companies to not record or pay taxes on profits earned by overseas subsidiaries if the money isn't brought back to the U.S.
Big American companies are booking more of their sales in faster-growing foreign markets. But companies also are moving more of their earnings overseas by assigning valuable patents and licenses to foreign units. ...
The amount of money at stake is significant, particularly when the U.S. budget deficit is high on the political agenda. Just 19 of the 60 companies in the Journal's survey disclose the tax hit they could face if they brought the money back to their U.S. parent. Those companies say they might have to pay $98 billion in additional tax—more than the $85 billion in automatic-spending cuts triggered this month after the White House and Congress couldn't agree on an alternative. ...
The Joint Committee on Taxation estimates that changing the law to fully tax overseas earnings would generate an additional $42 billion for the Treasury this year alone. Congress enacted a temporary tax holiday in 2004, prompting companies to repatriate $312 billion in foreign earnings. The law was intended to stimulate the U.S. economy, but studies found that few jobs were created and most of the money was used to repurchase shares and pay dividends. Another such holiday is considered unlikely in the next few years. ...
A Senate committee last year found that many tech and health-care companies have shifted intellectual property—such as patent and marketing rights—to subsidiaries in low-tax countries. The companies then record sales and profits from these lower-tax countries, which reduces their tax payments. "There are opportunities to basically wipe away your tax on your intellectual property," says Ms. Blouin, the Wharton professor.
Bloomberg reported that some congressmen, including Sen. Charles Grassley (R-Iowa), want to crack down on corporate tax avoidance.
"GE did not get a tax refund in 2010, and in fact paid U.S. federal income tax and more than $1 billion in other federal, state and local taxes in the U.S. for 2010," Martin wrote in an email to HuffPost. "GE’s overall tax rate for 2010 was low because we lost $32 billion in our financial business during the global financial crisis."
But GE has come under fire for its light tax burden. Though it has been earning billions in profits, it paid an average tax rate of just 1.8 percent between 2002 and 2011, according to Citizens for Tax Justice. GE CEO Jeff Immelt has said that the U.S. tax system is "old, complex and uncompetitive" and has had a "hugely negative impact" on the economy.
A winery in North Carolina, a golf resort in Puerto Rico and a Corvette museum in Kentucky, as well as the Barclays Center in Brooklyn and the offices of the Goldman Sachs Group and the Bank of America Tower in New York — all of these projects, and many more, have been built using the tax-exempt bonds that are more conventionally used by cities and states to pay for roads, bridges and schools.
In all, more than $65 billion of these bonds have been issued by state and local governments on behalf of corporations since 2003, according to an analysis of Bloomberg bond data by The New York Times. During that period, the single biggest beneficiary of such securities was the Chevron Corporation, which issued bonds with a total face value of $2.6 billion, the analysis showed. Last year it reported a profit of $26 billion.
At a time when Washington is rent by the politics of taxes and deficits, select companies are enjoying a tax break normally reserved for public works. This style of financing, called “qualified private activity bonds,” saves businesses money, because they can borrow at relatively low interest rates. But those savings come at the expense of American taxpayers, because the interest paid to bondholders is exempt from taxes.
What is more, the projects are often structured so companies can avoid paying state sales taxes on new equipment and, at times, avoid local property taxes. While some deals might encourage businesses to invest where they might otherwise not have invested, there are few guarantees that job creation or other economic benefits actually occur.
Budget analysts say these bonds amount to a government subsidy, in the form of forgone tax revenue. While it is difficult to calculate the precise dollar amount of the subsidy, given the number and variety of these bonds, experts say the annual cost to federal taxpayers could run into the billions.
… Pethokoukis has been particularly outspoken about the need for Republicans to detach themselves from the banks … In an interview, the think tanker said, “The banks need to be downsized, broken up or at least restructured in some fashion. But that view has made little penetration with the politicians.”
And Pethokoukis says part of the reason for that is something that inhibits other policy reforms: donorism.
“The campaign money may be playing a role,” he acknowledged.
With ambitious politicians trekking to Wall Street to raise cash and frequently sending their former staffers to lobby for the banks on K Street, the ardor elected Republicans may have for cracking down on financial institutions is diminished.
Every battle within the G.O.P. tends to be explained in moderate-vs.-conservative terms, and when the subject of policy innovation comes up it’s usually framed as a matter of sensible centrists trying to push their ideas against an intransigent right-wing base. But financial reform is just one of the many areas where the divide might be aptly described as a “donorist” (to borrow Martin’s phrase) versus “populist,” and where the party’s rank-and-file and their tribunes might actually be more receptive to new policy ideas than the self-described moderates who often write the party’s biggest checks.
Currently, earned income in excess of $113,700 is entirely exempt from the 6.2 percent payroll tax that funds Social Security benefits (employers pay a matching 6.2 percent). 5.2 percent of working Americans make more than $113,700 a year. Simply by eliminating the payroll tax earnings cap — and thus ending this regressive exemption for the top 5.2 percent of earners — would, according to the Congressional Budget Office, solve the financial crisis facing the Social Security system.
So why don’t we talk about raising or eliminating the cap – a measure that has strong popular, though not elite, support?
When asked by the National Academy of Social Insurance whether Social Security taxes for better-off Americans should be increased, 71 percent of Republicans and 97 percent of Democrats agreed. In a 2012 Gallup Poll, 62 percent of respondents thought upper-income Americans paid too little in taxes. ...
Cutting benefits is frequently discussed in the halls of Congress, in research institutes and by analysts and columnists. The idea of subjecting earned income over $113,700 to the Social Security payroll tax and making the Medicare tax more progressive – steps that would affect only the relatively affluent — is largely missing from the policy conversation. ...
Theda Skocpol, a professor of government and sociology at Harvard and an authority on the history of the American welfare state, contended in a phone interview that policy elites avoid addressing the sharply regressive nature of social welfare taxes because, “at one level, it’s very, very privileged people wanting to make sure they cut spending on everybody else” while “holding down their own taxes.” ...
Gary Burtless, a senior fellow in economic studies at the Brookings Institution, agrees that elite proponents of cutting benefits for the elderly have a narrow view based on their own high incomes and comfortable lives: “The median voter has a much more well-rounded sense of the risks associated through everyday life than the elite,” he said in an interview. ...
Contrary to the claims Heritage is making, current levels of federal taxation are at historically low levels, and the increases needed to finance restoration of the Social Security trust fund will not break the bank.
Federal tax revenues in 2009, 2010 and 2011 have been 15.1 percent, 15.1 percent and 15.4 percent of Gross Domestic Product, lower than any level since 1950.
The Congressional Budget Office estimates that the amount of new revenue required to bring the Social Security trust fund into balance over the next 75 years would amount to 0.6 percent of G.D.P.
The same C.B.O. document presents a series of alternative ways to achieve such a goal, including the elimination of the current $113,700 cap on income subject to the Social Security payroll tax. If the cap or ceiling were lifted, the amount of money raised would be 0.6 percent of G.D.P., the exact amount of income needed to get Social Security out of the red — a striking coincidence. ...
Elite anxiety over entitlement-driven budget deficits and accumulating national debt has created a powerful class in the nation’s capital. The agenda of this class is in many respects on a collision course with mounting demands for action by those lower down the ladder to address the threat to government social insurance programs. Intransigent opposition by the better off and their representatives to raising the necessary revenue means that not only Social Security and Medicare face a budgetary ax. ...
In this kind of conflict over limited goods, one of the most valuable resources that can get lost in the fray is the wisdom of the electorate at large. In this case, the electorate is pointing toward progressive tax increases for those closer to the top far more readily than members of the political class, for whom high-earners are a crucial source of campaign contributions. The very nature of the basic security Americans are entitled to is at stake.
Consider two stories this week that make Karl Marx look prescient: one, in The Wall Street Journal, concerns the payout of $1 billion in bonuses to nine private equity executives; the other, under a New York Times headline, states that the jobless recovery has been a boondoggle for corporate profits. “Recovery in U.S. Is Lifting Profits, but Not Adding Jobs,” the headline reads, by way of explaining why the stock market is nearing its unprecedented high while the unemployment picture remains so dismally bleak.
But whenever a politician dares to hold those “fat cats” accountable, as Barack Obama once did, he or she is branded by apologists for the super rich as a socialist engaging in class warfare. The outrage of the entitled as opposed to the despair of the dispossessed is the cultural norm, as evidenced by Stephen Schwarzman, one of the more egregious of those private equity billionaires.
What is truly outrageous about Schwarzman is not the $213.3 million he got last year from Blackstone, the private equity company where he has long been the CEO. Heck, he “earned” that much the previous year and has been raking it in since he co-founded the company back in 1985. What is startling, and it goes to the hubris of America’s most wealthy at the heart of the current sequester impasse, is that he thinks the more than $1 billion he and eight other private equity executives got in compensation last year should continue to be taxed at the “carried interest” rate of 15 percent, rather than the 35 percent reserved for ordinary income.
The bill would "allow banks to keep commodity and equity derivatives in federally insured units," Politico reported on Wednesday, meaning that banks would no longer be forced to spin off their trading desks. It would weaken Dodd-Frank's "push out" provision, otherwise known as the Prohibition Against Federal Government Bailouts of Swaps Entities, which bars federal assistance from being provided to any swaps entity.
Derivatives -- which Warren Buffett has referred to as “financial weapons of mass destruction” -- are viewed as a key trigger of the 2008 economic crisis.
"At Costco, we know that paying employees good wages makes good sense for business," Jelinek said in a statement. "We pay a starting hourly wage of $11.50 in all states where we do business, and we are still able to keep our overhead costs low."
"An important reason for the success of Costco’s business model is the attraction and retention of great employees," Jelinek added. "Instead of minimizing wages, we know it's a lot more profitable in the long term to minimize employee turnover and maximize employee productivity, commitment and loyalty. We support efforts to increase the federal minimum wage."
Costco has a reputation for paying its employees above market rate, with the typical worker earning around $45,000 in 2011, according to Fortune. Walmart-owned Sam's Club, in contrast, pays its sales associates an average of $17,486 per year, according to salary information website Glassdoor.com.
Costco also provides health insurance to a significantly larger percentage of its workers than does Walmart, the Harvard Business Review reported in 2006.
America's Health Insurance Plans (AHIP), a leading Washington-based trade group, said a 30-second commercial titled "Too Much" would be shown in a dozen states and the Washington, D.C., area in hopes of dissuading the Obama administration from imposing a 2.3 percent cut in government payments next year.
The commercial, presented by an industry-sponsored group called the Coalition for Medicare Choices, fails to mention that the payment cuts are aimed at insurers, not beneficiaries.
The second fallacy is often called "the perfect is the enemy of the good." There is no question that employers will try to game the Obamacare rules. Employers currently try to game overtime rules and regulations defining who is and is not an employee to avoid paying payroll taxes; there have been numerous high-profile settlements (think Microsoft among others) penalizing companies for incorrectly classifying employees as independent contractors. While Obamacare is not perfect, providing health coverage to more people is desirable, both from the moral standpoint of stopping the 50,000 needless deaths that occur each year because people do not have access to health care, and from an economic standpoint of increasing workplace productivity and job mobility. Waiting for a law that ensures employers won't engage in any attempts to game the system will paralyze us from ever achieving any progress. ...
The most pernicious fallacy about ACA pertains to "costs." As OECD and World Health Organization data amply demonstrate, health care costs too much in the U.S. and delivers health outcomes below those of many other developed nations. The problem is partly one of getting care too late--in the emergency room rather than when disease is less advanced and more easily treated. That's why initial evaluations of Healthy San Francisco show a reduction in emergency room visits when people are able to see primary care doctors. But Obamacare also puts in place several paths to improve quality, efficiency, and outcomes -- reducing hospital re-admissions, health care associated infections, and fraud and waste, among others. And, by expanding health care coverage, Obamacare will eliminate the billions of dollars of lost productivity from an unhealthy workforce who cannot access quality care. That just makes economic sense to us.
The current system of delayed care, sporadic follow-up, and cost shifting not only harms people's well-being, it is economically inefficient as well.
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