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    Highlights—December 25, 2004
  • (Denver) Rocky Mountain News: IBM worker's number-crunching led to lawsuit against Big Blue, by Roger Fillion. Excerpt: The IBM pension lawsuit has some roots in Colorado, thanks to Dave Finlay. In 1999, the former IBM senior engineer painstakingly calculated how much he would lose after IBM switched to a cash-balance pension plan from a traditional pension. The bottom line: Finlay's future pension benefits would get slashed more than 30 percent from what he would have received under -IBM's traditional pension plan. "Every day I went to work I got angrier and angrier," said Finlay, who retired in 2001 after 29 years at Big Blue, most of them in Boulder. Finlay put his anger to work. In the end, his thousands of hours of data crunching helped inspire IBM employees to file a lawsuit in 1999 accusing Big Blue of age discrimination. If link is broken, view Adobe Acrobat version [PDF--31 KB].

  • Rocky Mountain News: Cash imbalance: Outcome of IBM case could ripple throughout nation, by Roger Fillion. Excerpts: A court case pitting IBM against about 130,000 current and former employees is a ticking time bomb — one that could produce shock waves for companies and employees in Colorado and nationwide. At issue: whether IBM discriminated against older workers when it replaced its traditional pension plan in 1995 with a new type of pension plan and then changed it yet again in 1999. A federal judge ruled last year that the changes were discriminatory because older employees' benefits at retirement would be less than those of younger workers. According to different studies, Big Blue's new pension plan cut some workers' pensions by up to 40 percent. Armonk, N.Y.-based IBM, which employs about 6,200 people in Colorado, plans to appeal the ruling. ... Take the case of Dave Finlay, 59, of Boulder. The former IBM senior engineer, now retired, calculated in 1999 that his future pension benefits would get slashed 31 percent under Big Blue's cash-balance conversion: to $27,534 a year at retirement vs. $40,102 under IBM's traditional pension.

    More than 300 companies with 8 million workers and $334 billion in plan assets have converted their defined-benefit pension plans to cash-balance plans in the past decade, according to the Labor Research Association, a nonprofit research and advocacy organization that provides research and educational services for unions. Since 2000, there have been few cash-balance conversions because of court fights and regulatory uncertainty. Recently, IBM itself decided to close its cash-balance pension plan to new employees and to give all new workers a new 401(k) plan starting in 2005. The overall dispute dates to the 1980s and 1990s, when IBM and other companies began converting traditional pension plans into cash-balance plans. Court documents in the IBM case revealed that Big Blue ultimately expected to save billions of dollars in pension costs through the conversion. For a company, a cash-balance plan can be cheaper than a traditional pension plan. "They tend to reduce costs because they end up reducing future benefits for older employees," said Norman Stein, a pension law expert who teaches at the University of Alabama School of Law. If link is broken, view Adobe Acrobat version [PDF--96 KB].

  • Rocky Mountain News: Broken promises. Underfunded plans may hit retirees, taxpayers hard. Excerpts: After toiling on the tarmac for nearly 36 years at United Airlines, Jim Anthony finally received his payoff: a pension of almost $3,000 a month. Now the former ramp supervisor and operations planner could see that amount cut to $2,000 if the airline moves ahead with plans to end its pensions next year. The change could force Anthony, who is 60 and hampered by a bad knee and other ailments, to return to the work force. "What this does is put a hell of a lot of strain on us," said Anthony, who retired in 2001 and lives in Centennial with his wife, Barbara. "It's a heck of a lot of money to have to pick up." Generations of Americans have counted on their pensions to carry them through the golden age of retirement. Yet increasingly they have discovered an unsettling trend: There are no guarantees. It's a reality that hit workers at CF&I Steel in Pueblo more than a decade ago, and one that is now rippling through the ranks of United Airlines.

  • Rocky Mountain News: Cuts mean return to work, retirement dreams put on hold. Excerpt: The likely pension cut is the latest in a string of financial hits Hall and other United workers have faced. The company's employee stock ownership plan, launched in 1994, turned into a colossal failure when the company went into a tailspin in 2001. Workers forfeited part of their wages for about six years in exchange for the stock. Hall sold his stock for about $1,300 in 2002 because shares in United parent UAL Corp. had plunged. He said that stock had been worth about $120,000 at one point. He also said his 401(k) retirement plan is smaller than those of many other American workers because he was offered the benefit late in his career and was restricted in how much he could put into it during United's employee stock program. For the pension problem, Hall points a finger at United management and the U.S. government. He said he will survive the turmoil but "feels sorry" for people still working for United. He said he's saddened that rank-and-file workers and retirees will pay a huge price to help the company stay aloft, while executives, even while experiencing losses, will be better positioned financially. "These people like me came to work every day, in the snow, in the rain, in the cold, on Christmas, on Thanksgiving, and busted their a-- to do their jobs," he said. "And we're the ones paying the consequences of their mistakes and a government that has let them underfund these pension plans."

  • Rocky Mountain News: Possible $100,000-a-year loss prompts lifestyle changes. Excerpts: Retired United Airlines pilot Jimmy Allen is good at math. But when it comes to calculating the impact of likely lost pension benefits, he'd prefer not to see all the numbers. Take a look at the following data, and you probably won't fault him. Allen, 62, who flew for United for 38 years, including high-paying stints flying jumbo jets to Asia and Europe, has been receiving a pension of about $12,000 a month. That's about $144,000 a year. If the carrier goes forward with plans to shed its pensions next year, Allen might be looking at less than $40,000 a year, or a cut of more than 70 percent. He would get his monthly check from the Pension Benefit Guaranty Corp. The pension insurer's payments to individuals are capped by Congress, and United pilots have qualified for benefits that, in many cases, are far higher than the caps. ... Allen was more disappointed last summer when a three-member U.S. government board denied United's final bid for more than $1 billion in loan guarantees. Shortly thereafter, the carrier signaled it would need to end its pension plans to raise financing on its own so it could emerge from bankruptcy. As the head of the administration, President Bush, through the loan-guarantee denial, has effectively taken "the sword of al-Qaida" and placed it over the heads of United retirees, Allen said. And he stressed he voted for Bush. "The retirees are defenseless. We have no voice. And we are on our knees with our hands tied behind our back, our head bowed, and that sword is coming down on our necks. . . . "It's sad to watch."

  • Rocky Mountain News: Likely scrapping of pension plans appalls retiree. Excerpts: With her $2,900-a-month pension from United Airlines, retired flight attendant Judy Schumacher has just enough money to cover her mortgage and other expenses. Take away $700 or $800 a month - the change Schumacher is bracing for - and she estimates she'll be working at least part time the rest of her life. Schumacher, 57, who is single and lives in Elizabeth, said she's appalled that the company she served for 37 years can legally get away with scrapping its pension plans. The nation's pension-protection agency would insure part of the defaulted pensions. "This is a breach of contract," she said. "And I think this is just a sample of how broken our legal system is. Something is seriously wrong with our culture."

  • Rocky Mountain News: 'Now a lot of us are thinking no retirement'. Excerpts: Last May, 32-year United Airlines ramp worker Geno Heslin and his wife, Linda, bought their dream home here: a rustic, $240,000 wood-sided house with a breathtaking mountain view. "I'm finally living the life I moved to Colorado to live," he said. ... But now - saddled with a mortgage and a likely termination of his United pension - Heslin said he might have to hold a full-time job into his 70s. He feels "violated" by a company he joined when he was 20, following in his father's footsteps. ... Under his plan to retire from United at 55, he could have expected a pension of about $2,200 a month from the carrier. Working until 60 would have meant about $3,000. But if United ended its pensions next year and he went forward with retirement at 55, his payments from the pension insurer likely would be $500 to $1,000 less per month than those from the airline. He could get more from the agency by working much longer for United. "I can't get over it," he said. "I've been working for 30 (plus) years. In my mind, when I'm at the end of my career, there's going to be a quid pro quo. Now they're turning around and saying, 'Deal's off.' "

  • New York Times: Want to Retire Early, It May Take Some Work. Excerpt: Workers considering early retirement should crunch the numbers first, financial planners say, to make sure that they will have enough income - typically about 70 to 80 percent of their preretirement earnings. They should also consider how they are going to cover their health care. Some buyout offers that are geared toward encouraging early retirement will offer medical insurance until Medicare kicks in at age 65, and might also sweeten employee pensions.

  • Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC.
    • In "I might add...", "jerkbait" points out some of positive points of having a "road warrior" job. Excerpt: In addition to the observations from Dose, any Road Warrior job does have some benefits. If you are assigned to a long term, out of town job, you can drop the apartment, car loan payments and any other trappings and live off the client. You won't need them. You bounce around on weekends, living off friends and family. You bank roll your salary and pile up frequent flyer miles, hotel and credit card points. Diamond club this, Platinum club that. If you have a per diem, you live like a migrant farm worker with 8 people sharing a two bedroom apartment, sleeping on a futon (aka dogbed) and cramming into rental cars to sock more away. Perq's galore. Within a short period of time you can pay off student loans, have a down payment on an abode, or pay for a honeymoon (if you still have a significant other by the end of it all).

  • Citizen's Council on Health Care press release: WAKE-UP CALL: Technocrats are Taking Over the Practice of Medicine. Full excerpt: A report meant to challenge current thinking in health care reform was released today by Citizens' Council on Health Care (CCHC). Extensively documented, the report: "How Technocrats are Taking Over the Practice of Medicine: A Wake-up Call to the American People," shines a bright light of openness on the terms "evidence-based medicine" and "best practices," including the purposes of proponents and the concerns of critics. "The public needs to understand that evidence-based medicine is an attack on the patient-doctor relationship. EBM is not individualized care. It is group-think medicine," says Twila Brase, president of CCHC and author of the report. Noting the recent and growing inclusion of these terms in state and federal law, Ms. Brase told news reporters last Thursday at an special press briefing: "If evidence-based medicine is not understood for what it is, managed care will use it to solidify control over medical decisions and the practice of medicine. Managed care will become the law of the land."

    CCHC stresses the following five points: 1)* The term "evidence-based medicine" (EBM) cannot be taken at face value*. EBM/ is/ managed care. Same game, different name. 2)* Science, the purported foundation of EBM, is not incontestable*. In research, there are subjective choices all along the road to creating the "evidence" of EBM. 3)* Practice guidelines, used to implement EBM, have significant problems*. These include out-of-date, biased, conflicting with each other, lack of individualization, and single-disease focus. 4)* Under EBM, practice guidelines are becoming treatment mandates*. Financial consequences are increasingly a possibility for doctors who do not follow guidelines issued by health plans or government. Computer systems to track and report physician adherence are being established. 5)* Patient harm can result from EBM, and its treatment mandates*. Practice guidelines are written based on data collected from medical records of many patients. They do not focus on the care, or the unique circumstances and physiology, of individual patients. And, as has been reported in England, they can be used to implement health care rationing.

    "Control over medical decisions is being shifted from doctors to data crunchers; from professionals at the bedside to bureaucrats in big offices," says Ms. Brase. "The public should not be fooled by the nifty-sounding names. Evidence-based medicine is managed care masquerading as science," The CCHC report can be viewed at: http://www.cchconline.org/pdfreport/

  • Salt Lake Tribune: Health savings accounts: Medicine and market forces don't mix. (Editor's note: highly recommended) Excerpts: Once again we are being told that a new health financing policy will unleash the power of the market in the health-care system. Because patients have no incentive to conserve health-care dollars, they overutilize health services leading to excess health costs, or so this market-oriented theory goes. Accordingly, these market proponents propose converting employee health benefits from indemnity or managed-care plans to individual health savings accounts (HSA) coupled with high deductible or catastrophic health insurance policies. ... As an American grateful for the efficiencies of our market economy, I can understand why there is a desire for a market solution to our health-care problems. However, we should not let our market experiences induce us to chase a mirage. We have long had the world's most privatized and investor-owned health economy, and consequently we also have the world's least-efficient health system. HSAs, like other market-oriented health policies, will not increase American health-care efficiency, but will cause health-care inflation, reduced access to needed health services, and rising morbidity and mortality. Here's why: High American health-care costs are not due to overutilization. ...

    Despite our lack of overutilization and our use of co-payments, Americans pay more for health care by far than do any other citizenry in the world. High American health-care costs are due to excessive administrative costs, which will worsen with HSAs. Changing employee health benefits from group insurance or managed care to individual HSAs and catastrophic policies will increase administrative costs. Bureaucrats will be needed to supervise each dollar spent from each individual HSA and each individual catastrophic insurance policy. The vast majority of health-care expenditures are catastrophic costs. Even relatively routine procedures such as appendectomies and gall bladder surgeries cost more than the few thousand dollars projected for HSAs. Once the HSA money is spent, the alleged incentive for conservative health-care spending is gone and with it any possible market forces. Even if HSAs would moderate consumer health spending, they could only do so at the very thin margins of our nearly $2 trillion health economy. If link is broken, view Adobe Acrobat version [PDF--14 KB].

  • New York Times: Bush Says Social Security Plan Would Reassure Markets. Excerpts: President Bush said on Thursday that addressing the long-term problems in Social Security would reassure the financial markets, offering a rationale to offset criticism that his plan to add personal investment accounts to the retirement system would require up to $2 trillion in new government borrowing. ... As he did throughout his re-election campaign, Mr. Bush largely avoided talking about the specific steps to assure the long-term solvency of Social Security. Social Security trustees estimate that if no changes are made, the system will start running short of money to pay full benefits to retirees in 38 years. In particular, Mr. Bush never mentioned the near certainty that without raising taxes, which he has ruled out, any plan to add personal investment accounts to Social Security and improve its financial condition would include a reduction in the guaranteed retirement benefit. His aides say there really is no guaranteed benefit in the long run, because without any changes to the system, Social Security will not be able to afford to meet its promises. Mr. Bush used the conference, which was intended to build public and legislative support for his agenda, to begin addressing the likelihood that the plan on personal accounts would require borrowing hundreds of billions or even trillions of dollars at a time the government runs up large deficits. A big new borrowing program could bring political and economic risks for the administration.

  • New York Times commentary by Paul Krugman: Buying Into Failure. Excerpts: As the Bush administration tries to persuade America to convert Social Security into a giant 401(k), we can learn a lot from other countries that have already gone down that road. Information about other countries' experience with privatization isn't hard to find. For example, the Century Foundation, at www.tcf.org, provides a wide range of links. Yet, aside from giving the Cato Institute and other organizations promoting Social Security privatization the space to present upbeat tales from Chile, the U.S. news media have provided their readers and viewers with little information about international experience. In particular, the public hasn't been let in on two open secrets: 1) Privatization dissipates a large fraction of workers' contributions on fees to investment companies. 2) It leaves many retirees in poverty. Decades of conservative marketing have convinced Americans that government programs always create bloated bureaucracies, while the private sector is always lean and efficient. But when it comes to retirement security, the opposite is true. More than 99 percent of Social Security's revenues go toward benefits, and less than 1 percent for overhead. In Chile's system, management fees are around 20 times as high. And that's a typical number for privatized systems.

    Privatizers who laud the Chilean system never mention that it has yet to deliver on its promise to reduce government spending. More than 20 years after the system was created, the government is still pouring in money. Why? Because, as a Federal Reserve study puts it, the Chilean government must "provide subsidies for workers failing to accumulate enough capital to provide a minimum pension." In other words, privatization would have condemned many retirees to dire poverty, and the government stepped back in to save them. The same thing is happening in Britain. Its Pensions Commission warns that those who think Mrs. Thatcher's privatization solved the pension problem are living in a "fool's paradise." A lot of additional government spending will be required to avoid the return of widespread poverty among the elderly - a problem that Britain, like the U.S., thought it had solved.

    Britain's experience is directly relevant to the Bush administration's plans. If current hints are an indication, the final plan will probably claim to save money in the future by reducing guaranteed Social Security benefits. These savings will be an illusion: 20 years from now, an American version of Britain's commission will warn that big additional government spending is needed to avert a looming surge in poverty among retirees. So the Bush administration wants to scrap a retirement system that works, and can be made financially sound for generations to come with modest reforms. Instead, it wants to buy into failure, emulating systems that, when tried elsewhere, have neither saved money nor protected the elderly from poverty. If link is broken, view Adobe Acrobat version [PDF--20 KB].

  • New York Times commentary by Paul Krugman: Borrow, Speculate and Hope. Excerpts: How, then, can privatizers claim that they could secure the future of Social Security without raising taxes or reducing the incomes of future retirees? By assuming that workers would invest most of their accounts in stocks, that these investments would make a lot of money and that, in effect, the government, not the workers, would reap most of those gains, because as personal accounts grew, the government could cut benefits. We can argue at length about whether the high stock returns such schemes assume are realistic (they aren't), but let's cut to the chase: in essence, such schemes involve having the government borrow heavily and put the money in the stock market. That's because the government would, in effect, confiscate workers' gains in their personal accounts by cutting those workers' benefits.

    Once you realize that privatization really means government borrowing to speculate on stocks, it doesn't sound too responsible, does it? But the details make it considerably worse. First, financial markets would, correctly, treat the reality of huge deficits today as a much more important indicator of the government's fiscal health than the mere promise that government could save money by cutting benefits in the distant future. After all, a government bond is a legally binding promise to pay, while a benefits formula that supposedly cuts costs 40 years from now is nothing more than a suggestion to future Congresses. Social Security rules aren't immutable: in the past, Congress has changed things like the retirement age and the tax treatment of benefits. If a privatization plan passed in 2005 called for steep benefit cuts in 2045, what are the odds that those cuts would really happen?

    Second, a system of personal accounts, even though it would mainly be an indirect way for the government to speculate in the stock market, would pay huge brokerage fees. Of course, from Wall Street's point of view that's a benefit, not a cost. There is, by the way, a precedent for Bush-style privatization. One major reason for Argentina's rapid debt buildup in the 1990's was a pension reform involving a switch to individual accounts - a switch that President Carlos Menem, like President Bush, decided to finance with borrowing rather than taxes. So Mr. Bush intends to emulate a plan that helped set the stage for Argentina's economic crisis.

  • Bloomberg.com: Washington Fiddling While Private Retirement Burns, by John Wasik. Excerpts: Why has fixing Social Security become the epicenter of the U.S. retirement debate while the easily bolstered private retirement system is largely ignored? Social Security generously provides inflation indexing of benefits, which the private system largely lacks. Worse yet, the private accounts that the Bush administration wants will most likely balloon the U.S. budget deficit, raise interest rates and do nothing to solve Social Security's long-term funding shortfall. Yet in an era in which inadequate 401(k)-type plans are the dominant employer retirement program -- plans that you already can own and manage yourself -- Social Security may be getting a needless shock treatment. "Social Security provides almost universal coverage," says Zvi Bodie, an economics professor at Boston University and an authority on pensions, "but (private) defined contribution and defined benefit plans combined only cover half of the workforce." There's no reason why the private sector can't duplicate inflation protection within existing retirement plans without dismembering Social Security. Policy makers, though, are pursuing the wrong beast. ... Over the last quarter century, employers have not only sponsored fewer traditional pensions, their total contributions have become much stingier. When 401(k)s were born in 1978, only 11 percent of total contributions in both plans were made by employees. By 1999, workers were investing 70 percent of the money in 401(k)-type plans and 51 percent into defined benefit programs, according to the U.S. Department of Labor.

  • Washington Post: The Bigger Problem. Excerpts: The program now consumes one-eighth of the federal budget; in 10 years that share is expected to grow to one-fifth. It will consume more money this year than enters the Treasury through payroll taxes. By 2019, if current spending patterns hold, the trust fund that finances the biggest part of the program will be out of cash. The program is not Social Security but Medicare. Those frightening figures emerged during what might be called the Medicare Moment of President Bush's economic summit -- an official pause to recognize the problem and then crisply move on. "My role is to say: 'Remember health care, remember Medicare,' " said Dr. William Roper, dean of the University of North Carolina School of Medicine. Indeed, the figures tell the story. Medicare is a bigger problem than Social Security: its hospital care trust fund is on track to go bust two or even three decades before the Social Security surplus runs out; its unfunded liabilities dwarf those of Social Security -- $27.7 trillion over the next 75 years, compared with $3.7 trillion liability for Social Security. ...

    You wouldn't know it from Mr. Bush, though, and that's the truly scary part as he presses for Social Security reform. "We did take on Medicare, and it was the Medicare reform bill that really began to change Medicare as we knew it," he said at his news conference Dec. 20. "It introduced market forces for the first time, provided a prescription drug coverage for our seniors, which I believe will be cost-effective. I recognize some of the actuaries haven't come to that conclusion yet, but the logic is irrefutable." Actually, none of the actuaries have come to that conclusion; their only disagreement is about how mammoth the cost will be. And while the president is right that in some cases paying for prescription medication saves money down the road, we disagree in suggesting that the drug benefit will even come close to paying for itself overall. Mr. Bush's rosy scenario notwithstanding, Dr. Roper's admonition -- "remember Medicare" -- is precisely on point.

  • Christian Science Monitor: One man's retirement math: Social Security wins. Excerpts: At the heart of President Bush's plan to sell Social Security private accounts is a simple notion: You're always better off investing your retirement money than letting the government do it. By doing it yourself, you can stow some money in the stock market, and over the long run will get a better return on that investment than today's Social Security system offers. The idea is broadly accepted. That's why the administration's plan to partially privatize the system sounds appealing to many. But that better return won't always happen. Just ask Stanley Logue of San Diego. For 45 years, the defense-industry analyst paid into the system until his retirement in 1994. But with all the recent hoopla over reform, Mr. Logue, a Massachusetts Institute of Technology graduate, decided to go back and check his own records. Would he have done better investing his money than the bureaucrats at the Social Security Administration? He recorded all the payroll taxes he paid into the system (including the matching amount from his employer), tracked down the return the Social Security Trust Fund earned for each of the 45 years, and then compared the result with what he would have gotten had he been able to invest the same amount of payroll tax money over the same period in the Dow Jones Industrial Average (including dividends). To his surprise, the Social Security investment won out: $261,372 versus $255,499, a difference of $5,873. ...

    There are other problems with private accounts. Administration expenses of the present Social Security system are minuscule compared with the size of the benefits provided. The Bush administration so far has provided no details on its private accounts plan. But if these are handled by Wall Street, the fees could be sizable, dissipating some of the return from investing in stocks. Logue takes no account of such expenses in his analysis. Further, administrative costs and difficulties for private business could be large as companies, big and small, try to deduct the right amount from a payroll and put it into a private account in a timely fashion.

  • The Social Security Network: Social Security Privatization: The Reform That Isn't Needed for a Public That Doesn't Want It, by Ruy Teixeira, The Century Foundation. Excerpts: The Bush administration appears determined to build on its "mandate" and push Social Security privatization early in Bush's second term. This seems an ill-advised plan for several reasons. First, there is little compelling evidence that Social Security is in any kind of crisis and none at all that carving out private accounts will improve Social Security's fiscal position. In fact, it will almost certainly worsen that position.

  • New York Times: The Risky Assumption in Social Security Change. Excerpts: The familiar disclaimer in ads for investment vehicles and money managers of all sorts is: "Past performance is no guarantee of future returns." It probably sounds obvious to anyone who has ever played the markets. So why, in proposing changes to Social Security, has the White House ignored that counsel? ... IF the stock market would do as well as it did in the last 30 years, by the time people retire, without rebalancing, they might have 90 percent in stocks," Dr. Benartzi said. Finally, he added, assuring people of a minimum benefit in retirement - another part of the commission's plan - might also lead them to take excessive risks with their portfolios. In any case, Dr. Benartzi said, most people would rather have someone else make their investment decisions, and from an economic perspective, that might make the most sense. "If you have a medical problem, rather than spending seven years to learn to be a doctor, you might as well just pay a doctor," he said. "If you need to figure out a portfolio allocation, then, rather then delegating it, now we're going to force you to spend all the time and learn how to do it? It doesn't seem to be a very efficient use of people's time."

  • Washington Post: If It's Right, It's Wrong. Social Security Privatization Theories Don't Hold Up, by Michael Kinsley. Excerpts: As I wrote last week, I'm convinced that Social Security privatization is not merely a bad idea but a certain failure, and I offered to provide a logical proof, challenging supporters to find the flaw or give up. More money can come from only two places: increased economic growth and other people. Increased growth can come only from higher private investment or smarter private investment. Privatization would deflect some money from the Social Security trust fund into private investment, but the government would have to borrow an equal amount to replace it. As for investment decisions, the only change caused by privatization would be a new role for millions of small, naive investors. There is no credible theory that this would improve the overall wisdom of capital investment decisions.

  • AARP: Social Security: Where We Stand. An Open Letter to AARP Members. Excerpts: here is a lot of misinformation about Social Security. We want to make it clear where AARP stands on this issue: We stand with you. Let's look at the facts. Social Security is the most successful program in our nation's history. It is a promise our country makes to working Americans and retirees. And a promise should not have an expiration date. While Social Security is strong now and in no danger of going broke, it is true that the program needs some changes so it will always be able to pay full benefits for all generations of Americans-today and tomorrow. The changes needed don't have to be drastic, and the guarantee Social Security provides is one worth strengthening, not replacing. ... Taking some of the money that workers pay into the system and diverting it into newly created private accounts would weaken Social Security and put benefits for future generations at risk. AARP is opposed to private accounts that take money out of Social Security. In addition, private accounts are expensive. Just to switch to this new system could require as much as $2 trillion or more in benefit cuts, new taxes or more debt. Most of us would then have to pay twice to gamble on this new plan-first to keep our commitments to current retirees and again to pay into these private accounts. Some critics of these personal accounts think that Wall Street, not retirees, would be the real beneficiaries.

  • Economic Policy Institute: Private accounts: The 'spicy sauce' to sell deep benefit cuts. Excerpt: Like a cafeteria selling a cheap cut of meat by serving it in spicy sauce, proponents of deep cuts in Social Security benefits are masking their sour taste with the artificial sweetener of private accounts. The possible long-term shortfall in the Social Security system as it currently stands would require modest increases in revenue or cuts in benefits. However, the President has stated he will not increase revenues, leaving only benefit cuts to balance the system. Indeed, in its primary plan, President Bush's commission on Social Security proposed to slash the guaranteed portion of Social Security by 16% for people who retire in 2022 and who had previously opted for private accounts; the cuts would increase to 40% for those who retired in 2042 and by 62% for those in 2075. To sell those deep cuts, the commission touted the benefits of private accounts, which would require the federal government to borrow several trillion dollars over the next three or four decades. (The additional borrowing would stop once benefit reductions exceeded the new funds going into private accounts.) Even with the commission's overly optimistic projections of returns on private accounts, future retirees would lose big under the commission's plan. The combined income from guaranteed benefits and these new private accounts would fall 7%, 12%, and 23% short of the benefits scheduled under current law for 2022, 2042, and 2075, respectively. By their own admission, the commission's privatization proposal would cut benefits significantly.

  • Forbes: IBM deal builds up China Great Wall. Excerpt: IBM will outsource its server manufacture after sealing a joint venture deal with China Great Wall Computer Corporation. The agreement will create a new company, International Systems Technology (IST), of which 80 per cent will be owned by IBM and 20 per cent by China Great Wall. The joint venture will initially produce IBM's eServer xSeries, but is also expected to produce the forthcoming OpenPower Linux-only server.

  • New York Times: Chinese Buyer of PC Unit Is Moving to I.B.M.'s Hometown. Excerpts: To further globalize the company, however, Lenovo will do something even bolder: it will move its headquarters to Armonk, N.Y., where I.B.M. is based, and essentially hand over management of what will become the world's third-largest computer maker, after Dell and Hewlett-Packard, to a group of senior I.B.M. executives. American multinational companies outsource manufacturing to China. Why can't a Chinese company outsource management to the United States? Executives at Lenovo - which gets about 98 percent of its $3 billion in revenue from China - are, in effect, acknowledging that they do not have the necessary global experience to run the new company. "The most valuable asset we have acquired through I.B.M.'s PC business is its world-class management team and their extensive international experience," says Liu Chuanzhi, chairman of Lenovo and one of the company's founders. Indeed, few executives at Lenovo seem disappointed by the move. In fact, many seem pleased to be buying into a blue-chip American corporation. After all, Lenovo - formerly known as Legend - may be the biggest computer maker in China, but the company is still virtually unknown outside of Asia.

  • San Jose Mercury-News: A look back at the IBM PC saga, by Dan Gillmor. Excerpts: The $1.75 billion deal, which vaults China into the top tier of PC sellers worldwide, will be cited by opponents of globalization as yet another example of the withering of U.S. manufacturing. The qualms are legitimate, but China's rise as a manufacturing power has been a trend for years. IBM hasn't manufactured its own PCs for some time. But IBM's latest move away from PCs is a coda on an almost operatic business saga. Big Blue took big risks and suffered from epic blunders. In bringing the PC to the market, it did something very un-IBMish at the outset, by creating a relatively open architecture. I remember seeing the first IBM PC, a clunky box with a screen that had green ASCII characters and no graphics. But IBM's computers were open in ways that helped create a vibrant industry. You could add plug-in hardware, and use a variety of software. An ecosystem developed. A legendary mistake helped create the ecosystem, and will be remembered as long as business journalists and professors have jobs. IBM gave Microsoft the rights to sell operating systems on non-IBM computers. Whoops.

  • "whoknewbluewhen" expresses gratitude for the benefits received from his spouse's union membership. Excerpt: I have also stated several times on this board the benefits of my spouse's 32-year membership in a union. Because of that union, we receive a very generous pension check every month, very good health and dental benefits at the same cost as active employees (a little over $100/month), along with a myriad of other excellent benefits -- all thanks to that union. I can dig up the prior posts if you would like more details.

  • CFO.com: Judge Rules for Halliburton Retirees. Excerpt: For a change, score this round for retirees. As more and more companies try to cut back on the benefits promised to their former employees, a federal judge ruled that Halliburton Co. cannot trim the medical benefits received by retirees of Dresser Industries Inc., which merged with a Halliburton subsidiary in 1998. "The merger agreement obliged Halliburton to continue Dresser's benefit programs for its employees and retirees unless the benefits were similarly changed for active employees," wrote U.S. District Judge Lynn N. Hughes, according to the Associated Press. Halliburton had wanted to end coverage for 4,000 Dresser retirees who are eligible for Medicare by the end of the year and cap its monthly prescription drug contribution at $22, according to the Houston Chronicle. Last year the paper reported that the company planned to cut the coverage so benefits offered to Dresser employees and retirees were in line with those offered under Halliburton's other plans.

  • Miami Independent Media Center: Ed Asner's Speech during the Umbrella Movement Meeting on Sunday, November 21st. Excerpts: Now for those of you here today that are not terribly concerned with the slashing of your basic civil rights - what about your basic right to keep Uncle Sam’s hand out of your pocket? I’m talking about corporate pickpockets. Do you know that the CEO paycheck vs. the worker paycheck is approaching 301 to 1!!! Twenty some years ago the ratio was more like 42-1. What this means is the ‘average Joe’ out there --- took home last year around $517 a week, while your not so average CEO socked away more than $150,000 a week! According to Business Week, if the minimum wage had increased as quickly as CEO pay since 1990, today it would be $15.71 per hour instead of $5.15 an hour. According to ‘Citizens for Tax Justice‘: Between 2001 and 2006, Florida taxpayers will receive $69 billion in tax cuts - sounds pretty good - but you will also face $216 billion dollars in added Federal debt. Even my own dismal attempt at bookkeeping translates that to forking over $147 billion to Washington for $69 billion dollars in tax cuts. Could this have anything to do with the fact that corporations paid 40% of the federal tax bill in 1940, but by 2002 they have reduced that number to 7.1%?

    According to the Population Health Forum the U.S. spends more hours at work than any other country Almost 40 percent of Americans are now working more than 50 hours a week. In fact, we're working more than medieval peasants did, and more than the citizens of any other industrial country. Working Americans average a little over two weeks of vacation per year, while Europeans average five to six weeks. Many of us (including 37% of women earning less than $40,000 per year) get no paid vacation at all. Generally we are working almost 3 months more than European workers AND…. we are doing the impossible without even knowing it: working longer than the legendary Japanese worker! We haven’t worked this hard and long since the 1920’s and as a result we are experiencing stress, burnout and personal sacrifice that undermines the fabric of our society. According to the website: poclad.org – giant corporations govern, even though they are mentioned nowhere in our Constitution or Bill of Rights. So when corporations govern, democracy is nowhere to be found. When people live in a culture defined by corporate values, common sense evaporates. We stop trusting our own eyes, ears, and feelings. Our minds become colonized and we wake up one morning greeted by George Bush’s CEO government (which now officially owns our representatives and runs this land), calling the shots and shifting the tax burden off investments and onto wages - and America’s low and middle income citizens twitch about - vaguely sensing a thieving hand ever deeper inside their drawers - pockets picked!

  • CNET: Internet hoax hoodwinks McNealy. Excerpt: At a keynote address here at the Oracle OpenWorld show, McNealy displayed a picture supposedly from the magazine "Popular Mechanics" showing how people in 1954 envisioned the home computer. His point was to show how far computing has advanced beyond what was expected. Alas, in reality the photo he used is a doctored picture of a nuclear submarine control room mock-up, according to the myth-debunking site Snopes.com.
    The black-and-white photo, which has circulated by e-mail and Web postings, shows a man in an Eisenhower-era suit standing before a long panel studded with dozens of gauges and a single steering wheel. A bulky monitor looms above, and a keyboard is placed in front.

Coverage on H1-B and L1 Visa and Off-Shoring Issues
  • DMReview: The Death of Domestic Programming. (Editor's note: This article is highly recommended). Excerpts: The demeanor and outlook of the domestic programming landscape is one of deep pessimism. The aforementioned statement may be substantiated by three main components that include: A) The weak overall domestic IT environment B) The outsourcing of programming jobs to foreign counties such as China, India and Russia C) The lack of domestic computer science graduates entering the job market. One cannot blame American business for the weak economy, but one can certainly hold American business responsible for giving away jobs, and not properly promoting computer science as a future career path. Some exceptions may exist for the latter, but they are few and far between. In a nutshell, America is losing a key asset (programmers) and a future talent pool (computer science graduates) because of shortsightedness by both the government and private sectors.  ...

    American businesses (companies conceived and incorporated within the United States) are allowing foreign competitors to eat their lunch. Case in point: In 2000, GM had approximately 35 percent of the domestic auto market. Its market share has since dwindled down to 28 percent in Q3 of 2004. A good example of how Detroit is stacking-up against foreign competition can be related to engine volumetric efficiency. The 2005 Honda Accord pushes out 240 hp from 3.0 liters, while the recently introduced Pontiac G6 makes 200 hp from 3.5 liters. Higher output from the Honda offering maybe directly attributed to technological innovations such as advanced engine management systems and variable valve timing (VVT). In a nutshell, Asian and European auto manufacturers have surpassed the United States in automotive technological prowess. The United States is now in a "catch-up" position rather than a "leadership" position.  ...

    During the last four years many American businesses have put their IT departments in precarious positions by shedding valuable employees, while accelerating the pace of offshore outsourcing. As a result of this shortsighted approach, anxiety is the "buzz" across the IT community. While pundits push the ROI mantra, reality dictates that job cuts and offshore outsourcing promote unease and disloyalty among staff members that remain with businesses and organizations, which promote this type of approach. In a nutshell, job cuts and offshore outsourcing will severely impact American businesses ability to organically grow the future application developer, project manager and systems analyst of tomorrow.  ...

    Where will the application developers, project managers and systems analysts of tomorrow come from? With American businesses cutting key employees and the acceleration of offshore outsourcing, the United States will have no choice, but to look at countries such as China, India and Russia to fill its future IT needs. Accordingly, expect foreign nations to nurture in-house talent by sending these individuals to domestic schools as well as colleges and universities based in the United States. Case in point: In a recent official report, figures state that India produces approximately 250,000 IT engineering graduates annually verses 60,000 for the United States. This line of attack will allow foreign nations to organically grow their domestic labor pools to satisfy the global demand for future IT services. Unfortunately, history does have a habit of repeating itself. America will soon again be relegated to a consumer, rather than a producer status nation in another important industry it once dominated.

  • WashTech News: Oasis of Hope in a Job Desert. Workers’ Rights Board Panelists Hear Testimony in Tacoma. Excerpts: WashTech member and laid-off programmer, Steve Gentry, portrayed the human cost of offshoring at a recent Workers’ Rights Board hearing in Tacoma’s Hilltop neighborhood, held this month. He was joined by other workers in the audience who gave testimony, as well as by Ashim Roy, an Indian union activist who soundly debunked the assumption that offshoring to India has helped Indian workers. ... Recent call-center wages in India are not significantly higher than what Indian workers would get elsewhere in their country. While they do provide new college graduates with immediate employment, many call-center workers are getting only 60 days of work a year, and one third do not have enough money to live on. For Indian workers, economic globalization means that 250,000 people now have dead-end jobs. Not only that, but these jobs are often abusive, with 60-hour weeks and excessive demands. Many workers must complete their calls within one minute, unlike the average of five minutes in the United States. Many do not get adequate bathroom breaks. Indeed, some are working in sweatshop-like conditions, and their jobs are always at risk of being sent to yet another shore. Washtech/CWA Local 37083 hopes to build a relationship with Indian union organizations, such as the NTUI, to further our common interest in keeping and developing both of our economies for workers’ benefit.

Now on the Alliance@IBM Site:
  • Forbes: Lenovo's Corporate Culture a Key Issue As It Absorbs IBM. Excerpt: Can a company molded in the tradition of socialist state-owned enterprises, and which still holds twice-daily exercise sessions and company sing-alongs, transform itself into a global computer powerhouse? With its purchase last week of IBM Corp.'s PC business, China's Lenovo Group Ltd. is betting that it can. ... The merged company will combine Lenovo's staff of 10,000 employees, almost all in Beijing, with the IBM PC division's staff of 10,000 _ about one-fifth in North Carolina, nearly one-half in China and the rest scattered around the world. One of the most formidable obstacles will be integrating the corporate cultures. "The cultural challenges are going to be big. (Lenovo is) traditional, in the state-owned enterprise style," said Duncan Clark, managing director of BDA China Ltd., a Beijing-based consulting firm. "Lenovo hasn't had a particularly successful track record of partnerships with foreign companies." Lenovo went to Silicon Valley in 2002 to recruit middle managers. A handful of U.S.-educated Chinese were hired, most of them taking huge pay cuts for the excitement of working for a Chinese company with worldwide ambitions. But about a year later, almost all of them had quit, said a U.S.-educated Chinese man who worked at Lenovo for a little more than a year until early this year. He insisted on anonymity because he is working at another multinational high-tech firm in Beijing. The former employee described its culture as so Chinese, and so strange, that most employees who had been educated abroad soon left.

  • IBM Human Resources Transition Questions & Answers (U.S.) HR Q&A, December 2004. Employees Affected by the Announced Sale of the IBM Personal Computing Division, December 8, 2004 (for U.S. use only). [PDF] (Editor's note: This is the official IBM Q&A, posted on the Alliance@IBM site. It consists of 59 questions and answers).

  • IBM PC Division Employees Alert! Full excerpt:
    • PC Division Sold - Although virtually unknown in the United States, Lenovo, China's largest PC maker and the world's fastest growing one, has bought the IBM PC Division for $1.75 billion. The sale brings the end of an era in an industry that IBM helped invent.
    • What of the PC division employees? The impact on employees, their families and communities is still to be determined. Nearly 10,000 IBM employees will become Lenovo employees, doubling their workforce. In RTP alone there are an estimated 1900 PC division employees.
    • The fight for a voice in the workplace continues. The Alliance@IBM/CWA Local 1701 is deeply concerned about the impact that this sale will have on current IBM employees. We want to make it clear that we will not abandon our members or co-workers. We intend to keep organizing and representing employees as they move into Lenovo. In fact, we will actively pursue the formation of a new Alliance chapter at Lenovo. We encourage IBM PC division employees to contact us. Let us not be victims in this sale, but active participants in this transformation. Let us all do our part to ensure that the employee's voices are heard, as employees of IBM become employees of Lenovo.
    • Contact the Alliance@IBM/CWA Local 1701 via phone at 607-658-9285, fax us at 607-658-9283, email us at EndicottAlliance@stny.rr.co


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