Join your fellow employees who are fighting for your benefits - Join the Alliance!

Retirees, Vendors, Contractors, Temps, and Active Employees are all eligible to become members of the Alliance.

• "Sam has the right idea, but cannot implement" by "MythAndMeaning". Full excerpt: Oddly enough, I think Mr P has the right idea when he emphasizes the importance of services as IBM's future. Growth and margins in h/w and s/w are stagnant and are only going to continue to deteriorate - no news here. Now post-spin off to Lenovo we learn that the PC business hasn't made a nickel in years -- how many other skeletons are there in our closets, I wonder? Unfortunately my best guess is that Mr P just doesn't have what it takes to redirect the company. The services leadership - Joyce, Rometty, and Collins - might as well just stay at home for all the effect they are having and real leadership they evince. Mr P doesn't seem to understand this, doesn't see the shrinking market presence, skills, thought leadership, and raw talent that afflicts IGS/BCS. It's very sad, seriously. Mr P's other great blindspot is this persistent notion that our client want to buy end-to-end solutions. If this were the case, wouldn't it be great to have an end-to-end solution to offer? I suppose... but there is nothing to indicate that this is the case: customers are not buying this way. Moreover, Systems, SWG, and IGS/BCS don't have end-to-end solutions to offer (for a lot of reasons). I think it's time for Mr P to move on.
• "Let me take another swing" by "Dose of reality". Full excerpt: At the risk of being called for not being able to remember a piece of relatively ancient history that did not affect me directly, but only through subsequent damage control I had to provide, let me outline my recollection, which will be directionally and in principle correct.
  During calendar 2003, in the first annual pay cycle after the acquisition, there was an across the board salary reduction for all (legacy PwC?) staff. Frankly I was not close enough to the legacy BIS staff at that point to know whether they were affected or not. I believe band 6 and possibly 7 were excluded. The amount was then subsequently paid out as an advance on the fiscal 2003 bonus in two installments - one mid spring and the other in the summer. That bonus would normally be paid out early calendar 2004.
  After the fact, they informed staff via an E-Mail that the monies would have to be repaid in the event you left the company prior to the date of the annual fiscal 2003 bonus payout in 2004.
  The process was repeated in the annual salary cycle that followed fiscal 2003, with the 2% "advance" paid in calendar 2004 to cover the fiscal 2004 bonus that was to be paid in 2005. Draw a timeline and grid if you are confused on this. Again, if you leave prior to the normal date for the bonus payout (in 2005), you are supposed to forfeit the bonus, because you are not employed when the bonus is "officially" paid.
  The effect of these actions was to make your salary flat and bonus zero for the first pay cycle. For the mathematically inclined, it is actually a bit worse, since you lose $4 and get paid 4% back of a lower base, but what's a few basis points among friends?
  In the second cycle, your overall compensation was down 4%. A little simple Excel work will prove this out. It was an elegantly confusing way to go about it - as I have always said, creativity is a core competency of IBM HR!

  Base Year 1 Year 2 Salary 100 96 94 Bonus 4 4 2 Total 104 100 96

  If nothing else, maybe this qualified explanation will beat some of the real affected parties out of the woodwork to provide the personally painful facts.
• "Addendum to Ides" by "mogrits". Full excerpt: Ancient, I left IBM in early 1994 to do some other things I really enjoy. Interestingly enough, out of the blue over the last two weeks, I've had two unrelated phone calls from IBM seeking my interest in returning to Principal or Client roles. In my 20 year career at Blue, I had 17 100% Clubs or Golden Circles. My previous role was eliminated to make way for a new hire young gun who stayed on the job for three months then promptly skidaddled when he figured out what a FUBAR situation he had landed in. I got a nice package when I left so no skin off my nose but I was surprised to get the phone calls. Can't imagine going back but money talks. Are they now so desperate that they are going through the previous employees lists?
• "Yes" by "Dose of reality". Full excerpt: I am not sure if this is a firmwide initiative, but I have been on a few conference calls the past few months where the topic of attrition and recruiting were on the agenda, and the suggestion was made to actively recruit veterans to deal with the hemorrhaging. I also hear we are in negotiations with PwC to purchase the roster lists from the five years leading up to the acquisition, and have been cold-canvassing phone directories for anyone whose last name is Dey, Hollerith, Cary, Opel or Akers, to try to upgrade the gene pool and reignite the brand.
• "Things have gotten that much worse" by "Dose of reality". Full excerpt: It is a combination of factors. First, the simple passage of time and additive weight of three zero/negative-reward pay cycles has made all but the most oblivious staff realize that there is no future here, and made all but the most overpaid and unmarketable staff actively engage in an exit strategy. Add to this, fiscal 04 options vesting, improving opportunities both in consulting and in industry, organizational implosion from having crossed over the line to not having critical mass of skills and expertise to deliver projects, historically overmatched management layers that lack the resourcefulness to manage through it, and finance and HR continuing to do that voodoo that they do so well, and you have an environment that makes everybody say "anywhere else but here". The people we are bringing in are incapable of delivering in a stable organization, let alone of turning this around. I have to say, I predicted this implosion eighteen months ago. All of the "notes" we took out by screwing employees are now coming due. It really is quite entertaining to see this from the inside, and it will make for a great ending for my book!
• "Reinforcing Loop" by "CONsulting_2_long". Full excerpt: I am more concerned about BCS than I had been in the past. Previously, I thought that it was experiencing market forces and having some more acute issues due to the merger hangover. But now, I believe that is significant individual firm-level risk with BCS. A level of risk that I am unsure that current management can successfully navigate. I see a couple is truly significant challenges specific to BCS.
  • I am sensing a pending staff exodus. Not just a 10-20% kind of flow like the heady days, but a 30-50% kind of turn. If turnover reaches these levels (for the reasons you named), service delivery would be impossible. BCS would have bad jobs (and bad job expense) all over. No amount of spreadsheet/PMR control will fix it. Plus the replacement's quality as observed on this board is an order of magnitude lower than either legacy BIS/PwCC organization. If turnover explodes, I don't see how jobs (even low end jobs) get delivered profitably. There just is not enough margin in them to have that much turnover.
  • Partner exodus. Polling my prior organization, I have observed a systematic removal many partners/associate partners. While I agree that the bloated overhead needed to be addressed, my observation is that many legacy BIS guys are getting moved out. (We can argue on talent mean/variation in a later thread.) My concern is that an organization so heavily weighted to PwCC leadership has created a leadership risk. My understanding of merger agreements would indicate that many of the 'handcuffs' begin to lose effectiveness soon. And with such a sour culture, I would expect many legacy PwCC partners to bolt once that happens. I can foresee a possibility where there is a significant voluntary loss of partners. While this effect would not be so lumpy on vesting dates and such, it could be a chronic problem for sustained revenue growth. Look at AT Kearney for similar effect of what happens to a firm with Partner drain.
  I guess my conclusion is indeed an implosion. I thought previously that those types of comments were rhetoric, but I see significant, significant firm-specific challenges. And I seriously doubt existing IBM leadership has the capabilities to prevent or even acceptably manage through such an impending crisis. As an outsider, I am glad I am gone. And I counsel every current employee to think long and hard on this post and several others like it. If BCS was a stock, I have lowered my call for the stock to a 'strong sell'. But then again, I am a former disgruntled employee that should be discounted, because I've been CONsutling_2_long.
• "On Staff Exodus" by "Dose of reality". Full excerpt: The staff level exodus momentum has been building for years.
  Wave 1 - best and brightest leave shortly after first pay cycle. Not a flood at that time, since the market did not easily accommodate them at their relatively generous base comp levels. However, the desire to leave steadily built up, creating a heavy overhang just waiting for the market to break. Talent that was capable of getting the tough lucrative projects that always exist “at the margin” no longer around. Few replacements, since business was generally contracting.
  Wave 2 – Next level down of overachievers wake up with the second FU pay cycle. Targets are raised, so those that are sensitive to job and worklife quality hop on the job search bandwagon. Economy improving so wave 1 overhang falls. Revenue steadily declining, but we have to hire to replace existing project resources, compensation for new hires ratcheted down, project resource shoe-horning in full swing both in terms of experience level and skill inventory. Quality of life and career opportunity all but gone. Front line sales talent severely depleted.
  Wave 3 – Pricing for new projects catches up with new evolving low cost/low quality resource model, since we desperately try to close revenue gap, and we don’t have the talent or resource time to adequately service the proposal pipeline. Cost cutting in full swing and revenue/utilization targets set by finance using plug and play models to meet corporate commitments, and can not be supported by depleted sales/delivery capability. Overhang of wave 2 crests and crashes and the intractable staff exploitation policy becomes common knowledge. Majority of staff are looking for a new job in varying degrees of intensity. Option vesting removes another soft obstacle to resignation. Unfavorable impact of weak new hires on project delivery being felt and contract extensions become increasingly challenging.
  Wave 4 (Now) – Word is out about environment, most new hires overmatched by job demands. All but the most hard core loyalists are actively looking. No more staff level cost cutting or target increase cards to play and the economic overhang of previous decisions still being played out. Gap between project delivery capabilities and project commitments are very wide, and stress and lack of project achievability further increases systemic motivation to get out. Average shelf life of new hires declines significantly – this engine of firm sustainability we implicitly counted on grinds to a halt. Resource quality is even lower than our comp levels should draw in, since there is a “pain and suffering premium” that we have to pay. Since we won’t pay it, we just get a lower, more desperate form of life.
  Three key points here. First, the impact of screwing with the organization has a year or so lead time. BCS has consistently turned a blind eye to this in our planning and HR management policies, looking only to the impact on today’s financials. Second, the relationship among compensation, worklife balance, career opportunity, stress levels, motivation, organizational talent/capability, targets, and overall psychic satisfaction is extremely delicate in any organization. Tampering with any one of these in isolation, without a candid assessment on the other considerations is suicidal. Finally, you can recover from a year of bad management. However, given the one-directional interrelationships in point 2, with multiple years of consistently bad management, a company is bound to reach a point of no return and implode like a house of cards. BCS has reached that point, and the worst of the overhanging pain is yet to come, both in terms of financial impact and attrition.

• Mother Jones: Exporting America: An Interview With Lou Dobbs. Excerpts: This faith-based economics that seems to be the hallmark of this administration is leading us into a no man’s land of inexplicable possibilities. This administration -- and frankly, it’s both parties, Democrats and Republicans as well as the administration -- seems indifferent to the impact of a trade deficit that now amounts to $4 trillion in external debt. We have to borrow nearly $3 billion a day to support it. The dollar has plummeted. And yet everyone keeps saying, “Free trade is good for you.” I cannot find anyone for whom free trade is good. As we go deeper in debt, we continue to lose jobs and diminish our manufacturing base. Many people want to talk about our dependency on foreign oil, and it’s a legitimate and real concern. But so is our dependency on the rest of the world for our clothing, our food, our computers and our consumer electronics. Our dependency isn’t just on foreign oil; we can’t even clothe ourselves. Free-trade economists will tell you we’re a technology economy, but we don’t even produce the technological components that are the foundation of a technology economy. [...]
  Well, there’s nothing short-term about 28 consecutive years of trade deficits. There’s nothing short-term about a mounting external debt as a result of our reliance on imports -- an external debt that has reached $4 trillion. I see no basis whatsoever for the sophistry that’s coming from some of the conservative think tanks and much of academia that says this is a short-term issue. This is real and present pain for literally millions of Americans, and a clear and present danger to an economy that has generated most of the wealth of the entire world over the past 50 years. We could be near the end of that role.
• Jim Hightower: A Leadership Gap on the Trade Gap. Excerpt: Yet, Snow, apparently snorting a noseful of intergalactic dust, proclaimed that this Grand Canyon of a trade gap "reflects the fact that Americans are becoming more prosperous," thus buying more foreign products. More Prosperous? Hey, Snow man – you Bushites are waving our middle-class manufacturing and high-tech jobs offshore, and American wages are not even keeping up with the cost of living, at the same time that your disastrous borrow-and-spend economic policies are sinking us into an unfathomable sea of federal debt. Just the interest on that debt now costs every American man, woman, and child $333 a year. This is prosperity? As is typical of Bush and the people he puts around him, Snow blames others for the rising trade imbalance. He whines that the Europeans and Japanese are at fault because – sob, sob – they don't buy enough American products. So his "solution" is to plead with foreign governments to change their economic policies to fit our needs. Hellooooo, Johnnie – they're our competitors. We're supposed to out-do them, not whimper at them. It's not exactly in the can-do spirit of America for our team leaders to be begging the other team to give us some points. This is Jim Hightower saying... To bridge the trade gap, our leaders must start investing again in American workers, farmers, and entrepreneurs, restoring our grassroots competitive strength.
• Janet Krueger. Full excerpt: My friend Mike Saville successfully proposed a resolution on outsourcing for this year's IBM proxy...= The full text and IBM's response is available in the files area of the IBMPension board as OffshrProp_1_26_pm.pdf. Like other resolutions, it hasn't got much chance of passing, but at least he gets to make a 5 minute speech at the shareholder meeting about the issue! Excerpts from Mr Saville's resolution follow:
  Resolved: The stockholders request that the Board establish an independent committee to prepare a report evaluating the risk of damage to the Company's brand name and reputation in the United States resulting from IBM's offshoring initiative and make copies of the report available to shareholders of the Company upon request.
  Tom Lynch, IBM's Director of Global Employee Relations, told an internal meeting that US workers or workers in a country where the work is being relocated from, will, in many cases, be asked to train their replacements. He also said that's going to raise a lot of tensions as you're training someone to do a job that you know is no longer going to be yours at the end of a fixed period of time. He called attention to a Washtech union website where you can see some of the fairly appealing arguments that they're making to why employees need to do some things like organize to help fight this. He noted issues like dignity and justice and fairness, those sort of gut sort of issues tend to raise or strike an emotional cord after which the money issues, pay and benefits issues can come in, but the dignity of being told that it's not that your job is going away it's just that it's moving and you're going to be put out of work as a result of that. It certainly raises those kind of dignity issues. Full text at http://www.allianceibm.org/articles/execoffshoremeet.htm.
• WashTech News: Business and Labor Spar Over WA Offshoring. Excerpt: A Washington State legislative hearing became the latest battle ground in the ongoing debate over offshore outsourcing and its impact on the economy. “Taxpayers in this state like to see their tax dollars used to create jobs in Washington,” said Chairman Steve Conway (D-Tacoma) to a packed audience in the labor and commerce committee. Rep. Conway has become one of the nation’s leading state lawmakers who have been looking into the trend. The hearing focused on a series of bills designed to restrict state tax dollars getting spent on overseas contracting, increase transparency for contracts getting done overseas and finally create a task force to look into the impact of globalization on the Washington economy. [...] Representatives from the state employees union supported measures that would restrict tax dollars from being spent overseas and the bill that calls for more transparency. “Current procurement rules do not adequately protect the state’s interest,” said Bob Doyle who is a contract specialist with the Washington Federation of State Employees. He went on to say, “ultimately, you will hear today that these kinds of policies will create a trade war. As you have heard from staff, other states have enacted similar measures and I don’t believe war has been declared.”

• Los Angeles Times: Kinsley's Proof That Social Security Privatization Won't Work. By Michael Kinsley. Excerpts: My Contention: Social Security privatization is not just unlikely to succeed, for various reasons that are subject to discussion. It is mathematically certain to fail. Discussion is pointless. The usual case against privatization is that (1) millions of inexperienced investors may end up worse off, and (2) stocks don't necessarily do better than bonds over the long run, as proponents assume. But privatization won't work for a better reason: It can't possibly work, even in theory. The logic is not very complicated...
• Social Security Network: What the President Didn't Say about Social Security. By Greg Anrig, Jr., The Century Foundation. Excerpts: Diverting payroll taxes to finance new accounts will make Social Security's long-term stability worse, not better. Social Security's trustees forecast that if nothing is done, the system will be able to pay promised benefits in full until 2042; after that, payroll taxes would cover about 70 percent of promised benefits. That's a shortfall, but not a "bankrupt" system. Regardless of whether you think the prospect of a 30 percent reduction in benefits 37 years from now constitutes a crisis, diverting up to 4 percentage points (nearly a third) of payroll taxes to private accounts will make that shortfall far more severe and immediate. [...]
  Federal debt would explode. To pay for the new accounts while continuing to provide currently promised benefits to individuals ages 55 and over would require enormous levels of new federal borrowing. An analysis by the Center on Budget and Policy Priorities of the president's plan shows that over the first 10 years the plan is in effect, new federal borrowing would amount to more than $1 trillion. Over the following 10 years, an additional $3.5 trillion would be borrowed, bringing the total to $4.5 trillion over 20 years. That's substantially more than the shortfall forecast for Social Security over the next 75 years. The 2004 Economic Report of the President concluded that national debt levels would be increased by an amount equal to 23.6 percent of Gross Domestic Product by 2036. That means that 31 years from now, the added debt burden for every man, woman and child would be more than $31,000. And not a cent of that borrowing would do anything to alleviate Social Security's long-term shortfall.
• New York Times: Spearing the Beast. By Paul Krugman. Excerpts: President Bush isn't trying to reform Social Security. He isn't even trying to "partially privatize" it. His plan is, in essence, to dismantle the program, replacing it with a system that may be social but doesn't provide security. And the goal, as with his tax cuts, is to undermine the legacy of Franklin Roosevelt. Why do I say that the Bush plan would dismantle Social Security? Because for Americans who entered the work force after the plan went into effect and who chose to open private accounts, guaranteed benefits - income you receive after retirement even if everything else goes wrong - would be nearly eliminated. Here's how it would work. First, workers with private accounts would be subject to a "clawback": in effect, they would have to mortgage their future benefits in order to put money into their accounts. Second, since private accounts would do nothing to improve Social Security's finances - something the administration has finally admitted - there would be large benefit cuts in addition to the clawback. [...]
  Jason Furman of the Center on Budget and Policy Priorities estimates that the guaranteed benefits left to an average worker born in 1990, after the clawback and the additional cuts, would be only 8 percent of that worker's prior earnings, compared with 35 percent today. This means that under Mr. Bush's plan, workers with private accounts that fared poorly would find themselves destitute. Why expose workers to that much risk? Ideology. "Social Security is the soft underbelly of the welfare state," declares Stephen Moore of the Club for Growth and the Cato Institute. "If you can jab your spear through that, you can undermine the whole welfare state." By the welfare state, Mr. Moore means Social Security, Medicare and Medicaid - social insurance programs whose purpose, above all, is to protect Americans against the extreme economic insecurity that prevailed before the New Deal. The hard right has never forgiven F.D.R. (and later L.B.J.) for his efforts to reduce that insecurity, and now that the right is running Washington, it's trying to turn the clock back to 1932.
• Washington Post: Feeding the 'Crisis'. By E. J. Dionne Jr. Excerpts: Our country could profit from an honest debate about the future of Social Security. Judging from President Bush's State of the Union address, that is not the kind of debate we are about to have. The president wants to use real but quite solvable problems in Social Security financing as an excuse for radical changes in the program. If Bush were to admit the simple fact that the shortfall in the Social Security trust fund is at most 0.7 percent of gross domestic product over the next 75 years, his alarmism would fall flat. So he has decided to exaggerate and mislead by way of frightening the American people, especially the young. It's bad politics, worse policy and a terrible shame. [...] The president insisted that "our children's retirement security is more important than partisan politics." Well, yes. But if the president were genuinely interested in a bipartisan compromise, he would put everything on the table -- including his own tax cuts that have added to the budget deficit. Consider that the cost of making Bush's tax cuts permanent is roughly three times the size of the Social Security shortfall over the next 75 years. Rolling back Bush's tax cuts just for those Americans who earn more than $350,000 a year would come close to covering the shortfall, according to the Center on Budget and Policy Priorities. It noted that the CBO's more modest estimates of the shortfall suggest that rolling back the tax cut for those high earners would more than cover the entire problem.
• New York Times: Bush's Class-War Budget. By Paul Krugman. Excerpts: On one side, the budget calls for program cuts that are small change compared with the budget deficit, yet will harm hundreds of thousands of the most vulnerable Americans. On the other side, it calls for making tax cuts for the wealthy permanent, and for new tax breaks for the affluent in the form of tax-sheltered accounts and more liberal rules for deductions. The question is whether the relentless mean-spiritedness of this budget finally awakens the public to the true cost of Mr. Bush's tax policy. [...]
  Why shouldn't the affluent, who have done so well from Mr. Bush's policies, pay part of the price of dealing with that problem? Here's a comparison: the Bush budget proposal would cut domestic discretionary spending, adjusted for inflation, by 16 percent over the next five years. That would mean savage cuts in education, health care, veterans' benefits and environmental protection. Yet these cuts would save only about $66 billion per year, about one-sixth of the budget deficit. On the other side, a rollback of Mr. Bush's cuts in tax rates for high-income brackets, on capital gains and on dividend income would yield more than $120 billion per year in extra revenue - eliminating almost a third of the budget deficit - yet have hardly any effect on middle-income families. (Estimates from the Tax Policy Center of the Urban Institute and the Brookings Institution show that such a rollback would cost families with incomes between $25,000 and $80,000 an average of $156.) Why, then, shouldn't a rollback of high-end tax cuts be on the table?
• From Janet Krueger: This week, Sound Money on MPR did an analysis of the Bush proposal: http://soundmoney.publicradio.org/display/web/2005/02/05/wash_notebook/. Generally, they are fairly conservative, and they've tended to support most of Bush's policies. However, on this one, they gave him a complete thumbs down -- he is proposing to reform a system that isn't broken, while ignoring the health care crisis that needs attention right now...
• New York Daily News: Why Bush is wrong. His Social Security reforms are neither 'social' nor 'secure'. Excerpt: President Bush has a different answer to all of the above. In pursuit of his "ownership society," he wants to move Social Security toward "greater individual opportunity, risk and reward" by allowing individuals to carve themselves private investment accounts out of Social Security payroll taxes, much like a 401(k) plan. This raises a whole host of problems. It discriminates against poorer workers because the lower your income, the less you have to invest and the smaller your return will be. The Bush plan offers nothing close to the financial security of the existing program. Then there's this: Are individual investors sophisticated enough to match the higher returns now being forecast? At least 10 studies analyzed by the Securities and Exchange Commission indicate a disturbing level of financial illiteracy. Only 12% of the investors studied could distinguish between a load and a no-load mutual fund; only 14% understood the difference between a growth stock and an income stock; only 38% knew that when interest rates rise, bond prices fall; almost half somehow believed that diversification guarantees that their portfolio would not suffer if the market dropped, and 40% thought that the trust fund's operating costs would not be deducted from their investment return.
  Of course, the idea of Bush's "ownership society" is to change the relationship of Americans to government so they look less to Washington than to themselves (and, just maybe, vote more Republican). No doubt some Americans could build savings and more wealth and have a nest egg for retirement. No doubt there is value in savings and self-reliance, planning ahead and increasing distance from the government. But there are other values in the very title of the program - Social Security. "Social" surely implies a contract to help manage poverty among the old and to know that our society provides a minimum income for all in the retirement years. And "security" means buffering the harshness and cruelty of the markets so the well-being of the elderly is not dependent on shrewd stock picks and hot mutual funds. Privatization thus gets things upside down. Social Security was not meant to re-create the free market; it was intended to insure against the vagaries and cruelties of the market and to permit Americans to count on the promise that the next generation will take care of them in their old age.
• San Francisco Chronicle: Details reveal drawbacks of Social Security investment plan. Excerpts: As details of President Bush's plan for personal Social Security accounts dribble out, it appears they are neither entirely personal nor terribly secure. The accounts would resemble 401(k) plans in some ways, but with less freedom and flexibility for workers. For example, once people decided to divert part of their Social Security taxes into a personal account, they wouldn't be able to change their minds. Employees could not take any withdrawals -- even loans -- from their personal accounts until retirement. And investment options would be very limited. Upon retirement, some workers would have to use part of their personal account to buy an annuity to keep them above the poverty line. If they died soon thereafter, they wouldn't recoup the cost of the annuity. [...]
  "I'm concerned that when people are putting money into their personal accounts, they will stop putting money into their actual 401(k) plan, and many employers -- particularly small employers -- will say, 'I want to get rid of my 401(k) plan now because my employees can participate in the government 401(k),' " says Brad Huss, a pension attorney with Trucker Huss. "It will cut into the already low level of saving being done through private employer plans."
  "The way the program is structured, the person comes out ahead if their personal account exceeds a 3 percent real (after-inflation) rate of return," a White House official told the media. "So, basically, the net effect on an individual's benefits would be zero if his personal account earned a 3 percent real rate of return. To the extent that his personal account gets a higher rate of return, his net benefit would increase as a consequence of making that decision." Earning 3 percent over inflation is possible, but not without taking investment risk. From the late 1980s through 2001, the U.S. Treasury sold inflation- indexed savings bonds that paid the rate of inflation plus 3 percent or more. Perhaps because it was too costly, the government has been whittling that rate down. Today, I-bonds pay only 1 percent over inflation.
• Reuters, courtesy of Yahoo! News: Cheney Sees More U.S. Borrowing for Pension Accounts. Excerpts: Vice President Dick Cheney on Sunday acknowledged trillions of dollars in future borrowing may be needed to cover the cost of private retirement accounts under President Bush's plan to retool the Social Security system. Cheney brushed aside charges that the administration has proposed phasing in the accounts gradually in order to minimize the costs, which will increase more sharply in later years. Under Bush's plan, Cheney said, the administration would borrow roughly $754 billion over the next 10 years to set up the private accounts. "We think that's a manageable amount," he told "Fox News Sunday." [...]
  Bush for the first time said in his State of the Union address last week that some limits on the growth of future benefits may be necessary to improve the financial viability of the 70-year-old program. He has said he is willing to consider any possible solutions except raising payroll taxes. Many estimates have pegged the 10-year cost of Bush's plan at $1 trillion to $2 trillion. But the Bush administration gave a lower estimate of those estimates, at $754 billion. That number includes $90 billion in debt service costs. The reason that estimate is lower than others is that the Bush plan is phased in, reducing the cost of the private accounts in the first few years.
• Social Security Wall of Shame: A Phrase Reporters Should Stop Using. Excerpts: Frequently in reporting on Social Security, reporters put in, without any basis or sourcing or justification, a phrase like "in theory the higher returns in private accounts would offset any benefit cuts." NO. This is not even true in theory let alone in fact. Right now the closest thing to an actual Bush plan is "Model 2" from the "President's Commission to Strengthen Social Security" According to the scoring of the Graham version of the plan (which is essentially Model 2 pushed forward in time a bit with an addon feature which doesn't affect the numbers here), a median income worker retiring in 2050, 2070 will have his/her total retirement income, including private account annuity, in half relative to promised benefits and by a third relative to benefits projected to be payable under pessimistic and internally contradictory trustee projections by the CBO.
  It's absolutely stunning that the plan could be "this bad," but it really is. CBPP explains why: It may seem surprising that the benefit reductions would be larger under the Graham plan than if no action were taken to shore up Social Security’s finances. This is the case for a basic reason. As explained below, the diversion of funds from Social Security to private accounts would enlarge Social Security’s deficit by about 50 percent over the next 75 years, necessitating much deeper benefit reductions to bring the system into balance. These deeper benefit reductions would not be fully offset by income from the private accounts.
• Christian Science Monitor: Wall Street optimistic yet pragmatic on Social Security. Many workers at investment firms view Bush's plan favorably, but few see a boom for themselves. Excerpt: Joseph Malone, dressed in an electric-blue shirt that identifies him as an assistant trader on Wall Street, is an enthusiastic supporter of President's Bush's plan to add private accounts to Social Security (see chart). "I don't look at it as risky," he says while on a break outside the New York Stock Exchange. "It's a good opportunity for younger people like me who may not have much of Social Security around when they retire." Not surprisingly, the president can count on the pinstriped set. Wall Street generally thinks it's a good idea, in good measure because it means more money going into the stock market.
• Bloomberg: Scrap Social Security Reform and Super-Size 401(k)s. By John Wasik. Excerpt: Employer-sponsored plans, for one thing, are voluntary. They don't have to be offered and employees don't have to contribute. That could be why, even when employer matches are offered, a third of workers don't participate in 401(k)s and few contribute the maximum amount, according to the Employee Benefit Research Institute, an employer research organization. As a result, millions are under-funding their retirement. Social Security was never designed to be a full pension program. That's why it's illogical and unfair to graft a private savings account onto this public social insurance system, particularly when the private sector can provide pure savings vehicles that are much more effective than Social Security. A smorgasbord of private retirement programs can be replaced with one super-sized plan called a Universal Savings Account (USA), an amalgam of ideas put forward by several organizations.
• Los Angeles Times: President Putting 'Big' Back in Government. By Janet Hook. Excerpts: Bush's $2.57-trillion budget for 2006, if approved by Congress, would be more than a third bigger than the 2001 budget he inherited four years ago. It is a monument to how much Republicans' guiding fiscal philosophy has changed over the 10 years since the GOP's Contract With America called for a balanced budget and abolition of entire Cabinet agencies. [...] Bush's budget projections likely understate future deficits as they do not include the full costs of three priorities at the core of what he seeks as his second-term legacy: ongoing military operations in Iraq and Afghanistan, making his 2001 and 2003 tax cuts permanent, and overhauling Social Security. [...]
  "President Bush would never admit this, but he has transformed the party into the party of permanent big deficits," he said. A key question is whether that prospect spooks Republicans into taking more aggressive steps to reduce the deficit and curb spending. Ironically, the initiatives that might suffer are the cornerstones of Bush's second-term agenda. Some Republicans already are balking at his Social Security overhaul because of its high transition costs. And even some Bush loyalists — including Sen. Pete V. Domenici (R-N.M.), former chairman of the Senate Budget Committee — are having second thoughts about Bush's proposal to make his tax cuts permanent. Said Steve Bell, Domenici's chief of staff: "These deficits are serious business."
• Washington Post: Bush's Social Security Plan Assumes Much From Stocks. By Jonathan Weisman and Ben White. Excerpts: To conclude that Social Security is careening toward a crisis in 2042, President Bush is relying on projections that an aging society will drag down economic growth. Yet his proposal to establish personal accounts is counting on strong investment gains in financial markets that would be coping with the same demographic head wind. That seeming contradiction has become fodder for a heated debate among economists, who divide sharply between those who believe the stock market cannot meet the president's expectations and those who say investor demand from a faster-growing developing world will keep stock prices rising.
  "If economic growth is slow enough that we've got a problem with Social Security, then we are also going to have problems with the stock market. It's as simple as that," said Douglas Fore, director of investment analytics for TIAA-CREF Investment Management Group. A spokeswoman said the company has not taken a position on the Social Security debate.
• New York Times: When Math Is Worse Than Fuzzy. Excerpt: Whenever the Bush administration wants to sell a costly new program, look carefully before you accept any numbers it puts out. The math isn't just fuzzy, as the current euphemism would have it - it is often downright misleading, and deliberately so. The latest example is the newly acknowledged cost of the Medicare prescription drug bill, which the administration bulled through Congress in late 2003 over the objections of conservatives who railed that the price tag would be too high. The number that had deficit hawks choking then was a projection that the drug benefit would cost $400 billion over 10 years, from 2004 through 2013. The administration already had an internal estimate that the cost would exceed $500 billion for that period. But it made sure to suppress that figure as it strong-armed Republicans who had already approved irresponsible tax cuts and an expensive war in Iraq, whose true costs were also being hidden. Now it turns out that the earlier discrepancy was small beer compared with the latest upsurge in the projected 10-year cost of the drug benefit. As pointed out in an article yesterday by Robert Pear in The Times, the drug benefit is actually expected to cost some $720 billion over the first 10 years, from 2006, when the benefit kicks in, through 2015. The previous numbers were lower because they included in the 10-year projections two years when the program would not yet be up and running. [...]
  The administration is trying a similar dodge in its efforts to sell the idea of converting part of Social Security to private accounts. Those accounts are a bad idea on the merits, but even many who might be inclined to support them are fearful of the enormous transition costs, which could exceed a trillion dollars over the first 10 years of the program. So the administration has conjured up a more palatable number. By delaying the new accounts until 2009, it is able to project that costs over the 10-year period from 2006 until 2015 will be $754 billion. That presents less of a target than a trillion-dollar bull's-eye, but all it does is delay the real accounting. [...]
  We're with the fiscal watchdogs in Congress in believing that these budget numbers just aren't sustainable. Americans have to choose. We can have a social safety net that protects our retired citizens from poverty and makes sure they can afford adequate health care. Or we can have a small government with a tax code that has a 1950's mentality in protecting the wealth of the richest Americans at the expense of the middle class and the working poor. We would prefer the first. Some conservatives may prefer the second. But Mr. Bush, in trying to have it both ways, is going to undermine the nation's longstanding social contract with workers and the elderly. The deficit-addicted government that he has created doesn't have enough money coming in to pay for the programs that the public wants and deserves, not to mention the nation's defense.
• Palm Beach Post: Bush Social Security plan differs in key way from federal model. By Bob Dart. Excerpt: Personal investment accounts modeled on the federal Thrift Savings Plan, the centerpiece of President Bush's plan for overhauling Social Security system, would bring users both new advantages and risks. While holders of Bush's accounts could collect financial market gains, they would not share one key edge that federal workers now enjoy — the ability to collect full Social Security benefits upon retirement. [...] One of the greatest differences is that the TSP requires workers to make full contributions to the Social Security system, while Bush's accounts would be funded with worker taxes that are diverted from Social Security. The fact that Bush's accounts are funded by what pension experts call a "carve-out" rather than an "add-on" is one of the main points raised by their critics. When TSP workers retire, they receive income not only from their accounts, but also full Social Security benefits and a government-funded traditional pension — both of which are indexed for inflation. Under Bush's plan, by contrast, workers would receive a lower Social Security benefit to reflect their reduced contribution to the system, in addition to income from the new account and any private pension they may have.
• Economic Policy Institute: Proposed Social Security price indexing would slash benefits. Excerpts: he Bush Administration has spoken favorably about substituting price indexing for wage indexing, a change that was a centerpiece of Plan 2 of the President's Social Security commission. Under this change, benefits would no longer reflect improvements in the country's standard of living, but would just be indexed to prices. It is hard to overstate the effect of that substitution on hypothetical future benefits. Recent research by the non-partisan Congressional Research Service (CRS) sheds light on this issue. The CRS estimated what the effect on current Social Security retirees' benefits would have been if initial benefits had been calculated based on increases in prices—using the consumer price index—instead of increases in average national wages.
  Figure 1 shows that, with a price indexation formula, retiree benefits would have been cut substantially. Under the current wage indexation, the Social Security benefit for a person with average earnings over one's lifetime and retiring in 2005 would be $15,336 per year, replacing 42% of the average worker's income. If, however, price indexing had been used instead of wage indexing, that same 2005 retiree would receive only $6,180 per year, replacing just 17% of income. In other words, as the figure shows, a change from wage indexation to price indexation would have meant a 60% cut in Social Security benefits for today's retirees.
• Reuters: Smaller Fixes Could Bolster Social Security -AARP. Excerpts: The AARP, formerly known as the American Association for Retired Persons, said the amount of wages that can be taxed for Social Security should be raised from $90,000 to $140,000. The change could be phased in over about 10 years and would cut the projected shortfall by 43 percent.

• Job Cut Update: Alliance@IBM has received further information from employees on recent job cuts and resource actions. We don't believe it is complete yet; and we will not list locations at this time, so that we can protect workers identities. The cuts occurred in IBM Global Services units. The total number so far, is about 250. We are also getting reports of employees being given separation packages not related to resource actions; but in response to PBC evaluations. Many of those cut in resource actions and separations are being reported as "over 40 years old". Stay tuned for information as we receive it. See our visitor comments section for update on RTP.
• Resource Action Alert!! - Alliance@IBM is hearing of job cuts in IGS: Distribution Sector, Tech Support, Deskside Support Services, Operations and Network Services. If you have any information, please e-mail us at: endicottalliance@stny.rr.com
• Pension Lawsuit Questions & Answers (updated Jan 12, 2005). Read this to determine how this lawsuit affects you.
• Think Twice for January/February 2005 [PDF]. (Editor's note: This issue is a "must read."). Articles in this issue include:
  • The Fight Continues...at Lenovo
  • Outsourcing Blues
  • PBCs and Behavior Modification
  • Message From the President