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Net income grew faster than sales in the first quarter, which is something IBM works hard to engineer each quarter through continuous share buybacks, "workforce rebalancing," automation, and supply chain wringing. Net income was up 10.1 per cent, to $2.86bn, in the quarter, and earnings per share was up 17 per cent, to $2.34. ...
IBM's Software Group continues to be the profit engine, of course, with sales up 10 per cent, to $5.3bn. Thanks to organic growth with application servers and integration products and the acquisition of Sterling Commerce, Unica, and others, the company's WebSphere branded products had a crazy 51 per cent growth spurt in the first quarter. ...
If software is the profit engine at Big Blue, services is the revenue engine and even with lower gross margins than even hardware, this people-intensive business nonetheless throws off plenty of cash just from its sheer size.
Global Services represented $14.6bn in revenues in the first quarter for IBM, up six per cent from the year ago period. Global Technology Services – where IBMers manage your technology, either directly or through outsourcing – accounted for $9.86bn of that, with Global Business Services – where IBMers run your applications on Big Blue's own iron, integrate your systems, or mess around with your business processes – accounting for $4.71bn of that.
Wall Street was a little freaked out on the call with Loughridge that services signings had plummeted 18 per cent in the quarter, and IBM's CFO did a lot of singing and dancing to try to convince them there was nothing to worry about. IBM had a services backlog of $142bn as the first quarter came to an end, an increase of $8bn as reported but only up $1.5bn on a year-on-year basis if you look at it on a constant-currency basis. ...
Don't expect Big Blue to make any big bang acquisitions. Even if it wanted to, it needs the cash to keep engineering that EPS growth. Speaking of which, business was so good in the first quarter that IBM upped its expected operating EPS for 2011 by 15 cents to $13.15.
Microsoft also said it will increase funding for its bonus and stock awards so it can better reward top performers. It now aims to deliver 100% or more of those forms of compensation to 80% of the company's eligible employees, rather than only about 50% of employees in prior years.
"These changes represent the most significant investment in overall compensation we have ever made," Mr. Ballmer said in the email, a copy of which was obtained by The Wall Street Journal.
The boost in compensation for selected portions of the company show how much pressure Microsoft is under to hold onto talented employees, especially software developers. The pressure is coming from Facebook and other closely held companies that can offer the prospect of potential riches through future public stock offerings, as well as more established publicly held companies like Salesforce.com Inc., VMware Inc. and Google.
A selected reader comment (possibly written by an IBM executive?) follows:
I am surprised that they are not moving these jobs offshore. It would be much cheaper. I guess they have become set in their ways and find protecting their employees more important than serving the interests of their shareholders. First sign of a declining business is not doing what it takes to be competitive. This might explain Vista and Windows Mobile, too.
Many companies are going gangbusters with billboards in the San Francisco Bay Area — such as Groupon's "Do Something Massive" and Skype's "Embrace Your True Calling" — to attract talent. The signs include links to available jobs. ...
Jobs are so plentiful in Silicon Valley these days, that it's more eye-opening when companies are retrenching rather than expanding. Apple, Google, Facebook and others continue to hire, as they did during the worst of the economic downturn. During its earnings call last week, Google said it added 1,900 jobs in its recently completed fiscal first quarter. "It's a money war for engineers," says Dave MacKeen, CEO of Eliassen Group, one of the largest tech-staffing firms in the Northeast. It works with Fortune 500 companies.
The firm, run by Chairman and CEO Kip Tindell, pays sales associates up to $46,000—more than double the average wage for retail workers, according to BLS data. It also offers health care benefits for all employees, and survived the worst of the recession without having to resort to layoffs—although salaries were frozen and 401(k) matches suspended for a couple of years.
As Tindell put it in the Sunday Morning segment, "you can't go around calling yourself an employee-first culture and then lay people off." ...
Look again at the list at the top: there are many companies currently in business that could put those things into effect, if they simply made the choice to. And if they did, at a single stroke they'd create a workforce that was more motivated and engaged, better at their jobs, and significantly more likely to remain with the organization for an extended period of time.
Instead, many major employers choose to pay marginal salaries to workers on the lowest rungs of the career ladder, eschew benefits in the name of cost-saving, and give little thought to training or development. And, as they saying goes, most of the time those companies get what they pay for: workers with little sense of attachment to the company or its goals.
A reader comment follows:
Cost cutting's easier than investment. It may be a sad reflection on our times, but cutting costs delivers results fast. You can see the financial payoff immediately. Investing in staff - through training, better conditions, et cetera - has an up front cost and only delivers financial benefits after some time. There is nothing strange about this: there is always a delay between the time an investment is made and the time it delivers. It requires a longer term outlook than some firms are willing to allow for, unfortunately.
The data also underscore the vulnerability of the U.S. economy, particularly at a time when unemployment is high and wages aren't rising. Jobs at multinationals tend to pay above-average wages and, for decades, sustained the American middle class. ...
A decade ago, Mr. Slaughter, who consults for several big companies and trade associations, drew attention with his observation that "for every one job that U.S. multinationals created abroad...they created nearly two U.S. jobs in their [U.S.-based] parents." That was true in the 1990s, he says. It is no longer. ...
The growth of their overseas work forces is a sensitive point for U.S. companies. Many of them don't disclose how many of their workers are abroad. And some who do won't talk about it. "We will decline to comment on future hiring or head-count numbers," says Kimberly Pineda, director of corporate public relations for Oracle Corp. ...
(Editor's note: Ending a decades long practice, IBM no longer breaks out its employment numbers by country.)
Microsoft is an exception. It cut its head count globally last year, but over the past five years, the software giant has added more jobs in the U.S. (15,300) than abroad (13,000). About 60% of Microsoft's employees are in the U.S.
The Wall Street Journal reports today that Corporate America certainly isn't doing its part to help bring America out of its economic malaise. The paper surveyed employment data by some of the nation's largest corporations — General Electric, Caterpillar, Microsoft, Wal-Mart, Chevron, Cisco, Intel, Stanley Works, Merck, United Technologies, and Oracle — and found that they cut their workforces by 2.9 million people over the last decade while hiring 2.4 million people overseas. ...
As you can see from the chart, the economic recession has had little impact on Corporate America's patriotism. In fact, in 2009, representatives of many of the nation's most powerful corporations attended the "2009 Strategic Outsourcing Conference" to talk about how to send American jobs overseas. Conference organizers polled the more than 70 senior executives who attended the conference about the behavior of their companies in response to the recession. The majority said their companies increased outsourcing in response to the downturn, with only 9 percent saying they terminated some outsourcing agreements.
Another question asked of the executives found that the top reason for companies to outsource was to "reduce operating costs" (46 percent of respondents). Only 12 percent of respondents said their reason for outsourcing was "access to world class capabilities." This means companies are outsourcing to save themselves money, not make better products.
History has taught us that when IBM wants something to happen or not to happen they get their way. They don't like the current health care bill that is on a fast track to the governor's desk so they have put together a coalition of large business owners to turn the bill into something they can live with.
Their rhetoric is right out of the right-wing playbook. They say they are in favor of health care reform and recognize that it needs to happen. Then they go on to detail all of things wrong with the bill, which is just about every major piece of it.
The IBM coalition is lobbying (or is it bullying?) the governor and the legislature to make sure the health care bill turns out the way they want it. They may say that are only looking out for what is best for Vermonters, but what they really want is to protect their bottom line at all costs. Just ask the former and current employees who made it clear that IBM management does not speak for them when it comes to health care reform. ...
IBM could get out of the business of being an insurance company and concentrate on their ability to generate even more than $4.81 billion a year in profit. Instead of being Vermont's biggest bully they could lead the charge to create the largest and most diverse insurance pool the state has ever seen so that our new form of insurance will be financially viable for all Vermonters, not just IBM.
Background: In his complaint, Plaintiff alleged he worked for IBM from January 2000 until August 15, 2007, and IBM owed him $156,071.98 for commissions accrued in the month of June 2007 and recorded on IBM's web-based Field Management System. He also alleged IBM failed to pay him $35,831.60 in separation pay when he left his employment.
IBM then filed a motion to dismiss, to which it attached the Field Management System letter explaining the incentive plan for the relevant employment period. After setting out the plan details, this incentive letter stated:
Right to Modify or Cancel: The Incentive Plan is described on the Internal Incentive Plan Website . . ., and you should rely on the details provided within the Website for up-to-date information. The Plan does not constitute an express or implied contract or a promise by IBM to make any distributions under it. IBM reserves the right to adjust the Plan terms, including but not limited to any quotas or target incentives, or to cancel the Plan, for any individual or group of individuals, at any time during the Plan period up until any related payments have been earned under its terms. . . . Employees should make no assumptions about the impact potential Plan changes may have on their personal situations unless and until any such changes are formally announced by IBM. ...
IBM argued the language of this letter made clear that IBM's incentive plan did not create an enforceable contractual promise to pay commissions.
In his response to IBM's motion to dismiss, Plaintiff agreed the letter provided by IBM was the relevant document controlling his breach-of-contract claim. However, he argued the language of this letter only gave IBM the right to cancel the incentive plan or adjust the overall plan terms, while IBM had no right to simply withhold commissions for one month in the quarterly plan period. Plaintiff attached an affidavit and other evidence to his reply and argued that the district court should convert the motion to dismiss into a motion for summary judgment because the court needed to consider facts outside the pleadings.
I was in development all my years, and under none of these plans, but if I'd read that as a part of my compensation plan, I'd never have taken that job. Considering IBM is offshoring so much of development, support etc, and the majority of US employees are now sales and consulting, jobs that would fall under such incentive pay "systems" it is unconscionable that you guys (and gals) don't stand up and force the issue that if there is a compensation plan, that IBM have to abide by their end of the bargain, and can't weasel out of paying you for earning money for them.
This one item should be a massive wake-up call for you to GET A CONTRACT! (This was not anger on my part, but incredulity after I read this court ruling) -RAed Jan 09-
Alliance Reply: When IBM makes the rules, as in 'incentive plans', they can break those rules anytime they want. There is absolutely no legal obligation for them to adhere to those rules; since they are the ones that designed the incentive plan in the first place. You are absolutely correct: Organize and get a contract.
The US$1.4 billion deal, signed in July 2007, was supposed to be a seven-year arrangement, but now IBM is to leave AstraZeneca in 12-15 months, according to multiple sources familiar with the matter. AstraZeneca is said to have made its plans known on April 8, after several months of negotiations with IBM. ...
According to sources, AstraZeneca has been dissatisfied with IBM for a long time. Several IBM competitors are now gearing up to compete for the $200 million a year contract and replace IBM at the pharma giant. ...
The 2007 agreement was seen as a key win for IBM's services unit, given that it came at a time when an increasing number of large pharmaceutical companies where tapping offshore vendors for their IT needs. ...
IBM and AstraZeneca declined to comment. "We never comment individual client relationships," said a spokesman for IBM in Sweden. "We won't give any comments on this at this time," a spokeswoman for AstraZeneca said.
In an effort to shine a light on CEO pay, the AFL-CIO examined chief executive salaries at 299 firms traded on the S&P 500. Their compensation was up 23% in 2010, compared to 2009. AFL-CIO used Bureau of Labor Statistics wage data to define typical worker pay, which was $33,190 for all occupations in 2009, the most recent year for which data is available. ...
9. Samuel J. Palmisano: $25.2 million. Cash compensation: $11.9 million. Stock and options: $13.3 million. Total compensation 1-yr. change: 19%.
Her response? "She said she knew exactly what it was," Willis says. "There are so many kids like her who are focused on saving." When Willis travels to some of the colleges where the Omaha, Nebraska-based railroad company recruits, prospective candidates often want to know whether a defined benefit plan is available, even if they don't completely understand the details. "They'll ask questions about it, and they know the difference between a pension plan and a 401(k)," Willis says.
Union Pacific sees its defined benefit plan as an employee retention tool. The plan's cost is worth the value it provides in retaining well-trained employees, Willis says. "We have made cost trade-offs in other benefit areas that keep our total benefits plan value competitive." ...
Perhaps most striking is the appeal of traditional pension plans to younger employees. In the Towers Watson study, nearly two-thirds of workers under 40 said defined benefit plans are a key factor in their decision to stay with their companies compared with only a quarter of those with defined contribution plans. ...
Particularly as companies "move out of this recession and into more of a hiring mode, retirement benefits are becoming a factor for employees," says David Speier, senior retirement consultant in Towers Watson's Arlington, Virginia, office. "I think younger individuals are looking at their parents and seeing the struggles they are going through—having to delay retirement—and are reacting."
"The firm understands that work is not all we have to do. They encourage me to spend time with my family, and I believe they truly want me to be happy," wrote one survey respondent about Hall Render Killian Heath & Lyman, this year's top-ranked midsize company. ...
Despite those benefits, many employers lose focus on employee satisfaction in challenging economic times -- often adopting the attitude that workers should be grateful simply to be employed, Claffey said.
When the economy improves, however, such an attitude can prove disastrous.
"Things pick up, and (the employees) all leave, and it's harder and more expensive to find replacements," Claffey said. "The cost of replacement is huge compared to the cost of retention, so we think having a top workplace is just the right thing to do."
And that's just for starters. Here's a list of nine more things you should know if you plan to retire this year.
Selected reader comments concerning this article follow:
For many years IBM unions, including the Alliance, have worked together as a network of information and cooperation. The new Global Union Alliance, under the umbrella of the International Metalworkers Federation (IMF) and Union Network International (UNI) takes that network to another level and will include many more IBM unions. This past year new IBM unions have formed in Bulgaria, Chile and Argentina. In a statement from the IMF and UNI about the new Global Union to IBM unions:
As IBM has set itself up as a truly global company, trade unions also need to set up a truly global alliance cooperating to the maximum extent for the benefit of their members and IBM employees. This meeting creates an IMF/UNI Global Union Alliance at IBM of trade unions with members working for companies owned by IBM or companies in which IBM has a significant interest.
The purpose is to express the determination/commitment of trade unions at IBM to work together at global level based on shared values and objectives to strengthen communication and cooperation and to implement action coordinated by IMF/UNI global union.
The objectives are:
The partners of the Alliance will work together with the aim of protecting and furthering the interests of IBM employees throughout the world.
The partners will take concrete action to enlarge the network by improving contacts with unions in countries where employees are unionized and make every effort to organize unorganized plants/locations.
The Alliance@IBM looks forward to the forming of this new organization for IBM employees and their unions.
As many of you know, we have lost many members due to job cuts at IBM US.
Please help us build the American section of the new IBM Global Union Alliance. If you are not a dues paying member of the Alliance, please consider joining today at: https://afl.salsalabs.com/o/4004/donate_page/alliance-join
When fully phased in, in 2022, the Ryan plan would give people on Medicare a voucher that they could use to buy private health insurance on a special exchange similar to the exchanges to be set up for working-age adults under the Affordable Care Act. The size of the voucher would vary according to the person's health, age, and income. Plans couldn't turn people down on the basis of pre-existing conditions.
The problem, according to an analysis by the nonpartisan and authoritative Congressional Budget Office, is that the Ryan plan would be more expensive overall than traditional Medicare, and individuals would have to bear almost all of that extra cost themselves. The nonpartisan, nonprofit Kaiser Family Foundation (no relation to the HMO) estimates that in 2022 the average 65-year-old Medicare recipient would be personally paying $12,500 of the typical plan's total cost of $20,500. Out-of-pocket costs would be even higher in the years beyond, because the Ryan plan is set up so the value of the vouchers won't increase as fast as the price of health care. ...
So, would the plan help reduce the deficit? Yes. According to the CBO analysis, if the Ryan plan were to be adopted, by 2030 the government would be spending only about 6 percent of our nation's Gross National Product on health programs, including Medicare and Medicaid. If the current system stays in place, government spending on health would total between 8.75 and 9.75 percent of GNP in 2030, the CBO said.
But overall health spending, both public and private, would be higher—and more of it would come out of your pocket.
What has gone wrong with us? ...
About that advisory board: We have to do something about health care costs, which means that we have to find a way to start saying no. In particular, given continuing medical innovation, we can't maintain a system in which Medicare essentially pays for anything a doctor recommends. And that's especially true when that blank-check approach is combined with a system that gives doctors and hospitals — who aren't saints — a strong financial incentive to engage in excessive care.
Before you start yelling about "rationing" and "death panels," bear in mind that we're not talking about limits on what health care you're allowed to buy with your own (or your insurance company's) money. We're talking only about what will be paid for with taxpayers' money. And the last time I looked at it, the Declaration of Independence didn't declare that we had the right to life, liberty, and the all-expenses-paid pursuit of happiness. ...
Now, what House Republicans propose is that the government simply push the problem of rising health care costs on to seniors; that is, that we replace Medicare with vouchers that can be applied to private insurance, and that we count on seniors and insurance companies to work it out somehow. This, they claim, would be superior to expert review because it would open health care to the wonders of "consumer choice."
What's wrong with this idea (aside from the grossly inadequate value of the proposed vouchers)? One answer is that it wouldn't work. "Consumer-based" medicine has been a bust everywhere it has been tried. To take the most directly relevant example, Medicare Advantage, which was originally called Medicare + Choice, was supposed to save money; it ended up costing substantially more than traditional Medicare. America has the most "consumer-driven" health care system in the advanced world. It also has by far the highest costs yet provides a quality of care no better than far cheaper systems in other countries. ...
Medical care, after all, is an area in which crucial decisions — life and death decisions — must be made. Yet making such decisions intelligently requires a vast amount of specialized knowledge. Furthermore, those decisions often must be made under conditions in which the patient is incapacitated, under severe stress, or needs action immediately, with no time for discussion, let alone comparison shopping.
That's why we have medical ethics. That's why doctors have traditionally both been viewed as something special and been expected to behave according to higher standards than the average professional. There's a reason we have TV series about heroic doctors, while we don't have TV series about heroic middle managers.
The idea that all this can be reduced to money — that doctors are just "providers" selling services to health care "consumers" — is, well, sickening. And the prevalence of this kind of language is a sign that something has gone very wrong not just with this discussion, but with our society's values.
In his speech last week, the president renewed his call to raise tax rates on family income over $250,000, and he appears to hold the high ground politically, according to the poll. At this point, 72 percent support raising taxes along those lines, with 54 percent strongly backing this approach. The proposal enjoys the support of majorities of Democrats (91 percent), independents (68 percent) and Republicans (54 percent). Only among people with annual incomes greater than $100,000 does less than a majority "strongly support" such tax increases. ...
There is broad support for keeping Medicare structured the way it has been since it was instituted in 1965: as a defined-benefit health insurance program. Just 34 percent of Americans say Medicare should be changed along the lines outlined in the Ryan budget proposal, shifting it away from a defined-benefit plan. Under that proposal, recipients would select from a group of insurance plans providing guaranteed coverage, and the government would provide a payment to the insurer, subsidizing the cost. Advocates say this approach is more sophisticated than a pure voucher plan.
It is the "cause" advanced in the modern era by President Ronald Reagan and economist Milton Friedman. It calls for further slashing the tax rate for the richest Americans by another ten percentage points, from 35 percent to 25 percent, while enacting a wide range of domestic spending cuts, including phasing out the Medicare health program for the elderly as it has existed since the 1960s.
Under Ryan's plan, senior citizens in the future would have to select a private health insurance policy with the government paying "premium support" worth about $8,000 to the company, thus shifting a heavier, even crushing, financial burden onto the elderly.
And, since Ryan's plan also would repeal President Barack Obama's health reform, which prohibits insurance companies from excluding coverage of "preexisting conditions," senior citizens suffering from chronic illnesses might find themselves unable to get coverage of those ailments and likely consigned to a premature death. ...
Even today, people just shy of Medicare's 65-year-old threshold find themselves either shunned by insurance companies or paying exorbitant amounts. Yet Ryan envisions thrusting Americans over 65 into that same predicament, only worse because they are more likely to have health problems and are less likely to be under a company plan. ...
"For older people the prospect of getting and paying for private health insurance is daunting," Guilloton wrote "For instance, in Connecticut a PPO with a $5,000 deductible would cost a 60-64 year old and spouse between $1,400 and $1,900 a month. And that cost presumes that they either are part of a company group plan or have no pre-existing conditions. ...
Yet, even as Ryan touts his goal of cutting government spending by more than $6.2 trillion over the next decade, compared to Obama's budget, Ryan's plan would still not result in a balanced federal budget for nearly three decades, let alone pay off the accumulated national debt. That's because Ryan would accompany his steep spending cuts with lower tax rates for the wealthiest Americans. And those lower tax rates – based on an ideological devotion to Reagan's "trickle-down economics" and Friedman's "free-market" extremism – have been a principal cause of the debt problem.
Unlike the Affordable Care Act, which mandated that millions of young and healthy Americans purchase insurance with government subsidies, the Paul Ryan plan would instead bring the oldest, sickest, and least profitable demographic to the table. And with the CBO projecting that the average senior would be on the hook for over two-thirds of their health care costs within just 10 years of the plan's adoption -- a proportion that is projected to worsen in the long run --- the government subsidies backing them up may not bring in enough profitable customers to make things worthwhile. ...
Insurers have successfully demanded funding hikes to other programs even as their clients faced far less dire circumstances than projected under Ryan's plan, raising the question of whether Ryan's savings would ever come to pass. Take Medicare+Choice, a private exchange for seniors created in 1997 by the GOP Congress. Under the program, the government paid the equivalent it would use to fund Medicare coverage to reimburse private HMOs instead under the theory that the free market would operate more efficiently and produce better results. Instead, insurers found they were unable to sustain a profit and began pulling out en masse. In 2000, more than 900,000 patients were dropped as HMOs deserted the program, citing inadequate federal backing and a lack of a prescription drug benefit.
"Year after year, the reimbursement rates were cut for these plans, making it increasingly unattractive for private providers to offer plans," one Republican congressman recalled in 2009, adding that for seniors who lost coverage "the consequences were painful and the vocal anger was justified."
That congressman was none other than Paul Ryan. And he put his money where his mouth was in 2003 by voting for President Bush's Medicare law, which replaced Medicare+Choice with the more costly Medicare Advantage and added a pricey prescription drug benefit. The more generous system brought insurance companies back to the table, but ended up spending 14% more per patient than regular Medicare in the process.
"In theory the idea of a more competitive market would have a lot to recommend it," MIT economist Jonathan Gruber told TPM, "But in fact it just simply hasn't worked. We have the example, we've lived it, it's Medicare Advantage, and it hasn't worked"
Saez also found that a considerably larger share of the top income receivers comes from salaries and bonuses, rather than from dividends, rents and capital gains that the very rich also depended upon in the past. In addition, the tax system has become less progressive. Who are the people in the top 1 percent, with incomes of more than $368,000?
Certainly not the small businessmen so routinely touted by our politicians when they discuss tax changes. They are probably CEOs of large corporations, investment bankers, Wall Street traders, hedge fund managers, university presidents, Hollywood stars and famous athletes. ...
It may be debated to what degree the changing income distribution is just or morally justified, and to what degree it may lead to social stress. What is clear is that it affects the current and future performance of the economy. The increased income inequality helped cause the recent financial crises. Excess borrowing by people whose real incomes were declining but who wanted to maintain their living standard most probably would not have happened if incomes were growing in a more uniform manner.
Also, the growing income disparities are prolonging the recession, since aggregate consumer spending is being held back by insufficient incomes of a large segment of the population. Finally, future economic growth is not being helped by the shrinking of the middle class. Historically, income distribution has been more uneven in less developed countries than in rich countries. That implies that as economies grow, new income is spreading more evenly than before.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
If you're poor, not so much. The pall of the recession is suffocating. The unemployment rate is still unbearably high. The Census Bureau reported in September that the poverty rate for 2009 was 14.3 percent, higher than it has been since 1994, and the number of uninsured reached a record high. And the Department of Agriculture has reported record "prevalence of food insecurity."
So in a civil society, which of these groups should be expected to sacrifice a bit for the benefit of the other and the overall health and prosperity of the nation at a time of great uncertainty? The poor, of course. At least that seems to be the Republican answer.
Under the guise of deficit reduction, the Republicans are proposing to not only make the Bush tax cuts for the wealthy permanent, but to reduce their taxes even more — cutting the top individual rate from 35 percent to 25 percent to "promote growth and job creation." And they plan to pay for this by taking a buzz saw to programs that benefit the poor, elderly and otherwise vulnerable.
But the spurious argument that cutting taxes for the wealthy will somehow stimulate economic growth is not borne out by the data. A look at the year-over-year change in G.D.P. and changes in the historical top marginal tax rates show no such correlation. This isn't about balancing budgets or fiscal discipline or prosperity-for-posterity stewardship. This is open piracy for plutocrats. This is about reshaping the government and economy to benefit the wealthy and powerful at the expense of the poor and powerless.
And it's not that the rich haven't already gotten their tax cuts. According to an analysis released Thursday by the Economic Policy Institute, the average tax rate for the top 1 percent of households dropped by about 20 percent from 1979 to 2007, while the average tax rate for all Americans dropped by just 8 percent over that time. However, in just the period from 1992 to 2007, the tax rate on the top 400 households in America — those with an average annual income of nearly $350 million — fell by more than a third. In fact, the tax rate for these supermillionaires is now less than the tax rate for average Americans.
The problems with these liberals' logic are many. First, if the government taxed corporations and the wealthiest individuals more, it could maintain high spending without having to incur huge deficits. One recent calculation showed that if corporations and individuals earning over $1,000,000 per year paid the same rate of taxes today as they paid in 1961, the US Treasury would collect an addition $716 billion per year. That would cut the 2011 deficit by half and likewise its interest costs. Second, consider who lends to the US government. Major creditors include the People's Republic of China, Japan, large corporations and wealthy individuals in the US and abroad. The greater our deficits, the more of everyone's taxes go to pay interest to those creditors. Third, consider the basic injustice of deficits: (1) Washington taxes corporations and the rich far less than it used to in, say, the 1960s, (2) Washington therefore runs a deficit and (3) the US Treasury then borrows from corporations and the rich the money that the government allowed them not to pay in taxes.
In the latest budget deal, our politicians could have tackled the deficit by stopping the flow of these ill-gotten billions to corporations. Instead they cut billions from "wasteful" programs that do "wasteful" things, like create new jobs, drive economic growth, and help the needy and our nation's children. It's Democracy in reverse and it sickens me. ...
We're doing this because we don't buy into the Big Lie: that greedy teachers caused the crash on Wall Street! That the selfish firefighters sent millions of jobs overseas! That pregnant woman, infants, and children are sending us into deficit!
No, it was the big corporations that did this. It was the CEOs and the top 1% of the country. THEY brought on the mortgage crisis. THEY made off with trillions of dollars from our economy. THEY are systematically destroying the middle class. And THEY have bought and sold the very people elected to represent us!
Taxes reveal who we are as a people and what we value. Polls consistently show that majorities of Americans are willing to pay taxes and even have them increased when the revenues are devoted to their priorities, such as education, health care and deficit reduction. The public's support is greatest for raising taxes on the affluent, but it extends to hikes tied to popular programs such as Social Security and Medicare. ...
I told the truth in 1984. "The American people will have to pay Mr. Reagan's bills," I said in my acceptance speech at the Democratic National Convention in San Francisco. "The budget will be squeezed. Taxes will go up... It must be done. Mr. Reagan will raise taxes, and so will I. He won't tell you. I just did."
I lost the election, but I won the debate. Reagan ended up increasing taxes in 1984, 1985, 1986 and 1987 to mend the budget and tax systems. ...
It makes sense to seize today's bipartisan support for cutting tax exemptions as a way to increase revenue. I also believe that we must eliminate Bush's tax cuts for the rich. Where is the decency in cutting taxes for those making tens of millions while middle America struggles? This is a fight over fairness that Americans can understand.
Republicans are not risk-free in the tax debate. GOP politicians promise to reduce the deficit, but the indisputable record of Bush shows that his first priority was cutting taxes for the super-rich, even when that brought higher deficits. This record has bred distrust among the conservative base, including tea party sympathizers. One of Reagan's domestic policy advisers, Bruce Bartlett, wrote a book in 2006 titled "Impostor," decrying Bush's phoniness on deficits and spending. Talking about shrinking deficits while cutting taxes for the the wealthiest does not attract conservative populists or swing voters.
The result of this purchased public myopia is that we are left with an absurd debate over how deeply to cut teachers' pensions and seniors' medical benefits while preserving tax breaks for the superrich and their large corporations. At a time when 10 million American families will have lost their homes by year's end, when $5.6 trillion in home equity has been wiped out, when most Americans face steep unemployment rates and stagnant wages, a Democratic president is likely to compromise with Republican ideologues who insist that further cuts in taxes for the rich is the way to bring back jobs.
Let's deal right off with that canard. There is currently no shortage of corporate profits or excessive executive compensation to explain away the failure of the private sector to create jobs. On the contrary, as The New York Times reports, "In the fourth quarter, profits at American businesses were up an astounding 29.2 percent, the fastest growth in more than 60 years. Collectively, American corporations logged profits at an annual rate of $1.678 trillion." And to add insult to injury, the top executives, who seem unable or unwilling to create jobs or adequately reward their workers, have increased their own compensation by a whopping 12 percent over the previous year, setting the median pay at $9.6 million per year for those in control of the leading 200 companies. The Times adds that "C.E.O. pay is also on the rise again at companies like Capital One and Goldman Sachs, which survived the economic storm with the help of all of those taxpayer-financed bailouts."
Lost in this faux debate is the reality that our debt now looms so large because the government had to bail out many of those same corporations, quite a few of which, like General Electric and AIG, pay no taxes and have no problem paying truly obscene amounts to their top executives. GE CEO Jeffrey Immelt, whom President Barack Obama named chairman of the Council on Jobs and Competitiveness, is making as much as he did before the recession hit, a recession that his GE Capital division did much to cause with its reckless loans. AIG, saved with a government infusion of $170 billion, has just lavishly rewarded its top executives but has provided no relief for the homeowners ripped off by its phony credit default swaps.
Continued tax breaks for the 1 percent of the population that controls 40 percent of the nation's wealth will do nothing to restore the confidence of the other 99 percent of consumers who are suffering so. This at least Obama seems to understand, but count on him to betray his own better instincts by once again following the advice of his treasury secretary and the Wall Street crowd that contributed so lavishly to his first presidential campaign and whose support he seeks once again.
For what it's worth, polls suggest that the public's priorities are nothing like those embodied in the Republican budget. Large majorities support higher, not lower, taxes on the wealthy. Large majorities — including a majority of Republicans — also oppose major changes to Medicare. Of course, the poll that matters is the one on Election Day. But that's all the more reason to make the 2012 election a clear choice between visions.
Which brings me to those calls for a bipartisan solution. Sorry to be cynical, but right now "bipartisan" is usually code for assembling some conservative Democrats and ultraconservative Republicans — all of them with close ties to the wealthy, and many who are wealthy themselves — and having them proclaim that low taxes on high incomes and drastic cuts in social insurance are the only possible solution.
This would be a corrupt, undemocratic way to make decisions about the shape of our society even if those involved really were wise men with a deep grasp of the issues. It's much worse when many of those at the table are the sort of people who solicit and believe the kind of policy analyses that the Heritage Foundation supplies.
So let's not be civil. Instead, let's have a frank discussion of our differences. In particular, if Democrats believe that Republicans are talking cruel nonsense, they should say so — and take their case to the voters.
A decade and a half after Clinton and Gingrich, Republicans are once again trying to privatize Medicare, gut Medicaid (by turning it into block grants), cut education spending and regulations that protect the environment, and give yet another round of tax cuts to the rich. They continue to insist—despite years of evidence to the contrary—that market forces will lower health-care costs and that tax cuts will create economic growth and lift all incomes. "Ideology makes it unnecessary for people to confront individual issues on their individual merits," the late Daniel Bell wrote. "One simply turns to the ideological vending machine, and out comes the prepared formulae." Ideology knows the answer before the question has been asked. ...
The impetus for Obama's return to politics was the budget plan of Representative Paul Ryan, the doe-eyed Wisconsin Republican who chairs the House Budget Committee. The Ryan plan, which claims to cut the deficit by $4.4 trillion over the next decade (and was passed by the House last Friday, along party lines), contains every Republican dogma about political economy, and Obama, in his speech, pointedly called them out, while Ryan sat seething in the audience: "There's nothing serious about a plan that claims to reduce the deficit by spending a trillion dollars on tax cuts for millionaires and billionaires. And I don't think there's anything courageous about asking for sacrifice from those who can least afford it and don't have any clout on Capitol Hill." Obama then offered a counter-plan, vague on details, that would combine spending cuts and tax increases in roughly equal measure, imposing cost controls on health care but preserving entitlement programs, while claiming to arrive at roughly the same savings as Ryan, but guided by vastly different principles. ...
All this suggests, not for the first time, that the President might be a better tactician than his critics. But outmaneuvering his political opponents is not the same thing as achieving a country that, as he said last week, "values fairness." The most persistent and corrosive feature of American life over the past three decades is income inequality: it rose steeply during Clinton's first term, and, despite his budget victory, it continued to go up in his second. Obama often discussed inequality during the 2008 campaign, and his health-care plan represented the most serious effort in a generation to reverse it. But last week he mentioned it only in passing. As he knows, the reform stage of his Presidency lasted less than two years. We have now entered the period of rearguard defense.
General Electric, which was bailed out by taxpayers and which stored so much of its profit abroad that it paid no taxes for the past two years, was forced to tighten up, but while cutting its foreign workforce by 1,000 it cut a far more severe 28,000 in the United States. Jeffrey Immelt, the CEO of GE, recently appointed by President Barack Obama as his chief outside economic adviser, admits that this does not involve poorly paid work that Americans don't want, but instead prime jobs: "We've globalized around markets, not cheap labor. The era of globalization around cheap labor is over. Today we go to China, we go to India, because that's where the customers are." ...
Of course it will be argued that multinational corporations have the right to arrange their business as they see fit in order to maximize profit. But if that is the case, do beleaguered American taxpayers have to foot the bill? When those corporations run into trouble overseas because of financial hustles or hostile locals and need the diplomatic and military might of the U.S. government to protect their interests abroad, it is again the U.S. taxpayer who must pay to maintain this new world order. It is an order, as we see with three current wars and a military budget that rivals Cold War highs, that is contributing mightily to the U.S. government debt. More than half of all discretionary spending, the dollars that the Republicans in Congress now want to take out of needed domestic programs, is accounted for by defense spending. That defense spending to support a massive network of military bases and deployed weapons and troops is key to establishing an order in which the interests of American corporations are attended to. If the companies don't feel that way, let them operate under the flag of Liberia or the Cayman Islands.
Big government, the devil that Republicans love to inveigh against, is big precisely because it is so active in so many costly ways in serving the interests of our biggest corporations. Corporate lobbyists attest with their every breath that big government and big business are bedmates in a bountiful venture that impoverishes the rest of us. It is time to admit that we are, in practice if not surface appearance, close to the Chinese communist model of state-sponsored capitalism that sacrifices the interests of ordinary workers, be they in the public or private sector, for the exorbitant profits of the super-rich. It is the corporations that need big government to protect their interests, and one would hope they would be willing to pay for the services that their government so faithfully renders to make them obscenely wealthy as it studiously ignores the well-being of the rest of us.
Republican House Budget Committee Chairman Paul Ryan sought to eliminate any confusion on this point. He proposed, and last week the Republican House approved, a budget bill that will transfer tens of trillions (yes, that is "trillions" with a "T") of dollars from ordinary working people to the insurance industry, the pharmaceutical industry and generic rich people from any industry. This money will come in the form of higher payments by seniors in their old age for health insurance and another round of tax breaks for the country's richest people. ...
The main reason that retiree health care costs will increase is that the private sector is less efficient at delivering care than the existing Medicare program. The Congressional Budget Office (CBO) projects that, under the Ryan plan, the increase in the cost of buying Medicare equivalent policies would be more than $30 trillion over Medicare's planning horizon.
This additional waste comes to almost $100,000 for every man, woman, and child in the country. It is approximately equal to six times the size of the projected Social Security shortfall. This waste is a direct transfer from retirees to the insurance industry and the health care industry. ...
The tax breaks would be real money for the people who get them. For example, Representative Ryan's tax breaks could give Lloyd Blankfein, the CEO of Goldman Sachs, another $3 million a year based on his $20 million annual paycheck. That's the equivalent of more than 2,600 monthly Social Security checks.
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