To replace FTEs, or full-time employees, IBM reportedly is looking to hire contractors and temps, the Reuters news service says.
The goals: Cut costs and speed up project work.
“Internally the restructuring has been dubbed ‘Generation Open’ and staff that work for IBM on projects but are not full time are called ‘liquid players,’ according to an internal document seen by Reuters.”
So reads the news service report.
“With the move, IBM aims to accelerate the speed at which it completes projects by 30 percent and reduce costs by a third, according to the document.”
Reuters broke its story after the German newspaper Handelsblatt reported IBMers in that country faced “massive upheaval” with the Big Blue work force there being sliced 40 percent to 12,000 from 20,000. Bloomberg and Dow Jones picked up on the Handelsblatt report.
The trend to reduce workers in the U.S. and Western Europe in favor of adding jobs in lower-cost countries such as India, China and Brazil, continues.
Here are numbers for U.S. workers as compiled by Alliance at IBM, a union seeking to represent Big Blue employees (2011 and 2010 are estimates by Alliance since IBM no longer reports jobs numbers by country):
Earlier Hints: Code Words for Cuts:
Anyone paying attention to Chief Financial Officer Mark Loughridge heard the first hints of big cuts when he discussed another year of strong earnings for IBM last month.
“Now like all years, we're going to acquire and we're going to divest businesses,” he said. “We're going to invest in market opportunities and we're going to drive productivity where it's more challenging.
“We're going to rebalance our workforce to opportunities and skills aligned with our key investments and hire to drive in those growth initiatives.
“When you look at workforce rebalancing, I think it should be roughly consistent with what we've seen over the last four years. More specifically, I think, it would be more like 2010. Once again, if there's a charge associated to that, it would be offset above net income. But you put that all together, and I think we have a good hand as we enter 2010.”
IBM laid off some 10,000 people in the U.S. in 2009 and several thousand more in 2010.
Last year, some 100 people in the Triangle were cut as part of a wider restructuring.
In the January conference call (read transcript here), one analyst asked the CFO directly about “productivity enhancements” linked to offshoring.
“I know you spoke to productivity enhancements, but I'd like to, a, better understand what that is,” said A.M. Sacconaghi of Snaford Bernstein & Co. “Is that just a code word for labor migration, offshoring as a result of the headcount reductions you did at the beginning of the year, or what does it mean?”
The CFO responded with talk about “pull spend and drive productivity” and “structural takeout.”
“We're going to continue to work to spend reductions and productivity, much of that delivering within our services segment and drive value add in the customer engagement with assets, research and value-add approach,” he added.
IBM calls layoffs “resource actions,” but layoffs are layoffs no matter what kind of nice phrase the company uses.
As for “structural takeout” – watch out.
Big Blue likes to say that it is expanding its overall work force and hiring. True. Numbers are well above 400,000. But what IBM no longer discloses is how many people it employs where. By hiding that fact (it says for competitive reasons), Big Blue escapes harsh criticism about offshoring and outsourcing jobs.
"This is confirmed by members of the highest governing bodies of the IBM," the newspaper said. "Some leading members expect a real clear-cutting." "In the end it may be that only 12,000 of the 20,000 jobs currently remain in the country's society," said a member of IBM's leadership crew, according to a Google translation of the German text.
Asked about the report, IBM told the newspaper: "Given the competitive nature of our business, we discuss the details of our planning work is not public." ...
To this end, future client projects, such as advice on the modernization of enterprise software are increasingly performed in place of previously free of permanent staff. IBM wants to advertise on Internet sites such projects, where the former can then apply permanent IT developers to the job. Not the work disappears, but the current form of fixed workplace. Should the project succeed, it will be repeated in other national companies.
It hardly seems like your rating matters in many cases. Almost my entire department got laid off at the same time in May 2010. None of us were 3 performers. Two people in the department got kept and one of those kept (and still there) was the one "most likely to be voted a three performer" by his fellow co-workers, though I don't know what his actual rating was.
But we supported a large customer who was promised that the work we did for them could be done much more cheaply in India. The customer was happy with this, but asked if they could pick a few people to be kept. IBM told them "you can't pick a person but you can pick a *function* to be kept). In our department we had teams, 2 people supported CICS and MQ, 2 people supported DB2, 2 people supported DASD, 2 people supported performance and capacity, 4 people supported z/OS. The fellow we all though was a clear three performer was paired with the one guy in the department who was a clear one performer.
The customer didn't want to lose him so selected his function to stay, which brought the low performing guy along with him, and they are both still there and the rest of us are unemployed. Well not totally. One person in the group has found a job. At this point I think only one of us is really looking - the one who was most screwed, being laid off a month before his 54th birthday, which would have made him eligible for the 1-year bridge - so he gets no FHA, etc. and was just diagnosed with heart problems two months before we got the axe - and his TMP coverage and COBRA are all gone now, and still no job in sight.
Cons: There are a lot of IBMers who work from home. That's fine, but it is thing of the past. If you get into one of their Delivery Centers, do not expect to be allowed to work from home. Due to a new "process" and "framework", all work now should be done inside those centers (sort of "team work" or "team work environment"). So to summarize the Columbia (Missouri) delivery center:
Advice to Senior Management: Have a box for suggestions. I bet you a lot of people would ask for another catering service and would love to have free coffee. We are IT folks, after all, and we drink coffee a lot.
Cons: IBMers are typically overworked providing services that exceed 40 hours a week including nights and weekends that are just expected. Balancing personal and work life can be difficult especially since the many positions are work from home. Additionally, collaboration becomes very difficult in this position since everyone must engage in conference calls.
Advice to Senior Management: IBM leadership should make more of an effort to use collaboration such as team meetings where at least once a quarter the team leads and managers can physically meet in a conference room to discuss the customer's risks, issues and new services so that there is interaction providing increased productivity and efficiency.
Cons: No job security for US employees. Pay raise and bonus for technical engineers are almost nonexistent. If you are technical person be prepared to be abused especially if you are working in the US. Long hours with little or no recognition for work is standard practice. Especially in the software business unit. Technical growth opportunities just do not exist. Every year middle and upper management is looking to see how much of the work done in their groups/orgs in the US can be shipped and outsourced to India or China. The companies financial profits result in bonuses and raises only at the top.
Advice to Senior Management: Invest in producing and manufacturing in the US. The company has totally turned to a huge global services company. The upper management has no vision in establishing a manufacturing base in the US. They only seem to manage for the immediate quarter results, long term impact on the company is not something they serious consider.
Cons: Moving away from employee caring company to employee sucking company. Believe me, IBM US is still a great place to be in. The subsidiary companies like IBM India, rather cost center like IBM India is a glorified body shopping shop for employees they ship from India. After few years you will realize what damage they did to your career. Compensation - That remains pathetic in India and US (IBM India only). Health Benefits - They have increased the insurance contribution from employee to 100% in US and in India where insurance premium is to be paid by employer as per law, they have managed to reduce the coverage to 3 lakh (family) which in today's India is nothing.
Advice to Senior Management: Start caring about employees and stop treating them like machines to churn dollars.
"At IBM for example, we developed something called Personal Learning Accounts, which are essentially 401(k)s for education. This program allows employees to contribute money to an account earmarked for any kind of learning they feel will benefit their careers. And IBM matches 50 percent of those contributions, giving employees additional funds to pursue new skills and expertise. IBM is currently working with members of Congress to sponsor a bill that would encourage other companies to provide similar programs."
Gee, seems all we hear is about the worker skill gap and the inability of Americans to compete. Record profits quarter and quarter and IBM cuts education? Working with Congress on this?? Really?????
Jim Kerick, a client support engineer at NetApp in Research Triangle Park, has a salaried position and doesn't put in a lot of extra hours. But Kerick still is worried about the revision. He says he's been laid off three times because of industry ups and downs, and he knows no one making a living in computers and technology can count on staying in the same job forever.
When he started working in the industry in the 1990s, he worked as much as 90 hours a week. He used the overtime he earned to make the down payment on his Garner home. He's not eager to work such long hours again regularly without being compensated for it. "I'm not an indentured servant," he said. "I'm allowed to have a life."
Employers are seeking the changes as class-action lawsuits by employees seeking back pay for overtime and missed breaks have risen dramatically over the last decade. In November, California-based Oracle agreed to pay $35 million to settle a class-action suit brought by a group of California employees who said they were wrongly denied overtime pay. IBM, which is one of the Triangle's largest employers with about 10,000 people, agreed to pay $65 million in 2006 to settle claims that it denied overtime to 32,000 computer technicians. ...
Computer giants such as IBM have invested thousands of dollars lobbying politicians to clarify labor laws that would allow them to give their computer employees more flexible work schedules, but also to stop paying them overtime. ...
IBM did not respond to requests seeking comment, but Randy MacDonald, a senior vice president of human resources for the New York-based company, told Congress in July that employers have experienced an explosion in litigation. Lawyers, he said, "literally troll" for companies to sue by taking advantage of outdated provisions in the labor laws. He said the classifications must be clarified and also updated to be more reflective of employees' training and income. In today's global economy, companies such as IBM have to think about business in the context of labor costs, he said. ...
Still, it's a begrudging sort of gratitude. John Kochis, a Raleigh software engineer who has been working as a contractor, sees the legislation as part of a corporate trend toward marginalizing workers and devaluing wages. "During this recession, the companies got profitable by squeezing their people longer and harder," said Kochis, who is currently between assignments. "It's an ongoing, age-old saga of management trying to exploit the human beings that make up their labor pool."
Such data is closely guarded by some of the country’s biggest multinationals, including Pfizer, Apple and IBM. Public filings by these firms disclose their total number of employees, but don’t specify where those jobs are located. Meanwhile, other data shows that multinationals overall cut 2.9 million jobs in the United States and added 2.4 million overseas between 2000 and 2009.
The Outsourcing Accountability Act would require firms with revenues over $1 billion to report how many employees they have in the United States and break them down by state; jobs abroad would have to be broken down by country. Firms would also have to track the percentage increase or decrease of these figures from the previous year. ...
Some of the companies that keep these numbers secret have lobbied for tax breaks in the name of job creation, as reported by The Washington Post last August. But without firm-specific data on where jobs are located, it can be tough for lawmakers to track which companies are adding jobs in this country.
The fee disclosures are required by new Department of Labor rules and could provide shocking new information to 401(k) participants. A recent AARP survey found that 71 percent of 401(k) participants think they don't pay any 401(k) fees at all. "I think some people will be surprised about how much some of the investment options charge," says Mary Ellen Signorille, an employee benefits attorney for AARP. "Some plans charge each individual basically an account maintenance fee. The changes are perfectly legal, but some people may not have known they were being charged the fee." Among survey respondents who know how much they pay in fees, the most common fee range is between 1.1 percent and 5 percent of their account balance annually.
While the broader unemployment rate dropped to 8.5 percent in December, reaching a three-year low, few companies outside of technology have as voracious an appetite for workers. In the software and services industry, 74 companies with more than $100 million in market value expanded their workforce by at least 10 percent. That was more than any other industry group measured by Bloomberg. ...
Apple Inc., Google Inc., Amazon.com Inc. were among the companies that increased their workforce by at least 50 percent in the past two years, Bloomberg’s data showed. The growth has prompted Silicon Valley companies to consider more people from nontechnical backgrounds and ramp up recruitment everywhere from Wall Street to Seattle. Workers who would have shied away from the volatility of 1990s-era startups are seeing the technology industry as a haven of stability.
What are the causes of postponed retirement? Many retirement hurdles stem from the newer employer-sponsored retirement models that are based on a defined contribution plan, such as a 401(k), says Mark Davis, senior vice president of CAPTRUST Financial Advisors, a financial advising firm in Raleigh, N.C., and a member of the American Society of Pension Professionals & Actuaries. Past generations funded their retirements with defined benefit models, but baby boomers are the first population segment to experiment with defined contribution plans, which first showed up in the late 1970s and became prevalent in the 1980s. Given this newer model, there still are questions as to how effective defined contributions will be for lasting retirement. ...
Health care is another issue that is causing many baby boomers to delay retirement, Glickstein adds, especially for those who are under the age of 65 and not yet eligible for Medicare. For pre-Medicare retirees, although 80 percent of employers offer a pre-Medicare subsidy, 51 percent of those employers have a subsidy cap, according to the Retiree Health Survey, conducted jointly by Towers Watson and the International Society of Certified Employee Benefit Specialists. Sixty-three percent of respondents report that 2011 plan costs surpassed the cap, and another 15 percent of respondents believe those costs will top the cap within two years.
Inflation is a tax, even if the inflation rate is low. The Federal Reserve Board Members and Federal Reserve Bank Presidents are projecting long run inflation to be 2.0 percent, although this year the rise is expected to be slightly lower. Combine the Fed’s inflation target with their intention to leave short-term interest rates at rock-bottom levels through late 2014, and the result is an onerous phantom tax on the owners of CDs, money market funds, bonds, and bond funds.
People who own fixed income investments in the U.S. are disproportionately retirees and persons nearing retirement. Thus, the Fed has created a “retiree tax.”
Slowly but surely, across the country, Republican governors and state legislatures are making progress in their war against labor unions, especially ones that represent public employees. Just yesterday, there was bad news from two states.
In Indiana, Gov. Mitch Daniels signed a bill making Indiana another “right to work” state, which is one of those slogans, like “pro-life” and “family values,” that sounds unobjectionable, but isn’t. That law is relatively simple: It prohibits labor contracts from requiring workers to pay union dues. The spin is that this is better for everyone. The truth is that it is not only bad for labor but also bad for the economy.
Unions will reduce a company’s profits somewhat, because they get higher wages for workers. But economists have found that unionization has a minimal impact on growth and employment. Six of the 10 states with the highest unemployment have right-to-work laws in place. North Carolina, which has the lowest unionization rate in the country, 1.8 percent, also has the sixth highest unemployment, 10 percent. ...
Unions have over-reached in many ways, clinging to wage-and-benefits agreements that are simply untenable in today’s economy. But they are fundamental to maintaining fairness for workers. And governors in many states, including New York, have managed to get concessions from public employee unions without outlawing them.
But what is the value of this credit? And does it make sense for Congress to restore it?
The research credit has been in existence for over 30 years. During that time, not one company has announced an invention or product that was produced as a result of the R&D tax credit. Unlike government subsidies that have gone to the Defense Advanced Research Projects Agency, the National Science Foundation or the Energy Department, we taxpayers have nothing to show for our investment in the research credit.
American media employ a disproportionately large share of pundits who either deny or defend the riches accruing to America’s "job creators”—ranging from the outraged George Will to the sly discounting of the problem by NPR’s Adam Davidson. They are accompanied by a chorus of leading voices—Thomas Friedman and Fareed Zakaria, to name just two, who gloss over the inequities caused by global corporate supremacy.
Even the supposedly liberal pundits—E.J. Dionne, Howard Fineman, Jonathan Alter, Ezra Klein and Richard Wolffe, among others—are remarkably confined in their discussions of inequality. They almost never refer to the 35-year campaign of union-busting by Corporate America, in which 90 percent of union organizing drives are greeted with high-pressure resistance from management, according to Christopher Martin's 2003 book on media coverage of labor, Framed!. ...
Yet the liberal politicians and media voices who should be challenging the role of free-trade and union busting in driving down wages and increasing inequality have almost uniformly remained silent. While liberal on a wide variety of issues, pundits like Dionne and Wolffe continue to adhere to the free-trade faith without examining its consequences in lost jobs, depressed wages and devastated factory towns. ...
Without any audible and visible pressure to aggressively move to lift wages and control the export of jobs, Obama will simply fall back on pleading with executives to engage in “insourcing” jobs, and then exaggerate the importance of a minor, perhaps inconsequential, trend. But most of the public, wary of free-trade agreements, knows that the trickle of jobs returning to the U.S. is far smaller than the torrent headed to China and Mexico, a torrent that continues to decimate the families and communities that were once part of the nation’s strong industrial base.
The highest pension, $272,892, is paid to a retired four-star officer with 43 years of service, according to the Pentagon. Before the law was changed, the typical pension for a retired four-star officer was $134,400. The top pay for an active-duty officer is capped at $179,900; housing and other allowances boost their compensation an additional third. ...
The Project on Government Oversight, which looks at waste in government, said the pensions were too much. "At a time when the Pentagon is struggling to pay for the men and women who actually fight wars, and is shrinking the size of its fighting force and civilian employees, it doesn't make sense to nearly double the size of a retired four-star's pension," said Nick Schwellenbach, director of investigations for the group.
We all know the sad funding state of Social Security and Medicare. We’ve seen traditional pensions swapped for less reliable 401(k) plans. AMR proposes just such a swap. Last year, sponsors filed to terminate 1,425 fully funded pension plans. ...
So the backdrop isn’t pretty. Still, AMR and other pensioners under PBGC care are in no immediate danger—unless they are among the 15% whose pension benefits exceed PBGC limits. On average, pensioners who exceed the PBGC limit end up seeing their benefit slashed by 28%.
Later has come, but there’s been a change in that plan.
American Airlines, whose parent company filed for bankruptcy in November, said this week that it wants to terminate its four pension plans for 130,000 workers and retirees and ask the federal government’s Pension Benefit Guarantee Corp. to bail out its unfunded pension obligations to the tune of $9 billion. It would be the largest PBGC bailout ever. Without the congressional relief, the gap would have been smaller, the PBGC said. ...
“American and other carriers have repeatedly asked Congress to give them funding relief in the last six years. More than $2 billion was diverted from their pension funds to their bankruptcy war chest,” Josh Gotbaum, director of the PBGC, said Friday. “In effect, the Congress of the United States and the employees of American Airlines provided half of the money to sustain American in bankruptcy.” ...
The PBGC’s Gotbaum, a former investment banker, spent two years as bankruptcy trustee for Hawaiian Airlines, ultimately restructuring the company, repaying creditors and preserving defined benefit pensions.
“We know that other airlines have successfully restructured, preserved their jobs and kept their pension plans. We don’t see why American can’t, too,” Gotbaum said Friday. “We hope that before American takes the drastic action of terminating the pension plans covering 130,000 American employees that it tries hard to find an alternative and shows the world that there is no other alternative.”
“This is not a case of runaway labor costs. This is a case of poor management,” Jamie Horwitz, spokesman for the Transit Workers Union, said. He pointed to infighting among top executives and the bankruptcy filing’s revelation that the airline bought a $30 million London home for Tom Horton, who recently became the company’s chief executive. “I’m a little bitter,” said TWU International President James C. Little, who had just negotiated concessions and was about to bring them to a vote of the union’s 26,000 American workers. “I’m very frustrated at American’s going to go to court and use the bankruptcy process to terminate the plan.”
IBM’s shift in workers is not about skill or job rebalancing. Sam is replacing older American workers with low wage college hires, as well as contractors and foreign workers who are typically young, male, and without benefits. The global employee count is almost 500,000, but the decimated American count of 105,000 in 2009 is now estimated to be about 98,000.
Sam is not retraining Americans. He says IBM spent $600 million training and retraining “and people can’t move up the skill ladder. So we have to replace them. I think it appropriate and fair. You give them the opportunity to reboot and help them transition. But if they don’t do it, then they don’t do it.” This rationalization is disturbing and untrue. It shifts responsibility for being fired to employees saying many tens of thousands of Americans are not able to learn.
Instead, while the HR team and written performance objectives require employees to create skill plans, which are used as a determinant as to who is fired, the business end for years has told us there is no longer a training budget. Skill plans and mandatory conference calls that detail improved, sophisticated career path programs are ignored and replaced by the rare approval for a class or conference for a few employees. Paranoia to cut costs is so strong my manager repeatedly chastised me for spending $30 on a company course I had thought was free. The truth is, IBM would not train Americans already targeted for replacement because they are considered expensive – the reason for offshoring so many positions they want filled by low wage workers. The flood of layoffs attests to this. Many laid off employees are required to train their foreigner replacements to do their job. This demonstrates they have the skills.
Then, it does not matter what skills an American has.
IBM employees typically find their next project by applying to internal job posts. “Americans need not apply” seems apt. An email reply to an application for a job in my neighborhood stated that the first group considered is foreigners. It reads, “The cost difference is too great. IBM India may not have visa ready resources with the specific skills, so many times U.S. resources do fill seats”.
I rebooted, Sam, and spent my money and time aggressively building skills. I was ambitious enough to be certified in two IBM professions. I became an IBM Advisory Project Manager and was PMP certified, one step from being a Sr. Project Manager. I became a Master IT Specialist. My performance reviews were consistently above expectations. I graduated summa cum laude. But no executive mentored me and provided opportunities for advancement or transition in career path. Nor was I offered a demotion to stay employed. I was in the wave of mass layoffs in 2009. It was especially nonsensical when a colleague, who was recently promoted and had the highest performance rating, got the call saying he was in the layoff. He had just received a contract extension on a customer account and was making money for IBM. Neither the IBM account executive nor client knew this would happen. This is not unusual.
I was one of the few who found a posted position that could keep me employed. I saved the chat script with the IBM manager saying she wanted me for this internal job under the IBM CIO office. Headquarters denied me this position saying it was marked to be offshored. An American expert in a twin job for years lost his job for the same reason.
Sam, your layoffs are mean-spirited robbery. The last work day is 4 days or so before month’s end so we lose a week of earned vacation pay. IBM’s “stealth” layoffs skirt the Warn Act with small numbers at many locations on different dates. Instead of 60 days notice and pay, we get 30. This unfairly gives IBM a massive cost savings as we are kicked rudely to the curb.
Perhaps IBM will slow down throwing away American employees like yesterday’s news with the new generation of college hires. They will not saddle IBM with costly benefits because employees now largely shoulder the funding and risk. Or will cheaper foreign and contract workers replace them after a few years of salary increases and aging skills? As a nation, the least we can do is stop subsidizing companies with tax break rewards for offshoring our good jobs.
My PBC rating did not change despite my going above and beyond the call of duty and donating my entire summer to a project that made the customer extremely happy. I met all of my goals and exceeded in some areas. I know of at least a few people who are extremely unhappy with their PBC ratings this year. I don't think I could ever match the amount of time and dedication I put into that project so now I am left with a sense of disappointment and bitterness with the entire process.
I'm not playing 'poor me' but simply have taken off the rose colored glasses and realized that the cards are indeed stacked against the US worker and it is but a matter of time before that Friday afternoon when your manager pings you and asks if you can "talk". Everyone I work with is in survival mode. We are all just putting our heads down and doing our work. It is not supposed to be like this. The customer is unhappy. They want back what they had. When they had a person/team behind their account who they could call and reach out to. Not opening a ticket that gets dumped into a queue that some boob halfway across the globe will take 3 days to figure out and complete.
I suggest everyone that is on here reading about the cuts and the injustice being served to us...join and see if we can make a difference. To me it is worth $10 a month. Good luck everyone. -DisappointedIBMer-
How can any of you stay at this company and not join the union? By your inaction, you support their strategy of shedding American jobs, and weakening the American jobs that remain with them. By your complacency, you tacitly approve of what they do. By your silence, you aid and abet the destruction of your, and your fellows' jobs. -irRational-
Just joining and paying dues is not enough, if you want the union to grow and be able to push back against IBM and its image in the public eye. Reveal the practices of executive management. Expose their lies to people inside and outside IBM. Throw their policies back in their face...but do it all within the law and within the rules of union organizing. Don't know all those rules? Ask an Alliance staff member. They know the rules, and they know what IBM doesn't like but can't do anything about.
Once you begin to act and speak as a collective voice, the power of that action begins to take effect. I'm a union member and I know this is true. 45,000 CWA Verizon workers did just that, last year and Verizon caved in and came back to the bargaining table.... Yes, it's true that CWA Verizon union members already had a contract, but the point is that they acted together and demonstrated to Verizon that their strength and skill together was greater than executive management's stubbornness. Get busy fighting for your job, or get busy losing it. -Tyler Durden-
PR means to create a favourable opinion in your local environment. Further tools that the PR departments use are pre-wirtten articles that go to the media at the same time as they pay for adds, positive reviews in e.g. GlassDoor and more things of this kind. Is it ethical to manipulate in this way? I wouldn't thinks so but that doesn't matter for a company that needs to keep the promises of the agenda 2012. So here the question is, do they only post job openings or are they really hiring in Miami, NYC, ... -anonymous-
Finally, she learned that fighting for her life was not her only battle or maybe even her toughest. When she finished her chemotherapy in December, she was fired. “Due to changes in business operations,” wrote her employer of more than six years, “We can no longer hold your position open.” ...
The crisis in American health care is not limited to hospital emergency rooms where uninsured people wait for care. It also is found in a neat, three-bedroom house in Dumont, N.J., occupied by a widow who worked full time, raised two kids and likes to get her nails done occasionally.
In less than a year, Giordano lost her health and her job. Now, she’s afraid she’ll lose her good credit and her health coverage. ...
Giordano had health insurance throughout her illness. She didn’t have to beg for treatment and was not denied it. She loves the surgeon and oncologist and nurses whose care, she hopes, will give her many more good days with her first grandchild, born in July. But she may be ruined financially. In this country, people can go broke if they get sick.
Overall, the study found that individuals in high deductible plans did tend to delay care at a greater rate than those in more traditional plans. But even more interesting was who was delaying the care: In families where the child had a chronic condition, the healthier adult tended to be the one reporting holding off. For those with an unhealthy adult, however, it was the opposite: Care for children got delayed. These effects were even more significant for lower income families, as you can see in the chart above, tended to delay care at higher rates.
Workers, meanwhile, are shouldering more of that burden. Their share of annual premiums increased by 63 percent over the same period. In 2010, employee premiums for family-plan coverage averaged about $3,700, up from roughly $2,300 back in 2003. As a result, “many working families have seen little or no growth in wages as they have, in effect, traded off wage increases just to hold onto their health benefits,” the report found.
What’s more, employees are paying more for less, because of higher deductibles — the amount workers pay out of pocket before coverage kicks in. The average family deductible nearly doubled over the seven years studied, to almost $2,000 in 2010.
But it gets even weirder from there. Now the insurance industry is trying to kill the idea of even giving you a choice of a public option. Who could be against the idea of giving you a choice of either keeping your existing health insurance, or having the option of a government-run insurance plan (especially to people who have been turned down for insurance)? We are talking about something like Medicare, but which would be available to all those people that private insurance companies refuse to cover. If we can’t have the single-payer system we want, could this be a reasonable compromise?
But like a jealous lover, the insurance industry doesn’t want you to be able to get health insurance from anyone, even if they turn you down! Take the recent argument from Senator Chuck Grassley (R-Iowa). Grassley argues that a public insurance option would be so popular — that people would prefer it so much over private insurance — that it cannot be permitted. The private insurance industry is so important (at least to his campaign contributions) that he would prefer that people die rather than give them the choice of a public plan!
Equally important contributors to our high health spending, and probably more so, have been two other factors.
The first is the much higher administrative overhead costs loaded onto the American health system. David Cutler and Dan Ly, both of Harvard University, illuminate this proposition in their recent paper, “The (Paper) Work of Medicine: Understanding International Medical Costs,” in which they compare health spending in Canada and the United States.
Earlier, in a 2003 paper, “Costs of Health Care Administration in the United States and Canada,” Dr. Steffie Woolhandler, Terry Campbell and Dr. David Himmelstein estimated that in 1999 total administrative costs of health insurers and all other parties in health care, save patients, accounted for 31 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada.
A second major factor accounting for high health spending per capita in the United States is the significantly higher prices Americans pay for virtually all health care services and products.
My thesis on this issue — expressed in the title of my paper — is that these much higher prices are the product of a deliberate strategy, hashed out in our political bazaars between the supply side of health care and state and federal legislators, always to keep the payment side of our health system fragmented and relatively weak vis à vis the supply side of health care.
The Georgia plan features multiple tax breaks to expand the use of Health Savings Accounts tied to high-deductible insurance plans. CHT claimed it would reduce the number of uninsured Georgians dramatically, but instead, the percentage of Georgians without insurance has substantially increased. In fact, since the law's enactment, the ranks of the insured have risen more rapidly in Georgia than in the rest of the South and in the nation as a whole.
These findings are relevant to ongoing debates over how to cover the uninsured. Not only Newt Gingrich, but also Presidential candidates Mitt Romney and Rick Santorum, as well as conservative policy organizations like the National Center for Policy Analysis, have called for repealing the Affordable Care Act and expanding Health Savings Accounts as a key part of the alternative.
"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.
There’s no clearer example of the collusion between government and corporate finance than the Citicorp-Travelers merger, which — thanks to the removal of Glass-Steagall — enabled the formation of the financial behemoth known as Citigroup. But even behemoths are vulnerable; when the meltdown hit, the bank cut more than 50,000 jobs, and the taxpayers shelled out more than $45 billion to save it.
Senator Dorgan tells Moyers, “If you were to rank big mistakes in the history of this country, that was one of the bigger ones because it has set back this country in a very significant way.”
Now, John Reed regrets his role in the affair, and says lifting the Glass-Steagall protections was a mistake. Given the 2008 meltdown, he’s surprised Wall Street still has so much power over Washington lawmakers.
“I’m quite surprised the political establishment would listen to groups that have been so discredited,” Reed tells Moyers. “It wasn’t that there was one or two or institutions that, you know, got carried away and did stupid things. It was, we all did…. And then the whole system came down.”
How Wall Street and Washington got together and stacked the deck against the rest of us. Watch it here.
Pensions, endowments and sovereign-wealth funds, which comprise the majority of so-called limited partners in buyout funds, have pressed for better payouts and data from global private-equity managers in the wake of the financial crisis. Some of the biggest investors formed the Toronto-based Institutional Limited Partners Association, which introduced guidelines in 2009 addressing fees, governance and communication with clients. Blackstone Group LP, KKR & Co. and TPG Capital are among firms that have signed on.
In addition to the fees, which eat into returns for pensioners, private-equity managers have also been criticized for paying a lower tax rate on much of their income than ordinary wage earners. Carried interest is taxed at the lower, 15 percent rate for capital gains, rather than the 35 percent top rate that applies to regular income. ...
Buyout profits and their tax treatment helped make buyout pioneers such as Stephen Schwarzman, co-founder of Blackstone and a supporter of Romney’s campaign, some of the richest Americans. Schwarzman, ranked the 66th-richest American by Forbes, held a fundraiser for Romney at his Park Avenue apartment on Dec. 14. He has opposed raising the tax on carried interest and endorsed a flat tax as part of comprehensive reform of the U.S. tax code. ...
Under pressure from rivals, Romney, whose wealth is estimated at between $190 million and $250 million by his campaign, this month disclosed tax returns showing he paid a 13.9 percent tax rate in 2010 on income of $21.6 million. ...
To mitigate the damage to private equity’s image, the industry’s lobbying group is starting a campaign to showcase its members’ contributions to the American economy, using testimonials of people who say private equity has helped their businesses grow. David Rubenstein, Carlyle’s co-founder, said Romney shouldn’t be criticized for the taxes he pays lawfully.
Surveys indicate that most voters now favor higher taxes on the rich. But many wealthy people are determined to hang on to their tax cuts, and because recent changes in campaign finance law have greatly increased their political leverage, they may prevail. If so, however, it could prove a hollow victory.
Beyond some point, there seems to be little gain in satisfaction from bolstering your private spending. When mansions grow to 15,000 square feet from 10,000, for instance, the primary effect is merely to raise the bar that defines an adequate home among the superwealthy.
By contrast, higher spending on many forms of public consumption would produce clear gains in satisfaction for the wealthy. It’s reasonable to assume, for example, that driving on well-maintained roads is safer and less stressful than driving on pothole-ridden ones. ...
It would be one thing if lobbying against taxes and regulation brought wealthy Americans a world more to their liking. But if their goal is to buy a home with a more spectacular view, for example, they will be disappointed. There are only so many such homes to go around, and they’ll be bought by the very same people as before, since everyone will be bidding more. So when the anti-tax wealthy make campaign contributions, they are buying only the deeper potholes and dirtier air that inevitably result when tax revenue is low.
The case for continuing the George W. Bush tax cuts, at a cost of $3.7 trillion over 10 years (including interest), is shaky enough. The cuts for the wealthy alone, which President Obama would end, would cost with interest about $1 trillion over the next decade. But the GOP candidates want to continue all those cuts — and add many more, the vast bulk of which would again go to the wealthiest taxpayers.
Former Massachusetts governor Mitt Romney proposes additional cuts that would drain $180 billion from the treasury in 2015 alone, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center. The nonpartisan center has not calculated the 10-year cost of the plan. But merely multiplying by 10 illustrates that Romney is talking trillions. ...
The centerpiece of the Romney plan is eliminating all taxes on investment income for taxpayers earning less than $200,000 per couple. Wealthier taxpayers would keep the 15 percent capital gains rate that allowed Mr. Romney and his wife to pay such a low share of their income in taxes. The corporate tax would be reduced from 35 percent to 25 percent. Like Mr. Santorum and Mr. Gingrich, Mr. Romney would eliminate the estate tax and the alternative minimum tax and would repeal new taxes on the wealthy contained in the health-care law and set to take effect in 2013. The benefits of his plan would be heavily skewed toward the wealthy. Millionaires would see an average tax cut of $146,000. Meanwhile, because Mr. Romney would let some lower-income Obama tax breaks lapse, taxes could actually increase on a significant share (between 16 and 20 percent) of taxpayers earning less than $50,000.
This one occurred here in Manhattan at the annual black-tie dinner and induction ceremony for Kappa Beta Phi. That's the very exclusive Wall Street fraternity of billionaire bankers and private equity and hedge fund predators. People like Wilbur Ross, the vulture capitalist; Robert Benmosche, the CEO of AIG, the insurance giant that received tens of billions in bailout money; and Alan "Ace" Greenberg, former chairman of Bear Stearns, the failed investment bank bought by JPMorgan Chase.
This year, the butt of many a joke were the protesters of Occupy Wall Street. In one of the sketches, the bond specialist James Lebenthal scolded a demonstrator with a face tattoo, "Go home, wash that off your face and get back to work." And in another, a member -- dressed like a protester -- was told, "You're pathetic, you liberal. You need a bath!"
Pretty hilarious stuff. The whole affair's reminiscent of the wingdings the robber barons used to throw during America's own Gilded Age a century and a half ago, when great wealth amassed at the top, far from the squalor and misery of working stiffs. Guests would arrive in the glittering mansions for costume balls that rivaled Versailles, reinforcing the sense of superiority and the virtue of a ruling class that depended on the toil and sweat of working people.
Shocking as it may seem, the assorted bankers, businessmen, oligarchs and autocrats who descend on Davos each year are not motivated principally by altruism. And yet Davos this year did feature much agonising about inequality. In a few cases, this may have reflected moral unease. But pragmatism was even more important. Davos is effectively a festival of globalisation for men in suits and snow boots – who now fear that the argument for globalisation may be lost in the west. ...
Peter Mandelson, a former EU trade commissioner, caught the mood when he told a lunch that politicians need to persuade people that globalisation and free trade are still good, even when they are blamed for higher unemployment and stagnant wages. From the platform came numerous suggestions of how this might be done: stimulate growth in Europe, invest in education, get the Chinese and Germans to spend more. ...
Globalisation contributes to inequality in the west by creating a global labour pool that holds down wages, while boosting corporate profits. Before the financial crisis – when economies were growing strongly and credit was easy – the middle classes were able to share in the proceeds of growth by borrowing heavily, while the poor could be protected through generous social spending. But now, with a credit crunch and pressure to cut welfare budgets, these adjustment mechanisms are much weaker.
According to the report, 43 percent of households in America -- some 127.5 million people -- are liquid-asset poor. If one of these households experiences a sudden loss of income, caused, for example, by a layoff or a medical emergency, it will fall below the poverty line within three months. People in these households simply don't have enough cash to make it for very long in a crisis. ...
That's not to say that everyone who is liquid-asset poor spends all their time fretting. On the contrary, because many have regular paychecks coming in, they may not grasp the precariousness of their situation. "They don't necessarily realize how close people can be to one interruption to income or one interruption to health benefits," said David Rothstein, the project director for asset building at the non-profit Policy Matters Ohio. "They're one paycheck away from being in debt."
Chris Christopher, senior principal economist at IHS Global Insight, said that the U.S. economy is now stuck in a catch-22: Companies are not hiring in the U.S. because they do not expect the economy to improve, but the economy will not pick up until companies speed up their hiring. So for now, companies are keeping wages and benefits low while working their employees harder -- because they can.
The biggest culprits in the housing fiasco came from the private sector, and more specifically from a mortgage industry that was out of control. These included lenders who originated home loans, investment bankers who packaged them into securities, rating agencies that misjudged these securities, and global investors who bought them without much, if any, study.
In other words, America’s mortgage securitization machine was fundamentally broken. It created millions of mortgage loans that, even under reasonable economic assumptions, stood little chance of being repaid — and were not. As a result, hundreds of billions of dollars were lost as defaults and write-downs brought the financial system, and the wider economy, to the brink, requiring a massive government bailout.
Also to blame, of course, were regulators, who gave the private mortgage market little, if any, oversight. The market’s watchdogs were lulled to sleep by a misplaced view that self-interested private financial institutions would regulate themselves. This flawed thinking was most pervasive at the nation’s most important financial regulatory agency, the Federal Reserve.
The preponderance of mega-rich supporters poses a political challenge for Romney, who has struggled for weeks over questions about his vast wealth, his history as a private equity manager and a series of gaffes that seemed to highlight his privileged station. He stumbled again on Wednesday when he told a CNN interviewer that he was “not concerned about the very poor, because they have a safety net.”
Some of Romney’s biggest supporters include executives at Bain Capital, his former firm; bankers at Goldman Sachs; and a hedge fund mogul who made billions betting on the housing crash. These and other donor details follow the release last week of Romney’s tax returns, which showed millions held in the Cayman Islands and other overseas havens and a tax rate that is far lower than that paid by most American workers. ...
“Of course these guys are going to give a million dollars,” Franken said. “What a bargain — what a bargain to give that to a candidate who they know will veto a bill that makes the carried interest subject to the top” income tax rate. ...
The president has acquired nearly half of his campaign war chest from small-money donors, raising more from contributions of $200 or less than the Romney campaign has brought in overall, disclosure data show. Romney’s GOP rivals also have raised a larger proportion of their money from small donors.
One conservative campaign group cofounded by Karl Rove, former adviser to George W Bush, which includes a super-Pac, raised $51m by the end of 2011, raking in $7m in two donations from a single Texas businessman, Harold Simmons. ...
Mr Rove's Crossroads group aims to raise more than $200m before November's election to spend against Mr Obama and Democratic candidates for Congress. Most of its donors, however, have not been declared as $33m of the $51m was donated to a body established under the tax code, Crossroads GPS, that does not require disclosure. American Crossroads, Mr Rove's super-Pac, raised $18m.
“We are reliving a history of scandal and corruption that takes us back to Watergate days,” said Fred Wertheimer of Democracy 21, a Washington non-profit organisation that promotes campaign finance reform.
The new campaign landscape was shaped by two court decisions in 2010, which spawned the super-Pacs – campaign organisations that can take unlimited money from corporations, individuals and unions to spend on elections. ...
The super-Pacs’ donors for 2011 were released on Tuesday, providing the first full accounting of how they had raised their money last year. Harold Simmons, a Texas businessman with interests in chemicals and waste management, and a longtime backer of conservative causes, gave $8.6m to three different super-Pacs in the final quarter of last year. The biggest super-Pac supporting Mr Romney, Restore Our Future, took in $30m, with 10 individuals and companies giving $1m each.
They included big names from the hedge fund industry – Julian Robertson of Tiger Management and Paul Singer of Elliott Management Corporation. Executives from Bain Capital, the buy-out firm co-founded by Mr Romney, gave substantial sums too.
However, the $49m figure does not include the $10m that Las Vegas casino magnate Sheldon Adelson and his wife gave in January to the main pro-Gingrich super-Pac, Winning Our Future, which will be disclosed formally in a few weeks. ...
Meredith McGehee of the Campaign Legal Center, a Washington-based organisation that scrutinises campaign finance, says that thanks to the courts, the political system is now a “world of unlimited money ... The few rules on the books can be easily circumvented by anyone trying to influence elections, and that is what has happened”.
“I think the evidence is that I am right about that. If you look at the big players, Lehman and Bear Stearns were both standalone investment banks,” Summers replied, referring to two investment banks allowed to fold. Summers is very good at obscuring the obvious truth—that the too-big-to-fail banks, made legal by Clinton-era deregulation, required taxpayer bailouts.
The point of Glass-Steagall was to prevent jeopardizing commercial banks holding the savings of average citizens. Summers knows full well that the passage of the repeal of Glass-Steagall was pushed initially by Citigroup, a mammoth merger of investment and commercial banking that create the largest financial institution in the world, an institution that eventually had to be bailed out with taxpayer funds to avoid economic disaster for millions of ordinary Americans. He also knows that Citigroup—where Robert Rubin, who preceded Summers as Clinton’s treasury secretary, played leading roles during a critical time—specialized in precisely the mortgage and other debt packages and insurance scams that were the source of America’s economic crisis.
The reports describe Chinese trade violations and calculate the damage done to our economy:
Faced with criticism, the candidate has claimed that he didn’t mean what he seemed to mean, and that his words were taken out of context. But he quite clearly did mean what he said. And the more context you give to his statement, the worse it gets.
First of all, just a few days ago, Mr. Romney was denying that the very programs he now says take care of the poor actually provide any significant help. On Jan. 22, he asserted that safety-net programs — yes, he specifically used that term — have “massive overhead,” and that because of the cost of a huge bureaucracy “very little of the money that’s actually needed by those that really need help, those that can’t care for themselves, actually reaches them.”
This claim, like much of what Mr. Romney says, was completely false: U.S. poverty programs have nothing like as much bureaucracy and overhead as, say, private health insurance companies. As the Center on Budget and Policy Priorities has documented, between 90 percent and 99 percent of the dollars allocated to safety-net programs do, in fact, reach the beneficiaries. But the dishonesty of his initial claim aside, how could a candidate declare that safety-net programs do no good and declare only 10 days later that those programs take such good care of the poor that he feels no concern for their welfare?
Also, given this whopper about how safety-net programs actually work, how credible was Mr. Romney’s assertion, after expressing his lack of concern about the poor, that if the safety net needs a repair, “I’ll fix it”? ...
Still, I believe Mr. Romney when he says he isn’t concerned about the poor. What I don’t believe is his assertion that he’s equally unconcerned about the rich, who are “doing fine.” After all, if that’s what he really feels, why does he propose showering them with money? And we’re talking about a lot of money. According to the nonpartisan Tax Policy Center, Mr. Romney’s tax plan would actually raise taxes on many lower-income Americans, while sharply cutting taxes at the top end. More than 80 percent of the tax cuts would go to people making more than $200,000 a year, almost half to those making more than $1 million a year, with the average member of the million-plus club getting a $145,000 tax break.
The CBS segment graphically showed the suicide prevention nets at the factory, it showed workers reportedly as young as 12 who worked shifts as long as 12 to 14 hours a day, six days a week. It also reported on the death of one worker who died at work after a shift of more than 30 hours. There's no question that these conditions approach the emotional feeling of slavery, if not the legal definition. What's missing from the conversation is that Foxconn builds electronics products for a wide variety of companies, not just Apple.
In fact, there's a good chance that the smartphone in your pocket, the laptop on your desk or the tablet in your briefcase was assembled by Foxconn. If it wasn't, it was probably assembled by another Chinese contract manufacturer that operates in a manner similar to Foxconn. Regardless of what company has its logo on your consumer electronics, it's a virtual certainty that it was manufactured in China in a factory very similar to the one where your iPad was made. ...
Your iPhone was once a collection of parts that is often assembled by children who will never have time to play, get a decent education or know much about anything except assembling electronic components until they are too old or worn out to keep working. We bought that iPhone at a great price without a thought of what the social costs are in a country half a world away.
Earlier this week, the CBO raised its projection for the government's 2012 budget deficit from $973 billion to close to $1.2 trillion, in part because of "disappointingly low corporate tax receipts of the sort that's a little puzzling," CBO director Douglas Elmendorf said. The CBO cut its projections for 2012 corporate income taxes from $279 billion to $251 billion. It expects them to rebound to $427 billion in 2014 as the tax breaks ends.
The CBO's numbers undercut a popular conservative claim -- that the United States places a higher tax burden on its corporations than almost any other first-world nation -- and arrive at a time when national politicians are engaged in a fierce rhetorical battle over how much wealthy institutions and individuals should pay to the government.
Schneiderman has been outspoken in urging the Obama administration to hold the nation's largest financial institutions accountable for their role in the foreclosure crisis, notably hesitating to join a larger nationwide case against the country's five largest banks for mortgage fraud. States now have until Monday, according to the Iowa attorney general's office, to decide to join that deal. ...
About a year ago, Schneiderman was selected to join the small group of state attorneys general partnering with the Obama administration to negotiate a deal for desperate borrowers struggling to keep their homes. Under the proposed settlement, Bank of America, Wells Fargo, JP Morgan Chase, Citi and GMAC would provide $25 billion in homeowner assistance as retribution for their mortgage-related wrongdoings, which include wrongful foreclosures and forged documents. Schneiderman eventually left the negotiations over fears that the settlement would release the banks from future lawsuits.
(This is not true, of course. Many poor and elderly Americans pay no federal income tax, but they pay plenty of other taxes.)
Still and all, it's true that the federal income tax is indeed progressive. Conservatives are right about that—though it's not as progressive as it used to be, back before top marginal rates were lowered and capital gains taxes were slashed in half. But conservatives are a little less excited to talk about other kinds of taxes. Payroll taxes aren't progressive, for example. In fact, they're actively regressive, with the poor and middle classes paying higher rates than the rich.
And then there are state taxes. Those include state income taxes, property taxes, sales taxes, and fees of various kinds. How progressive are state taxes?
Answer: They aren't. The Corporation for Enterprise Development recently released a scorecard for all 50 states, and it has boatloads of useful information. That includes overall tax rates, where data from the Institute on Taxation and Economic Policy shows that in the median state (Mississippi, as it turns out) the poorest 20 percent pay twice the tax rate of the top 1 percent. In the worst states, the poorest 20 percent pay five to six times the rate of the richest 1 percent. Lucky duckies indeed. There's not one single state with a tax system that's progressive. Check the table below to see how your state scores.
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