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A corporate spokesperson for IBM confirmed that a "rebalancing" was underway but declined to provide specific numbers. "IBM is constantly rebalancing its workforce," he said in response to a query from WRAL. "That means reducing in some areas and hiring in others - based on shifts in technology and client demand. This flexibility allows IBM to remain competitive and relevant in an industry that is constantly changing. And given the competitive nature of our business, we do not publicly discuss the details of our staffing plans." ...
Lee Conrad, the local’s national coordinator, confirmed that layoffs have started. “Job cuts happening in a number of business units today,” he said. “No numbers yet.” However, Conrad said that the layoffs are expected to continue into March. “This is a continuing story,” he added. “Before it’s over the layoffs could build up into the thousands.” According to Conrad, “Workers are saying jobs cut here and work moved offshore … anywhere from Bratislava to China.” ...
IBM laid off some 10,000 people in the U.S. in 2009 and several thousand more in 2010. Over the last several years, IBM has reduced its work force in the United States by nearly 30 percent, according to figures published by IBM through 2009 and estimated since by the Alliance based on a variety of information.
The numbers by years:
In a report last month, Reuters said IBM was looking into the replacement of some full-time employees with contractors and temps. “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,” the news service said.
Lee Conrad had said earlier in the week that he believed the worst of the layoffs was over, but they have dragged on. He still fully expects a bigger round of cuts to come later this month. The fact that the job cut information continues to dribble out in no surprise.
IBM has a brilliant strategy when it comes to layoffs:
The bottom line: IBM slashes its U.S. work force by a third over the past few years and the government as well as the media remains relatively quiet as the transformation of the world’s largest technology company under Chairman Sam Palmisano continues to make Big Blue less of a U.S. company than ever before.
Canada and Western European work forces are getting hammered, too, by the way.
Selected reader comments follow:
“A few months back I stood alone, warning of my fears of relying upon promises from IBM, a global outsourcing giant, without getting those guarantees in writing. These new reports are deeply troubling and once again show why my demands that NY state demand specifics from IBM were legitimate. We must hold IBM accountable for any direct or indirect benefits they receive from NY taxpayers. They have already received hundreds of millions of dollars from New York State taxpayers. And, we know IBM has a history of cashing checks from taxpayers while simultaneously patenting a new technology specifically designed to outsource our jobs in America,” Senator Ball said. “Back in October, I warned our leaders that we should not reward these global giants with an even larger giveaway of corporate welfare. But, IBM was handed another $400 million. That money could have been divided into 1,600 or more small business loans, spreading opportunity to new businesses and entrepreneurs statewide. In fact, a portion could have immediately went to fix bridges, roads and crumbling infrastructure, putting thousands of New Yorkers back to work. Instead, we have once again made a deal, evidently without written guarantees, with a global outsourcing giant and the taxpayers are now left holding the bag as employees get pink slips. I don’t care if I have to continue to be the sole voice on this, this is unacceptable.” ...
Somers resident V. Gordon Sears was dismissed from IBM in 2009 after 40 years of employment. In this round of layoffs, he said he is watching friends lose their jobs. Sear said he fully supports Senator Ball’s legislation. “They are getting benefits for moving jobs out of the county. Why?” Sears said. “That’s why unemployment is so high. No longer are American companies, American companies.”
I'm sorry, John, that you are one of the many thousands of casualties who have been fired by IBM for so many years now. Yes, right now it's legal, someday perhaps it might not be. A small consolation? The air is better outside of IBM.
So IBM management thinks the only way to grow the business is to slash all costs and expenses and jettison better paid employees all in the hope of increasing the EPS. Then replace the experienced workforce with new hires mixed with a few experienced professional hires. The professional hires will very soon find out first that IBM is a big facade (and what a mistake they made in joining IBM) and the new hires might take a few years to come to the same conclusion, and then a sizeable number will leave.
IBM thinks the revolving door workforce will let them keep making increased EPS but eventually it will crumble and IBM will be history. IBM will have a bad quarterly report eventually. Once IBM finds India, China, Slovakia, Brazil, Russia, etc. too expense for them that hurts their lofty EPS goals and goes to Africa they will run out of places in the the world to go to conduct business. Eventually the smarter planet will realize IBM management direction is not as smart as they want everyone to believe. Once the world economy gets better and employees leave IBM in droves IBM will have nothing left to woo talent back to save IBM.
IBM has got to get back to the founding principles of TJ Watson: notably RESPECT FOR THE INDIVIDUAL, otherwise it is doomed. Doomed maybe not in Rometty's reign, but certainly in the next decade or so.
My area can not keep people. Global foundries, Albany college, and a few other employers look to IBM as a good training ground for their future hires.
Heard that IBM Burlington is losing people at an alarming rate to Green Mountain Growers. Yup, the coffee maker pays better and treats their people much much better.
When the blue collar jobs went to Mexico, the white collar guys sneered. When the low-level white collar jobs went to India, the rest of the white collar guys got a little nervous but were relieved. Now, as the rest of the white collar jobs go to Brazil and China and India, only the managers are safe. For now...
Go to the Files section of the this board, click on folder IBM Retirement Benefits Info, scroll down and click on IBM 2010 Retiree Medical Plan Costs.pdf. (Editor's note: I have copied the document to this server.)
The cheapest plan was the High-Deductible PPO- MVP.
For the old (non-FHA) plan the rates are Self: $0.00; Self+1: $381.00.
For the FHA plan, the rates are Self: $541.27; Self+1: $1,082.73.
These were the rates for 2010 and are the rates for premiums only. The spreadsheet shows the differences in the plan rates for all of the available choices. It shows how much more expensive the rates are for retirees on the FHA.
Retirees under FHA are paying more, when compared to non-FHA retirees but FHA retirees need to factor in the subsidy cap to come up with a fair comparison.
Sad to say, gone are the days of zero monthly premiums for all employees/retirees; if you work the numbers, IBM is really only insuring the employee/retiree with the subsidy or the 10 year FHA contribution; dependents or spouses are not being subsidized.
Just compare the -0- below for self under non-FHA, and $541.27 for self under FHA, and apply the 'subsidy of $7000, which comes out to about $583 per month.
The account balance of an FHA retiree might reach $50,000 by age 55, although it might not even get that high due to the low interest rates IBM has been paying for most of the last 10 years. (As a side note, there are some people under the FHA plan who may have larger balances, due to differences in their ages when IBM created the FHA which resulted in different opening balances for employees who were over age 40 at the time).
Starting at age 55, if the FHA withdraws $7000 per year to match the IBM subsidy that older retirees receive, the FHA will run out of money by age 63. After that, the retiree is entirely on his own. For the next 2 years, he will have to come up with an extra $7000 each year to continue with the same coverage.
At age 65, the FHA retiree will be eligible for Medicare, but if he wants to continue with IBM supplemental coverage, he will have to pay for that entirely out of his own pocket, while retirees under the old plan will get a $3000 per year subsidy.
Assuming the FHA retiree lives to age 85, he will have had to pay $74,000 more for the same medical insurance as a retiree under the old plan.
That said, yes most of us were absolutely, positively PROMISED when we were hired that we would have LIFETIME RETIREE MEDICAL. Absolutely. Positively. Free? Possibly.
Did YOU think to demand it in writing? Of course not. Did Joe Schmo the executive or Lou or Sam or Ginny the executive demand it in writing? Of course they did, and they got it in writing.
We were naive and took IBM at their word. Heck, as late as last year there were people writing about other threatened takeaways: oh IBM wouldn't do that, would they? Unbelievable but true.
So, my point? If you have it in writing from IBM "free for life for you and your spouse" I, and some others who don't espouse the mendacious "life is great" platitude, would LOVE to see it.
I wish I could remember the 'free for life' promise, but I can't. But I do remember the yearly meetings where I was PROMISED the lifetime retiree medical and given the doublespeak about how the "additional compensation" made up for the paltry raises in most years.
Then, as you say, it was taken away. Because they could take it away and no one could do anything about it. If not for Janet et al, the DB plan would have been stolen too, as it was for those who had the misfortune of being under 40 in 1999.
Yes, they do owe you. And they owe me. But guess what? They don't care. They don't have to. They're IBM.
Cons: - There are some VERY arrogant VPs and Directors who treat their employees like dirt. If you get stuck under them, it's better to leave IBM. (Some think of themselves as Steve jobs, except they lack in the creative department unlike Steve); - Because of IBM's size, sometimes processes can kill progress; - Politics at the VP & Director levels can inhibit innovation and collaboration unless it advances their agenda; - Internal competition exists between divisions that is counter productive; - Finance is king and many decisions forced by finance results in short sighted actions; - Employee appraisal process is rigged to give the company an advantage to let people go. There is a forced distribution of performance grading regardless of how talented the whole group being graded, a few must be at the bottom and will be let go. Management does not think of this as talent drain.
Advice to Senior Management: Our new CEO, Ginny has started some very creative collaborative dialogue within the company. She must continue that and take actions by listening to employees. I also wish there was a way to report counter productive behaviors by some mid-level executives without ending one's career!
This job does provide good finance experience for a recent college grad, but that's about it.. This isn't the place to build a career. In my opinion, the entire COE will be shipped overseas in the next 5-10 years.
Advice to Senior Management: The cheapest workers are rarely the best workers. I'm sure Sammy P and Ginny will take these words to heart.. Ha.
Cons: Too many levels of managers. Bad management decisions at at every level. Poor execution of critical processes and projects. Performance rating system is a complete joke. Begging for office supplies is embarrassing. Typical politics get in the way of trying to do the right thing.
Advice to Senior Management: Morale cannot be any lower than it is today. Revamp PBC system to use clearly QUANTIFIABLE metrics. "Relative Contribution" is completely subjective and results in abuses. PAY FOR PERFORMANCE, like IBM advertises. Salary has barely kept pace with inflation. Not what is expected from such a "respected" company. No raises and pitiful bonus payouts are unacceptable.
Cons: The workforce is being heavily globally resourced. More and more jobs are moving to other countries, with IBMers being laid off, with no regard to performance or length of time with the company. If you are exempt from overtime, then you can work your life away, with no recognition.
Advice to Senior Management: Be careful about how you are gutting the company. You are removing years of experience and training and replacing it with people with a lack of experience in their jobs, or in the work world in general. Those people are getting their training at IBM and then leaving to other, better paying companies in their own countries. How is that building a new, stellar employee base, with a strong bench strength? Where is the future of the company?
How much are they losing? It could take an online calculator for many workers to find out -- and GM is likely to have that calculator in place later in the spring. But some rough estimates indicate some employees in their early 50s could see cuts by nearly 35% or so, compared with what they expected if things remained on track and they retired at 62, according to some who worked up calculations. ...
As companies revamp retirement rules, the only solutions for many employees are to crank up savings and keep working as long as possible. Five years ago, GM made a major move when it changed its salaried pension plan regarding employees hired after Jan. 1, 2001. Those employees shifted to defined-contribution or 401(k) programs, as opposed to defined-benefit pensions.
(Editor's note: IBM, in a leadership role among American corporations, screwed its employees in a similar fashion thirteen years ago, in 1999. See Retirement Heist for details. )
The Pension Rights Center, a consumer organization dedicated to protecting retirement security, has a long list of major employers who have announced significant changes to their defined-benefit pension plans since December 2005.
That list includes IBM, Verizon, McGraw-Hill, Crain Communications, the NFL's Tampa Bay Buccaneers, Wells Fargo, Talbots, Neiman Marcus, Dow Chemical, Whirlpool and FedEx.
Companies are freezing their defined-benefit pension plans now to cut pension costs, which have been inflated by extraordinarily low interest rates, said Ellen E. Schultz, author of "Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers." Because pensions are recorded as debts, freezing the plans enables a company to reduce the debt it has recorded, Schultz said. And she noted that the move generates gains to boost a company's income. Reducing the debt by freezing or cutting benefits generates paper gains for the company's operating income, Schultz noted.
This growing interest in retirement security is not limited to older workers; the survey found that some of the most dramatic changes in attitudes toward risk, rewards and security trade-offs have been among younger employees and those with a defined benefit (DB) plan. Among DB plan participants younger than 40, the number willing to pay for a guaranteed retirement benefit jumped by nearly 70%, from 39% in 2009 to 66% in 2011.
Determining your retirement number is like getting on the bathroom scale: Sometimes it's a pleasant surprise; however, more often than not it forces you to face an ugly truth. Just as taking the dreaded step onto the scale is a necessary part of the weight-loss process, so too is crunching the numbers for retirement planning. According to the Employee Benefit Research Institute (EBRI) 2011 Retirement Confidence Survey, only 42 percent of American workers have taken the time and effort to complete a retirement needs calculation. Without going through that process, you're flying blind into your retirement.
Please know that this is not rocket science, especially in an age when there are so many online retirement calculators available. I like EBRI's Choose to Save Ballpark E$timate, which is easy to use, but your retirement plan/401(k) website probably has a tool available as well. The tricky part about using these calculators is that they ask you to estimate several factors that even economists can't agree upon, like future inflation rate or expected rates of return on investments. My crystal ball isn't perfect, but here are some sensible estimates that should help:
A: Several online communities connect former IBMers, but be aware that Big Blue is known for rock-bottom fees and robust investment selection. BrightScope Inc., which publishes data on 401(k) plans, routinely lists IBM among the 30 highest-rated large plans.
Still, millions of U.S. workers will begin to see these fees this year because of new disclosure requirements from the Department of Labor that compel employers to detail the investment and administrative costs associated with their plans. IBM has not yet made any changes to fees or fee disclosures this year, said Laurie Friedman, an IBM spokeswoman. ...
"I found your profile on LI. I am a recruiter for IBM's Systems and Technology Group. We are looking to hire 40-50 new IBMer's in RTP and I wanted to tap into your network to see if you know anyone! These opportunities are for a small, $35-40M division within IBM with 120 employees and we are exploding in growth. We would like to target the Raleigh area first since this offers a huge opportunity for growth as we transition from a hardware group to a services firm. We prefer computer science and engineer professionals who are customer focused, but can dig into the details as needed. I would love to talk to you about your background to see if we have an opportunity that matches your career goals. If you are interested in speaking with me or if you know anyone, please forward my information along. Here is a link to a sample opening:" https://jobs3.netmedia1.com/cp/job_summary.jsp?job_id=STG-0456433 -Rich-
Indeed, in 2009 (the latest year for which data is available), healthcare tax deductions were the only itemized deduction that grew, rising nearly 5 percent from the previous year to a total of $79.9 billion, according to Internal Revenue Service data. The amount has probably gone up since then.
To qualify for a healthcare tax deduction, you need to spend more than 7.5 percent of your adjusted gross income on health costs, as only the expenses above that threshold can be deducted. The U.S. Census has reported that real median household income in 2010 was still below its 1999 peak, so the combination of rising costs and lower incomes could produce more qualifying deductions. ...
What's included in deductible medical expenses? Actually, quite a lot. Doctor and dentist bills, eye glasses and contact lenses, hearing aids, prescription drugs (including birth-control pills), crutches, transportation to doctors' appointments, and nursing home fees. Acupuncture appointments, chiropractor visits, stop-smoking programs, and as of last year, breast pumps, too, are deductible. Laser eye surgery, infertility treatments, and service animals are all deductible. And the list goes on.
Most of us get health insurance through our jobs, a system puzzling to the rest of the industrial world, where the government levies taxes and offers health coverage to all as a basic right of modern society. But for many Americans, their way feels alien — the heavy hand of government reaching into our business as some bureaucrat tells doctors and patients what to do.
We always seem to fight over the role of government in our healthcare. In 1918, California voters defeated a proposed constitutional amendment that would have organized a state-run healthcare program. Doctors fought it with a publication declaring that "compulsory social health insurance" was "a dangerous device invented in Germany, announced by the German Emperor from the throne in the same year he started plotting and preparing to conquer the world." The amendment was defeated by a huge margin. ...
When FDR became president in 1933, the committees that developed the concept of Social Security for him also considered national health insurance. Roosevelt flirted with the idea but never threw political muscle behind it. After Harry S. Truman became president in 1945, he called on Congress to provide national health insurance but could never bring it to a vote. Opponents included the American Medical Assn., which in 1948 asked each of its members to kick in $25 to fund a campaign warning that Truman's "socialized medicine" plan could lead to socialism throughout American life.
In another curious twist, insurance companies, which battled Mr. Obama over health care in 2009 and 2010, are now urging state officials to set up exchanges. They generally prefer state regulation, and they stand to gain because the United States Treasury will send subsidy payments directly to insurers on behalf of low- and moderate-income people who enroll in health plans offered through an exchange. “Insurance companies are making planning and investment decisions around the Affordable Care Act,” said Representative Joe Courtney, Democrat of Connecticut. “They want to make sure the exchanges work.” ...
Texas is also taking a hard line. “Gov. Rick Perry believes that the federal health care law is unconstitutional, misguided and overreaching,” said his spokeswoman, Lucy Nashed. “Because of that, there are no plans to implement an exchange in Texas.”
The Mexican Social Security Institute (known as IMSS in Mexico) provides a national health care plan with no deductibles and no limits that includes free exams, tests, and medications for a flat annual fee that averages about $250 per individual.
For a growing number of American expats, this makes Mexico a no-brainer as a retirement destination. Having a Mexican retiree visa qualifies you to enroll for the plan.
Mexico’s IMSS plan isn’t perfect for American users — hospitals and facilities can be “bare-bones” by U.S. standards, and it can be a challenge to find English-speaking doctors and staff. But the price is right – there are no costs besides the annual fee. And Mexican health care providers are as well trained as any in the world. Mexico’s IMSS system is especially attractive to Americans who aren’t old enough to qualify for Medicare yet can’t afford private insurance in the U.S., either because they’re self-employed or underinsured by their current employer.
Few realize that this arrangement is both unique and absurd in comparison with other industrialized countries, where employers have absolutely nothing to do with health care. Nothing. Nada. Zip. Zero. Abroad, nationally funded programs enable private doctors and hospitals to care for one and all, unfettered by what any employer does or does not like -- just like Medicare, the most popular and cost-effective health care program in America.
People who feel insulted by the notion of the U.S. following anybody else's lead are quick to bad-mouth the national health programs elsewhere. And while one can find something to criticize about any of them, the fact is that they produce healthier citizens than our way does -- by a long shot.
The New England Journal of Medicine shows Americans floundering around in 37th place in terms of health status (e.g., mortality, life expectancy). Did you get that? Thirty-seventh place. Despite spending nearly twice as much per-person as the next most-costly nation's program. ...
Second, employers are burdened not only by paying for employees' health care but in maintaining the internal bureaucracy to manage those benefits. U.S. employers find it increasingly difficult to compete with non-U.S. companies because of the financial burden of covering employees' health -- even after their retirement, in many cases. What is more, the issue of health care coverage is a perennial aggravation to both employers and labor unions as they negotiate appropriate compensation; this bone of contention simply need not exist.
Third, the scatter gun array of private payers who administer employers' coverage has failed miserably in their half-hearted efforts to bring sanity to their reimbursement policies. No wonder. When presenting a cost-saving idea to the medical director of one of the two largest private health insurers in the country, I was told bluntly and without embarrassment that saving money was not a concern of theirs, as they simply pass increasing costs along to the employers (and their co-paying employees) as increased premiums. They largely shell out whatever providers put on the bill, irrespective of the value any particular procedure or medication might have in restoring the patient's health. ...
And can't you just imagine the coast-to-coast whoosh of relief if the unemployed and the about-to-be unemployed all awoke that morning to find themselves members of Medicare for All? That's actually the best reason of all. No more terror of falling out of a job and into medical bankruptcy. No more being reduced to medical beggars cringing hopefully at the door of the Emergency Room. And for the employed, no more revealing your most sensitive medical situations to a fellow employee in the H.R. department as you grope for a pathway forward through the confusing coverages.
"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.
Schiff, 46, is facing another kind of jam this year: Paid a lower bonus, he said the $350,000 he earns, enough to put him in the country’s top 1 percent by income, doesn’t cover his family’s private-school tuition, a Kent, Connecticut, summer rental and the upgrade they would like from their 1,200-square- foot Brooklyn duplex.
“I feel stuck,” Schiff said. “The New York that I wanted to have is still just beyond my reach.” ...
Executive-search veterans who work with hedge funds and banks make about $500,000 in good years, said Arbeeny, managing principal at New York-based CMF Partners LLC, declining to discuss specifics about his own income. He said he no longer goes on annual ski trips to Whistler (WB), Tahoe or Aspen. He reads other supermarket circulars to find good prices for his favorite cereal, Wheat Chex. ...
Richard Scheiner, 58, a real-estate investor and hedge-fund manager, said most people on Wall Street don’t save. “When their means are cut, they’re stuck,” said Scheiner, whose New York-based hedge fund, Lane Gate Partners LLC, was down about 15 percent last year. “Not so much an issue for me and my wife because we’ve always saved.”
Scheiner said he spends about $500 a month to park one of his two Audis in a garage and at least $7,500 a year each for memberships at the Trump National Golf Club in Westchester and a gun club in upstate New York. A labradoodle named Zelda and a rescued bichon frise, Duke, cost $17,000 a year, including food, health care, boarding and a daily dog-walker who charges $17 each per outing, he said. ...
The malaise is shared by Schiff, the New York-based marketing director for Euro Pacific Capital, where his brother is CEO. His family rents the lower duplex of a brownstone in Cobble Hill, where his two children share a room. His 10-year- old daughter is a student at $32,000-a-year Poly Prep Country Day School in Brooklyn. His son, 7, will apply in a few years. “I can’t imagine what I’m going to do,” Schiff said. “I’m crammed into 1,200 square feet. I don’t have a dishwasher. We do all our dishes by hand.” He wants 1,800 square feet -- “a room for each kid, three bedrooms, maybe four,” he said. “Imagine four bedrooms. You have the luxury of a guest room, how crazy is that?”
The family rents a three-bedroom summer house in Connecticut and will go there again this year for one month instead of four. Schiff said he brings home less than $200,000 after taxes, health-insurance and 401(k) contributions. The closing costs, renovation and down payment on one of the $1.5 million 17-foot-wide row houses nearby, what he called “the low rung on the brownstone ladder,” would consume “every dime” of the family’s savings, he said. ...
“If you’re making $50,000 and your salary gets down to $40,000 and you have to cut, it’s very severe to you,” Dlugash said. “But it’s no less severe to these other people with these big numbers.” A Wall Street executive who made 10 times that amount and now has declining income along with a divorce, private school tuitions and elderly parents also suffers, he said. “These people never dreamed they’d be making $500,000 a year,” he said, “and dreamed even less that they’d be broke.”
Despite the difficult environment, New York firms paid roughly $20 billion in year-end cash compensation to their employees. The average bonus was $121,150, down just 13 percent from the year before as the head count shrank. In 2006, the year before the financial crisis, the average investment bank employee took home a bonus of $191,360. But the comptroller’s estimates do not include noncash compensation given for last year and so may not give the full picture given that many banks dole out a larger portion of their annual payouts in stock. ...
Wall Street continues to be a lightning rod for politicians and critics who contend that the industry’s pay packages are too high. In 2010, the average pay, including bonuses, in the securities industry in New York City hit $361,180. (Figures are not yet available for 2011.) At that level, Wall Street paychecks are 5.5 times higher than those in the rest of the private sector.
...the current tax system is in certain ways manifestly unfair at a time of rising inequality. As is well recognised, America’s rich have become richer with the share of income going to the top 1 per cent increasing from about 10 per cent to about 20 per cent over the last generation while middle class incomes have stagnated.
There is plenty of room for discussion about the causes of this growing gap, the extent to which reducing inequality should be a central objective of government policy and the possible disincentive effects of excessively progressive taxes. But it is undeniable that certain fairly expensive aspects of the current tax system favour the most fortunate and border on the indefensible. Recent political debates, for example, have highlighted loopholes that permit a few to accumulate tens of millions of dollars in a tax-free individual retirement account (IRA) when almost everyone else is constrained by a $2,000 contribution limit.
Can the observation that Ireland, Bermuda and Luxembourg are three of the five jurisdictions where the US corporate sector earned the most profits reflect anything other than rampant tax sheltering? Anyone who doubts this should ponder the fact that in 2007, US corporate profits in Bermuda totalled 646 per cent of Bermuda’s GDP. The treatment of profit incentives paid to investment operators who do not use their own money but simply receive the “carry” as they invest other people’s money is another example of an inappropriate provision. ...
Leaders in both parties should commit themselves to the goal of tax reform for growth, fairness and deficit reduction. They should acknowledge that every tax expenditure or special break has to be on the table. They should ensure their staffs are compiling a large inventory of options. The relevant Congressional committees should take testimony from experts of all persuasions. And then, right after the election, the negotiations should begin. Nothing that is likely to done during the next presidential term will be more important.
Last month, we examined former Massachusetts governor Mitt Romney’s reckless tax plan, which, according to calculations by the Urban Institute-Brookings Institution Tax Policy Center, would drain another $180 billion from the treasury in 2015 alone. The CRFB estimated the 10-year cost of the original Romney tax plan at $1.3 trillion. By the end of the 10-year window, the debt would be a dangerous 86 percent of the gross domestic product.
But last week Mr. Romney upped the tax-cutting ante, promising, in addition to the previous grab bag of tax goodies, a 20 percent across-the-board cut in marginal rates and repeal of the alternative minimum tax. The Tax Policy Center estimated that the 20 percent rate cut would cost about $150 billion in 2015 alone. The Romney campaign said that the rate change wouldn’t add to the deficit because it would generate unspecified economic growth and be accompanied by spending cuts and elimination or cutbacks of deductions. Okay, which ones? On that question, the campaign was decidedly unspecific — understandably so, because its math doesn’t add up. Until he is more specific about what sacred cows he would tackle — employer-sponsored health care? — Mr. Romney’s plan cannot be taken as a fiscally responsible proposal.
Then again, he looks reasonable by comparison with former Pennsylvania senator Rick Santorum, who envisions a tax cut costing an eye-popping $6 trillion over 10 years — above and beyond the $4 trillion cost of extending the George W. Bush tax cuts. ...
The campaign debate needs to move from pie-in-the-sky promises. Promising additional tax cuts may win votes, but these proposals are unaffordable and dangerous.
By contrast, the Romney plan is little more than a press release, lacking even the most basic information necessary to begin to evaluate it. This is not to say that one plan is per se good and the other bad; only that there is a major imbalance in terms of addressing complex tax issues in a way that tells us whether we can trust the author to implement meaningful tax reform. To begin with the Romney plan is only slightly longer than this column and consists largely of subheads with little in the way of actual text. Almost all of the text involves assertions that cannot be taken at face value. ...
Undoubtedly the best thing that could be done in the tax area would be to stop fiddling with the tax code and make all of its provisions permanent. A vast amount of the complexity of the code comes from the annual expiration of the so-called fix for the Alternative Minimum Tax to keep it from taxing the middle class instead of the wealthy for whom it was originally intended; the research and development tax credit and many other provisions that have been expiring for decades and routinely extended. ...
Unfortunately, the lack of fiscal responsibility is the biggest problem with the Romney plan. While it claims that the proposed reduction in statutory tax rates for both businesses and corporations will be paid for with loophole closings and broadening of the tax base, it contains no specifics whatsoever. University of California economist Brad Delong calls this making policy through “magic asterisks.” It’s a reference to one of Ronald Reagan’s budgets that had a line in it for unnamed spending cuts, with an asterisk in place of an actual proposal. ...
Turning to the Obama plan, it at least has the virtue of naming specific tax expenditures to pay for a reduction in the statutory corporate tax rate from 35 percent to 28 percent. It also makes some important points about the necessity of addressing some “sacred cows” in the tax code, such as the deductibility of interest by corporations, which has contributed heavily to excessive indebtedness.
The Obama report also makes the critical point that in comparing U.S. corporate rates to those of our competitors, it is essential to look at effective rates, which include the impact of deductions and credits, and not just statutory rates. The U.S. corporate tax system is not nearly as far out of line with other countries on that basis, which is why Republicans only talk about statutory rates, which are basically meaningless, economically.
A new study co-authored by MIT economist David Autor shows that the rapid rise in low-wage manufacturing industries overseas has indeed had a significant impact on the United States. The disappearance of U.S. manufacturing jobs frequently leaves former manufacturing workers unemployed for years, if not permanently, while creating a drag on local economies and raising the amount of taxpayer-borne social insurance necessary to keep workers and their families afloat. ...
The findings highlight the complex effects of globalization on the United States. “Trade tends to create diffuse beneficiaries and a concentration of losers,” Autor says. “All of us get slightly cheaper goods, and we’re each a couple hundred dollars a year richer for that.” But those losing jobs, he notes, are “a lot worse off.” For this reason, Autor adds, policymakers need new responses to the loss of manufacturing jobs: “I’m not anti-trade, but it is important to realize that there are reasons why people worry about this issue.” ...
In conducting the study, the researchers found more pronounced economic problems in cities most vulnerable to the rise of low-wage Chinese manufacturing; these include San Jose, Calif.; Providence, R.I.; Manchester, N.H.; and a raft of urban areas below the Mason-Dixon line — the leading example being Raleigh, N.C. “The areas that are most exposed to China trade are not the Rust Belt industries,” Autor says. “They are places like the South, where manufacturing was rising, not falling, through the 1980s.”
All told, as American imports from China grew more than tenfold between 1991 and 2007, roughly a million U.S. workers lost jobs due to increased low-wage competition from China — about a quarter of all U.S. job losses in manufacturing during the time period. And as the study shows, when businesses shut down, it hurts the local economy because of two related but distinct “spillover effects,” as economists say: The shuttered businesses no longer need goods and services from local non-manufacturing firms, and their former workers have less money to spend locally as well.
The government rescued it even though it had already blown a reported half-billion dollars on a shady mortgage firm that hired strippers and at least one ex-porn actress to sell its loans, shafting thousands of homeowners and leading many of them into foreclosure.
The government gave it favorable tax treatment for moving thousands of jobs offshore.
And to top it all off, President Obama honored it (and undoubtedly helped its sales) by naming its CEO to be his "Jobs Czar."
You'd think GE would be more than 2.3 percent grateful for all these favors. But apparently our tax code reads "To whom much is given, very little will be required."
CNBC's Andrew Ross Sorkin asked Buffet what he thought the highest rate should be.
"What the rate should be are rates that bring in about 18.5 or so percent of GDP [gross domestic product] as revenue," the Oracle of Omaha explained. "The interesting thing about the corporate rate is that corporate profits, as a percentage of GDP last year were the highest or just about the highest in the last 50 years. They were 10 and a fraction percent of GDP. That’s higher than we’ve seen in 50 years."
He continued: "The corporate taxes as a percentage of GDP were 1.2 percent, $180 billion. That’s just about the lowest we’ve seen. So our corporate tax rate last year, effectively, in terms of taxes paid for the United States, was around 12 percent, which is well below those existing in most of the industrialized countries around the world."
"So it is a myth that American corporations are paying 35 percent or anything like it. Incidentally, 1.2 percent of GDP or 12 or so percent of corporate profits actually paid, that is a rate far, far, far below what we've seen in the United States. ... Corporate taxes are not strangling American competitiveness."
Most recently, there was his cringe-inducing appearance at the Daytona Speedway. Mr. Romney wandered through the Nascar crowd like an anthropologist in a pith helmet observing the natives. He was trying to be Just Plain Joe, but he ended up being Just Plain Thurston Howell III. “I like those fancy raincoats you bought,” he said to a group of fans wearing plastic ponchos. “Really sprung for the big bucks.”
Not content with just one lame attempt at levity, Mr. Romney also recalled driving “a little fast” as a youth near his Michigan home. That would be Bloomfield Hills, Michigan, one of the wealthiest small towns in America.
When asked if he was a stock-car racing fan, Mr. Romney said, “I have some great friends who are Nascar team owners.”
But his penchant for awkward references to his own wealth has underscored the suspicion that many voters have about his ability to understand their economic problems. His opponents in both parties are gleefully highlighting these moments as a way to drive a wedge between Romney and the working class voters who have become an increasingly important part of the Republican Party base.
Companies are improving margins and generating profits as wage growth for the American worker lags behind the prices of goods and services…While benefiting the bottom line for businesses, the decline in inflation-adjusted wages bodes ill for the sustainability of economic growth as consumers may eventually be forced to cut back. [...]
Of the 394 companies in the Standard & Poor’s 500 Index that have reported since Jan. 9, earnings for the quarter ended Dec. 31 increased 5.1 percent on average and beat analyst estimates by 3.2 percent. Some 70 percent of the companies have posted better-than-projected results. ...
And yet, in a short 33 years, things had turned around enough so that I was able to give a million dollars to the super PAC of a certain mixed-race president who, I would like to remind all my overconfident progressive friends, does NOT have this election in the bag. And a lot of people this last week have said the same thing to me: "You're not picking up the drinks tonight?"
The great thing about having been poor is how liberated it makes you if you eventually become rich. There's nothing like the knowledge that you don't need money to survive. That the money cushion you lie on every night doesn't have to be three feet thick, and you can still get to sleep. ...
You know, the only place in America where the millionaires and billionaires are predominantly liberal is here in Hollywood -- with the possible exception of Silicon Valley and Ben & Jerry's ice cream. There's a reason that of the 16 billionaires that have contributed to super PACs this year, 14 have given to Republicans. It is generally the party of the rich. And in a post-Citizens United world, the party of the rich has an advantage like they've never had before. In 2008, the most you could give to a candidate was $2,300. Now it's Infinity. No, the election is not in the bag.
Romney’s plan is simultaneously extreme and very, very boring. It draws on the one and only idea that today’s conservatives offer for solving any and every problem that comes along: just throw yet more money at rich people.
At his moment of triumph Tuesday night after his necessary victories in Michigan and Arizona, a bit of inspiration from Romney would have been nice. Instead, he detailed a list of tax changes that might lift the spirits of accountants and lawyers for wealthy Americans across our great nation, while sending everyone else off to the fridge for a beer.
Romney promised to enact an “across-the-board, 20 percent rate cut for every American,” pledged to “repeal the alternative minimum tax” and said he’d abolish the “death tax” (conservative-speak for the estate tax paid by only the most affluent Americans.) He’d lower the corporate tax rate to 25 percent, “make the R&D tax credit permanent to foster innovation” and “end the repatriation tax to return investment back to our shores.”
It’s not exactly “Ask not what your country can do for you,” but these ideas do appeal to Romney’s most faithful constituency in primaries: Republicans earning more than $200,000 a year. In Michigan, they backed him over Santorum by 2 to 1.
They’re Romney’s base for good reason. That “across-the-board” tax cut sounds fair and balanced. But a Tax Policy Center study in November of the impact of a 20 percent across-the-board rate cut showed that the wealthiest 0.1 percent would get an average tax reduction of $264,000. The poorest 20 percent would get $78, and those smack in the middle would get $791.
...this project, produced and directed by Frances Causey and Donald Goldmacher, has the virtue of taking the long view of a crisis that recent films like “Inside Job” and “Too Big to Fail” have only sketchily explored. It makes a strong case that government regulation of business is essential for democracy to flourish. One of many pertinent observations from a host of experts is that the rich really don’t need the government as much as everybody else. ...
The seeds of the financial crisis, the film maintains, were sown by Lewis F. Powell Jr., a Virginia lawyer and representative of the tobacco industry who later became an associate justice of the United States Supreme Court. In a confidential memo to the United States Chamber of Commerce, “Attack on the American Free Enterprise System,” he urged American corporations to take a much stronger role in influencing politics and law.
The memorandum helped spur the formation of advocacy research organizations like the Heritage Foundation and the Cato Institute and paved the way for lobbyists to descend on Washington. In 1978, while on the Supreme Court, Powell successfully argued for the right of corporations to make political contributions.
The movement to deregulate government control of corporations and to disempower organized labor accelerated after the 1980 presidential election. An early public battle in 1981 pitted Ronald Reagan against striking air traffic controllers. The film says that the number of American workers in unions has dwindled to 1 out of 14, from 1 in 3 in the 1950s.
The filmmakers swiftly tick off legislation that they regard as concerted class warfare waged by corporations in collusion with corporate-controlled news media against the middle and working class: Starting in 1994, the North American Free Trade Agreement, which encouraged the outsourcing of cheap labor; the 1999 repeal of parts of the Glass-Steagall Act, which had separated commercial and investment banking; and the Commodity Futures Modernization Act of 2000, which deregulated over-the-counter derivatives, allowed financial institutions to run wild. Both major political parties, they argue, promoted deregulation fever.
Santorum needn’t worry. America is already making it harder for young people of modest means to attend college. Public higher education is being starved, and the middle class will shrink even more as a result.
Over just the last year 41 states have cut spending for public higher education. That’s on top of deep cuts in 2009 and 2010. Some public universities, such as the University of New Hampshire, have lost over 40 percent of their state funding; the University of Washington, 26 percent; Florida’s public university system, 25 percent.
Rising tuition and fees are making up the shortfall. This year, the average hike is 8.3 percent. New York’s state university system is increasing tuition 14 percent; Arizona, 17 percent; Washington state, 16 percent. Students in California’s public universities and colleges are facing an average increase of 21 percent, the highest in the nation.
The children of middle and lower-income families are hardest hit. Remember: The median wage has been dropping since 2000, adjusted for inflation.
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