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6, 2000 April, 2000

Highlights—April 13, 2013

  • Council on Foreign Relations: A Conversation with Ginni Rometty. Excerpts: And I see this in -- by the way, what it ends up doing to any company, any organization, it will change who you hire, how you compensate them, how you develop them. And in fact, I see it in IBM. You know, every IBMer today has access to -- boy, you name it; we have wikis, blogs, community, social networking and the like. But in the near future there will be something else, and I'm going to have IBMers -- they're not only going to rate each other; professionals, clients and the like will rate them. You'll be rated by the information you create, how you share it, what's its value. You know, you've seen this -- five stars. Maybe I'll even pay you that way. Five stars, one compensation; two stars, not. So it will be a different future. ...

    Yeah, that's -- you know, so when you're over a hundred years, you have lots of lessons you learn, right? And I would say one of the biggest lessons we have learned in the hundred years is don't define yourself by a thing, that that's a mistake. Don't define yourself by a product at any one point in time. So if you asked me to put it in a word, I'd -- I feel what IBM is an innovation company, so it's a company that continuously transforms to become something else that's of higher value.

    So what you remember would have been right. I mean, decades ago we were a hardware company. But you look today, and the hardware business represents 15 (percent) to 20 percent of our business today. So it's a complete 80-20 flip from where it has been. But that's always just been about a search of finding what's the next area where you can make a market and contribute. ...

    To me, I learned along the way, you know, culture is behavior. That's all it is; culture is people's behaviors. As someone once said to me, culture is what people do when no one looks, all right? And so it is true behaviors. And so what you have to do to change it -- I mean, and I think in most companies, the biggest and most important thing you can do is you have a set of values in a company. And instead of stopping there, you have to operationalize them. So people know, what are the behaviors expected of me? And I don't mean a rulebook. It's what do you do when there's no rule and you have to decide something? That's what a behavior and a value drives. So that's how you can operationalize it in a big group and it is just behaviors, right? So when I say "just behavior," but it's behaviors driven by values. ...

    Ours are -- what have you ever heard an IBM person called? Does anyone -- they're called IBM'ers. And it's -- to me it speaks to that culture that is a very unique culture. You are an IBM'er. And I hope our values -- look, every day I want and aspire to that, that the folks all walk and live those values, which are, of course, dedication to every client's success, innovation that matters for our company and the world, and trust in all personal responsibility.

  • Baton Rouge Advocate: Letter: IBM deal raises questions. By Wesley Smith, retired IT deputy director. Excerpts: I am speculating strictly upon my own experience in state government and information technology.

    I’m both thrilled and very concerned to see that IBM is locating a major application development center here in Baton Rouge. After much reflection, I’m seeing only more reason to be concerned.

    First, the good news — the state is going to invest an extra $14 million in education to support this center. The state is going to grant IBM $28 million and the city/parish is going to kick in $1.5 million. The building will be funded by $14.8 million from the state, $3 million from the city-parish and $12.7 million in federal Community Development Block Grant money. That’s the good news? My math is rusty but it sounds like the taxpayers are kicking in around $74 million to help IBM run a business. Well, I guess we at least get a better education program for this money. Maybe.

    Now, what concerns me? How can IBM possibly generate enough new work in the area to make this work? Someone needs to pretty much guarantee that they’ll have enough work. They say the area is underrepresented for Information Technology (IT) jobs and will need the 500 or so new programmers. If true, I’d think there’d be a lot more employment ads in the paper for this area than I’m seeing. It would also mean that the existing programmers would be demanding much higher salaries than they’re getting.

    Then I start to wonder, how does the state guarantee enough work for IBM? Then I think, maybe we’ll just steer a lot of state contracts in that direction. Since the state probably doesn’t have a lot of extra money or programming work stacking up in all of its departments, I think you’d need to lay off a bunch of state employees to generate that level of work for the private sector. They say IBM pays an average of around $67,000 for programmers. That’s about what the state probably pays. Of course, IBM is a for-profit entity, and they usually charge around $200/hour for programming services. That works out to around $400,000/year per programmer in revenue!

    Selected reader comments follow:

    • I can assure you the State agreed to provide a certain dollar amount in contracts and people. That equates to layoffs and no new contracts for those currently doing business with the State. Need proof? Look no further than the ongoing lawsuit between IBM and the State of Indiana. Sadly, Mr. Smith is 100% correct.
    • I don't often agree with Phil, but I have to today. This is cronyism. And this article is correct--IT individual will have to be laid off for it to work. So far, they claim this will bring 800 IT jobs. After considering all the layoffs Jindal has forced, we are still in a net job loss situation. But, hey, 74 M to purchase 800 jobs-- Go Bobby Jindal-- that way...just go.
  • Yahoo! IBM Employee Issues message board: "Really appreciate any input for things to consider for possible Retirement..." by "skid.mark77". Full excerpt: I started with IBM 1978, and due to an unfortunate accident (non work related) I was disabled/retired in 2006. Making that 28 years with IBM.

    The strange part is that even though I am labeled disabled/retired, I have not yet pulled the retirement trigger, and am still clicking time, making my current time of 35 years with IBM.

    I am now starting to think about retirement, in case something happened to me before I reach age 65. That way at least my wife would have some extra income.

    If I ask for retirement now, what are the things I need to consider? OR would it make more sense to let my 'time' continue to accrue and then retire when I achieve age 65? That would make my total time with IBM 38 years.

    Being disabled I am already on SS and Medicare.

    What, if anything, should I consider with regards to health insurance etc?

    Are there any 'other' things that I should consider or inquire about? I am being assigned a Coordinator as I write this, so they should be getting back to me within 2 business days. Thanks in Advance.

  • Yahoo! IBM Employee Issues message board: "Re: Really appreciate any input for things to consider for possible Retirement..." by "madinpok". Full excerpt: If you were to die before you start receiving your pension, your wife would receive only 50% of your pension under the provisions of the "Pre-Retirement Spouse Protection" feature of IBM's plan.

    When you do officially retire and start your pension, you will be able to choose a different survivor benefit percentage, all the way up to 100%. If you choose a percentage other than zero, it will reduce your pension payment somewhat. How much it is reduced will depend on the age difference between you and your wife. For many people, selecting the 100% survivor benefit reduces their pension by 10 to 15%.

    If you want your wife to receive more than 50% of your pension as a survivor, then you should probably retire sooner rather than later. Otherwise, you are taking a risk that something could happen to you in the meantime, leaving her with less than you had planned on.

    As Paul pointed out in his response, your pension does not increase much after you reach age 60. For someone who is age 62, you would see an increase of about 0.5% for each additional year you wait.

    In my opinion, you would be better off retiring now and starting to receive your monthly pension. With such a small increase for each year you delay starting your pension, you will never reach the break-even point if you do wait.

    The health insurance aspect is also important, and you need consider how you will be able to provide coverage for your wife.

  • CBC News: Ex-RBC foreign workers say contractor controlled their lives. Canadian bank insiders say outsourcing savings not worth the cost. By Kathy Tomlinson. Excerpts: Two IT contractors from India who worked at RBC in Toronto said their lives were tightly controlled by their multinational employer, while they took over the jobs of Canadian bank workers.

    "They have a rotation policy, and they make sure you don’t get settled here," said one of the ex-iGATE employees. “You are always threatened that at any time you will be sent back [to India]."

    The men, who now have permanent resident status in Canada and new jobs, spoke to the CBC's Go Public under the condition they would not be identified. Go Public first broke the story Saturday of dozens of employees at RBC who were losing their jobs to temporary foreign workers.

    The men said they were among a group of approximately 200 Indian nationals shuttled back and forth between Canada and India, while doing work for Canada’s largest bank between 2008 and 2012. ...

    The workers said Canadian bank employees lost their jobs in the process and they felt badly about that. ...

    "There are legions of Canadians qualified, willing and available for work if they knew the jobs existed. There’s something that needs to be dramatically overhauled here nationally," said Richard Kurland, an immigration lawyer from Vancouver.

    He and two colleagues are now preparing to launch a class-action lawsuit on behalf of affected Canadian bank workers.

    The iGATE workers’ stories support what dozens of bank employees and contractors have told Go Public, that foreign contractors from India are now cycling through all the major banks, for months or years at a time, displacing more and more IT staffers and local contractors.

    'It's not Canada' “It's India operating on different soil. It’s not Canada,” said a former senior bank executive, who is now a consultant. “The banks are losing control of their business.”

    Dozens of bank insiders said the outsourcing companies getting the big contracts are Tata Consultancy Services, iGATE, IBM Global and Mahindra Satyam. ...

    All banks involved. Meanwhile, several staffers at other Canadian banks have told Go Public they are upset about how outsourcing to foreign companies is affecting them.

    "We have many foreign workers that have displaced Canadian jobs,” said one 25-year veteran at the Bank of Montreal. “The departments run by [foreign vendor] IBM Global Resources are divided into two teams – onshore and offshore. The onshore team is brought into Toronto for a year or two and then they cycle back to India and new people come.”

    TD recently terminated several dozen IT workers including Juan Terrazas, from the Toronto area, after temporary foreign workers showed up to learn the ropes.

    "I had to train one of the guys to do the job I was leaving," said Terrazas.

    “One thousand-plus employees at different CIBC locations will be out of jobs by October 2013,” claimed an email from a group of CIBC employees. “India employees are already in Toronto and are job-shadowing us.”

  • InformationWeek: H-1B Rush Sparks Broader Debate. By Michael Fitzgerald. Excerpts: The technology business is back, if H-1B visas are any indicator. There was a rush for the specialty long-term visa this year, and on Friday the U.S. Citizenship and Immigration Services division said H-1B petitions exceeded the number of visas available. ...

    The H-1B petitions are used to bring in specialized talent from overseas, and applies to any job that requires at least a bachelor's degree. They've become synonymous with importing high-tech talent, and computer-related occupations make up about 40% of the list; occupations in architecture, engineering and surveying are next, followed closely by education. (See page 16 of this report.) More than half of recent H-1B visas have gone to Indian nationals. The list of H-1B petitioners is dominated by Indian outsourcers like Tata and Wipro, and U.S.-based technology firms like Microsoft, IBM and Amazon.com.

    In a time of near-stagnant hiring in the U.S., when even recent engineering and computer science graduates seem to have trouble finding jobs, the H-1B is a source of political controversy. There are groups that think there should be more of them, as was temporarily the case in 2000, 2001 and 2002, when Congress approved an additional 110,000 visas. ...

    But U.S. Senators Dick Durbin (D-Ill.) and Chuck Grassley (D-Iowa) have long argued that the H-1B system is rife with abuse by companies seeking lower-cost labor. H-1B reform is part of the broader immigration debate under way on Capitol Hill this month. The IEEE-USA endorsed Grassley's recent H-1B and L-1 Visa Reform Act of 2013. Among that bill's aims are ensuring H-1B workers receive comparable wages to U.S. citizens with the same jobs, and barring employers from advertising jobs only to H-1B holders.

    Selected reader comments follow:

    • There is no shortage of IT talent. There is a shortage of people who are willing to work for substandard wages. Business wants cheap labor, and they want to hold down salaries and billable rates. There is no shortage of people at reasonable rates. There is a shortage of people willing to work for minimum wage, live in a closet, and eat oatmeal.
    • As a recruiter, this whole "shortage" of IT talent is a joke. It is solely an excuse to hold down pay rates, and even that isn't working since the companies that hold the visa are contracting the worker out and adding their overhead, and many of the people I have interviewed have no more skills than recent college graduates that have had an internship or two. Oh by the way, THEY CAN"T SPEAK ENGLISH! When I started in IT many companies had development programs to help "raw" talent, fresh out of college, transition to the real world - an company executives had the backbone to make project managers and first line managers take these newbies onto their teams so that they could develop.
    • 10000%, there's really one group of employers that are in love with H1b - outsourcing and onshoring companies, mainly from India but also a lot of domestic ones that hope to imitate what the Indian companies like Tata, WipePro and Infosh*t are doing. Body shops and pimps get an H1b, mark them up big time and profit, while'st American tax-payers take the fall. And for sure, H1b's can be exploited on account of their severe lack of experience, skill and know-how/know-not; really good people demand top dollar and have the control - pimp agencies and head shops hate that, as there's no profit in the high-skilled seasoned people...H1b/L1/B1 are all big fraudulent scams, how companies can get away with the lies that they spread is really a testament to their propaganda finesse....no one that does any thinking, after a minute or two would come to the conclusion that all the pro-H1b "tall tales" are simply hot air and pure bull$hit
    • When we have a shortage of nurses do we go to H-1B visas? When we have a shortage of teachers did we go to H-1B visas? When we have a shortage of any work place talent other than technology do we go to H-1B visas? Its time to end the H-1B visas.
  • Business Insider: The 25 Best-Paying Companies For Software Engineers. By Alyson Shontell. Excerpts: Tech companies have a reputation for treating their employees well – especially their engineers. Engineering talent is scarce, so companies are willing to pay big bucks to keep them happy.

    Which companies pays their engineers the most? Jobs review site Glassdoor helped us pull the top 25 companies around the world that pay their US-based software engineers the most. ...

    • 25. Citrix Systems pays its software engineers an average base salary of $91,844
    • 24. Texas Instruments pays its software engineers an average base salary of $92,870
    • 23. QUALCOMM pays its software engineers an average base salary of $94,097
    • 22. Hewlett-Packard pays its software engineers an average base salary of $96,893
    • 21. Expedia pays its software engineers an average base salary of $98,672
    • 20. Intel pays its software engineers an average base salary of $98,804
    • 19. Yahoo pays its software engineers an average base salary of $100,998
    • 18. Cisco Systems pays its software engineers an average base salary of $101,991
    • 17. Intuit pays its software engineers an average base salary of $102,209
    • 16. Amazon pays its software engineers an average base salary of $102,831
    • 15. Microsoft pays its software engineers an average base salary of $103,563
    • 14. NVIDIA pays its software engineers an average base salary of $104,717
    • 13. Oracle pays its software engineers an average base salary of $105,660
    • 12. VMware pays its software engineers an average base salary of $106,568
    • 11. PayPal pays its software engineers an average base salary of $106,920
    • 10. Zynga pays its software engineers an average base salary of $107,242
    • 9. Bloomberg L.P. pays its software engineers an average base salary of $108,430
    • 8. eBay pays its software engineers an average base salary of $108,461
    • 7. Brocade Communications pays its software engineers an average base salary of $111,858
    • 6. LinkedIn pays its software engineers an average base salary of $116,375
    • 5. Apple pays its software engineers an average base salary of $118,192
    • 4. Facebook pays its software engineers an average base salary of $118,857
    • 3. Twitter pays its software engineers an average base salary of $120,768
    • 2. Google pays its software engineers an average base salary of $124,520
    • 1. Juniper Networks pays its software engineers an average base salary of $128,378
  • Glassdoor IBM reviews. Selected reviews follow:
    • Don't believe the hype” Current Field Service in Glendale, AZ. Pros: -Pads your resume; -Helps you acquire industry experience; -If you are lucky enough to have a good manager (which is rare) you can have flexibility and opportunities to develop. Cons: -They outsource everything they can, so your job is constantly in jeopardy. -Long hours without care or concern about work/life balance. -Compensation is below industry standard. -Benefits are below industry standard. -Little to no appreciation or recognition for work done. Advice to Senior Management: If your company has been profitable for the past 4 years, it's time to quit "tightening the belt" and give back to the employees whose backs you have built your wealth upon.
    • Once Was A Great Place to Work! Not True Today!” Current Enterprise Software Sales in Chicago, IL. Pros: Aggressive software acquisition strategy. Ability to work from home. A great place to start ones career and build a foundation of skills. Cons: Subjective performance reviews. Monthly driven quota objectives versus quarterly. Too few reps make their quota objectives with quota assignment tied back to Wall Street expectations versus reality. Too many layers of top management who add little value. IBM is supposed to be "family friendly" but taking vacation days is not encouraged.
    • World class company, below average compensation” Current Employee. Pros: Access to the best of the best, and all with the name of IBM on your resume. IBM has their fingers in almost every aspect of life, and working for this company opens up opportunities beyond those available with other employers. Cons: You have to learn to roll with the punches. Globalization and cost factoring are an every day reality that even IBM is susceptible to. If you're expecting to get a good raise or a fair bonus, then think again, because that won't happen here. Your real compensation is working on the projects and with the people, and using that to further your career. Advice to Senior Management: Recognize your top talent by what they do, not just who they are. Reward your rank-and-file people appropriately, and remember that the size of the reward is sometimes much more significant than the fact that they're getting one in the first place.
    • The bean-counters have taken over and they know how to shoot themselves in the foot!” Former Information Developer in Tarrytown, NY. Pros: Benefits were fine - but there wasn't time to enjoy them! Cons: No longer understand that saving money by cutting essential infrastructure is a bad thing. M&A process doesn't pay attention to essentials, and if it's not in the budget, god help you! Advice to Senior Management: Monetary incentives to save money encourage people to hide problems. Not good.
    • “Good place to learn, bad place to stay” Current Graduate Consultant in Melbourne (Australia). Pros: Security. Some very clever people. Great view. Cons: Corporate politics. Processes for everything. Little freedom for creativity.
    • Excellent management and growth possibilities” Current Applications Development Specialist in Phoenix, AZ . Pros: - Management is very friendly; - Excellent training and learning environment; - Work from home days occasionally; - Great benefits. Cons: The only con I can think of is that advancement won't happen very quickly. Advice to Senior Management: Continue the good work, it shows even at the lower levels.
    • Grindshop” Former Senior Software Engineer in Austin, TX. Pros: Mostly nice people to work with, at least the ones not scared of losing their jobs and backstabbing people to keep it. Many projects to choose from, this company really does do it all. Pay is good if you can get hired in at the right rate.

      Cons: Management is grinding their employees out, expect to be hired on for a position only to pick up one or two extra jobs within a year of working there. Miserable work environment, morale is very low and gets worse with the constant fear that layoffs are coming. Difficult to move jobs unless a project falls apart, constantly being told you are either too valuable to move or that you don't have the right skills.

      Advice to Senior Management: Take better care of your employees, don't wait until they are on the way out the door to finally allow people to move around. Hire people to replace those who left, expecting employees to shoulder the growing burden of leaving employees gets tiresome and weighs on morale. Quit doing the trickle layoffs, it keeps people constantly on edge.

    • Excellent company with breadth and depth, a balance of excitement and stability” Current Employee. Pros: Opportunity to work on big complex deals and projects; large accounts; access to the best in technology and business. Cons: Management hierarchy is strict, and rules of etiquette, formal. Few if any checks for bad management practice. Escalations are discouraged. Advice to Senior Management: Keep the bar on integrity high, and always find ways to encourage great work.
    • An excellent learning experience” Former Linux Developer (Internship) in Markham, ON (Canada). Pros: * Decent pay; * Interesting projects -- IBM has their hands in a lot of cool stuff; * Lots of opportunity to move around (and up); * Work with the best equipment (IBM makes some of the best servers, storage units, etc.); * Big company, meaning nice perks like travel, up-to-date equipment, etc. Cons: * Situated in Markham ;* I was doing my internship during the recession of 2008. I was quite put off by the fact that I saw many senior-level people shown the door around January of 2008, while, at the same time, IBM was continuing to hire interns for cheap labour. Ultimately, I decided to go to grad school instead of accepting the full-time offer of employment that they made to me. Nevertheless, I had a great time there and learned a lot.
    • IBM is an innovative company and the job as an engineer is stimulating, but the employee morale and atmosphere is poor.” Current Mechanical Engineer in Research Triangle Park, NC . Pros: IBM is an innovative company and the job as an engineer is stimulating. The work environment is professional and flexible. Cons: The overall morale and atmosphere at IBM is low. Salaries and benefits are well below competitors. The facilities, specifically in RTP, are poor...most employees work in a tiny cubicle in an industrial style building. Advice to Senior Management: Management should improve employee morale by providing more competitive incentives to work for IBM.
    • Not what it used to be” Current Development Engineer in Poughkeepsie, NY. Pros: IBM is a huge company and because of that there are many opportunities for long term employees to go overseas to China or India which are the only growth ares in IBM. They offer decent salaries after 20 years. Cons: They are working towards a $20 per share earnings target by 2015. That has resulted in very deep, often ill advised cost cutting. There is no incentive to work hard and the bonus salary plans have been gutted to meet the 2015 goal. Employees come last at IBM, don't ever forget it. Advice to Senior Management: Don't forget who got you where you are.
    • Very rewarding. Lots of freedom to work” Current Research Staff Member in Bangalore (India). Pros: IBM is a big company with many avenues to progress and make a big impact. Few other companies offer the variety of work and colleagues that IBM does. Cons: The con of working in a large company is the difficulty in making the elephant dance. In many places IBM is a big government bureaucracy so getting things done can be hard. Advice to Senior Management: Move to a slightly more bottom up responsibility architecture
    • Good workplace, not a job for everyone” Former Information Developer in Toronto, ON (Canada). Pros: The facility is great, my manager was very understanding and encouraging, and most of the experienced developers and managers are friendly. Cons: Very bad learning environment due to lack of standardized educational material or procedures. Very help based system of work, you have to constantly ask for help, asking for help itself is a waste of time in my opinion. Advice to Senior Management: Could use a little more experienced/skilled employees to help the new comers. As well as classes and one on one sessions where new comers will be taught for a few months, before they are left to their own.
    • Smart nice people in a big old ship” Current Employee. Pros: People work at home/time flexibility work life balance. Cons: Constant headcount reduction; heavy handed processes; many divisions doing similar/same things. Advice to Senior Management: Have clear values and visions and act on them. Reduce portfolio of stuff. You can't keep cutting people to show profit, but then keep/manage/maintain all the stuff.
    • Caste Hierarchy” Former Report and SQL Analyst in Boulder, CO. Pros: Very good place to learn enterprise business intelligence - worked with Fortune 500 companies and their data. IBM are the experts at BPM - you live and breathe it everyday. Cons: They don't hire contractors - period. While it was good to get experience, after a while it was blatantly apparent I was never going to become one of the privileged class - a full time IBM employee. Saw too many good people leave. Advice to Senior Management: Quit taking the attitude that contractors are scum - hey! some are even former employees who "keep the lights on".
  • Alliance for Retired Americans: Friday Alert. This week's articles include:
    • Masses Protest Obama Budget Release Including Cuts to Social Security, Medicare
    • Social Security Uniquely Important to Women, Cuts Would Have Major Impact
    • As Americans Prepare for Tax Day, Big Pharma Pockets Billions in Profits from Taxpayers and Seniors
    • Eye Drops Could Cure Macular Degeneration, a Leading Cause of Blindness
  • Kaiser Health News: Caveat For Contraceptive Coverage; Early Retirees May Get Cheaper Plans On Exchanges. By Michelle Andrews. Excerpts: Q: I'm in a pre-Medicare retirement insurance plan offered by my employer, but it is very expensive. After Jan. 1, 2014, will I be able to apply for alternate insurance through the health exchanges and get my insurance at a lower price?

    A: Anyone can buy a plan on his health insurance exchange, which will be running in January. If you meet certain criteria, you may also be eligible for a federal tax credit to help make the coverage more affordable.

    Retirees who are offered employer-sponsored coverage will have to meet the same eligibility standards for tax credits as active employees who are offered coverage through their jobs, says Sabrina Siddiqui, a spokeswoman for the Treasury Department. To qualify for a tax credit, the coverage offered by an employer must be either unaffordable, which is defined as having a premium that exceeds 9.5 percent of household income for individual coverage, or inadequate, meaning that it covers less than 60 percent of allowed medical costs.

    If a retiree's coverage is considered unaffordable or inadequate by those standards and if his household income is between 100 percent and 400 percent of the federal poverty level ($11,490 to $45,960 for an individual in 2013), he could be eligible for a premium tax credit, according to the Treasury Department.

  • Kaiser Family Foundation: EXPLAINING HEALTH CARE REFORM: Questions About Health Insurance Subsidies (PDF). Excerpts: Good health insurance is expensive, and its cost is out of reach for many lower and moderate income families, particularly if they are not offered health benefits at work. To make coverage obtainable for families that otherwise could not afford it and to encourage broad participation in health insurance, the Patient Protection and Affordable Care Act (PPACA) includes provisions to lower premiums and cost-sharing obligations for people with low and modest incomes. The adequacy of this assistance will be a key determinant of how many people will gain coverage and whether or not lower income people will be able to use the health insurance they obtain.

    This summary describes the financial assistance provided under PPACA for people purchasing coverage on their own through health insurance exchanges. Expanded coverage for low income people through Medicaid and CHIP and new tax credits for small businesses offering health insurance are addressed in other reports.

  • Yahoo! IBM Employee Issues message board: "Re: PPACA for active employees". Full excerpt: Some very current information on what is being discussed here:

    Excerpt- It's not just the poor and the elderly whose rights to health care have been infringed by the government. It's also the young.

    The Affordable Care Act contains a provision called "community rating." It requires that insurers charge their costliest customers a maximum of three times what they charge their least-costly customers.

    The problem is this: the average 64-year-old consumes about six times as much health care as the average 18-year-old. So the economic consequence of community rating, in the vast majority of U.S. states, is that many young people will see their premiums rise by more than 100 percent, so that some older individuals will enjoy modest discounts of 10 percent on their premiums.

    This provision was added to Obamacare at the behest of the AARP, the famous seniors' lobby. Our new health law cuts Medicare by $716 billion over the next ten years, and Democrats needed AARP's support in order to pass the bill. So they added community rating: in effect, a massive transfer of wealth from the young to the old.

    And here's the kicker: thanks to Obamacare's individual mandate, young people are no longer allowed to opt out of the system. They must pay these drastically inflated rates for health insurance, even if they never go to the doctor. The average 20-year-old consumes about $700 a year in health care, but will be forced to pay $4,000 a year, or more, for health insurance.

  • Yahoo! IBM Employee Issues message board: "Re: PPACA for active employees" by Paul Sutera. Full excerpt: What isn't discussed is how we currently subsidize the uninsured. The young have always subsidized the medical expenses of the older set. I don't think Obamacare changed that drastically. But I'm willing to entertain other ideas. 20K a year at age 64. I suppose I could move to the Mexican border, cross over for medical care, and cross back. If I die in a shooting, well, more money for my heirs. The IBM retiree (and future retiree) is forced to consider such wild scenarios.

    In all these discussions, most of us are either second choicers or younger (no-choicers with Annuity option and no-choicers lump-sum only). The first choicers got a better retirement medical plan...so if you are chiming in as a first-choicer, please let us know that.

  • USA Today: Retirement: Plan ahead for these 5 nasty surprises. By Rodney Brooks. Excerpts: You're all set for retirement. You've been planning and saving for years. You're just two years away from the big day, and everything's on track. Then, boom! Something happens. An unexpected legal or medical expense. A grown child moving back home after a divorce. If it happens when you're about to retire or are already retired, it can throw your well thought-out retirement plan into chaos.

    So, what should you do? Some financial advisers say an emergency plan should always be part of your retirement planning.

  • AARP: Changing Jobs? Beware of Bad Information About 401(k) Options. By Carole Fleck. Excerpts: About to change jobs? If you have a 401(k) account, you’re at risk of getting bad information when you ask the company managing your retirement plan about your options.

    Turns out that, in some cases, the people who give advice over the phone push departing workers toward rolling over their 401(k)s into a privately owned individual retirement account (IRA) that the investment company sells. What these plan providers also don’t disclose to workers are the fees associated with that move or other options that may be more appropriate, such as keeping their funds in a 401(k), according to a government report.

    The report says workers must be protected from deceptive marketing disguised as advice.

    “Some unscrupulous firms are making a profit by keeping customers in the dark,” Sen. Tom Harkin, chairman of the Health, Education, Labor, and Pensions Committee, says. “When Americans call up their 401(k) plan provider looking for advice, they shouldn’t be inundated with marketing materials masquerading as objective, investor education.” ...

    Harkin and two other Capitol Hill Democrats, Sen. Bill Nelson of Florida and Rep. George Miller of California, have written officials of the Labor Department and the Treasury Department, urging them to take action. “For most workers,” they said, “[their 401(k)] is their largest financial asset, and they have a right to full and fair information on all of their investment options.” The GAO’s findings, Miller added, come as no surprise, “since IRAs often come with higher costs when compared to a 401(k).”

    Nelson, who chairs the Senate Special Committee on Aging, said, “Saving for retirement is tough enough, so it’s terrible when employees lose hard-earned money to misleading sales pitches, harmful products or just poor investment advice.”

  • Wall Street Journal MarketWatch: Retiree health benefits: Facing extinction? Inflation, reforms lead more firms to shed retiree plans. By Elizabeth O'Brien. Excerpts: Employer-provided health insurance for retirees has been dwindling for decades now, but the trend is accelerating, experts say. Mounting costs have caused more employers to scale back or eliminate medical benefits for their former workers.

    What’s more, the public-insurance marketplaces established under the Affordable Care Act are expected to radically change the landscape for early retirees starting next January. That is likely to lead even more employers to rethink their strategy for retired former employees under 65, most of whom are not yet eligible for Medicare. Those baby boomers will be increasingly likely to find themselves shopping for their own insurance—though they may pay less for it than they would if they were shopping right now. ...

    In the survey, 71% of responding companies said subsidized health-care benefits for retirees would not be important to attracting and retaining employees in three to five years. “Twenty or 30 years from now, people won’t know what you mean when you say ‘retiree medical,’” Darling said. (One exception is certain engineering and scientific employers, whose need for highly skilled workers has led them to continue to promise richer benefits to incoming employees, Darling said.) ...

    Early retirees could see biggest changes. The real sea change in retiree health care will come in January for early retirees, experts say. Under the Affordable Care Act, starting on Jan. 1, 2014, insurers will no longer be able to use people’s health status as a basis for denying them coverage or charging them more. Currently, people ages 55 to 64 often have trouble finding affordable individual coverage—or any coverage at all—due to pre-existing conditions.

    Some premiums may even decline for people ages 55 to 64 on the public exchanges, versus comparable individual coverage today, experts say. This is because new pricing requirements for insurers will shift costs from older consumers to younger ones. What’s more, those whose gross income is up to 400% of the federal poverty level—in 2012, $44,680 for an individual, $60,520 for a family of two, and $92,200 for a family of four—will receive government subsidies toward their insurance costs. “There’s no doubt that the ACA changes the playing field for early retirees,” said Paul Fronstin, director of the health research program at the Employee Benefit Research Institute.

  • Seeking Alpha: More Bad News For Stock Buybacks. By Tim McAleenan Jr. Excerpts: One thing that can make stock buyback programs so dangerous for shareholders is the fact that there is a meaningful disconnect between theory and reality when it comes to the actual execution of stock buybacks. In theory, stock buybacks sound great (and even seem superior to dividends because of present taxation laws). It seems so simple: your stock is undervalued, you buy back shares, you retire them, earnings per share go up, and shareholders get richer. But as Jack Hough of Barron's recently reported, this has not been the case for S&P 500 companies.

    Hough writes:

    Last quarter, 317 companies in the Standard & Poor's 500 index repurchased shares, but only 98 of these reduced their share counts, according to the S&P. Many companies use repurchases merely to offset shares that are issued to employees as compensation. Net buybacks-repurchases that whittle down a company's sharecount - are what matters.

    Ignore net buybacks that look like short-term financial fixes. Studies show that companies often turn to buybacks when manager pay is linked to earnings per share, and when companies would otherwise miss Wall Street's earnings-per-share targets by a penny or two. Just 36 companies in the S&P 500 shrank their share counts by 1% or more last quarter.

    Let's not sugarcoat this. These statistics are terrible. Only a third of companies currently doing stock buybacks in the S&P 500 are actually reducing shares. And only three dozen out of over three hundred are actually doing it by an amount over 1%. There can be a lot of temptation to mess up the good effects of a stock buyback because it is so easy to pay executives in the form of shares, thus wiping out the benefits of a stock buyback in the first place.

New on the Alliance@IBM Site
  • Job Cut Reports
    • Comment 04/07/13: @GBSUPDATE - The GBS purge of folks and either eliminating the work or shifting to Brazil, Costa Rica, etc- very low cost folk started in 2009 and will continue until all (or most) of US non directs are no longer around. Don't be surprised if GBS is sold off - low margins (due to high expenses of non client facing folks), loss of opportunities (due to offshoring of work that doesn't meet the contractual obligations) -GBS-
    • Comment 04/08/13: Heads up child. Word on the street is, remaining Sametime work will be moved to Brazil in Q3. Good luck with those outages -Anon-
    • Comment 04/11/13: Rumors have gone from whispers to loud talk about IBM selling of business unit(s). Usually when talk gets much louder than a whisper, it turns out to be true. Those there that may be affected could benefit from it. -Rumors-
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • Fierce Health Payer: Aetna sues freestanding ERs over facility fees. By Dina Overland. Excerpts: Freestanding emergency rooms, which are quickly becoming a popular option for consumers to receive medical care, may also soon become the bane of insurers' attempts to reign in costs.

    By offering perks such as 24-hour service, short waiting times and board-certified emergency specialists, consumers are drawn to these freestanding ERs as an alternative to traditional ERs or hospitals, reported Bloomberg. ...

    But this relatively new type of care delivery comes with hefty price tags. Treatments for a chest cold and breathing problems, for example, can cost $2,000, including about $1,500 in "facility fees."

    Insurers, including Aetna and Humana, are concerned that freestanding ERs aren't justified in charging such facility fees and claim they aren't being transparent about the reasons behind the fees. Humana has said they're concerned patients don't understand the differences in costs between freestanding ERs and urgent care centers. ...

    Aetna has sued three freestanding ERs and a hospital last August in Houston federal court. It alleged in the lawsuit that these new ERs have "wrongfully submitted facility fees" and have "masqueraded as hospital emergency rooms, without a license or any of the associated overhead," Bloomberg noted. ...

    In particular, Aetna claimed that Rayford ER Management Co. LLC, which owns freestanding ERs, entered into a "sham" management contract with Cleveland Imaging and Surgical Hospital LLC, allowing the ERs to using the hospital's tax identification number as a "front" for high facility fees.

  • Concord Monitor (N.H.), courtesy of Physicians for a National Health Program: The great health care sinkhole. By Robert S. Kiefner, M.D. Excerpts: The bizarre and tragic loss of a Florida man a few weeks ago, slipping to his death from his bedroom into a sinkhole, offers up a fitting metaphor for the great abyss between cost and value in health care and how it has the potential to swallow us up without warning.

    The periphery of that huge health care sinkhole is occupied by guys in suits – insurance companies, Big Pharma, and overpaid hospital executives and their legions of lawyers and lobbyists. In Steven Brill’s recent Time magazine expose, “Bitter Pill,” he shows how the elite of a separate health care economy are all doing quite well, while middle-class folks with serious illness are going bankrupt as a consequence of being under insured or just plain priced out of the market.

    Equipped with shovels on the edge of the great sinkhole, health care executives contend that they are filling up the hole. In reality they are digging it deeper to everyone’s peril.

    In the world of for-profit medicine, doctors also need to be held accountable, particularly among sub-specialties, as the gap between the pay of primary-care physicians and specialists continues to grow.

    The five minutes during which an orthopedic surgeon applies a cast to a broken wrist, a dermatologist freezes a couple of barnacles on someone’s face, or a radiologist interprets an MRI are still reimbursed vastly more than a family physician might charge for an hour of managing a patient with multisystem disease, sorting through the pharmacy the patient has brought into the office in a brown paper bag, and making referrals where necessary, all while being trying to enact evidence-based medicine and maintaining an awareness of cost/benefit ratios. ...

    And so we witness the ascent of great and powerful hospital executives, modern-day health overlords charged with developing local networks of care, financed by the now famous “Chargemaster” system described by Brill. Two-dollar Tylenols, $70 gauze pads – it’s enough to make you cry into your $50 “mucus recovery system,” aka Kleenex. But it all adds up to million-dollar CEO salaries, even in community hospitals. No doubt that these are bright, clever and caring people, but no hospital CEO deserves to make a multiple of the salary of the president of the United States.

    The perversity is ratcheted up another notch when one contemplates the multimillion-dollar salaries of CEOs of health insurance companies. But instead of making money on gauze pads and Tylenol, they prey upon individuals and businesses. A family of four may expect to pay over $25,000 for a year of coverage, complete with an $8,000 deductible in some markets, given the lack of major cost controls in the ACA. ...

    While acknowledging and promoting the gains of the ACA, we need to resume the journey toward a single payer, where everyone enjoys the security and dignity of being covered by insurance. We’re not talking “free” care, just quality care at a truly affordable price. Where there are excessive profits, there cannot be compassionate and accessible care for all. Let’s fill in this enormous sinkhole, so that everyone gets a good and safe night’s sleep.

  • The Christian Science Monitor Opinion: Opponents of Medicaid expansion put politics over people. The rejection by several Republican-led states of the Affordable Care Act’s Medicaid expansion to provide health care access to millions of America’s poor isn’t just partisan politics; it’s immoral. It’s not too late to press state leaders to put people ahead of partisanship. By Kate Holder. Excerpts: The third anniversary of the signing of President Obama’s Patient Protection and Affordable Care Act, also known as “Obamacare,” was recognized last month with the usual debate over its costs and benefits and impact on the federal deficit.

    GOP opponents have objected to the law, often invoking a moral argument that it violates individual and states’ rights. But in their efforts to undercut the law, many of its most vocal adversaries are committing a moral transgression of their own. The rejection by several Republican-led states of the Affordable Care Act’s Medicaid expansion to provide health-care access to millions of America’s poor isn’t just partisan politics; it’s immoral. ...

    To date, as many as 17 states – all led by Republican governors and/or Republican-controlled legislatures – have either refused or are leaning toward refusing the Medicaid expansion. That means denying health coverage to more than 5 million of the 20 million uninsured Americans who would be eligible.

    This refusal to provide health-care coverage to some of the nation’s poorest working adults will consign millions of them to a coverage gap that the Affordable Care Act was designed to close. As many America Catholic bishops and other religious leaders have clearly stated: Access to affordable health care is a moral imperative as well as a fundamental human right. ...

    Yet Medicaid expansion offers a very favorable deal to the states. It asks states to increase Medicaid eligibility to adults with incomes at or below 138 percent of the federal poverty level. In return, the federal government will pay 100 percent of the cost of expansion for the first three years, and at least 90 percent after that.

    That’s 90 percent paid for by the federal government, forever. And if the law failed to follow through with its 90 percent commitment, then states could withdraw at any time.

    If all states accepted the expansion, state Medicaid spending nationally would increase by less than 3 percent from 2013 to 2022, according to a November 2012 report by the Kaiser Family Foundation and the Urban Institute.

    Many business groups, hospitals, health-care advocates, and health-care providers across the country strongly back Medicaid expansion for reasons both economic and ethical. Those reasons include improving health-care providers’ abilities to save lives and improving health-care outcomes, as well as curtailing costs for hospitals that rack up millions in unpaid bills to treat the uninsured. ...

    In Texas, for instance, it seems that Gov. Rick Perry (R) would rather deny Medicaid coverage to 2 million Texans than submit to what he called Obamacare’s “power grab.” Texas has the nation’s highest percentage of uninsured residents at 24 percent.

  • Bloomberg BusinessWeek: The Reason Health Care Is So Expensive: Insurance Companies. By Jeffrey Pfeffer. Excerpts: But the thing that few people talk about, and that no serious policy proposal attempts to fix—the arrangement that accounts for much of the difference between health spending in the U.S. and other places—is the enormous administrative overhead costs that come from lodging health-care reimbursement in the hands of insurance companies that have no incentive to perform their role efficiently as payment intermediaries.

    More than 20 years ago, two Harvard professors published an article in the prestigious New England Journal of Medicine showing that health-care administration cost somewhere between 19 percent and 24 percent of total spending on health care and that this administrative burden helped explain why health care costs so much in the U.S. compared, for instance, with Canada or the United Kingdom. An update of that analysis more than a decade later, after the diffusion of managed care and the widespread adoption of computerization, found that administration constituted some 30 percent of U.S. health-care costs and that the share of the health-care labor force comprising administrative (as opposed to care delivery) workers had grown 50 percent to constitute more than one of every four health-sector employees.

    What remains missing even in the discussion of the enormous administrative burden is not just how large, both in absolute dollars and as a percentage of health costs, it is, but also how few incentives there are for insurance companies to stop wasting their and everyone else’s time. Most large employers, including mine, Stanford University, are self-insured, which means they pay for their own medical claims. These large employers invariably hire health insurance companies to “administer” their health-care dollars, doing things such as paying claims. Employers typically reimburse the insurers the amount of money they pay out to health-care providers plus a percentage of these costs. In Stanford’s case, we pay Blue Shield 3 percent of the amount, about $3 million a year. (Note that the overhead costs of Medicare are less than one-third as much at slightly less than 1 percent.)

    Because insurers are paid a fixed percentage of the claims they administer, they have no incentive to hold down costs. Worse than that, they have no incentives to do their jobs with even a modicum of competence. To take one small personal example, I have reached the age of Medicare eligibility but, because I continue to work full time, have primary health insurance coverage through my employer. Blue Shield, of course, wants to be sure it doesn’t pay for any claim it doesn’t have to, so I was asked to attest to the fact that I have no other insurance. No problem there, except such attestations seem to be required on almost a monthly basis—requiring my time on the phone (and on hold) with Blue Shield’s customer service, an oxymoronic term if there ever was one, and also requiring my doctor and laboratory to call me, call Blue Shield, or both, and thus also waste their time and resources.

News and Opinion Concerning the "War on the Middle Class"
Minimize "It is a restatement of laissez-faire-let things take their natural course without government interference. If people manage to become prosperous, good. If they starve, or have no place to live, or no money to pay medical bills, they have only themselves to blame; it is not the responsibility of society. We mustn't make people dependent on government- it is bad for them, the argument goes. Better hunger than dependency, better sickness than dependency."

"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.

  • The Smirking Chimp: Death of 1,000 Cuts: Our Lousy Economy Is Already Slashing Social Security Benefits. By Richard Eskow. Excerpts: With all the controversy over the President’s proposed “chained CPI” cuts to Social Security, it’s worth noting the effect the economy is already having on Social Security benefits. We’re seeing a growing divide between the “penthouse economy” and the one the rest of us live in, with implications that last well into our retirement years.

    The Penthouse Recovery. Corporate profits are at record highs. Corporate earnings have risen 20 times as fast as disposable income during this ‘recovery.’ And most of that 1/20th went to higher-income earners. Hourly wages actually fell.

    Those profits are, in Derek Thompson’s well-chosen words, “eating the economy.” As Thompson notes, corporate profits have doubled their share of the overall economy since 2000 while labor’s percentage, which were already at a half-century low, have fallen another four points. ...

    The 1 Percent Solution. In an economy like this one, a proposal to cut Social Security benefits compounds the injuries which have already been inflicted on the middle class. Dean Baker’s calculations show that the President’s budget asks the typical financially-strapped senior to sacrifice more than three times as great a share off income as the average wealthy American.

    The “chained CPI” is a bad idea under any circumstances. In this economy, it’s a declaration of war on the middle class – and an expression of solidarity with the wealthiest and most powerful among us.

  • Washington Post opinion: The end of majority rule? By E.J. Dionne Jr. Excerpts: The National Rifle Association is facing attacks from Gun Owners of America for being too soft on gun control. This is like a double cheeseburger coming under severe criticism for lacking enough cholesterol.

    Universal background checks are supported by 91 percent of Americans. Yet there is enormous resistance in Congress to passing a strong bill to keep arms out of the wrong hands. What does “rule of the people” mean if a 9-to-1 issue is having so much trouble gaining traction?

    Or consider the Morning Joe/Marist poll last week showing 64 percent of Americans saying that job creation should be the top priority for elected officials. Only 33 percent said their focus should be on reducing the deficit. In light of Friday’s disappointing jobs report, the public’s instinct is sound. Yet politicians in our nation’s capital are so obsessed with the deficit you’d imagine they still haven’t heard how many Americans are unemployed or underemployed.

    These three non-randomly selected facts illustrate a deep structural tilt in our politics to the right. This distortion explains why election outcomes and the public’s preferences have so little impact on what is happening in Washington. At the moment, our democracy is not very democratic. ...

    In the House, those gerrymanders helped Republicans keep control even though more Americans voted for Democrats in the 2012 congressional races.

    This representational skew affects coverage in the media. Most Americans may care more about jobs than deficits. But if a right-tilted power structure is talking about deficits all the time, members of the media feel obligated to cover the argument they hear in Washington, even if that means downplaying views held by a majority of the voters — and even if the economic data say we should be talking about growth, not austerity.

    There’s also this: While background checks probably would pass the Senate with relative ease if there were no filibuster, the media cover a world in which 60 votes is the new 51. Thus do the battles for 60 percent of the Senate, not the views of 91 percent of Americans, dominate journalistic accounts.

    There is no immediate solution to the obstruction of the democratic will. But we need to acknowledge that our system is giving extremists far more influence than the voters would. That’s why American democracy is deadlocked.

  • New York Times: The People’s Choice for the People’s Pension. By Nancy Folbre. Excerpts: Social Security, the most transparently self-financed program of the federal government, is not increasing our budget deficit. The most recent trustees’ report shows sufficient funds to pay full benefits until 2033.

    No one is making out like a bandit: Social Security beneficiaries who retired in 2010 are expected to get back approximately what they paid in.

    If we wanted to adopt a cautious policy measure that would eliminate the shortfalls predicted 20 years down the road, we could eliminate the cap on earned income subject to Social Security taxes, currently set at $113,700. Such a measure would lead to increased payments by about the top 5.2 percent of wage earners. ...

    But as Thomas B. Edsall pointed out in a recent commentary, “scrap the cap” has apparently been taken off the table, despite evidence of considerable public support for it.

    Readers doubtful of that public support should read the new National Academy of Social Insurance report, “Strengthening Social Security: What Do Americans Want?,” based on an online survey asking respondents whether they favored or opposed 14 specific changes to Social Security. The analysis also draws on findings from focus groups to add qualitative texture to the quantitative results. ...

    Readers mystified by the yawning gulf between public opinion and current political discussion might benefit from the background provided in Eric Laursen’s magisterial history, “The People’s Pension: The Struggle to Defend Social Security Since Reagan.” The book offers more than 800 pages of fascinating if gory details about the lobbying efforts and misinformation campaigns aimed at bringing the program down. ...

    Readers feeling demoralized by the history of class warfare over social insurance might be cheered by two of the short videos recently entered in an online contest sponsored by the Peter G. Peterson Foundation on the theme of “I’m Ready” to fix the national debt.

    In one entry, “Being Honest, Tough Choices,” a serious young man uses his webcam to explain in simple, direct terms why he supports Social Security and deplores the rhetoric of “makers versus takers, young versus old.”

    Another entry, originally titled “Scrap the Cap” but currently labeled “Movin’ In, Kids,” has outpaced all others to date in terms of both viewings and ratings. It features some lovable oldsters in a hilarious rap performance warning their son that if their Social Security benefits are cut he better pull out the sofa bed and put out some fresh towels because they will be living together from now on.

  • Bloomberg: Obama’s Budget Would Cap Romney-Sized Retirement Accounts. By Richard Rubin & Margaret Collins. Excerpts: President Barack Obama’s budget proposal would cap multimillion-dollar tax-favored retirement accounts like the one held by Mitt Romney, his Republican rival in 2012.

    Obama’s budget plan, to be unveiled April 10, would prohibit taxpayers from accumulating more than $3 million in an individual retirement account. That proposal would generate $9 billion in revenue for the Treasury over the next decade, according to a White House statement released today.

    “Under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving,” the statement said.

    The most prominent taxpayer with a multimillion-dollar IRA is Romney, the 2012 Republican presidential nominee and co- founder of Bain Capital LLC. Romney disclosed in public filings during the campaign that his retirement account held between $18.1 million and $87.4 million. At one point, the maximum exceeded $100 million.

    IRAs have evolved from a retirement-planning technique into an estate-planning tool for some wealthy families because tax laws allow the accounts to be passed on to heirs, said Ed Slott, an IRA specialist and certified public accountant based in Rockville Centre, New York. ...

    “Over the last election it hit a critical mass when a lot of people found out that Romney had $100 million in his IRA,” Slott said. “People thought, how on earth did that happen? I think that was the tipping point.”

    The Romney campaign didn’t explain how he amassed that much money in an IRA when contribution limits are much lower. Most taxpayers can contribute a maximum of $5,500 for 2013. Older workers, self-employed workers and those who save through 401(k)-style plans have higher caps and can roll those accounts into IRAs.

    One possibility is that Romney included Bain investments valued at close to nothing that later grew exponentially. The value would increase tax-free in the retirement account and would be subject to taxation at ordinary income tax rates when taken out.

  • Yahoo! IBM Pension and Retirement Issues message board: "Re: Proposed limits on retirement accounts of 3 million" by "louise217". Full excerpt: The problem is that anyone who has more than $3 million in an account like this has more than enough to retire on in that account - it's not equivalent to a haircut.

    What the REST of us Americans do is pay higher taxes when someone else gets a tax break, right? So, to be FAIR to everyone, we're willing to give tax breaks, within reason, to folks. We give them tax breaks on a primary residence - but we don't let people claim primary residence tax breaks on every home they might possibly own, for example, because giving them a tax break on multiple homes wouldn't be fair to the rest of us who have to pay higher taxes to replace the missing taxes given to those who get tax breaks!

    And to be fair to everyone, we're willing to give people tax breaks when they save for their own retirement - but within reason. If you have the ability to retire with more than $3 million saved up, you can ONLY get a tax break on $3 million in an IRA. That's not unfair to anyone. As I explained in an earlier post, $3 million is a TON of money. That's more than generous. If you're able to save more than that - great for you. Terrific. Good on you for being well-paid and for managing your income well to allow yourself to sock that much away.

    But don't expect the rest of us to sacrifice in order to allow you to get a tax break for more than $3 million in a tax-sheltered IRA. As I wrote before, don't whine that you're being mistreated.

    The logic behind this isn't puzzling at all. It's the way virtually ALL tax breaks work. Because we recognize that giving a tax break to one person or one group makes everyone who's not a member of that group pay more, we implement fair limits on tax breaks.

  • Huffington Post: The Biggest Republican Lie -- 'America Is Broke'. By Robert Creamer. Excerpts: The big lie in American politics today is that "America is broke" or "in this time of austerity we have to tighten our belts." America is not broke. We are not in a time of "scarcity" and when we buy into this fallacy, we contribute to political decisions that actually will do damage to our standard of living and that of our children.

    This lie is used relentlessly to argue that "America just can't afford" investments in education, or infrastructure, or jobs programs. It is used as the justification for the need to cut Social Security benefits, shift the cost of Medicare to senior citizens, increase the costs families bear to send children to college, or cut back on food for low-income children.

    The fact is that for ordinary people times are tough. Median per-person income for ordinary Americans hasn't increased for 20 years. And the federal, state and local governments are short of revenue.

    But America is not broke -- far from it. Ask the gang on Wall Street. Ask the bankers whose recklessness caused a massive financial collapse, yet continued to get multi-million dollar bonuses, if America is broke.

    The reality is our economy is producing a higher gross domestic product per capita -- the best measure of the sum of goods and services produced by our economy per person -- than at any other time in American history. Gross domestic product per capita slumped after the Great Recession that was caused by the recklessness of the big Wall Street banks. Then it once again began to increase and has now reached record levels.

    Overall, America is still the wealthiest nation in the world -- and wealthier today than it has ever been. ...

    And note that GDP per capita has increased six fold since Social Security was passed in 1935 and 2.3 fold since Medicare was passed in 1965. Demographic trends, like the number of seniors in society, have been massively outstripped by increases in our per capita gross domestic product -- or standard of living. Those who claim that while we might have been able to afford Social Security and Medicare when they were passed, we just can't afford them anymore, are just plain wrong.

    So if per capita gross domestic product keeps going up, how could it be possible that the median income of ordinary Americans hasn't increased in twenty years? And why do we have such big budget deficits? Why do we feel so broke in our everyday lives?

    The answer is that we are not living in a time of scarcity. We have been living in a time of enormous inequality. Look at a guy like John Paulson. In 2007, as the financial crisis descended, he made $4 billion in personal income betting against subprime mortgages that helped sink the rest of the economy. In 2011 he made a record $5 billion in personal income as the manager of a hedge fund.

    In 2011, Mr. Paulson made as much as 100,000 of his fellow citizens who earned $50,000 per year.

    Ordinary people haven't had a raise in 20 years, while the wealthiest among us have accumulated unthinkable riches. As a percentage of national income, corporate profits have risen to their highest levels since the 1950's -- 14.2 percent in the third quarter of last year. At the same time, the percentage of national income going to wages dropped to 61.7 percent -- almost to its low point in 1966.

    And we are living in a time of scarcity for government budgets because Republicans in Congress slashed taxes on the wealthy, opened up new loopholes for big corporations, and obstructed policies that would put everyone back to work and generate new tax revenue.

    Ask our friend Mr. Paulson how Republican tax policies affected him. Had he somehow managed to make his $5 billion laying bricks or sweeping floors, he would have paid taxes at a rate of 35 percent on the bulk of that income. Instead, he paid at a rate of only 15 percent, since he earned his money by speculating as a hedge fund manager instead of making a useful good or service. Makes sense, right?

  • The Smirking Chimp video: Homeless in High Tech's Shadow. By Bill Moyers. California's Silicon Valley is a microcosm of America's new extremes of wealth and poverty. Business is better than it's been in ten years. Facebook, Google, and Apple have minted hundreds of new tech millionaires.

    But not far away, the homeless are building tent cities along a creek in the city of San Jose. A recent Associated Press story about this poverty in the valley of success got our attention, so we went to see for ourselves and to speak with the reporter, Martha Mendoza. See our full report below.

  • The Smirking Chimp: Why Obama's Social Security Cuts Are Our Wake-Up Call. By Richard Eskow. Excerpts: No jobs. No growth. Falling income. Unaffordable colleges. A dying middle class. Young people without hope. The greatest economic inequality in modern history.

    And yet, in the midst of the Long Depression, we're told that the president intends to cuts Social Security.

    According to reports, the new presidential budget proposal will also include job-killing spending cuts and a Medicare cost hike that will increasingly affect the middle class with every passing year. ...

    Death by a Thousand Cuts. Call it 'the unkindest cut of all.' What makes the chained CPI particularly unkind is the fact that millions of Americans have already had their Social Security benefits cut. Benefits are determined based on a person's lifetime earnings, so any significant loss in income now results in a benefit cut later. (More details here.)

    Long-term unemployment is a benefit cut. A stagnating wage is a benefit cut. Wealth inequity is a benefit cut.

    How many more cuts can the American people stand? ...

    Off-Balance. The White House is defending these cuts by saying they're only acceptable as part of a 'balanced package.' But their current budget is already unbalanced. Dean Baker's calculations show that the president's asking the typical financially-strapped senior to sacrifice more than three times as great a share off income as the average wealthy American. Disabled veterans could be hit even harder, since they tend to spend more years collecting the benefit.

  • Washington Post opinion: Social Security’s needed expansion. By Katrina vanden Heuvel. Excerpts: On the very day that a bleak jobs report showed how feeble the recovery is, the White House revealed that the president will propose a budget that features cuts in Social Security. This was designed to get Republicans to agree to negotiate a grand bargain on deficit reduction — or to prove that they are obstructing any deal. ...

    The exchange has Republicans salivating. Cutting Social Security becomes the president’s choice, not something extorted by Republicans. If Democrats stand for anything, it is defense of Social Security and Medicare, the United States’ most beloved and vital social programs, a proud legacy of the New Deal and the Great Society. The president’s negotiating ploy puts every Democrat supporting the president’s budget in a contested reelection race at peril in 2014. Democrats will face a flood of ads accusing them of wanting to cut Social Security and face the wrath of seniors who constitute a greater percentage of the vote in midterm elections.

    If Democratic leaders Nancy Pelosi and Harry Reid have any sense, they will organize their entire caucuses and pledge to oppose any deal that cuts a dime from Social Security benefits.

    The economics of the president’s proposal are even worse than the politics. The crisis we face in Social Security isn’t that the benefits are too generous; it is that more and more Americans lack the savings for a secure retirement. Decades of wage stagnation and the corporate rollback of pensions have sapped worker savings. The Wall Street wilding that produced the Great Recession savaged what little wealth workers had stored in the value of their homes when the housing bubble collapsed, as well as their 401(k)s and IRAs when the stock market imploded. Fifty-five percent of all workers have no retirement plan at work. Only about 15 percent of private-sector workers have traditional employer pensions with a guaranteed benefit.

    Corporations used the turn to 401(k) individual savings accounts to drastically slash their retirement contributions. This hidden pay cut has had devastating effects. ...

    The greatest power of a president is the power to set the agenda. He (or eventually she) is the great teacher, and Barack Obama is one of the most skilled. This president now could be informing Americans that deficits are plummeting and that we must address the human tragedy of mass unemployment. He could be rallying Americans to address the growing retirement crisis. He could focus attention on continuing to challenge the entrenched interests that drive up costs in our health system, the greatest source of our long-term debt concerns.

    Instead he is fixated on more austerity, on a “grand bargain” that will include cuts to already inadequate Social Security payments. That is a lousy deal, not a grand bargain for most Americans.

  • New America Foundation: Expanded Social Security, A Plan to Increase Retirement Security for All Americans. By Michael Lind, Joshua Freedman, Steven Hill, New America Foundation and Robert Hiltonsmith, Demos. Excerpt: The conventional wisdom about Social Security is profoundly misguided. According to today’s mistaken consensus, the U.S. as a society cannot afford to allocate the money to pay for the present level of Social Security benefits for retirees in future generations. The solution, it is widely argued, is to cut benefits – either directly by means-testing or indirectly by raising the retirement age or allowing inflation to erode their real value over time. In this narrative, tax-favored private savings vehicles like 401(k)s and IRAs should be expanded in order to compensate for the allegedly necessary cuts in Social Security.

    This consensus is not only misconceived in its diagnosis but also mistaken in its prescriptions and potentially disastrous in its consequences. Retirement security is often thought of as three-legged “stool” consisting of Social Security, employer retirement plans, and private savings. Social Security has been far more stable and successful than the other two legs of the stool. The reliance on these other legs of the system has resulted in a retirement security crisis for most Americans, shifting costs and risks onto individuals, even as the benefits of these programs go overwhelmingly to upper-income earners. Yet the current debate is arbitrarily restricted to the chief public component of the American retirement system, Social Security.

    In reforming America’s retirement security system, we should build upon what works. Instead of compounding failure by expanding private benefits, a category that includes rapidly-disappearing defined benefit pensions, employer-provided 401(k)s and individual retirement accounts (IRAs), we should substantially expand the successful, purely public Social Security program.

  • The Smirking Chimp: The 1983 Strategy Behind Today's Social Security Attacks. By Dave Johnson. Excerpts: In 1983 a couple of conservative “think tanks” developed a step-by-step plan to privatize Social Security, for the benefit of “the banking industry and other business groups.” The plan describes a strategy to convince people that Social Security is going broke and that it is a “Ponzi scheme,” to undermine confidence in the program and lead people to accept that it needs “reform.” The plan outlines methods to “neutralize” opposition. The plan involves a smokescreen strategy of saying things to distract people from seeing what they are doing.

    This strategy for attacking Social Security was spelled out in a 1983 document from the Cato Institute (previously named the Koch Foundation), with Heritage Foundation input. You can read the original document for yourself, it is titled Achieving A Leninist Strategy. Please, if you have time, read the entire document (in particular the section “Weakening the Opposition”) to understand the strategy that has been unfolding in the years since, but the following quotes give you an idea:

    “Lenin recognized that fundamental change is contingent upon … its success in isolating and weakening its opponents. … we would do well to draw a few lessons from the Leninist strategy.”

    “…construct … a coalition that will … reap benefits from the IRA-based private system … but also the banks, insurance companies, and other institutions that will gain from providing such plans to the public.”

    “The first element consists of a campaign to achieve small legislative changes that embellish the present IRA system, making it in practice a small-scale private Social Security system.

    “The second main element … involves what one might crudely call guerrilla warfare against both the current Social Security system and the coalition that supports it.”

    “The banking industry and other business groups that can benefit from expanded IRAs …” “… the strategy must be to propose moving to a private Social Security system in such a way as to … neutralize … the coalition that supports the existing system.”

    “The next Social Security crisis may be further away than many people believe. … it could be many years before the conditions are such that a radical reform of Social Security is possible. But then, as Lenin well knew, to be a successful revolutionary, one must also be patient and consistently plan for real reform.” ...

    So Now You Know. If you know there is a plan do something that harms you, and you know the plan describes a smokescreen strategy where things are said to distract people from seeing what is happening to them, and then you see the plan unfold step by step … you can stop reacting to the cover story outlined in the plan meant to distract you. You can start fighting back.

    Read the plan, and then the next time they say “Social Security is going broke” or “Social Security is making the debt worse” you’ll see what is going on in a whole different way. Social Security is not “going broke” and Social Security does not add to the debt.

  • Huffington Post: Elizabeth Warren 'Shocked' At White House Plan To Cut Social Security With Chained CPI. By Jason Linkins. Excerpts: Senator Elizabeth Warren (D-Mass.) made it clear Wednesday in an email to supporters that not only would she oppose President Barack Obama's plan to cut Social Security benefits through a cost-of-living adjustment known as chained CPI, but that she was "shocked to hear" it was included in the White House's budget proposal at all.

    Warren said her brother David lives on the $13,200 per year he receives in Social Security benefits. "I can almost guarantee that you know someone -- a family member, friend, or neighbor -- who counts on Social Security checks to get by," she wrote. She continued:

    That's why I was shocked to hear that the President's newest budget proposal would cut $100 billion in Social Security benefits. Our Social Security system is critical to protecting middle class families, and we cannot allow it to be dismantled inch by inch.

    The President's policy proposal, known as "chained CPI," would re-calculate the cost of living for Social Security beneficiaries. That new number won't keep up with inflation on things like food and health care -- the basics that we need to live.

    In short, "chained CPI" is just a fancy way to say "cut benefits for seniors, the permanently disabled, and orphans."

    Two-thirds of seniors rely on Social Security for most of their income; one-third rely on it for at least 90% of their income. These people aren't stashing their Social Security checks in the Cayman Islands and buying vacation homes in Aruba – they are hanging on by their fingernails to their place in the middle class.

  • AlterNet: 10 Tax Dodges That Help the Rich Get Richer. How Mitt Romney stashed millions in a tax-free IRA, and other mysteries. By Alexander Arapoglou and Jerri-Lynn Scofield. Excerpts: The biggest income tax loophole is the definition of income. For most people, what counts as income is simple to see—it’s their salary, and maybe, if they’re lucky, a bonus. Yet for the very wealthy, salary is trivial—if they earn one at all. That’s not where their riches come from. Instead, their money comes from “carried interest” (which we’ll explain more fully below) and from the appreciation of their ownership interests in stock, real estate and other assets. Every year, Forbes and other magazines show how the wealth of hundreds of individuals increases by hundreds of millions from one year to the next. As long as this increase is not defined as income, no income tax is due. ...

    Some of the wealthiest people in America manage hedge funds, private equity funds, or real estate partnerships, and typically, these investment managers receive a very small salary, relative to their total compensation. But don’t feel too sorry for them—they’re not working for free. Instead, most of their compensation comes in the form of a share of the fund or project they manage. This ownership share is called a “carried interest.” And currently, it’s usually taxed as a capital gain instead of ordinary income.

    Okay, why does this matter, and what does it mean in plain English? It means that when the manager’s tax bill comes due, he owes the federal government 20 percent in taxes-- the current tax rate on long-term capital gains-- rather than the 39.6 percent rate that applies to ordinary income. This dodge halves his effective tax rate on these earnings. It’s just this loophole that Mitt Romney used to pay less than 15 percent— based on the legal capital gains tax rate at the time—on the millions he cleared while head of Bain Capital. This compares to the nearly 40 percent in federal income tax that a top surgeon, or anyone else whose earnings are defined as ordinary income, pays on his money.

If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

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