Just when you thought it could not get more ridiculous, GOP Congressman and Chairman of the House Appropriations Labor-Health and Human Services subcommittee, Denny Rehberg, has come up with a novel idea. He wants the Congressional super committee to solve $1.2 trillion in deficit reduction by simply killing off the expansion of Medicaid and the subsidies that will open the door to health care for millions of Americans.
In making his argument, Rehberg noted that expanding the Medicaid safety net program, and providing subsidies to low and middle class workers, is akin to the “expensive vacation home” that the average American would choose not to buy if that American was facing a deficit as serious as the nation’s.
Before getting to the heart of Rehberg’s suggestion, one can’t help but wonder what makes the Congressman think that the “average” American can afford an expensive vacation home (or any vacation home for that matter) on what the average American earns, even if that American is not in debt?
But should we be surprised by the Congressman’s view of the world? This is the same Denny Rehberg who is not only listed as number 23 on the list of the wealthiest members of Congress, but is the same Congressman Rehberg who had no idea what the minimum wage was in his own state (check out this video as it is priceless.)
Of course, far more important is Rehberg’s inability to grasp that getting treatment for cancer or unblocking that clogged artery that is going to make someone a widow or widower is not quite the same as purchasing a vacation home—expensive or otherwise.
And while life might not be worth living for Rep. Rehberg and friends without that idyllic home on the lake, the average American would still prefer to remain alive, thank you very much, which is precisely why Medicaid coverage was extended to more people and subsidies are to be made available to the working poor and middle-class so that medical care will become an option in their lives.
When asked how low and middle class Americans will manage to purchase health care, should the mandate requiring them to do so be found to be Constitutional by SCOTUS, Rehberg answered that Health and Human Services would be able to grant waivers to those who cannot afford coverage without Medicaid or subsidies.
Thus, Rehberg’s solution is to simply leave millions of Americans without coverage by way of a waiver. Nice.
Health Care For America Now’s Executive Director, Ethan Rome, put it this way:
Rep. Rehberg’s proposal is yet another part of the Republican assault on the middle class. Denny Rehberg says that basic health care is a luxury item, as if a mother in Montana taking her children to the doctor or a cancer patient getting treatment is the same as buying ‘an expensive vacation home.’
Considering that estimates place the uninsured under age 65 in Montana at somewhere between 16 percent and 20 percent of the population, a number well in excess of the national average, I suspect that Rehberg’s fellow Montanan’s might disagree with his approach.
Let’s hope they voice that disagreement at the ballot box next November.
By: Rick Ungar, Mother Jones, October 6, 2011
October 7, 2011
Posted by raemd95 |
Class Warfare, Congress, GOP, Ideologues, Income Gap, Medicare, Minimum Wage, Politics, Republicans, Right Wing | Congress, Conservatives, Deficits, Health Insurance, Low Income, Medicaid, Middle Class, Minimum Wage, Rep Denny Rehberg, Super Committee |
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In the Tea Party’s America, families must mortgage their home to pay for their mother’s end-of-life care. Higher education is a luxury reserved almost exclusively to the very rich. Rotten meat ships to supermarkets nationwide without a national agency to inspect it. Fathers compete with their adolescent children for sub-minimum wage jobs. And our national leaders are utterly powerless to do a thing.
At least, that’s what would happen if the Tea Party succeeds in its effort to reimagine the Constitution as an antigovernment manifesto. While the House of Representatives pushes Rep. Paul Ryan’s (R-WI) plan to phase out Medicare, numerous members of Congress, a least one Supreme Court justice, and the governor of America’s second-largest state now proudly declare that most of the progress of the last century violates the Constitution.
It is difficult to count how many essential laws would simply cease to exist if the Tea Party won its battle to reshape our founding document, but a short list includes:
- Social Security and Medicare
- Medicaid, children’s health insurance, and other health care programs
- All federal education programs
- All federal antipoverty programs
- Federal disaster relief
- Federal food safety inspections and other food safety programs
- Child labor laws, the minimum wage, overtime, and other labor protections
- Federal civil rights laws
Indeed, as this paper explains, many state lawmakers even embrace a discredited constitutional doctrine that threatens the union itself.
What’s at stake
The Tea Party imagines a constitution focused entirely upon the Tenth Amendment, which provides that “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people”—which is why their narrow vision of the nation’s power is often referred to as “tentherism.” In layman’s terms, the Tenth Amendment is simply a reminder that the Constitution contains an itemized list of federal powers—such as the power to regulate interstate commerce or establish post offices or make war on foreign nations—and anything not contained in that list is beyond Congress’s authority.
The Tea Party, however, believes these powers must be read too narrowly to permit much of the progress of the last century. This issue brief examines just some of the essential programs that leading Tea Partiers would declare unconstitutional.
Social Security and Medicare
The Constitution gives Congress the power “to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States,” thus empowering the federal government to levy taxes and leverage these revenues for programs such as Social Security and Medicare. A disturbingly large number of elected officials, however, insist that these words don’t actually mean what they say.
In a speech to the conservative American Legislative Exchange Council, Texas Gov. Rick Perry listed a broad swath of programs that “contradict the principles of limited, constitutional government that our founders established to protect us.” Gov. Perry’s list includes Medicare and “a bankrupt social security system, that Americans understand is essentially a Ponzi scheme on a scale that makes Bernie Madoff look like an amateur.” And Perry is hardly the only high-ranking elected official to share this view.
Sen. Mike Lee (R-UT) mocked President Franklin Delano Roosevelt for calling upon the federal government to provide “a decent retirement plan” and “health care” because “the Constitution doesn’t give Congress any of those powers.” Rep. Bob Goodlatte (R-VA), who engineered the House of Representatives’s dramatic reading of the Constitution earlier this year, claimed that Medicare and Social Security are “not in the Constitution” and are only allowed to exist because “the courts have stretched the Constitution to say it’s in the general welfare clause.” Sen. Tom Coburn (R-OK) said we should eliminate Medicare because “that’s a family responsibility, not a government responsibility.”
Because this erroneous view of our founding document is rooted in an exaggerated view of the Tenth Amendment’s states rights’ provision, many so-called tenthers claim that eliminating Social Security and Medicare wouldn’t necessarily mean kicking millions of seniors out into the cold because state governments could enact their own retirement programs to pick up the slack. This proposal, however, ignores basic economics.
Under our current system, someone who begins their career in Ohio, moves to Virginia to accept a better job offer, and then retires in Florida pays the same federal taxes regardless of their residence. These taxes then fund programs such as Medicare and Social Security. If each state were responsible for setting up its own retirement system, however, the person described above would pay Ohio taxes while they worked in Ohio, Virginia taxes while they lived in Virginia, and would draw benefits from the state of Florida during their retirement. The state which benefited from their taxes would not be the same state that was required to fund their retirement, and the result would be an economic death spiral for states such as Florida that attract an unusually large number of retirees.
For this reason, tenther proposals to simply let the states take over Social Security and Medicare are nothing more than a backdoor way to eliminate these programs altogether. If the Tea Party gets its way, and our nation’s social safety net for seniors is declared unconstitutional, millions of seniors will lose their only income and their only means to pay for health care.
Medicaid, the State Children’s Health Insurance Program, and other health care programs
The Tea Party’s constitution has plenty of bad news for Americans below the retirement age as well. Rep. Virginia Foxx (R-NC), for example, recently claimed that any federal involvement in health care whatsoever is unconstitutional because “the words ‘health care’ are nowhere in the Constitution.”
Sen. Coburn lumped Medicaid in with Medicare when he claimed that providing for the frailest Americans is a “family responsibility,” and Gov. Perry includes Medicaid on his list of programs that “contradict[] the principles of limited, constitutional government.” Sen. Mike Lee’s (R-UT) claim that “the Constitution doesn’t give Congress” any authority over health care is a blanket statement encompassing all federal health programs.
If this vision were to be implemented, all federal health care programs would simply cease to exist and millions of Americans would lose their only access to health insurance.
Education
Education is also on the Tea Party’s chopping block. Rep. Scott Garrett (R-NJ) routinely grills education secretaries at congressional hearings, insisting that the Constitution does not authorize any federal involvement in education. Similarly, Rep. Foxx insists that “we should not be funding education” because she insists doing so violates the Tenth Amendment. And Sen. Coburn does not “even think [education] is a role for the federal government.”
In its strongest form, this position wouldn’t just eliminate federal assistance for state-run public schools. It would also eliminate programs enabling Americans to pay for their college education. Millions of students would lose their Pell Grants and federal student loans if the Tea Party’s full vision of the Constitution were implemented.
Some tenthers, however, offer a slightly less drastic position. It is commonplace for the federal government to grant money to the states if those states agree to comply with certain conditions. Federal law, for example, provides generous public education grants provided that states gather data on student achievement and comply with other such conditions. Many Tea Partiers argue that these conditions violate the Constitution. Thus, Rep. Blake Farenthold (R-TX), claims that the Constitution only permits the federal government to provide states with “block grants.”
The truth, however, is that the federal government has never told states how to educate their children—and it could not do so if it tried. Under a Supreme Court decision called Printz v. United States, federal laws ordering a state to take a specific action actually do violate the Tenth Amendment. So, the state of Texas is perfectly free to turn down federal grants if they do not like the conditions attached to them.
Moreover, it is not clear how federal grants of any kind can exist if Congress is not allowed to attach conditions to them. If Congress cannot constitutionally require states to spend grant money on standardized testing, for example, how can they require that it be spent on education and not on building a new wing for the governor’s mansion? Thus, even the slightly more moderate position advocated by people like Rep. Farenthold would likely eliminate the federal government’s ability to provide educational assistance to low-income students or otherwise help fund public schools.
Antipoverty programs, federal disaster relief, and other help for the less fortunate
Sen. Lee would go even further in cutting off assistance for low-income Americans. In an interview with a Utah radio host, Lee claimed that the framers intended all antipoverty programs to be dealt with exclusively at the state level. This would not only eliminate programs like income assistance and food stamps, it could threaten unemployment insurance, federal job training, and other programs intended to provide a bridge out of poverty.
In the same interview, Sen. Lee claimed that federal relief for hurricane, earthquake, tornado, and other disaster victims is “one of many areas where we ought to focus on getting that power back to the states,” a position that would kill the Federal Emergency Management Agency and prevent the nation as a whole from rallying to the support of a state whose financial resources are overwhelmed by a major natural disaster.
Food safety
Sen. Lee also claims that “the framers intended state lawmakers deal with” food safety in this same radio interview. This position would not simply endanger the residents of states with inadequate regulation of their food supply, it would also create costly and duplicative state inspection programs and impose logistical nightmares on food-importing states.
If a cow is raised in Texas, slaughtered in Oklahoma, and then sold as steaks in New York, which state is responsible for inspecting the meat? The likely answer is that all three states would have their own system of laws, tripling the regulatory compliance costs for the meat producer.
Moreover, if New York decides that Oklahoma’s inspections’ regime is inadequate, its only recourse would be to require meat producers to submit their products to a customs check at the border before it could be sold in that state. The result would be higher taxes for New Yorkers forced to pay for these customs stations, and higher costs for businesses forced to submit to inspections every time they brought food across a state border.
Child labor laws, the minimum wage, overtime, and other labor protections
Nearly 100 years ago, the Supreme Court declared federal child labor laws unconstitutional in a case called Hammer v. Dagenhart. Twenty-two years later, the Court recognized that Hammer’s holding was “novel when made and unsupported by any provision of the Constitution,” and unanimously overruled this erroneous decision.
Sen. Lee, however, believes that, while Hammer might “sound harsh,” the Constitution “was designed to be that way. It was designed to be a little bit harsh,” and thus we should return to the world where federal child labor laws are unconstitutional. Moreover, Lee has a very powerful ally prepared to sweep away nearly all national protections for American workers.
Under existing Supreme Court doctrine, Congress’s authority to “regulate commerce … among the several states” includes the power to regulate the roads and railways used to transport goods in interstate commerce, as well as the goods themselves and the vehicles that transport them. Additionally, Congress may regulate activities that “substantially affect interstate commerce.” This “substantial effects” power is the basis of Congress’s authority to make labor laws universal throughout all places of employment.
Yet Justice Clarence Thomas claimed in three separate cases—U.S. v. Lopez, U.S. v. Morrison, and Gonzales v. Raich—that this “substantial effects” test is “at odds with the constitutional design.” It is possible that Thomas’s vision would still allow some limited federal labor regulation—such as a law prohibiting children from becoming railway workers—but anything resembling the essential web of federal laws that protect American workers today would be impossible.
Civil rights laws
Shortly after he won his party’s nod to be a U.S. Senate candidate, Sen. Rand Paul (R-KY) revealed that he opposes the federal bans on whites-only lunch counters and race discrimination in employment. In a rambling interview with MSNBC’s Rachel Maddow, Paul explained that, while he believes that Congress may ban discrimination from “public institutions,” he does not support antidiscrimination laws that regulate private business.
As Sen. Paul suggested in that interview, these basic civil rights laws—like national laws banning child labor and establishing a minimum wage—can be snuffed out of existence if Congress’s power to enact commercial regulations is read too narrowly.
In 1964, the Supreme Court unanimously upheld the federal ban on whites-only lunch counters—once again relying on the “substantial effects” test to do so. For this reason, it is likely the Justice Thomas would strike down this and other federal laws protecting civil rights.
The union
Gov. Perry suffered well-deserved ridicule when he suggested in 2009 that Texas may secede from the union if “Washington continues to thumb their nose at the American people.” But Gov. Perry’s ill-considered remark is merely a distraction compared to a much larger movement to effectively secede from the union one law at a time.
Gov. Perry joins lawmakers from New Hampshire, Montana, Virginia, Idaho, Florida, and many other states in backing unconstitutional state laws purporting to “nullify” a federal law. Many state legislatures have passed, and a few governors have signed, laws claiming to nullify part of the Affordable Care Act, and Perry signed a law that partially nullifies federal light bulb standards.
Nullification is an unconstitutional doctrine claiming that states can prevent a federal law from operating within their borders. Although nullification conflicts directly with the text of the Constitution, which provides that Acts of Congress “shall be the supreme law of the land…anything in the Constitution or laws of any State to the contrary notwithstanding,” it has experienced a significant revival among state lawmakers eager to second-guess national leaders’ decisions.
This doctrine is not simply unconstitutional, it is a direct attack on the idea that we are the United States of America. As James Madison wrote in 1830, allowing states to simply ignore the laws they don’t want to follow would “speedily put an end to the Union itself.”
Conclusion
America has long endured the occasional politician eager to repeal the entire 20th Century, but, as President Dwight Eisenhower observed nearly 60 years ago, “Their numbers [were] negligible and they are stupid.” Sadly, this is no longer the case. Tenthers increasingly dominate conservative politics and their numbers are growing.
If this movement succeeds in replacing our founding document with their entirely fabricated constitution, virtually every American will suffer the consequences. Seniors will lose their Social Security and Medicare. Millions of students could lose their ability to pay for college. And workers throughout the country will lose their right to organize, to earn a minimum wage, and to be free from discrimination.
Worse, because the Tea Party believes their policy preferences are mandated by the Constitution, they would do far more than simply repeal nearly a century of essential laws. Once something is declared unconstitutional, it is beyond the reach of elected officials— and beyond the voters’ ability to revive simply by tossing unwise lawmakers out of office.
For this reason, the Tea Party’s agenda is not simply one of the most radical in generations, it is also the most authoritarian. They do not simply want to eliminate decades of progress; they want to steal away “We The People’s” ability to bring it back.
By: Ian Millhiser, Center for American Progress, September 16, 2011
September 16, 2011
Posted by raemd95 |
Affordable Care Act, Class Warfare, Collective Bargaining, Commerce Clause, Congress, Conservatives, Constitution, Democracy, Democrats, Economy, Education, Elections, Equal Rights, GOP, Government, Health Care, Ideologues, Ideology, Income Gap, Jobs, Labor, Lawmakers, Medicaid, Medicare, Middle Class, Minimum Wage, Politics, Public, Regulations, Republicans, Right Wing, SCOTUS, Social Security, State Legislatures, States, Tea Party, Unions, Voters | Anti-Poverty Programs, Child Labor Laws, CHIP, Civil Rights, Disaster Relief, FEMA, Food Safety, Gov Rick Perry, We The People |
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For the last day or so, a few of us have been trying to get Grover Norquist’s group to say whether GOP opposition to extending the payroll tax cut — which Obama wants — constitutes a “tax increase” and a violation of Norquist’s infamous anti-tax pledge.
Norquist’s spokesman is now clarifying that the group isn’t yet willing to say.
Norquist’s pledge not to raise taxes has been signed by virtually every Republican in Congress, and Norquist has clearly stated that the failure to extend the Bush tax cuts would constitute a “tax increase.” The question now is this: With Republicans now opposing an extension of the payroll tax cut, which impacts workers but not employers, will Norquist’s group also declare the GOP opposition tantamount to a tax increase that violates the pledge?
John Kartch, a spokesman for Americans for Tax Reform, tells me that “one would have to see the final legislation” before making the call one way or the other, in order to determine ”what is the net effect on total taxes.”
The problem here, though, is that this doesn’t deal with the possibility of the payroll tax cut simply expiring through Congress doing nothing. If Congress doesn’t extend the payroll tax cut, as Republicans want, it will simply expire on January 1st.
So it’s fair to ask whether Norquist’s group — which wields great influence over Republicans in Congress — thinks that Republicans who favor doing nothing and letting the payroll tax cut expire are hiking taxes and violating the group’s pledge. And for now, the group isn’t prepared to say.
By: Greg Sargent, The Washington Post Plum Line, August 23, 2011
August 24, 2011
Posted by raemd95 |
Class Warfare, Congress, Conservatives, Democracy, Economic Recovery, Economy, Elections, GOP, Government, Ideologues, Ideology, Income Gap, Labor, Lawmakers, Middle Class, Minimum Wage, Politics, Republicans, Right Wing, Tax Evasion, Tax Increases, Tax Liabilities, Tax Loopholes, Taxes, Teaparty, Wealthy | Americans For Tax Reform, Anti-Tax, Bush Tax Cuts, Employers, Grover Norquist, Payroll Tax Cuts, The Pledge, Workers |
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If you read the business and even the political press, you’ve doubtless encountered the claim that the economy is a mess because the threat to reregulate in the wake of a global-economy-wrecking financial crisis is creating “uncertainty.” That is touted as the reason why corporations are sitting on their hands and not doing much in the way of hiring and investing.
This is propaganda that needs to be laughed out of the room.
I approach this issue as as a business practitioner. I have spent decades advising major financial institutions, private equity and hedge funds, and very wealthy individuals (Forbes 400 level) on enterprises they own. I’ve run a profit center in a major financial firm and have have also operated a consulting business for over 20 years. So I’ve had extensive exposure to the dysfunction I am about to describe.
Commerce is all about making decisions and committing resources with the hope of earning profit when the managers cannot know the future. “Uncertainty” is used casually by the media, but when trying to confront the vagaries of what might happen, analysts distinguish risk from “uncertainty”, which for them has a very specific meaning. “Risk” is what Donald Rumsfeld characterized as a known unknown. You can still estimate the range of likely outcomes and make a good stab at estimating probabilities within that range. For instance, if you open an ice cream store in a resort area, you can make a very good estimate of what the fixed costs and the margins on sales will be. It is much harder to predict how much ice cream you will actually sell. That is turn depends largely on foot traffic which in turn is largely a function of the weather (and you can look at past weather patterns to get a rough idea) and how many people visit that town (which is likely a function of the economy and how that particular resort area does in a weak economy).
Uncertainty, by contrast, is unknown unknowns. It is the sort of risk you can’t estimate in advance. So businesses also have to be good at adapting when Shit Happens. Sometimes that Shit Happening can be favorable, but they still need to be able to exploit opportunities (like an exceptionally hot summer producing off the charts demand for ice cream) or disaster (like the Fukushima meltdown disrupting global supply chains). That implies having some slack or extra resources at your disposal, or being able to get ready access to them at not too catastrophic a cost.
So why aren’t businesses investing or hiring? “Uncertainty” as far as regulations are concerned is not a major driver. Surveys show that the “uncertainty” bandied about in the press really translates into “the economy stinks, I’m not in a business that benefits from a bad economy, and I’m not going to take a chance when I have no idea when things might turn around.”
The “certainty” they are looking for is concrete evidence that prevailing conditions have really turned. But with so many people unemployed, growth flagging in advanced economies, China and other emerging economies putting on the brake as their inflation rates become too high, and a very real risk of another financial crisis kicking off in the Eurozone, there isn’t any reason to hope for things to magically get better on their own any time soon. In fact, if you look at the discussion above, we actually have a very high degree of certainty, just of the wrong sort, namely that growth will low to negative for easily the next two years, and quite possibly for a Japan-style extended period.
So why this finger pointing at intrusive regulations, particularly since they are mysteriously absent? For instance, Dodd Frank is being water down in the process of detailed rulemaking, and the famed Obamacare actually enriches Big Pharma and the health insurers.
The problem with the “blame the government” canard is that it does not stand up to scrutiny. The pattern businesses are trying to blame on the authorities, that they aren’t hiring and investing due to intrusive interference, was in fact deeply entrenched before the crisis and was rampant during the corporate friendly Bush era. I wrote about it back in 2005 for the Conference Board’s magazine.
In simple form, this pattern resulted from the toxic combination of short-termism among investors and an irrational focus on unaudited corporate quarterly earnings announcements and stock-price-related executive pay, which became a fixture in the early 1990s. I called the pattern “corporate dysmorphia”, since like body builders preparing for contests, major corporations go to unnatural extremes to make themselves look good for their quarterly announcements.
An extract from the article:
Corporations deeply and sincerely embrace practices that, like the use of steroids, pump up their performance at the expense of their well-being…
Despite the cliché “employees are our most important asset,” many companies are doing everything in their power to live without them, and to pay the ones they have minimally. This practice may sound like prudent business, but in fact it is a reversal of the insight by Henry Ford that built the middle class and set the foundation for America’s prosperity in the twentieth century: that by paying workers well, companies created a virtuous circle, since better-paid staff would consume more goods, enabling companies to hire yet more worker/consumers.
Instead, the Wal-Mart logic increasingly prevails: Pay workers as little as they will accept, skimp on benefits, and wring as much production out of them as possible (sometimes illegally, such as having them clock out and work unpaid hours). The argument is that this pattern is good for the laboring classes, since Wal-Mart can sell goods at lower prices, providing savings to lower-income consumers like, for instance, its employees. The logic is specious: Wal-Mart’s workers spend most of their income on goods and services they can’t buy at Wal-Mart, such as housing, health care, transportation, and gas, so whatever gains they recoup from Wal-Mart’s low prices are more than offset by the rock-bottom pay.
Defenders may argue that in a global economy, Americans must accept competitive (read: lower) wages. But critics such as William Greider and Thomas Frank argue that America has become hostage to a free-trade ideology, while its trading partners have chosen to operate under systems of managed trade. There’s little question that other advanced economies do a better job of both protecting their labor markets and producing a better balance of trade—in most cases, a surplus.
The dangers of the U.S. approach are systemic. Real wages have been stagnant since the mid-1970s, but consumer spending keeps climbing. As of June, household savings were .02 percent of income (note the placement of the decimal point), and Americans are carrying historically high levels of debt. According to the Federal Reserve, consumer debt service is 13 percent of income. The Economist noted, “Household savings have dwindled to negligible levels as Americans have run down assets and taken on debt to keep the spending binge going.” As with their employers, consumers are keeping up the appearance of wealth while their personal financial health decays.
Part of the problem is that companies have not recycled the fruits of their growth back to their workers as they did in the past. In all previous postwar economic recoveries, the lion’s share of the increase in national income went to labor compensation (meaning increases in hiring, wages, and benefits) rather than corporate profits, according to the National Bureau of Economic Analysis. In the current upturn, not only is the proportion going to workers far lower than ever before—it is the first time that the share of GDP growth going to corporate coffers has exceeded the labor share.
And businesses weren’t using their high profits to invest either:
Companies typically invest in times like these, when profits are high and interest rates low. Yet a recent JP Morgan report notes that, since 2002, American companies have incurred an average net financial surplus of 1.7 percent of GDP, which contrasts with an average deficit of 1.2 percent of GDP for the preceding forty years. While firms in aggregate have occasionally run a surplus, “. . . the recent level of saving by corporates is unprecedented. . . .It is important to stress that the present situation is in some sense unnatural. A more normal situation would be for the global corporate sector—in both the G6 and emerging economies—to be borrowing, and for households in the G6 economies to be saving more, ahead of the deterioration in demographics.”
The problem is that the “certainty” language reveals what the real game is, which is certainty in top executive pay at the expense of the health of the enterprise, and ultimately, the economy as a whole. Cutting costs is as easy way to produce profits, since the certainty of a good return on your “investment” is high. By contrast, doing what capitalists of legend are supposed to do, find ways to serve customer better by producing better or novel products, is much harder and involves taking real chances and dealing with very real odds of disappointing results. Even though we like to celebrate Apple, all too many companies have shunned that path of finding other easier ways to burnish their bottom lines. and it has become even more extreme. Companies have managed to achieve record profits in a verging-on-recession setting.
Indeed, the bigger problem they face is that they have played their cost-focused business paradigm out. You can’t grow an economy on cost cutting unless you have offsetting factors in play, such as an export led growth strategy, or an ever rising fiscal deficit, or a falling household saving rate that has not yet reached zero, or some basis for an investment spending boom. But if you go down the list, and check off each item for the US, you will see they have exhausted the possibilities. The only one that could in theory operate is having consumers go back on a borrowing spree. But with unemployment as high as it is and many families desperately trying to recover from losses in the biggest item on their personal balance sheet, their home, that seems highly unlikely. Game over for the cost cutting strategy.
And contrary to their assertions, just as they’ve managed to pursue self-limiting, risk avoidant corporate strategies on a large scale, so too have they sought to use government and regulation to shield themselves from risk.
Businesses have had at least 25 to 30 years near complete certainty — certainty that they will pay lower and lower taxes, that they’ will face less and less regulation, that they can outsource to their hearts’ content (which when it does produce savings, comes at a loss of control, increased business system rigidity, and loss of critical know how). They have also been certain that unions will be weak to powerless, that states and municipalities will give them huge subsidies to relocate, that boards of directors will put top executives on the up escalator for more and more compensation because director pay benefits from this cozy collusion, that the financial markets will always look to short term earnings no matter how dodgy the accounting, that the accounting firms will provide plenty of cover, that the SEC will never investigate anything more serious than insider trading (Enron being the exception that proved the rule).
So this haranguing about certainty simply reveals how warped big commerce has become in the US. Top management of supposedly capitalist enterprises want a high degree of certainty in their own profits and pay. Rather than earn their returns the old fashioned way, by serving customers well, by innovating, by expanding into new markets, their ‘certainty’ amounts to being paid handsomely for doing things that carry no risk. But since risk and uncertainty are inherent to the human condition, what they instead have engaged in is a massive scheme of risk transfer, of increasing rewards to themselves to the long term detriment of their enterprises and ultimately society as a whole.
By: Yves Smith, Salon, August 14, 2011
August 15, 2011
Posted by raemd95 |
Big Business, Big Pharma, Businesses, Class Warfare, Congress, Conservatives, Consumers, Corporations, Economic Recovery, Economy, Financial Institutions, Financial Reform, GOP, Government, Health Reform, Ideologues, Ideology, Income Gap, Jobs, Labor, Lawmakers, Media, Middle Class, Minimum Wage, Politics, Press, Public, Pundits, Regulations, Republicans, Right Wing, Unemployed, Unemployment, Wall Street, Walmart, Wealthy | Certainty, Commerce, Corporate Profits, Dodd-Frank, Employees, Employers, Financial Crisis, GDP, Global Economy, Investors, Job Creation, Uncertainty, Wages, Workers |
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It turns out that the good times are even better than we thought for American chief executives.
Among the executives who registered huge gains in the value of their company stock and options in 2010 were Warren E. Buffett, the chief executive of Berkshire Hathaway, top, Lawrence J. Ellison of Oracle, center, and Jeffrey P. Bezos of Amazon.com. Together, the three men’s holdings climbed by more than $13 billion for the year.
A preliminary examination of executive pay in 2010, based on data available as of April 1, found that the paychecks for top American executives were growing again, after shrinking during the 2008-9 recession.
But that study, conducted for The New York Times by Equilar, an executive compensation data firm based in Redwood City, Calif., was just an early snapshot, and there were even more riches to come. Some big companies had not yet disclosed their executive compensation.
So Sunday Business asked Equilar to run the numbers again.
Brace yourself.
The final figures show that the median pay for top executives at 200 big companies last year was $10.8 million. That works out to a 23 percent gain from 2009. The earlier study had put the median pay at a none-too-shabby $9.6 million, up 12 percent.
Total C.E.O. pay hasn’t quite returned to its heady, prerecession levels — but it certainly seems headed there. Despite the soft economy, weak home prices and persistently high unemployment, some top executives are already making more than they were before the economy soured.
Pay skyrocketed last year because many companies brought back cash bonuses, says Aaron Boyd, head of research at Equilar. Cash bonuses, as opposed to those awarded in stock options, jumped by an astounding 38 percent, the final numbers show.
Granted, many American corporations did well last year. Profits were up substantially. As a result, many companies are sharing the wealth, at least with their executives. “We’re seeing a lot of that reflected in the pay,” Mr. Boyd says.
And at a time of so much tumult in the media business, it might be surprising that some executives in media and communications were among the most richly rewarded last year.
The preliminary and final studies put Philippe P. Dauman, the chief executive of Viacom, at the top of the list. Mr. Dauman made $84.5 million last year, after signing a new long-term contract that included one-time stock awards.
Leslie Moonves, of the CBS Corporation, got a 32 percent raise and reaped $56.9 million. Michael White of DirecTV was paid $32.9 million, while Brian L. Roberts of the Comcast Corporation and Robert A. Iger of the Walt Disney Company each received pay packages valued at $28 million.
“Media firms seemed to be paying a lot,” said Carol Bowie, head of compensation policy development at ISS Governance, which advises large investors on corporate governance issues like proxy votes. “Media companies in general tend to be high-payers, and they tend to feed off each other.”
Other big payers included oil and commodities companies like Exxon Mobil and a few technology giants like Oracle and I.B.M.
Some of the other highly paid executives on the new list who were not in the April survey are Gregg W. Steinhafel of Target, who had a $23.5 million pay package; Michael E. Szymanczyk of Altria, $20.77 million; and Richard C. Adkerson of Freeport-McMoRan Copper & Gold, $35.3 million.
Most ordinary Americans aren’t getting raises anywhere close to those of these chief executives. Many aren’t getting raises at all — or even regular paychecks. Unemployment is still stuck at more than 9 percent.
In some ways, chief executives seem to live in a world apart when it comes to pay. As long as shareholders think that the top brass is doing a good job, executives tend to be well paid, whatever the state of the broader economy. And some corporate boards were probably particularly generous in 2010 after a few relatively lean years for their top executives. In other words, some of this was makeup pay.
“What is of more concern to shareholders is that it looks like C.E.O. pay is recovering faster than company fortunes,” says Paul Hodgson, chief communications officer for GovernanceMetrics International, a ratings and research firm.
According to a report released by GovernanceMetrics in June, the good times for chief executives just keep getting better. Many executives received stock options that were granted in 2008 and 2009, when the stock market was sinking.
Now that the market has recovered from its lows of the financial crisis, many executives are sitting on windfall profits, at least on paper. In addition, cash bonuses for the highest-paid C.E.O.’s are at three times prerecession levels, the report said.
Of course, these sorts of pay figures invariably push the buttons of many ordinary Americans. Yes, workers’ 401(k)’s are looking better than they did in some recent years, but many investors still have not recovered from the hit they took during the financial crisis. And, of course, millions are out of work or trying to hold on to their homes — or both.
And it’s not as if most workers are getting fat raises. The average American worker was taking home $752 a week in late 2010, up a mere 0.5 percent from a year earlier. After inflation, workers were actually making less.
On the flip side, some chief executives have consistently taken token salaries — sometimes, $1 — choosing instead to rely on their ownership stakes for wealth. These stock riches don’t show up on the current pay lists, but they can be huge.
Warren E. Buffett, for instance, saw his stock holdings rise last year by 16 percent, to $46 billion. Other longtime chief executives or founders who are sitting on billions of paper profits include Jeffrey P. Bezos of Amazon.com and Michael S. Dell, the founder of Dell.
Resurgent executive pay has some corporate watchdogs worried that companies have already forgotten the lessons of the bust. Boards have promised to tie executive pay to company success, but by some measures pay is rising faster than performance. The median pay raise for chief executives last year — 23 percent — was roughly in line with the increase in net corporate profits. But it far exceeded the median gain in shareholders’ total return, which was 16 percent, as well as the median gain in revenue, which was 7 percent.
FOR the moment, shareholders aren’t storming executive suites. And while they received a say on pay under new federal rules last year, their votes are nonbinding. In other words, boards can still do as they please.
Pay specialists say companies are taking a hard look at these votes. Still, only about 1.5 percent of the 200 companies in the Equilar study were rebuffed by their shareholders on pay. A vast majority of the votes passed overwhelmingly, with 80 percent or 90 percent support, according to Mr. Boyd of Equilar.
Mr. Boyd says companies are making an effort to explain their pay plans. “We saw companies take it very seriously,” he says of the new rule.
In some respects, the mere possibility that shareholders might reject a proposed pay plan is enough to make corporate executives think again. Ms. Bowie of ISS says that outrageous payouts — such as so-called tax gross-ups, in which companies cover executives’ tax bills on perks like corporate jets — are becoming rarer.
Disney for instance, eliminated tax gross-ups this year in the face of shareholder ire, she said.
Company directors have the power to rein in runaway executive pay, but it is unclear whether either they or shareholders will do so in 2012. “It can be done if there is the will,” Ms. Bowie says.
By: Pradnya Joshi, The New York Times, July 2, 2011
July 4, 2011
Posted by raemd95 |
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