Why Wall Street Hates A Healthy Labor Market
It’s simple: When workers gain some leverage, it gets a little harder to generate totally obscene profits.
It’s always such a shame when the interests of labor don’t match up with the priorities of capital. The Bureau of Labor Statistics reported on Thursday that new claims for jobless benefits fell again last week. But in a Wall Street Journal roundup of reactions to the news, one economist found reason for concern.
Deutsche Bank’s Alan Ruskin observed that the rate at which productivity — the amount of goods and services produced per worker — is growing is beginning to slow down in the United States.
We are at the point in the cycle where squeezing any more output from the existing labor force, with the current capital stock, becomes more difficult and attempts to raise output, force an increase in employment or at least employee hours. The good news is that we are closer to the point where a virtuous cycle of increased demand, driving increased employment and income, generating more demand, is in place. The flip side is that the rise in wages relative to output pushes up unit labor costs and undermines productivity, and could chip into the record profit share of income with some negative implications for equities.
In other words, stock prices could slump because an increase in the demand for labor will put upward pressure on wages. For the vast majority of Americans, this is fantastic news. For the 1 percent, not so much.
The news inspires memories of the go-go days of the dot-com boom, when the stock market greeted every new monthly release of gangbuster job growth numbers with a sharp sell-off. Wall Street doesn’t like it when American workers are in demand. That’s either the most heartening news yet about the nascent economic recovery, or the most maddening.
By: Andrew Leonard, Salon, February 2, 2012
Super Bowl Players Should Stand Up For Indiana Workers
Last July, Major League Baseball blew an opportunity to make a difference. With 28 players who were either Hispanic or of Hispanic descent participating in the league’s annual All-Star Game in Phoenix, Arizona, and the eyes of the sports world watching, nary a one spoke out against the radical anti-immigration law Arizona had passed a year before, even though it could have directly affected the players and will directly affect many of their fans. “I ain’t Jackie Robinson,” David Ortiz, one of baseball’s biggest characters, said.
Over the next 10 days, the National Football League will have a similar chance to make a difference.
Just two weeks before Super Bowl XLVI kicks off at Lucas Oil Field in Indianapolis, more than 10,000 people marched through the city to protest right-to-work legislation that is being pushed through the state’s legislature. The legislation passed the state Senate this week and the state House today, and is backed by Gov. Mitch Daniels (R). Considering the NFL nearly lost its 2011 season, and Super Bowl XLVI with it, to a labor dispute, Indiana Republicans’ assault on workers is a cause the players should be familiar with.
Fortunately, there are signs that the NFL players aren’t going to repeat Major League Baseball’s mistake. Several players have spoken out against the legislation, and NFL Players Association President DeMaurice Smith said his organization is already taking action. “We’ve been on picket lines in Indianapolis already with hotel workers who were basically pushed to the point of breaking on the hotel rooms that they had to clean because they were not union workers,” Smith told the Nation. “We’ve been on picket lines in Boston and San Antonio. So, the idea of participating in a legal protest is something that we’ve done before.”
That’s a good first step. But it’s not enough. Indiana union officials are contemplating disrupting Super Bowl-related events to draw attention to their cause, clogging city streets and slowing down events around Lucas Oil Stadium (which was built and is maintained by union workers). Labor leaders are hesitant, though, fearing that such actions could give the city and their cause “a black eye” with people who think sports and politics don’t mix. If some of the league’s top players, particularly those participating in the Super Bowl, spoke in support of those efforts, however, that perception could change.
New England Patriots quarterback Tom Brady, one of the NFL’s most recognizable players, felt strongly enough about his own rights that he signed on as a plaintiff in the players’ antitrust lawsuit against the league last year. So did Logan Mankins, Brady’s teammate, and Osi Umenyiora, a prominent defensive end for the New York Giants. Those players were willing to risk backlash from the league, public scrutiny, and their own images to fight league owners for better benefits and wages. In the week leading up to the Super Bowl, they should do the same for workers who don’t have the luxury of multimillion-dollar contracts, rich endorsement deals, and the good fortune of playing a game for a living.
Sure, with Super Bowl week ahead of them, political causes may be the furthest thing from the minds of most players. But with thousands of reporters conducting hundreds of interviews before, during, and after the big game, the players will have the chance to stand up for the rights of people they should be fighting for. Unlike their counterparts in baseball, they shouldn’t blow it.
By: Travis Waldron, Think Progress, January 25, 2012
Six Facts About Mitt Romney’s Tax Returns
After weeks of refusals and equivocation, Mitt Romney finally released his tax returns last night to a handful of media outlets, showing that he made $21.7 million in 2010 and $20.9 million last year. He only actually released one year of returns, 2010, and his estimated return for 2011, even though many have called on him to follow the precedent set by his father and release many more years of returns.
Nonetheless, there is much to learn from the astonishing 550 pages of returns Romney released:
1. Romney paid a lower tax rate than many middle-class Americans: Romney’s returns reveal that he paid an effective tax rate of 13.9 percent, lower even than the low rate of 15 percent he estimated he paid last week. While this is far less than what many middle-class Americans pay, it’s also well below what wealthy people pay. The average effective tax rate for someone in Romney’s income bracket is 25 percent.
2. Romney makes more in a day than the average American makes in a year, and becomes a 1 percenter every week: As Bloomberg News notes, “In 2008, according to the IRS, the median adjusted gross income was $33,048, which Romney made in less than a day. Reaching the top 1 percent of taxpayers required $380,354 in adjusted gross income, about Romney’s earnings in a week.”
3. Romney paid almost nothing in payroll taxes: Romney contributed just .1 percent of his income to Social Security and Medicare in 2010 via the payroll tax because the tax is only assessed on earned wages, but all of Romney’s income came from investments. Most working Americans pay 7.65 percent.
4. Romney has accounts in countries notorious for tax dodging: By now, it’s well known by now that Romney invests in funds based in the Cayman Islands, but Romney’s returns were “crammed with information about foreign holdings” and reveal that he held accounts in Switzerland and Luxembourg, countries famous for hiding money thanks their low taxes and strict banking secrecy laws. Aides said he closed his Swiss account in 2010 because it might have been “politically embarrassing.”
5. Romney and Gingrich’s tax plans would slash Romney’s taxes: Romney already pays less than many middle class Americans, but under his proposed tax plan, his rates would be slashed in half. Meanwhile, under challenger Newt Gingrich’s plan, Romney would pay almost nothing, since Gingrich has proposed cutting the capital gains tax rate to zero and Romney earns almost all of his money from investments.
6. Romney needs four lawyers, including the former IRS commissioner to defend his tax plan: Romney’s campaign held a conference call with reporters this morning to defend and explain his tax returns, and apparently felt the need to have former IRS Commissioner Fred Goldberg, along with three other top lawyers and his campaign communications director to explain the returns. At one point, the call had to be interrupted so officials could confer with mega accounting firm PricewaterhouseCoopers.
Another small revelation from Romney’s returns is that while Romney said his speaking fees amounted to “not very much” in terms of income, he actually made $111,000 in speaking fees in 2011 and $529,000 in 2010, as Politico’s Ken Vogel points out.
By: Alex Seitz-Wald, Think Progress, January 24, 2012
An Untenable Figure: Mitt Romney And 100,000 Jobs
Last week, when we first looked at the former Massachusetts governor’s claim that “we helped create over 100,000 new jobs,” his campaign provided a list that included the growth in jobs from three companies that it said Romney helped to start or grow while at Bain Capital: Staples (a gain of 89,000 jobs), The Sports Authority (15,000 jobs), and Domino’s (7,900 jobs).
As we noted, “This tally obviously does not include job losses from other companies with which Bain Capital was involved — and are based on current employment figures, not the period when Romney worked at Bain.”
Glenn Kessler live chatted with readers on this topic. Read the chat transcript now.
In Saturday’s ABC News-Yahoo debate, Romney expanded on the list: “There’s a steel company called Steel Dynamics in Indiana, thousands of jobs there; Bright Horizons Children’s Centers, about 15,000 jobs there; Sports Authority, about 15,000 jobs there, Staples alone, 90,000 employed. That’s a business that we helped start from the ground up.”
Last week, when we looked at this 100,000 figure, we evaluated it along with Romney’s claims about President Obama’s job creation figures, which overall earned One Pinocchio. Earlier, we had ruled that it was all but impossible to prove or disprove Romney’s claims on job creation. But in light of Romney’s comments during the debate and some additional research, we have come to a new assessment.
The Facts
By all accounts, Romney was a highly successful venture capitalist. While running Bain Capital, he helped pick some real winners, earning his investors substantial returns. High finance is a difficult subject to convey in a sound bite, so Romney evidently has chosen to focus on job creation.
This is a mistake, because it overstates the purposes of Bain’s investments and has now led Romney into a factually challenging cul-de-sac.
Romney never could have raised money from investors if the prospectus seeking $1-million investments from the super wealthy had said it would focus on creating jobs. Instead, it said: “The objective of the fund is to achieve an annual rate of return on invested capital in excess of the returns generated by conventional investments in the public equity market and the private equity market.”
Indeed, the prospectus never mentions “jobs,” “job,” or “employees.”
Second, it has become increasingly hard to understand how Romney’s personal involvement played a role in creating these jobs, especially years later. He clearly is adding up all the jobs now at the companies that are thriving, arguing these numbers far outweigh the job losses at companies that failed. But as the Wall Street Journal reported Monday, the failure rate one can attribute to Bain Capital changes significantly if one counts five years from an investment or eight years from an investment.
Bain, in fact, rejected the Journal’s analysis, saying it “uses a fundamentally flawed methodology that unfairly assigns responsibility to us for many events that occurred in companies when we did not own or control them, and disregards dozens of successful venture capital investments.”
In other words, Bain appears to be rejecting a central premise of Romney’s calculation — that years after the investment ended, one can attribute either good news or bad news about the company to Bain’s involvement.
Romney is generally careful to use phrases such as “helped create.” He also acknowledged Saturday that we “were investors to help get them going.” But even that overstates the case.
Bain may have provided management expertise or money when others would not, but a company such as Staples — one of the biggest contributors to Romney’s job figures — was largely the brainchild of entrepreneur Tom Stemberg. Stemberg presumably should get most of the credit for inventing a killer new business category. (Left unsaid, of course, is all the jobs that might have been lost at small stationery stores unable to compete with the low prices of Staples, Office Depot and so forth.)
Moreover, should Romney even get any credit for jobs at Domino’s, as his campaign claims? The deal in which Bain Capital bought Domino’s closed on Dec. 21, 1998, according to a Domino’s news release that referred to “Milt Romney.” Less than two months later Romney had left Bain to run the Salt Lake Olympics, meaning he had barely any role in running the company once it became part of the Bain investment portfolio.
When Romney made a run for the governorship, the Boston Globe reported in 2002 that he had not been involved in the details of many deals toward the end of his Bain experience: “These days, Romney can say he hasn’t inked a deal in many years. Even during the end of his tenure at Bain, from 1994 to 1999, he played the role of CEO and rainmaker rather than delving into the details of buyouts.”
Interestingly, when Romney ran for the Senate in 1994, his campaign only claimed he had created 10,000 jobs. In one ad, a narrator said: “Mitt Romney has spent his life building more than 20 businesses and helping to create more than 10,000 jobs. So when it comes to creating jobs, he’s not just talk. He’s done it.”
Now, apparently, those 10,000 jobs have increased tenfold, apparently in part because of Bain investments in which Romney had at best a tangential role.
In the 2008 presidential campaign, as far as we can tell, Romney never highlighted any number for jobs created, having learned a lesson from how ruthlessly he was attacked by Sen. Edward Kennedy in that Senate race for jobs lost through Bain investments.
We asked the Romney campaign for a response, but did not get one.
The Pinocchio Test
Romney certainly has a good story to tell about knowing how to manage a business, spotting opportunities and understanding high finance. But if he is to continue to make claims about job creation, the Romney campaign needs to provide a real accounting of how many jobs were gained or lost through Bain Capital investments while the firm managed these companies — and while Romney was chief executive. Any jobs counted after either of those data points simply do not pass the laugh test.
By: Glenn Kessler, The Washington Post, January 10, 2012
“Bain Capitalist”: Mitt Romney Haunted By His Victims
During Mitt Romney’s Senate campaign 17 years ago, the Republican politician was faring quite well against Ted Kennedy, right up until voters started hearing from some of Romney’s victims.
To briefly review, Romney got very rich running a private-equity firm, Bain Capital, which broke up companies and laid off American workers. He had considerable success orchestrating leveraged buyouts, seeking taxpayer subsidies, flipping companies quickly for large profits, and making money for investors, even when the employees of those companies were deemed collateral damage.
In the 1994 campaign, this mattered. Many of Romney’s victims drove to Massachusetts to protest the Republican’s campaign, and Democrats put together a half-dozen ads featuring laid-off workers who said they suffered while Romney lined his pockets at their expense.
It proved effective in 1994, and Dems hope it will work again in 2012.
A former employee of Bain Capital, GOP presidential front-runner Mitt Romney’s former company, said Sunday that Romney’s decisions cost him and many others their jobs.
Randy Johnson said Sunday that the former Massachusetts governor’s decisions as Bain’s CEO put him out of work.
Romney was the chief executive officer of Bain Capital in 1992 when the company purchased American Pad & Paper, or Ampad, and oversaw the management of that company and others.
Ampad went bankrupt in 2000, and investors netted over $100 million from the deal, according to the Boston Globe.
Johnson told reporters yesterday, “I really feel that he didn’t care about the workers. It was all about profit over people.”
For its part, the Romney campaign recently began arguing that critics of Bain Capital’s layoffs are borderline communists, trying to “put free enterprise on trial.”
Between this and Romney’s agenda — take away health care coverage from millions, tax breaks for the wealthy, free reign for Wall Street, more foreclosures — the “man of the people” routine may prove to be a tough sell.
By: Steve Benen, Contributing Writer, Washington Monthly Political Animal, January 2, 2011
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