Tag: Corporations

Complaining About “Socialism”

THis is an op-ed piece from the People’s Weekly World

John McCain has been describing Barack Obama as a “socialist” because the Illinois senator would impose higher taxes on the wealthy than on the working class and poor. McCain says this amounts to an “unacceptable” redistribution of wealth.

Let’s grant, for a moment, that the Obama plan really amounts to redistribution of wealth from the rich to the poor. Let’s grant, just for the moment, that this really can be defined as a form of “socialism.”

How then would we define the upward redistribution of wealth that Congress approved in the Wall Street bailout package? The deal takes tax money from folks who earn $40,000 annually and hands it to bankers who, at the low end of their scale, make $4,000,000 per year.

McCain says he wants everyone to have the chance to get rich. But doesn’t the massive transfer of wealth from the poor to the rich that Congress just approved make that even more impossible than it already is? I’m not an economist, by any means. It seems to me, however, that the bailout only worsens the enormous income inequality between workers and Wall Street execs. It seems to me this only puts further out of reach for more millions the age old American Dream of “moving on up.” It seems to me that Obama’s approach would put that dream a bit more in reach and allow more people to move up a bit. It seems to me that the Obama approach makes for at least a little more economic democracy.
So far, nothing has been done to help bail out Main Street and none of the $700 billion approved for Wall Street has yet been used to help anyone other than the Wall Street moneymakers themselves.

Thus far Wall Street bankers have used the handout that we pay for to buy up other companies. They have even used some of it to go on $500,000 all-expense-paid “retreats” to discuss their next moves. They decided, during one of these “retreats,” to use some of the bailout money to pay lobbyists who will — guess what — lobby for additional taxpayer handouts. There is also evidence that quite a bit of the bailout money they have already received is being hoarded.

Be all that as it may, one thing is clear. They are not using the money for what we were told they were going to use it: pumping it into the market so that credit would again be available not just to Wall Street but to Main Street.

The issue during this major crisis of American capitalism is not that Obama or anyone else is trying to slip “socialism” into the picture. The issue is, as the economist, Dean Baker put it recently:

“Treasury Secretary Henry Paulson mailed $150 billion in checks to the big banks. From that point forward, the CEOs and all other top executives of these banks are now our dependents. They are living off the tax dollars of schoolteachers in Iowa, truck drivers in Montana and even Joe the Plumber.”

The Race Is On

The announcement of a virtually open-ended government bailout of Wall Street has set off a frenzied competition among the biggest banks and financial firms to grab the lion’s share of the super profits to be reaped from the program.

Banks, brokerage houses, insurance firms, mortgage lenders, private equity companies and asset managers are furiously lobbying the Bush administration and Congress to make sure that the legislation authorizing the bailout gives them the biggest possible share in the spoils. Behind the public speech-making and posturing by administration officials, presidential candidates and congressmen, a sordid campaign of influence-peddling and vote-buying is under way, which will determine the details of the bailout law that is expected to be passed either this week or next.

Tens of billions of dollars in corporate profits and billions more in personal windfalls for senior executives and big investors are at stake. The plan drawn up by Treasury Secretary Henry Paulson not only allows the biggest financial firms to rid themselves of virtually worthless assets that are driving down their stock and slashing their profits, it provides vast opportunities for the winners in the money race to realize huge gains from the management of the program and the ultimate resale of the assets by the government.

700 Billion And Counting

The Bush administration has asked Congress for the power to buy $700 billion in toxic assets clogging the U.S. financial system and threatening the economy as negotiations began on the largest bailout since the Great Depression.

The rescue plan would give Washington broad authority to purchase bad mortgage-related assets from U.S. financial institutions for the next two years. It does not specify which institutions qualify or what, if anything, the government would get in return for the unprecedented infusion.

In a fact sheet released Saturday night, Treasury said it was seeking latitude for the secretary and the Federal Reserve chairman to expand the bailout to non-U.S. companies if they determined it was necessary to stabilize markets, but the original request sent to Congress is limited to firms headquartered in the United States, according to a copy obtained by The Associated Press.

Democrats are pressing to require that the plan help more strapped borrowers stay in their homes and to condition the bailout on new limits on executive compensation.

I am sorry guys but this country only has so much money and that is quickly being used up by all these bailouts.  Somewhere if we only want this spiraling situation to slow or stop; we must let someone fail, I mean one of the biggies not some small struggling mom and pop operation.

Worker’s Will Be Paying More For their Healthcare

Most employers plan to lower their health care costs next year by tapping a familiar source of help: their workers.

Preliminary findings released this week from an employer survey by consulting firm Mercer Inc. show that 59 percent of U.S. employers will reduce their health costs in 2009 by increasing workers’ deductibles, co-pays and percentages of a medical bill that workers pay.

Even with shifting costs to workers, U.S. employers still project a 5.7 percent increase in health benefits cost next year, according to the Mercer survey of 1,317 employers. That increase is lower than those of the previous 10 years but still higher than the general rate of inflation. Small businesses will face 10 percent increases.

The annual rise in benefit costs stems, in part, from the continuing increase in prices of medical services and of prescription drugs. And more medical services are being used per person, Holmes said.

Many employers have more moderate benefit increases than previous years, in part because they’re focusing on health care as a mounting threat to profitability. “CEOs have put the cost of health care as one of their top business priorities,” Holmes said. Businesses are increasingly promoting wellness programs and installing high-deductible health plans, which lower their costs.

Obama’s Market Populism

An article from the Seattle Times and takes a good simplified look at Obama’s economic positions.

Barack Obama calls himself an economic pragmatist. In a long interview with The New York Times he says he is for “what works” — a statement safe but not revealing. What he often sounds like, though, and what we would like him to be, is a market populist — a champion of a bubble-up capitalism in which wealth creation is spread among more people.

A philosophy like that has to keep a close eye on what works. With each economic proposal, Obama should ask: Does it promote jobs or snuff them out? Does it promote education, job training, research and other ways for people to raise the value of their work?

Democrats have been good on the education part. Obama is for increasing the tax credit for college tuition, and it is a fine idea. He also has an intriguing idea to lower the job-killing payroll tax: a credit for the first $8,100.

Democrats have been less good on other taxes. Obama has proposed to raise the top personal income tax from the current 35 percent to 40 percent or so, to raise the capital-gains tax from 15 percent to 25 percent, and to freeze the top rate of the estate tax at 45 percent of assets.

Obama’s populism should focus instead on the distinction between kinds of business, asking of each proposal: Does it tend to concentrate wealth in behemoth corporations or spread it in smaller, more flexible and family-owned business? Does it promote long-term investment instead of quick gain?

Republicans, the presumptive pro-business party, have too often become the pro-big-business party. Here is where Obama can stake out a difference. If he has to raise taxes, raise them on passive earnings rather than active business. He proposes, for example, to make publicly traded partnerships pay corporate income tax. Whether this is a good idea we are not sure, but the thought is correct: It does less harm to squeeze a passive investor than an active owner.

Verizon UpDate #6

The contract negotiated by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) with the telecommunications company Verizon represents a betrayal of the 65,000 Verizon workers represented by the two unions. It cuts benefits and sets the stage for the company to eliminate thousands of jobs.

The agreement was reached one week after the August 2 expiration of the previous five-year contract. The unions refused to call a strike, despite a 91 percent vote to authorize a walkout. Instead, various protest stunts were organized while the membership was kept in the dark not only about the status of the negotiations, but even about the unions’ demands.

Workers and retirees will see a continued erosion of their living standards. The three-year pact calls for wage and pension increases of 3.25 percent, 3.5 percent and 3.75 percent, with a cost-of-living increase in only the final year. Already this year, the consumer price index has risen well beyond the wage increases in the contract. According to the US government, transportation costs have risen 13.4 percent since last year and energy costs are up a whopping 19.3 percent over just one year ago.

On health care, workers in New York and the New England states will be forced into a preferred providers organization, or PPO. Under the PPO, workers will be able to see only those doctors approved by the plan and will have to get referrals before seeing a specialist. Many services are not covered and there is a cap on benefits.

Both active and retired workers will see their prescription drug program cut and will be forced to pay a larger share of the cost of brand name medications.

The contract also sets the stage for Verizon to eliminate thousands of jobs. Since 2003, when the last contract was signed, Verizon has cut 13,000 union jobs and approximately 40,000 management jobs through attrition and layoffs. In addition, Verizon has forced thousands of other workers, mostly in management, to either move or be laid off and replaced by younger, lower-salary employees.

Union leadership continues down the path of helping the corporations to rape the worker of the benefits that they have fought for for so long.  With the approach of an election, I do not see the worker any better off, no matter who gets elected.

Why Do Corporations Need Tax Cuts?

A study released Tuesday by the Government Accountability Office (GAO) reveals that the majority of corporations pay no federal taxes on profits accrued through business conducted within the US.

From 1998-2005, the period covered by the survey, about two thirds of both domestic and international businesses paid no federal taxes, while about one quarter of large US corporations, defined as those with over $250 million in assets and at least $50 million in sales, had no tax liability.

While it failed to name the ways specific corporations avoided taxes, the GAO survey, based on Internal Revenue Service records, attributes the failure to three factors: tax credits, operating losses and “transfer pricing,” which means corporations internally shift taxable profits to their own subsidiaries in lower-tax nations.

The decline in the taxes that corporations actually pay is also suggested by the decline in the relative share these taxes contribute to the federal budget. According to an April report issued by the liberal Economic Policy Institute (EPI), in the 1950s corporate taxes represented one quarter of all federal revenue. Since 2000, this figure has fallen to about one tenth. The resulting shortfall has largely been made up through payroll taxes on US workers, according to the EPI.

The GAO study also listed the sustaining of regular operating losses as a possible explanation for corporations’ failure to pay taxes. Of the millions of companies submitting tax forms in the period, the vast majority were small businesses. There is no reason to doubt that many of these small ventures lose money year after year, and are dependant for their survival upon tax credits. Yet the crisis of the auto and airline industries demonstrates that the piling up of debt extends to the biggest corporations as well. At the same time, the tax code encourages companies to claim losses precisely as a means of avoiding tax payments.

Maybe if we elect McCain he will just give them a check once a year as compensation for their actions.  People are seriously ignorant at election time.

Secret Union Ballots

An Op-Ed by George McGovern in the WSJ

As a congressman, senator and one-time Democratic nominee for the presidency, I’ve participated in my share of vigorous public debates over issues of great consequence. And the public has been free to accept or reject the decisions I made when they walked into a ballot booth, drew the curtain and cast their vote. I didn’t always win, but I always respected the process.

Voting is an immense privilege.

That is why I am concerned about a new development that could deny this freedom to many Americans. As a longtime friend of labor unions, I must raise my voice against pending legislation I see as a disturbing and undemocratic overreach not in the interest of either management or labor.

The legislation is called the Employee Free Choice Act, and I am sad to say it runs counter to ideals that were once at the core of the labor movement. Instead of providing a voice for the unheard, EFCA risks silencing those who would speak.

The key provision of EFCA is a change in the mechanism by which unions are formed and recognized. Instead of a private election with a secret ballot overseen by an impartial federal board, union organizers would simply need to gather signatures from more than 50% of the employees in a workplace or bargaining unit, a system known as “card-check.” There are many documented cases where workers have been pressured, harassed, tricked and intimidated into signing cards that have led to mandatory payment of dues.

Under EFCA, workers could lose the freedom to express their will in private, the right to make a decision without anyone peering over their shoulder, free from fear of reprisal.

There’s no question that unions have done much good for this country. Their tenacious efforts have benefited millions of workers and helped build a strong middle class. They gave workers a new voice and pushed for laws that protect individuals from unfair treatment. They have been a friend to the Democratic Party, and so I oppose this legislation respectfully and with care.

To my friends supporting EFCA I say this: We cannot be a party that strips working Americans of the right to a secret-ballot election. We are the party that has always defended the rights of the working class. To fail to ensure the right to vote free of intimidation and coercion from all sides would be a betrayal of what we have always championed.

Some of the most respected Democratic members of Congress — including Reps. Marcy Kaptur of Ohio, George Miller and Pete Stark of California, and Barney Frank of Massachusetts — have advised that workers in developing countries such as Mexico insist on the secret ballot when voting as to whether or not their workplaces should have a union. We should have no less for employees in our country.

I worry that there has been too little discussion about EFCA’s true ramifications, and I think much of the congressional support is based on a desire to give our friends among union leaders what they want. But part of being a good steward of democracy means telling our friends “no” when they press for a course that in the long run may weaken labor and disrupt a tried and trusted method for conducting honest elections.

While it is never pleasant to stand against one’s party or one’s friends, there are times when such actions are necessary — as with my early and lonely opposition to the Vietnam War. I hope some of my friends in Congress will re-evaluate their support for this legislation. Because as Americans, we should strive to ensure that all of us enjoy the freedom of expression and freedom from fear that is our ideal and our right

Veto Would Protect Loopholes

President Bush, though, has pledged to veto a bill passed by the House, HR 6275, that would pay for new middle-class tax relief by closing a loophole that allows buyout managers to pay a 15 percent tax rate on much of their income — lower than that paid by many nurses, firefighters and middle managers.

As our elected officials and regulatory agencies navigate their way through one of the worst financial crises since the Great Depression, most analysts have focused on reforming the subprime mortgage market. But private equity is another massive, secret and largely unregulated force operating beneath the radar screen of disclosure and regulation — and with the potential to derail our economy.

While the favorable treatment of carried interest — the percentage of profits that buyout executives keep for themselves as a performance fee — has received most of the attention, it’s just one of the strategies that buyout firms employ to game the tax system and fatten their paychecks. Buyout firms rake in big dollars by loading up the companies they buy with debt, then deducting the interest payments. All businesses deduct their interest payments as a business expense, but leveraged buyouts typically have two or three times as much debt as equity. When the interest payments on that debt are subtracted from a company’s earnings, there’s often little or no taxable income left. That means fewer tax dollars for already-strapped state and federal treasuries.

Bring this up to the buyout industry, and they’ll claim that if lawmakers do anything to change the way they make their money, they’ll just go overseas. It’s a good line, but it’s not clear where they’d go. Denmark, Germany, England, Australia and the European Union are all considering legislation to cap interest deductions for debt used to finance leveraged buyouts.

When buyout firms depend on unfair tax advantages to prosper, it’s bad news for the economy as a whole. That’s why this coming Thursday, July 17, we are calling attention to the bad behavior of the private equity industry — and to the lax laws and regulations that have rewarded that behavior — with demonstrations in 100 cities worldwide. It’s a call from Main Street that change is needed, and the buyout industry and its tax dodges are a good place to start.

Today In Labor History

11 July
Coeur d’Alene, Idaho miners seize coal mines – 1892

A nine-year strike, the longest in the history of the United Auto Workers, began at the Ohio Crankshaft Division of Park-Ohio Industries Inc. in Cuyahoga Heights, Ohio.  Despite scabs, arrests and firings, UAW Local 91 members hung tough and in 1992 won a fair contract— 1983