Caught In A Machine That Grinds Us Up

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
This is Part II of Companies As Buy-And-Sell Commodities. See Part I, Companies As Buy-And-Sell Commodities – Workers, Customers and Country As Costs.
In Part I I wrote about a pattern we see over and over again: buying up good companies, shedding and outsourcing the workers, cutting their pay and benefits, outsourcing and cheapening the product or service, fleecing and mistreating the customers, closing the offices and factories and running up debt. If you want to make a few hundred million, here is the game:

  1. Find a good company that still respects its workers, paying decent wages and benefits, still respects its customers and produces a quality product or service, still respects and has ties to its community and keeps a plant open, maybe sponsors a little league team, etc. These are all “costs” to cut.
  2. Use other people’s money: Work with an investment bank to finance the buyout, with the company itself as collateral, and pay the banking fees from the financing.
  3. Cut. Cut costs, including the quality of the product or service and customer support operations. Externalize environmental costs onto the community. Wait for the union contract to expire and offer wage cuts and elimination of benefits and refuse to negotiate (where are they going to get other jobs?), fire union organizers, threaten to close the operations and move them overseas, and don’t worry about labor laws – they aren’t enforced anymore.
  4. After breaking the union and cutting costs, close the plant. outsource production to China.
  5. Now the books look better because of reduced costs, so take on new financing and pocket it.
  6. Further stoke up the books for a couple of quarters using gimmicks like pushing product into distribution channels to make sales look better than they are, find another buyer and pass what’s left to them to repeat the cycle – there are always more costs to cut.
  7. Pocket your millions, then go back to step 1 and repeat the process with another company.

This is the buyout game and it is part of the story of what has happened to our economy, our jobs, our communities and our country. It has become a machine, with profits fueled by tax and social incentives. These incentives create a formula that follows the steps described above, with an inevitability to the consequences. Because it CAN be done, of course it IS done. It is a great game for short-term profits for a few. It is justified as “finding efficiencies” and the ideology behind it insists that the profits prove the market demands the behavior.

Continue reading

Dollar Weak? Not Against Yuan!

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
Conservatives are blasting President Obama, saying he is causing a “weak” dollar. The Drudge Report has a headline or a story pretty much every day blasting this message out. Republican e-mails warn that the dollar is “collapsing” under Obama. Blogs and talk show hosts declare that civilization will cease, urging listeners to buy as much gold as they can.
But conservatives should know that the dollar is steady where it counts – against the Chinese Yuan. Yesterday, October 20, the exchange rate was 6.82653. On May 6 it reached a low of 6.82157 and on June 17 a high of 6.83743.
Conservatives react intensely to words like “strong” and “weak” without understanding the meaning. Here is what it means: Things made in America cost less when the dollar is lower, or “weak.” A lower dollar creates an incentive for others to purchase things made in America, which means factories are busy, new factories can open, and jobs are created.
But while the dollar drops against every other currency the Chinese Yuan remains the same, and Chinese goods don’t get more expensive – at least here. So our factories are not busier, the import/export imbalance stays the same and American jobs are not created.
One might ask, “How is this possible in a free market?” Indeed.

Dems To Describe Public Option As Medicare-For-Everyone

This is huge news. House Dems want Medicare for everyone,

Say hello to “Medicare Part E” — as in, “Medicare for Everyone.”
House Democrats are looking at re-branding the public health insurance option as Medicare, an established government healthcare program that is better known than the public option.
. . . While much of the public is foggy on what a public option actually is, people understand Medicare. It also would place the new public option within the rubric of a familiar system rather than something new and unknown.

If they do this I think the battle is 90% won. Everyone loves Medicare.
I think they should say that are giving in to Republican demands to get rid of the public option and just letting everyone buy into Medicare instead.

TWO Great Progressive Blog Sites AND A Great CA Site

Take a look at the Campaign for America’s Future blog, Blog for Our Future. There is a LOT there. Bookmark it.
Also, there is great thought-provoking stuff at the Commonweal Institute blog, Uncommon Denominator. Bookmark that, too.
And take a look at the names of the poeople posting at both of these sites – you’ll be surprised.
Finally, if you are in California you will want to check out the Speak Out California site!

What Happened To Economy? Accountability.

What happened to the economy? Without accountability corruption thrives. And there is still no accountability.
Read about one part of it — how ratings agency executives got rich from knowingly giving toxic debt the highest possible ratings, paid to do so by the investment banks that also got rich (and then bailed out): How Moody’s sold its ratings — and sold out investors. Read the whole thing to understand it but it’s about a corrupt bargain between the regulators at the SEC and other agencies the executives at Moody’s and the executives at investment banks, letting them all get away with giving junk debt the highest ratings.

McCleskey had raised concerns about the integrity of the ratings process, and Moody’s had excluded him from meetings in January 2008 with the Securities and Exchange Commission about the eroding quality of pools of subprime loans that Moody’s had blessed with top ratings.
SEC officials, however, didn’t bother to seek out McCleskey, even though he was the “designated compliance officer” in company filings with the agency. The SEC maintains that its officials met with Kanef because he was McCleskey’s superior.
. . . Others who worked at Moody’s at the time described a culture of willful ignorance in which executives knew how far lending standards had fallen and that they were giving top ratings to risky products.
“I could see it coming at the tail end of 2006, but it was too late. You knew it was just insane,” said one former Moody’s manager. “They certainly weren’t going to do anything to mess with the revenue machine.”
Moody’s wasn’t alone in ignoring the mounting problems. It wasn’t even first among competitors. The financial industry newsletter Asset-Backed Alert found that Standard & Poor’s participated in 1,962 deals in 2006 involving pools of loans, while Moody’s did 1,697. In 2005, Standard & Poor’s did 1,754 deals to Moody’s 1,120. Fitch was well behind both.

What happened to the economy? Simple answer, executives engaged in corrupt schemes that made themselves millions upon millions, and eventually destroyed the companies and the economy around them. Here is the thing: this was not a bad plan, it was a good plan — because they got rich and got away with it.
So far not one big corporate executive or investment banker is being prosecuted for fraud or anything else. No one is asking for the money back. No one is asking for accountability. In fact, in many cases, many of them were bailed out by the government and are still getting huge salaries and bonuses.
They got rich – really rich – castles in Europe, three ocean-going yachts and a private Boeing 767 rich. And got clean away with it. Many barely even pay taxes. So what message does that send about whether this is the right thing to do?
Without accountability corruption thrives. Our current government has made it clear they believe it is wrong to look back, point fingers, assign blame, etc. So it continues and will continue.
Oh, and torture, launching illegal wars and spying on Americans will be back, too, if Republicans get in again, because no one is being held accountable for that, either.

Final Bush Budget Year Ends – $1.4 Trillion Deficit

Well the last Bush budget year just ended. So how did the Republican budgets do? When Bush took office we have a HUGE budget surplus – over $230 billion. Alan Greenspan warned that we were paying off the debt too quickly. Then came Bush and his tax cuts for the rich, and the Republican spending binge.
So now? Record-High Deficit May Dash Big Plans,

The federal budget deficit soared to a record $1.4 trillion in the fiscal year that ended in September, a chasm of red ink unequaled in the postwar era that threatens to complicate the most ambitious goals of the Obama administration, including plans for fresh spending to create jobs and spur economic recovery.

Update – Oh, look, Republican blogs are claiming that the budget for the fiscal year that ended in September is Obama’s budget, even though he didn’t even take office until January! That;s like how FOX News puts an R after a Democratic legislator’s name when they do good things, or a D after a Republican’s when another one gets caught lying about an affair.

Who The Recession Hurts

I wonder if the New York Times will ever write about the the people who go through our recycling the night before it gets picked up. They collect bottles to turn in for a dime, because that is all the income they can find. We live a few blocks from a church with a big “dining room” for the poor. Literally hundreds of people have to go there or they won’t eat.
People at the Times are paid six figures. They live in a city where more than a hundred billion dollars of bonuses are handed out every year, even when times are hard.
Out here in the real world things are different. People’s unemployment pay is running out, and Congress is delaying extending it. And if you are unemployed you COBRA subsidies are also running out now — no sign of Congress doing anything about that.

Your Tax Dollars At Work

Wealthy U.S. Shoppers Boost Spending 29%, Survey Says,

Spending in the U.S. on luxury goods and services spurted 29 percent in the third quarter from the previous three months, as consumers with the highest incomes unleashed pent-up demand, according to Unity Marketing.
[. . .] “No question that this quarter’s spending increase is good news for luxury marketers,” Danziger said in a telephone interview today. “Many affluent consumers returned after sitting on the sidelines for a year. However, the richest are few in number, 2.5 million households, so competition will be fierce to win their attention.”

File this under Concentration of Wealth, Bailouts

Dems Who Validated Attacks On ACORN

ACORN registers millions of voters.

The Republicans are talking about taking back the Congress next year. That strategy depends on keeping people from coming to the polls.

So they attack ACORN, in a typical, coordinated smear and fear campaign, leading up to a vote in Congress to defund the organization. And many Democrats went along with it.

I kind of hope that many of those Democrats are defeated next year because people who would have been registered to vote are not registered so can’t vote.

Except for the consequences to the country and world when Republicans are in charge.

HOW many Iraqis died? HOW badly did they wreck the economy?