1.27.2005

But hey, it's only 70 jobs right? Right?

North Charleston tool company announces layoffs
theState.com (01.26)
A little bit here, a little bit there...

CHARLESTON, S.C. - A company that makes hand tools says it will layoff 70 workers by the end of 2006 and move what's left of the business, officials said.

L.S. Starrett Hardware president Jack Evans said Tuesday the company needed to find lower labor costs and lower overhead to compete with products coming from China.

"We just can't do that with the overhead and manufacturing costs we have," Evans said. "We call it outsourcing or offshoring. What it means is looking for a way to survive."

The layoffs will reduce the company's local payroll by nearly half to 80, he said. Less than three years ago, Starrett employed more than 250 workers in North Charleston.

The company will likely move the work to the Dominican Republic, where parent company, Athol, Mass.-based tool maker L.S. Starrett Co., has already transferred other operations there to cut costs.

"I didn't see your name on the list"

A very good friend just told us a very, very disturbing story. his parents moved to Florida a few years ago and are life–long Democrats and would never have given money to Bush's re–election campaign... until they were forced to.

It seems her boss had no qualms about declaring his, and the company's, undying support for Bush and was tracking who had given to the campaign and how much. Well one day he said to our buddy's mom "I didn't notice your name on the list" and asked her when she was going to give.

Well I'm sure more than a few of you would say "well she didn't have to give and could have told her boss off" but when you're older, and especially in today's economy, you probably want to hold on to what you have for dear life.

Sad isn't it because I'm sure she wasn't the only person in this country intimidated in such a way. So much for a "free country" eh boys & girls?

1.26.2005

Because he's Gore Vidal and you're not

People often ask why we picked "outsourcing" as the topic to blog. It's simple: the weakening of jobs is the weakening of America.

People go around saying "America is the greatest country in the World!" but they say it like they say "the Steelers/Patriots/Eagles/your-team-here is the greatest football team in the world!" Well, they're great... but only for the moment and only in light of the fact that american football is a very parochial sport played by a handful of teams in one country in the world. So, beyond being relative, it's also sort of meaningless.

YES, there are certainly many things that are great about this country. We have no doubt about that. But these things are not intrinsic to us and must be constantly re–examined to be truly understood. There are, however, also many things that are wrong and diminish the ideas this country stands for.

Back to the point at hand: we blog around the notion of 'outsourcing.' Outsourcing, where more and more work is shipped off to foreign countries that pay a fraction of wages here, is like bleeding yourself: The jobs we lose are revenues we lose because those wages are no longer taxed and multi–national companies increasingly sheild more and more of their money from being taxed.

Anyways, the other day Amy Goodman interviewed Gore Vidal on DemocracyNow and he had this to say:

AMY GOODMAN: What is your hope for the future, as President Bush inaugurated his second term with this speech?

GORE VIDAL: I don't see much future for the United States, and I put it on economic grounds. Forget moral grounds. We're far beyond any known morality, and we are embarked upon a kind of war against the rest of the world. I think that the thing that will save us, and it will probably come pretty fast, when they start monkeying around with Social Security, that will cause unrest. Meanwhile, the costs of the wars the cost of rebuilding the cities immediately after we knock them down, if we didn't knock them down, we wouldn't have to put them back up again, but that would mean that there was no work for Bechtel and for Halliburton. We are going to go broke. The dollar loses value every day. I live part of the year in Europe, which is always held against me. What a vicious thing to do, to have a house in Italy; but I also have one in Southern California. We are a declining power economically in the world, and the future now clearly belongs to China, Japan, and India. They have the population, they have the educational systems. They have the will. And they will win. And we will -- we only survive now by borrowing money from them in the form of treasury bonds which very soon we won't have enough revenue to redeem, much less service. So, I put it down to economic collapse may save the United States from its rulers.
Not sure who Gore Vidal is? Well you gotta read because he is one smart dude.

Scary times kiddies, scary times... oh and we'll through this one in for good measure: A Reign on the Wane? (registration may be required). Scary times for the dollar folks and that means scary times for us too.

1.24.2005

Privitization's dirty little secrets

Buying Into Failure
ThinkingPeace.com (12.17.04)
Yes, it's old but in light of Kathryn Harris' "Fact finding trip" to Chile about Privitizing Social Security, we thought we would turn to our old pal (and subject of our man–crush) Paul Krugman on the topic:

Yet, aside from giving the Cato Institute and other organizations promoting Social Security privatization the space to present upbeat tales from Chile, the U.S. news media have provided their readers and viewers with little information about international experience. In particular, the public hasn't been let in on two open secrets:

Privatization dissipates a large fraction of workers' contributions on fees to investment companies.

It leaves many retirees in poverty.
Uh oh. That doesn't sound good, but how could this be?
Decades of conservative marketing have convinced Americans that government programs always create bloated bureaucracies, while the private sector is always lean and efficient. But when it comes to retirement security, the opposite is true. More than 99 percent of Social Security's revenues go toward benefits, and less than 1 percent for overhead. In Chile's system, management fees are around 20 times as high. And that's a typical number for privatized systems.

These fees cut sharply into the returns individuals can expect on their accounts. In Britain, which has had a privatized system since the days of Margaret Thatcher, alarm over the large fees charged by some investment companies eventually led government regulators to impose a "charge cap." Even so, fees continue to take a large bite out of British retirement savings.

A reasonable prediction for the real rate of return on personal accounts in the U.S. is 4 percent or less. If we introduce a system with British–level management fees, net returns to workers will be reduced by more than a quarter. Add in deep cuts in guaranteed benefits and a big increase in risk, and we're looking at a "reform" that hurts everyone except the investment industry.
Yes, we knew the Krug (as we call him) would have the answer.

Don't believe the hype folks: there is no crisis just like there wasn't one from Iraq. Social Security is the most successful and stable government program there is.

This is part of Bush's "ownership society" which means the following: lots of your $$$ for Wall Street to invest in companies with—and without your input we might add (yes, that's right: you won't have a broker you call to play the stock market with: they'll just get your $$$ directly)—and if things go well, bully for you... but if they go south, we'll you "own" that and good luck because the safety net is gone.

Privatization. Bad for America.

Why do investors, entrepreneurs and landlords hate America?

Overstating of Assets Is Seen to Cost U.S. Billions in Taxes
The New York Times (01.24 - registration required)

Investors, entrepreneurs and landlords annually avoid paying at least $29 billion in taxes by overstating the price of stocks, businesses and real estate, two professors say in an article being published today in Tax Notes, an influential tax policy journal.

Claiming to have paid more than the actual price for a stock, business, apartment building or piece of art results in a smaller profit being reported when the asset is sold, and a lower tax on that profit.

"An unpublicized problem of crisis proportions is plaguing" the tax system, one that will cost the government at least $250 billion in the coming decade, the professors wrote.
"Investors, entrepreneurs and landlords, oh my!"

What will we tell the children?

The potential for abusive reporting in this area, particularly for stocks, "is virtually unlimited," according to the authors, who outline five ways that the law encourages cheating. They added that opportunities to cheat also abound in investment real estate, "where tax–free, like–kind exchanges are increasingly common."

Congress could easily reduce this cheating to a minor problem through changes in tax laws that, the professors wrote, would apply the same rules to those harvesting capital gains that now apply to workers, home owners and parents.

[snip]

The article, which appears in today's edition of Tax Notes, a nonprofit tax policy journal, is available online at www.taxanalysts.com.

Professor Soled said that conservative estimates were used in the article. He said he thought such cheating in the coming decade would top $300 billion.

The problem, the professors wrote, is that the Internal Revenue Service has no effective means to determine the price, known as the basis, paid for an asset that has been sold.

Capital gains and losses are reported on an honor system, unlike the rigorous verification regimes that Congress has imposed for wages, home mortgage interest deductions and tax breaks for parents.

Workers have their wages reported to the I.R.S. by their employer. Banks tell the I.R.S. how much people paid in tax–deductible mortgage interest. Congress requires parents to give a Social Security number for each child claimed as a dependent. The working poor are sometimes required to do much more, like producing report cards from schools and affidavits from landlords, to qualify for the Earned Income Tax credit.

Congress has cut overall financing for audits except for the Earned Income Tax credit for the working poor, which critics have said is rife with fraud. But the estimated $29 billion that is lost because of cheating on capital gains is more than four times the highest estimate cited by Congressional lawmakers for losses in the Earned Income Tax credit, most of which the National Taxpayer Advocate has shown is not related to cheating. Math errors and disputes between estranged parents over who may claim a child for the credit account for most of the disputes, and most of those who challenge denials eventually receive the credit.

Since 1997, Congress has given the I.R.S. additional funds to audit the working poor even as it has cut money for other audits. As a result, according to I.R.S. data, the working poor are about eight times more likely to be audited than investment partnerships.

A verification regime for capital gains would end most cheating, the authors say.
Our favorite part? "Congress has cut overall financing for audits except for the Earned Income Tax credit for the working poor, which critics have said is rife with fraud" as opposed to cheating on the capital gains tax with is 4 times higher as the article notes... but that's the "investor class" and they get to use the honor system.

Who is looking out for you? Nobody it seems. Good luck, 'cuz it seems like we all need it.