Krugman: The Story of Our Time

The Story of Our Time –

Is the story really that simple, and would it really be that easy to end the scourge of unemployment? Yes — but powerful people don’t want to believe it. Some of them have a visceral sense that suffering is good, that we must pay a price for past sins (even if the sinners then and the sufferers now are very different groups of people). Some of them see the crisis as an opportunity to dismantle the social safety net. And just about everyone in the policy elite takes cues from a wealthy minority that isn’t actually feeling much pain.

What has happened now, however, is that the drive for austerity has lost its intellectual fig leaf, and stands exposed as the expression of prejudice, opportunism and class interest it always was. And maybe, just maybe, that sudden exposure will give us a chance to start doing something about the depression we’re in.

Reprise: Go Ahead, Raise our Taxes

Let’s just do it.  Let’s just go over the fiscal cliff slope.  

The Bush tax cuts were designed to expire in ten years. For everyone. We’ve gone two years beyond that expiration date and it has cost the country dearly.

Before anyone starts talking about cutting Social Security, or Medicare, or Medicaid, or closing loopholes or what-have-you, let’s just push the re-set button. Let all the Bush tax cuts expire. End the Payroll Tax “holiday.”  All of it. 

I posted this back in November of 2010. It is timely and bears repeating:

We’re willing to bite the bullet along with the fat cats. Seriously.

I looked at our joint tax return from last year and going back to 2001 rates would mean paying an extra $102.63 in taxes between the two of us every two weeks. Basically $50 a week. At least as best as I can figure. That appears to be the maximum we would owe.

That’s the sacrifice we are willing to make.

Sweetie and I are fortunate. When it comes to household income, we land in that upper bar. Barely. But if Sweetie were to lose his job, we’d immediately plunge down to the bar second from the bottom.

We know how to live with less, but we can’t live with nothing and we have never felt so job insecure in our lives. If either one of us were to  lose our job today, there is nothing comparable in terms of income out there for us. It’s a fact.

We’ve had ten years of Bush’s tax cuts and really, what has it gotten for the vast majority of us? Stagnant wages and job losses.  Worries that Social Security is on the chopping block. Less social safety nets. Less police and fire, less education for our kids, pot-holed roads.

If tax cuts create jobs, then why have we lost millions upon millions of them? If tax cuts generate tax revenue, then why are states and local municipalities slashing their budgets to the bone, laying off employees, requiring wage cuts, freezes, furlough days, cutting vital services, and on and on?

We can live without that extra $50.00  every week.

You guys have had your chance.

It’s not just the small business that gets hosed

I’m catching up with my email, and this post by Prairie2 is eleven days old, but it’s timeless. Go read.

The Colonel can sell cheaper if the chickens also pay the bills


Then there is the myth of low prices. The big advantage that the BBS has is that it can come into a town and sell goods cheaper than its competitors pay for them wholesale. This only lasts until competition is eliminated of course, but to make sure this always happens they dictate the wholesale price suppliers sell to “small” buyers. They do this simply by demanding that they always get the lowest wholesale price as they have “economy of scale“. Wholesalers can’t actually cut wholesale prices no matter how much you buy, but they can raise the price they charge to the small buyers. Same effect without violating the laws of physics. What did you think, it was a miracle?

Prairie2 has half the equation right, but let me tell you how everyone BUT the Big Box Chain gets screwed.

I used to work for an office supplies wholesaler.

In our case the Big Box Chains (the Big Three – you know who they are) would lock us into extended contracts that guaranteed the Big Box Chain a price list that very often got them the item at our cost or maybe just a percent or two above cost (maybe). By the way, this price list was only for the online portion of their businesses. For their brick and mortar stores they bought directly from the manufacturer. This is key to understanding the next part of the scam they run.

We supplied all stock for their online business, which meant we held it at our warehouse and shipped it out to their customers at no charge to the Big Box Chain. Got that? They got a heavily discounted price on the inventory, but we covered the costs to store it, box it, and ship it. No freight was charged to the Big Box Chain regardless of whether the customer was charged freight on their end.

How could we do that and still make a profit?

There was one more leg to the stool: Volume discounts from the manufacturer. That is, if their price to us for a box of toner was $100 and we sold over a certain number of them in a month, we got a rebate.  These programs generally ran a quarter at a time.

As long as all legs of the stool were in place, it all worked out. As the guy in the middle, however, we were really in a precarious position. First of all, the pricing negotiations with the Big Boys often took MONTHS to finalize, but they would hold us to the original price quoted them. By the time the price list was finalized, our costs often had changed (read: gone up), but we were still committed to selling it to the Big Boys at the original price quoted. In our case, our main business was inkjet and toner, which are particularly subject to the ups and downs of the cost of oil.You can see that by the time we paid the freight to ship to their individual customers, and taken it in the shorts on the cost we’d quoted to them, the only thing saving our bacon was the volume discount agreement with the manufacturer.

When the Big Name Manufacturer decided to end said program and instead extend rebates directly to the end-users, my old company was still locked in to its contract pricing with the Big Box Chains (the contracts were generally for a year). Needless to say, red ink ensued, the distribution center in Reno closed, and the only winner in this scenario was the Big Box Chain.

All the time I worked for said company and maintained all their pricing lists I never understood why we worked so hard to slit our own throats. It seemed to me that we should have been courting our small and mid-sized customers rather than chasing after the “big win,”  because Prairie’s got it right.  The mom-and-pops who were also our customers paid a quite a bit more for their merchandise.  I kept thinking that we could have told the Big Boys to go take a flying leap, offered some discounts to the smaller guys and earned their undying loyalty. Instead we chose to chase after the BMOC and lived in fear daily that he’d throw us over for a competitor.

I guess I just don’t understand business.

“If you put people on the butcher block, they’ll agree to anything,”

Even to cutting their own throats.

But, there is hope on the horizon

The 58-year-old assembler at the General Electric plant in West Burlington, Iowa, was called back to work in September.

She had been on layoff since 2007 from the non-union factory, which makes electrical switch gears for municipalities and energy-hungry factories, hospitals, and call centers. “You know how you have a fuse box in your house?” she asks. “These are like fuse boxes for a city,” the size of a refrigerator.

But the job came with new terms: a 50 percent pay cut—she’d now make $12 an hour. No health care coverage when she retired. And no chance she’d get the $5,000 bonus GE’s union workers won in last year’s national contract.

“You know what the deal is, so I don’t want to hear any complaining,” the manager at the 150-worker plant told her at orientation.

Six months later Smith is a leader in the Electrical Workers (IUE-CWA) organizing committee that’s expecting a Labor Board election in April.


Well, something’s got to give . . .

From the County Manager Report on the budget shortfall facing Lyon County, NV.

We have received correspondence, telephone calls and personal visits from our constituents asking that we not cut or eliminate services or raise taxes.

Sorry, but we can’t have it both ways.

We can’t keep vital services going and not raise revenue to pay for them. Everyone has got to be willing to pitch in a little extra to provide for those things that we can only provide collectively, or face the fact that this county is going to dry up and blow away.

“I like to pay taxes. With them I buy civilization.” ~ Oliver Wendell Holmes, Jr.

“Taxes, after all, are dues that we pay for the privileges of membership in an organized society.”  ~ Franklin Delano Roosevelt

Full report below the jump.

Continue reading

Job-Killing Tax Breaks

I don’t hire people because of tax breaks. I hire people to expand my business — and make more money. I measure the success of my business by monitoring our market share and the revenues we see month by month. I’m competitive. I love thinking of new marketing plans and tracking their success. I seek ways to cut costs so that we can build the bottom line. My goal is long-term success.

Go read it all.

Is this the proper time to say that I’ve mentioned this before?

How is giving an employer a tax credit of $4,000 going to incentivize them to hire an employee who would cost,  at minimum, $15,080 a year (assuming the rock bottom minimum of a 40-hour work week at minimum wage)?

If the company doesn’t have the business revenue to cover the $9,080 difference, why would they make the hire?

And here.

There is only one thing that motivates an employer to hire, and it isn’t lower taxes, free rent or tax credits. The only thing that will cause an employer to hire is profit potential.

No business owner on the face of this earth is going to hire a new employee unless they think it will bring them more profits than failing to hire that person will.  If not having that extra person on staff means that they will lose business that will bring in substantially MORE money than the cost of that employee, that employer will not hire. If there is no demand, there is no hire. Period.

A couple of items

Go read: 272 billion reasons to feel depressed

On another note, I won’t be bugging any of you to support me in the Susan G. Komen Race for the Cure this year. In case you missed it, here’s why.  For years the local affiliate has had to deal with this nonsense, and it is beyond depressing that the national organization has taken the coward’s way out.

Locally, I will likely support Moms on the Run whose sole mission is to assist breast cancer and other women’s cancer patients in our area.  No lawsuits for “brand infringement.” No buckling to right wing pressure. Looks good to me. Nationally, I’m looking at the National Breast Cancer Foundation.  And yeah, I’ve made a donation to Planned Parenthood. You should too.

Our first critique night in our lighting class is tonight. I’ve got white spheres, cylinders and cubes dancing in my dreams. And not in a good way.

In the meantime

Guess what?  Rich folks are making even more money and as a result, profitable corporations are paying even LESS in taxes because of a loophole (surprise!) in the tax law,

Thanks to a quirk in tax law, companies can claim a tax deduction in future years that is much bigger than the value of the stock options when they were granted to executives. This tax break will deprive the federal government of tens of billions of dollars in revenue over the next decade. And it is one of the many obscure provisions buried in the tax code that together enable most American companies to pay far less than the top corporate tax rate of 35 percent — in some cases, virtually nothing even in very profitable years.

In Washington, where executive pay and taxes are highly charged issues, some critics in Congress have long sought to eliminate this tax benefit, saying it is bad policy to let companies claim such large deductions for stock options without having to make any cash outlay. Moreover, they say, the policy essentially forces taxpayers to subsidize executive pay, which has soared in recent decades. Those drawbacks have been magnified, they say, now that executives — and companies — are reaping inordinate benefits by taking advantage of once depressed stock prices.

A stock option entitles its owner to buy a share of company stock at a set price over a specified period. The corporate tax savings stem from the fact that executives typically cash in stock options at a much higher price than the initial value that companies report to shareholders when they are granted.

But companies are then allowed a tax deduction for that higher price.

For example, in the dark days of June 2009, Mel Karmazin, chief executive of SiriusXM Radio, was granted options to buy the company stock at 43 cents a share. At today’s price of about $1.80 a share, the value of those options has risen to $165 million from the $35 million reported by the company as a compensation expense when they were issued.

Wait. What? The company gets to claim the expense TWICE? First when the stock option was issued and then again when it’s paid?

If he exercises and sells at that price, Mr. Karmazin would, of course, owe taxes on the $165 million as ordinary income. The company, meanwhile, would be entitled to deduct the $165 million as additional compensation on its tax return as if it had paid that amount in cash. That could reduce its federal tax bill by an estimated $57 million, at the top corporate tax rate.

I would bet that “ordinary income” will be taxed as “capital gains” at the nearly rock bottom rate of 15%.

In the meantime, all over the country cities are turning off the lights and in some cases literally ripping out the streetlights due to declining tax revenue.

Cities around the nation, grappling with what is expected to be a fifth consecutive year of declining revenues and having exhausted the predictable budget trims, are increasingly considering something that would once have been untouchable: the lights.

Highland Park’s circumstances are extreme; with financial woes so deep and long term, it has extinguished all but 500 streetlights in a city accustomed to 1,600, utility company officials say. But similar efforts have played out in dozens of towns and cities, like Myrtle Creek, Ore., Clintonville, Wis., Brainerd, Minn., Santa Rosa, Calif., and Rockford, Ill.

What distinguishes these latest austerity measures is how noticeable they are to ordinary residents. If health care cuts, pay cuts, layoffs and furloughs — and even limits on enforcing building codes or maintaining parks — are most apparent to the people inside city halls, everyone notices when his streetlights go dark (and some cities, like Colorado Springs, where the issue boiled over, have already resumed some lighting when revenues allowed).

But hey, no worries. We of the 99% are just expected to get used to it.  Oh, and turn on our own damned lights. How we’re supposed to pay for the extra electrical cost at half the pay we used to receive is our problem.

The shrunken pay scale for newcomers — $12 to $19 an hour versus $21 to $32 an hour for longtime workers — threatens to undo the middle-class status of even the best-paid blue-collar jobs still left in manufacturing. A similar contract limits the wages of new hires at a nearby Ford Motor Company stamping plant, but neither G.E.’s 2,000 hourly workers nor Ford’s 2,900, nor their unions nor the mayor, Greg Fischer, have objected.

Quite the contrary, all argue that job creation must take precedence over holding the line on wages, given that the unemployment rate in this Ohio River city is above 9 percent and several thousand people apply for every unfilled, $13-an-hour factory job. “The trade-off is absolutely worth it,” Mayor Fischer said, arguing that while the city is actively subsidizing G.E.’s expansion here, mainly through tax rebates, that is not enough. “You must have a globally competitive wage to create jobs,” the mayor insisted.

The generational setback implicit in a “globally competitive wage” is evident at G.E.’s Appliance Park, the complex of factories where G.E. makes refrigerators, washing machines, dishwashers and other household appliances. Six years into the adoption of lower wages for new hires, half of the hourly workers are paid at the reduced scale.

In an earlier era, that would have been a source of friction, perhaps protest. Now it isn’t, and in an interview William Masden, 62, earning $31.78 an hour after 42 years at Appliance Park, attempted an explanation. The younger workers still get annual raises, he noted, and by the time they top out, he and his peers — the oldest baby boomers — “won’t be here any longer to remind them of what they are missing.”

Linda Thomas, 37, one of the first to be hired in 2005 under the new arrangement, amends that explanation. Her hourly wage, $18.19, has almost topped out, although it is nearly $14 an hour less than Mr. Masden’s. But she keeps silent. Too many unemployed people, she explained, would clamor for her job and her wage if she were to protest.

“You don’t want to rock the boat,” Ms. Thomas said. “You take a chance on losing everything you have if you do.”

Nope, don’t rock the boat baby. You’ll be out on your ear. And let’s talk about that  “globally competitive wage.”  Do we also get “globally competitive” expenses? Will they go down commensurate with our declining incomes? Not bloody likely.

From my Inbox: Spaghetti Feed to support the Dayton Food Pantry

30 Pike Street , Old Town Dayton
Serving Dinner Tuesday – Sunday from 4pm
You Can Help Make the Season Merry!

The holiday season is here and most of us look forward to celebrating with family and friends.  But so many of our neighbors and friends right here in Dayton are struggling this year. We don’t need to tell you that the economy has hit Lyon County hard. Js’ wants to help and you can too.

Join us Tuesday, December 13th, from 5 – 8pm for a Spaghetti Feed to benefit the Dayton Food Pantry. For just $10.00 you’ll get a spaghetti dinner with salad and $5.00 will go directly to the Dayton Food Pantry.
Nearly 3000 people sought help from the The Dayton Food Pantry in November, and more than 100 families asked for help for the first time. That number is expected to rise as Christmas approaches. We want to make sure that no one who needs help goes hungry.  

Together we can help ensure that everyone in the Dayton area has a Merry Christmas.

We look forward to seeing you on Tuesday!