Category: Economy

Wal-Mart: an anatomy of a colossus

walmart

You see them everywhere now, spreading like a fungus, invasive, unstoppable, a contagion blighting main street America.  What we used to call downtown is a pale shade of what once gave vitality and lent identity to our cities and towns, now reduced to a town hall, a few restaurants, maybe a police station, a bank or two, perhaps a post office and a motley of lawyer offices.

While the rise of the shopping mall, geared to a modern, mobile consumer, has played a significant role in emptying our town centers, the rise of box stores has accentuated the trend, with Wal-Mart foremost among them.

In the U.S., Wal-Mart is our largest retail employer, with 1.2 million workers; worldwide, more than 2 million.  It’s also the richest, with 2012 sales of $444 billion.  Each week, an estimated 200 million visit a Wal-Mart, at last count, some 10,700 stores located in 69 countries.  There are also ten web sites internationally for those finding it more convenient to shop at home.

Wal-Mart has its vociferous critics who malign its resistance to unions, poverty scrapping wages, marginal health benefits, and harsh impacting of local commerce.  Defending itself, Wal-Mart takes pride in pledging $2 billion through 2015 to combat hunger in America.  It gave 17 million to needy Gulf communities in the aftermath of Katrina.

Wal-Mart claims it’s done much to help small farmers by its increasing emphasis on local produce with $1 billion in purchases.  In countries such as Brazil, it has confined its meat sources to those farms not engaging in deforestation.

It has pioneered in garnering healthier foodstuffs in a commitment to reduce sodium by 25%% and added sugar by 10% and the elimination of transfats over the next two years at no price increase.  Last February, it introduced “It’s Great For You icons” to suggest healthier food items.  Along the same lines, it has contributed $26 million to programs promoting better nutrition.

In the sustainability area, Wal-Mart is a leader in transitioning to solar for 5 to 20% of the energy needs of its stores.  Last week, it announced immediate solar implementation for ten of its stores in Maryland.

But much of what Wal-Mart does is all about public relations, or polishing its image, a shellac concealing inequities.  Were it done for its own sake, or from compassion, or a sense of social need, such altruism would doubtless be received warmly.  It continues, however,  to advance itself by marginalizing worker wages and benefits.

In 2002, there were the revelations in Mexico, where bribery was used to purchase land sites and contracts. Initially, Bentonville, AR headquarters hushed up the scandal, only to sense media’s gaining on them and the fact of declining stock value.  Its response, as nearly always with Wal-Mart, was damage control.  Appointing its own investigators, it ultimately sent its findings back to the very authorities in Mexico tainted by the scandal, resulting in exoneration of the accused.

There is also no denying Wal-Mart has been fiercely anti-union.  In Canada, for example, it closed a store just after it had been unionized.  In late 2012, organized union boycotts were staged against Wal-Mart on Black Friday, though few “associates,” about 50 nationwide, took part and consumers virtually nil.  In fairness, unions were a principal factor behind the collapse of Hostess Brands following last November’s strike and have often exacerbated costs elsewhere in a marketplace keenly sensitive to foreign competition.  In Kentucky, where I live, Toyota workers have repeatedly turned down unionization by large pluralities.  My point is that when employees are treated well they have little relish for unions.  The lack of participation by Wal-Mart employees smacks of fear of reprisal, given their meager earnings yet need for income.

In those industries represented by unions, businesses in general have responded to decreased profitability by increasingly resorting to contract labor, reduced hours, reduction in workers hired, layoffs, elimination of stores and factories, or by simply packing-up and leaving the U. S.  Hostess Brands, makers of Twinkies I grew up on,  had already been struggling with indebtedness and sagging profits, and yet one of its several union called a fatal strike.  But it’s one thing to work for Toyota that treats workers like family and quite another working for parsimonious Wal-Mart, which has increasingly been turning to the same cost limiting measures.

It may come as a surprise, but nearly a third of Wal-Mart’s hires come from heavily unionized grocery stores and fast food enterprises that actually paid their workers less in wages and benefits than Wal-Mart.  According to the Bureau of Labor Statistics, the average pay of a Wal-Mart associate is $21,744 (2012) compared with $20,200 for grocery store workers.  The anomaly is that Wal-Mart prospers while retailers like Montgomery Ward have bellied-up, and chains like JC Penney and Sears may be about to follow.  It seems obvious consumers have been voting with their feet.  Sam Walton’s philosophy was to sell cheap and reap volume.  He seems to have gotten  the message, but for self-advantage rather than entering into the ethics good stewardship of wealth demands.

Turnover at Wal-Mart is high, with half of hires quitting after only a year. Still, it’s less than the 65% average in the retail industry at large, which merely demonstrates worker discontent is intrinsic in a market place defined by low wages and marginal benefits generally.

Recent headlines have focused on alleged discrimination against women in areas of  pay and promotion with several class action suits underway.  Though two-thirds of Wal-Mart’s workers are women, only a third are in management.  Wal-Mart’s argument is that the statistical disparity doesn’t reflect context, with many women preferring part-time employment or lacking in prerequisite skills.  Pay and promotion are decided by local stores anyway, not Bentonville.  In a 2011 High Court decision, the Court ruled by a 5-4 vote in Wal-Mart’s favor, based on local determination rather than national policy.  To Wal-Mart’s credit, two years ago it launched a support program to assist women in acquiring management skills.

Walmart has also been taken to task for relying on imports, especially from China, resulting in decimation of the manufacturing sector.  For me, this is reliable criticism, though I would argue America’s manufacturing exodus had begun before Wal-Mart’s emergence as a retail colossus.  I also ask, Where is this not happening and how likely its rebirth?  Still, Wal-Mart has pedaled foreign goods with unabated alacrity from the outset in consort with low wages to maximize profitability.

I started out with the given of the decimated local community; it’s a fact, much of it caused by Wal-Mart, but not solely.  What about Lowes and Home Depot, Best Buy and Macy’s among a plethora of entrepreneurial empires that have increasingly homogenized America’s look and short circuited the mom & pop stores of our childhood?  Will they also go away?

But there’s a good side, too.  Consider Vermont.  I’d gladly live there if it weren’t so cold and costly.  Vermont has only four Wal-Marts!  This comes about largely through small town pressure to maintain community cohesiveness.  Yet in Burlington, Vermont’s largest city, you’ll find the same crowded Wal-Mart aisles as anywhere else.  What’s more, it’s proved a spinoff as an anchor for other chain stores like Lowe’s.  Nonetheless, it comes at a price and I remember popular writer Bill Bryson commenting on his adopted Hanover, NH town how much he enjoyed the intactness of the town  center not yet impacted by suburban malls.

In today’s troubled economy, at least more than a million Americans have found work at Wal-Mart unlike many millions more who want to work and are open to even lower paying jobs, but cannot.  But this speaks to me of desperation and not free, and first, choice. Personally, I don’t like to shop at Wal-Mart’s and avoid doing so in favor of cleaner, less-crowded aisles; that special intimacy I find at my local drug store where they know me by name; foods that somehow look fresher and less picked-over.

I do sometimes think the Wal-Mart criticism, at times justified, borders on an unceasing venom fostered by some of my fellow Progressives yearning to restore us to a pristine world, which I doubt ever existed except in the weave of human myth, proving again Idealism’s too frequent folly in pursuing a salient, but unhelpful, simplicity. Bottom line, Wal-Mart is not some rude renegade in the business commune. They’re simply the largest and thus most visible target and hardly the sole sinner.

I suspect my fellows resent as I do the oligarchy of the rich, particularly when its comes to the money pinching Sam Walton who became America’s first billionaire, $2.8 billion, in the mid 80s.  Even then, parsimony came easily to Sam, who had a vogue for $5.00 haircuts and never left a tip.  He made sure his family, Helen and the four children, were  well-provided for, however, bequeathing a net worth of $23 billion.  Six of the surviving Walton offspring ultimately had as much money as the bottom 30% of Americans.  But money talks.  In 1992, he was awarded the Presidential Medal of Freedom by President Bush and his wife, who came to Bentonville for the occasion.

I’m chagrined at the $23 million executive salary paid to Wal-Mart CEO Michael Duke this year.  According to the Huffington Post, at an average pay of $12.67 an hour, it would take 785 years for an “associate” to earn Duke’s one year salary.  But maybe this is an unfair gripe or poor sense of what makes for injustice,  After all, Apple’s Tim Cook gets just under $400 million per annum, exhibiting capitalism’s vulgarity at its worst.

What I also fervently dislike about Wal-Mart is its intrusion into virtually every nook and cranny, not just textiles and food.  Not only do they sell gas, they now feature inside banks, subway and McDonalds outlets.  Medicine is currently all the rage, having begun with optometric services.  Now Walmart wants to be your physician, too, with thousands of clinics offering an array of services.

But I’m being unfair again, since Wal-Mart currently lags behind CVC and Walgreens in this market dash to offer such services.  But my insistent defiance leads to my confessing I now shop at a Kroger superstore for our groceries, another box store in other words, where I can also buy furniture, kitchen utensils, even jewelry.  New Yorker writer George Packer eloquently captures my mood in his acute analysis of America’s fall from grace (Unwinding [2013]) in writing of fellow resistant types:

… in parts of the country that were getting richer, on the coasts and in some big cities, many consumers regarded Wal-Mart and its vast aisles full of crappy, if not dangerous, Chinese-made goods with horror, and instead purchased their shoes and meat in expensive boutiques as if overpaying might inoculate them against the spread of cheapness, while stores like Macy’s, the bastions of a former middle-class economy, faded out, and America began to look once more like the country Mr. Sam had grown up in.

Like it or not, we’re all caught in the net. Wal-Mart has coalesced with the landscape, ubiquitous and with many imitators.  We can never, no matter what we do, get quite free again.  We can never go home again.

–rj

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Is government planning to nationalize the pension system?

Currently, rumors have been floating like broom-seated witches in the wind that the government wants to not only overhaul America’s pension system, but replace it with its own.  Nationalization then is the buzz word here.  Private plans such as IRAs and 401(k)s would ultimately be eliminated (National Seniors Council).

How tenable are such rumors?  We do know that the Labor Department has been looking at pension reform, soliciting input from several interests such as the AFL-CIO, who are urging more government regulation of private retirement accounts and maybe replacing 401(k)s, for example, with government annuities.  Some on the Left argue that 401(k)s and IRA’s discriminate against the poor.

Those on the right, however, fear that the government would set-up its pension annuities similar to Social Security, which is invariably used as a slush fund to buoy up government spending.  Benefit taxes would be subject to a sliding scale based on individual or family income. In short, redistribution would be built in.

Now let me give my view, not necessarily pleasant, but hardly fraught with fear-mongering conspiracies of a Marxist coup d’etat.

Yes, government is seeking to overhaul the pension system, but only to generate more revenue.   Huge deficits can’t continue without having to pay the piper.  Ask the Europeans.  Washington isn’t interested in nationalizing the pension system, though Argentina is about to do it, or eliminating private pension options.

Let’s take your IRA or 401(k), for an example of the way government sees them as potential sources for increased revenue.  At age 70.5, you have to make regular withdrawals known as “required minimum distributions”.  You pay a tax on those withdrawals, but they can be strung out over a very long duration, depriving the government of revenue.

As is, present contributions to 401(k)s are anticipated to swell tax deferrals by the billions in coming years.  For instance, backtracking to fiscal 2011, deferrals resulted in an estimated $111.7 billion revenue loss.  For 401(k)s alone, the loss is put at $67.1 billion (egis.ebscolhost.com).

Then there’s that issue of fairness I mentioned at the outset.  While you’re currently allowed in 2013 to contribute as much as $17,500 and a catch-up contribution of $5,500 for those age 50 or over, how many of us can actually contribute anywhere near the maximum?  But the rich can and do, reaping substantial tax benefits.  It’s the old formula perhaps that money makes money.

I think you get the picture.  Even here in Kentucky where I live, state government is looking for increased revenue sources too.  Currently, it’s on the drawing board to tax Social Security benefits just like the federal government.  By the way, while some states may seem tax havens for retirees,  know that laws can change.  Right now, Kentucky’s Homestead Exemption Act provides a break in taxes on property assessed value for senior citizens at age 65.  Even that isn’t chiseled in granite.  In 2011, Minnesota dropped their provision.

Conspiracy?  Socialist take-over?  No way!  The fact is that we live in lean times.  The challenge is then to cut spending meaningfully and fairly and safely.  But how you do that in a long-term marginal economy has thus far eluded resolution.

rj

My conversion to the Left

Let me tell you of my conversion to the Left

1.  The Great Recession:  Our worst economic crisis since the stock market collapse in 1928, its genesis clearly lies with Wall Street speculators and the banking industry.  With dollar signs for eyeballs, they lured many home buyers, often minorities, into high end mortgages fabricated by a bubble market swelled by over investment.  Subprime and adjusted rate mortgages flourished.  Ultimately, there were too many houses out there, reducing home mortgage values and, boom, the stock market debacle of 2008.  I believe government banking reform might have preempted this crisis.

2.   The transfer of wealth:  Whatever gains in wealth we’ve made over the last 30 years have largely benefitted the wealthy.   The collapse of the housing market is just one  recent example, with middle class buyers exchanging their already limited capital for long-term indebtedness on over priced homes.  While they may think they own their own homes, the reality is the banks own them for up to the next 30 years; in most cases, at huge profit.  Just do the math.  Ironically, the financiers responsible for the collapse have gotten away with their greed, some of them bailed out with tax payer money, even as they show no such charity towards those who default.  Their current vogue is to buy up these foreclosures for potential investment, particularly by foreigners.  Meanwhile, millions of other below-water “homeowners” struggle to honorably meet their monthly payments on houses no longer worth their purchase price in states where they have no recourse.

3.  Tax inequity:  Is it fair that a candidate for the presidency worth $240 million, owning several mansions, and with $100 million invested for his sons,  should pay at a tax rate of only 14% on his income in the last two years while many of us with median middle class incomes pay proportionately more?  This is but one example that surely could be multiplied by the thousands privileged to enjoy loopholes you and I can’t access.  Even social security gets rigged in their favor, with the salary max for social security taxes on 2012 income capped at $110, 000.  Talk about a windfall for the rich!

4.  Deficient health care:  Even the progressive Health Care Reform Act (to be fully implemented in 2014),  fails to remedy what ails us–the lack of a single payer system such as Canada enjoys with consequential lower costs and universal access.  As a fallout, you and I pay more for health care than in any of the developed nations,  concurrently with limited options.  I’m a retiree on Medicare, for example, yet must pay out of my pocket fully for eye glasses and hearing aids.  And then there are the ever escalating medical costs for all Americans far in access of annual inflation.  I say we can do better.

5.   Foreign policy:  We’re meddlers strutting our imperialism with a Daddy knows all approach.  We lavish more on the military than all the world’s countries combined, including Russia and China.  We’re beholden to Israel, an apartheid nation that would happily snare us into waging their conflicts for them and is busy killing Gaza civilians as I write.   In America, every decade seems to threaten a new war.  Now there’s pending trouble with Iran.  Our children bleed and die.  Iraq was a terrible folly and Afghanistan seems increasingly pointless.  We got our man.  Let’s go home.  Now!

6.  Environment:  Those on the Right simply laugh off or prove indifferent to climate change, some even proclaiming it a hoax.  For them, it’s business as usual, with profits their end-game.  As such, they remind me of those anti-evolution die-heads of years ago, still latent in today’s creationists.  While a few may admit to climate change, they downgrade its human component.  More coal, more oil.  Now their rage for Keystone. For the sake of a wounded Earth and for future generations, I cast my lot with the Left in its vibrancy as to what’s at stake..

7.  The crazies:  Conservatives, neo-cons, tea party devotees–they make me shiver–all those tirades against pro-choice, gays, immigrants, stem cell research, health care reform;  denigrators of the UN, deniers of global warming, the need for cap and trade, alternative fuels, they wed themselves to the past.  I dislike, too, their moral politics fettered to a religious view:  the creationists conflating theism with science, the zealots for capital punishment while decrying abortion; the unfeeling purists on death with dignity legislation, which they defeated in my native state of Massachusetts two weeks ago.  It’s company I choose not to keep.  I  prefer the affirmers, not the deniers; those who foster fairness and reconciliation, not callousness and division; those who champion change, not stultifying tradition; those who embrace optimism, not pessimism.

While I love my country dearly,  I think it can do better.  Like Bruce Springsteen, I’m proud to be born in the USA.  It’s a really great place. That is, if you’re on top.

Be well,

rj

I want to follow-up….

I want to follow-up on my last post dealing with our economic prospects in the coming year, exacerbated by Sequestration, or mandatory across-the-board budget cuts, beginning in January, 2013.

Things to ponder:

Whatever one’s politics, the Obama administration, in its doubtless sincere efforts to stimulate the economy, may have actually done it harm by adding $4 trillion to our national debt, now over a staggering $15 trillion. Nearly a trillion was spent on bailing out the banks, largely responsible for our economic meltdown.

These increases average a trillion dollars per year since this administration has been in office, with little to show for it. In fact, our stagnant economy may well plunge again. Last month’s economic figures, while showing a 180,000 job increase, did not alter the grim unemployment fallout, which remains at 8.2 percent. With more than 5 million unemployed, we have to do much better to make this sorry mess go away.

Certainly, this present recession, perhaps a euphemism, invites comparison with the Great Depression of the 1930s. While the latter was the mother of all depressions, with unemployment reaching a 26% level, making our present crisis seem puny, it does resemble our situation in its stubbornness, despite the Roosevelt’s fervent efforts, to yield results. What most people don’t know is that unemployment had actually increased under Roosevelt when he ran for reelection in 1936. It would take a world war to purge our economic woes.

I must confess I don’t think anyone has a definitive solution to what ails us, despite the heated rhetoric in an election year. Simple answers won’t do more than sugar coat a complex problem.

What’s more, our fate in a global economy isn’t entirely within our hands.

What if Israel attacks Iran?

Or if the economic malaise in Europe has no bottom and nations like Greece, Italy, Spain and Portugal default? Like the tsunami debris from Japan now washing-up on our West coast shores, we can’t escape the tidal impact of a European collapse resulting in reduced imports of American goods.

Back to our own shores again, if automatic cuts affecting defense go into effect next year it’s estimated that a million jobs will be lost. That’s more than all the projected jobs created in the American economy this year!

It seems a given that without confidence in the private sector, which is our primary catalyst for job creation, we’re doomed to a tortoise pace in achieving remedy.

And there are yet other mitigating factors that may compromise economic recovery. Although the health care reform measure has several desirable features, it may be the wrong time for it in a down economy. A recent survey indicates many employers anticipate costs increases with its implementation, so add this to the mix. If I were an employer, I’d certainly opt for caution when it comes to hiring or expanding inventory.

To be sure, economics has rightly been called “the dismal science,” except I’d underscore “dismal,” and eliminate “science,” since that implies probability corroborated by empirical data. Again, no one has the definitive answer, so be wary of snake oil formulas in this election year.

It’s all like some devastating disease that, despite our best efforts, defies our remedies. Much as we’d like, there’s no quick fix.

rj

A day of financial reckoning will soon come….

A day of financial reckoning will soon come to America, resulting in a substantial redistribution of income and entitlement payouts. It will see its genesis early in 2013, or shortly after this fall’s election.

We’ve already witnessed the opening skirmish of this inevitable transition to a more restricted access to America’s economic pie, beginning with the recommendations of the Congressional appointed Joint Selection Committee on Deficit Reduction, more commonly known as the “Super Committee”. The Committee, however, failed in its mandate to reduce the federal deficit by 1.5 trillion over the next decade, triggering automatic cuts (sequestration) to the tune of 1.2 trillion to be divided between Defense and other programs. Partisan politics had intervened, denting courage, and the chasm between Democrats and Republicans couldn’t be bridged.

The truth is that the economic meltdown we see in Europe is theater for what’s coming here. Thus far we’ve been able to either borrow or print money to shore up our stagnant economy. We’ve even cut taxes.

We’ve become like irresponsible credit card users, postponing tomorrow’s reckoning, to meet insatiable wants. Ultimately, we’ll have to pay our bills or close up shop. Presently, our national deb stands at a staggering $15 trillion and we pay $200 billion interest on that debt annually.

In January, the cuts will go into effect. When you take defense and entitlement programs into consideration, you’ve only got $600 billion left in the kitty to spend elsewhere.

Do we really want to cut our defense budget in an unsafe world or Social Security, Medicare, and Medicaid?

The social and political ramifications promise to be enormous and tax revenues will need to be raised. Ultimately, the poor and low wage earner will be sheltered, and while the rich will see higher taxes, the declining middle class will continue to bear the brunt.

Actually, things have been eroding for several decades. As a serviceman, I was once guaranteed health benefits. Today, a sliding wage scale applies, ruling out the middle class.

Each year, a retiree’s costs for Medicare increases, ultimately compromising monthly Social Security checks.

As for Social Security, after payroll deductions for over forty years, I pay out several hundred dollars in taxes on the rather paltry sum I receive.

And more is coming. Social Security outlays will be reconfigured. Age eligibility for full benefits will advance to 67.

You will pay more for Medicare while getting less coverage.

Let’s take some specific examples of the potential fallout for education, based upon current sequestration projections by the Congressional Budget Office (CPO):

ESEA Title I,Part A):: Funding cut: $17,958,000 affecting 27,660,000 students. Potential job losses: 280,000.

Special Education Grants to States (IDEA-B-611): $14,316,000 affecting 5,900,000 students. Potential layoffs: 230,000.

Head Start (HSA, section 639): $9,841,000 affecting 1,340,000 students. Potential job losses: 440,000.

Even for the financially marginalized, the slice of the pie is getting smaller, particularly at the state level, where budgets have imitated the faulty federal model, forcing cuts in Medicaid and welfare outlays.

At the state level, too, an ominous trend has begun of cities declaring bankruptcy, three in California this year alone. Much of this comes from budgets overburdened with generous retirement obligations to public workers.

The times are a-changing and we may find ourselves entering into an era of social rancor not seen since the Vietnam debacle. The battle will spill over into the streets,
and all, all will be utterly changed. It all comes down to who will pay and how much. (Most people think it’s ok for the neighbor to pay more, but not themselves.)

The great challenge is mustering cuts without dampening the economy. That’s been what’s gone wrong in Europe: austerity without stimulus.

Yet like your credit card balance, the bills will have to be paid.

The Obama administration prides itself…

The Obama administration prides itself on having saved Detroit’s auto industry with its proviso of bailout money.  Of course, this wasn’t the case for prosperous Ford Motor company, which enjoyed substantial profits despite the downturn in the economy with the onset of the 2008 recession.  Clearly, the demise of Chrysler and GM had its source elsewhere, or in mismanagement.  While GM and Chrysler have largely repaid the government, the fact remains that such bailouts have resulted in a trillion dollars of new debt.  Sooner or later, we will have to pay the piper as we approach the Eurozone’s  present dilemma.  
Both Republicans and Democrats have made matters worse by approving the Obama sponsored payroll tax cut, resulting in a diversion of 2% from Social Security funding, a vital program already in serious trouble.  Republicans have further contributed to our economic malaise by holding out for no new income tax revenues.  What is needed is a balance of stimulus money in programs that can work along with cuts in pork barrel spending and a provision for adequate tax revenue to pay for programs that do matter.  Germany is today’s model in this regard, to the envy of its neighbors.  
Ironically, Obama’s economic policies with their lavish spending, exacerbated by Republican intransigence on new tax revenue, threaten all of us.  Unfortunately, this administration seems bent on rewarding incompetence, and frequently, even with regard to malfeasance on the part of banks, the auto industry, and even home owners.
I strongly believe that government does better when it encourages the private sector, reducing deficit spending, limiting tax subsidies, reforming tax laws to broaden the tax base, etc.
To our peril, in our rush to ever increasing Federal encroachment on the private sector, we have retreated from those principles set in motion by the founding fathers, rewarding diligence and industry, that has distinguished the American experiment from Europe’s welfare state and propelled its prosperity.  
I would offer one final caution:  implementing new tax revenue without corresponding spending discipline only encourages government to spend even more.
What I have written is encapsulated in Benjamin Franklin’s observation on the new American republic:  “The expense of our civil government we have always borne, and can easily bear, because it is small.  A virtuous and laborious people may be cheaply governed” (Letter to William Strahan, February 16, 1784).

A view from the precipice: the American economy

In the last several weeks we’ve seen signs, small, yet significant because of their consistency, of an upturn in the American economy, with unemployment dropping to 8.6% after spiking to 9.9% in April, 2010. Nonetheless, we’re still facing a bumpy ride and it may take another three years to right ourselves in even the best scenario. Just yesterday, Boeing announced it will close its plant in Wichita in 2013, resulting in the loss of 2160 jobs. Boeing faults upcoming defense cuts.

This is a case in point. On the one hand, there is a need to stimulate the economy; on the other, a need to cut spending. As I see it, the priority should be on getting people back to work and preserving the jobs that remain. Yet I see the President will announce today a $500 billion reduction in defense spending. The fallout in job losses is incalculable, and I’m puzzled as to how this squares with his near daily appearances in several states, giving pep talks on what he’s done and wants to do to create jobs. The one hand gives, and the other hand takes away.

Here are some sobering facts you’re not getting from the Washington power-brokers:

As of July, 2011, only 63% of men were working.

Unemployment stood at 7.6% when Obama took office. Three years later, it hovers just below 9%. If you’re Black or Spanish, the numbers are staggering.

In the 1950s, manufacturing was 28% of our GEP. By 2010, it had dropped to 11.7%. In contrast, it stands at 25% in China. So much for free trade!

Forty percent of our jobs are low-paying, compared with 30% in the 1980s.

Median household income has fallen three years in a row.

Student loan indebtedness has soared to an average $25000 on graduation.

Consumer debt is rising again, as Americans turn to their credit cards to make ends meet.

The federal government now has ownership of more than 250,000 foreclosed homes.

Millions of Americans currently pay mortgages on homes no longer worth their purchase price.

The total debt of Fannie May, Freddie Mack, and Sallie Mae now stands at 6.4 trillion. It was 3.1 trillion in 2008.

Fifty million Americans lack health insurance. Meanwhile, companies are continuing to drop health care coverage for their employees or asking them to pay more.

Poverty is growing in the U. S., with one in five Americans now dirt poor, the highest figure since 1959 when the government began calculating poverty.

I haven’t ventured into state indebtedness, a whole subject in itself. Most of the states are in hock for millions, if not billions, especially in funding pensions for their public employees. In virtually all the states, costs are being passed on to cities and counties. Meanwhile, infrastructure, education, safety, health and environment are being compromised with spending reductions. Some states are selling off assets like tollways to foreign investors.

While all this is going on, Sears is closing, yet again, a number of its stores, Barnes and Noble just announced a steep drop in profits, and Bank of America will eliminate 600 branch banks.

Add to this the danger of a Europe meltdown: Greece, Ireland, Spain, Portugal, Italy going into default. Our economies are interlocked in today’s global village. Should it happen, it means an even deeper recession.

Meanwhile our politicians seem more interested in power than solutions. Worse, they have been lying to us. Maybe they need to join the unemployed.

On the dividends of a late read

I read a lot, eagerly, omnivorously, and in doing so sometimes overreach, ordering books I can’t possibly get to in the short term; hence they accumulate in heaps on my office floor, as my shelves are already squeezed. I confess my gluttony, yet without repentance. Liking books isn’t a bad vice, I think, and I’ll hardly bankrupt our family budget in doing so.

Sometimes, however, I’ll guiltily raid one of my piles, snatching a book that’s lain there goodness knows how long, with the end result that it’s somewhat dated in what it has to say. Take, for instance, my latest snatch, Bill Bryson’s I’m a Stranger Here Myself: Notes on Returning to America After Twenty Years Away. Well, here’s a book that came out in 1999, or 12-years ago, and I’m reading it just now. I deserve what I get.

But sometimes there are dividends in doing a late read, as time’s passage can afford a new perspective. For example, Bryson, in a chapter called, “The Numbers Game,” has this paragraph, mind you, written pre-1999:

No matter where you turn with regard to America and its economy you are going to bump into figures that are so large as to be beyond meaningful comprehension. Consider just a few figures culled at random from this week’s papers. California has an economy worth $850 billion. The annual gross domestic product of the United States is $6.8 trillion. The federal budget is $12.6 trillion, the federal deficit near $200 billion (p. 51).

Well, let’s see what time’s warp has done to those stats.

Today, the worth of California’s economy has swelled to $2 trillion.

The USA annual gross domestic product (GDP) is now over $15 trillion.

The approved federal budget for 2011 is currently at $3,360 trillion. http://en.wikipedia.org/wiki/2011_United_States_federal_budget#Total_spending
Wikipedia

As I write, the federal deficit exceeds $15 trillion. http://www.federalbudget.com/FederalBudget. The figures increase every second. Remember, it was just $200 billion when Bryson wrote his book 12-years earlier!

I don’t know about you, but I find this sobering, if not downright scary. We’ve gone from a budget mess to the very precipice. Ironically, the bailouts and stimuli to the economy, rather than helping us, are contributing to our economic malaise, turning the United States into a full scale deficit crisis. Somewhere, we’ve got to stop the fiscal hemorrhaging. Ok, my figures update Bryson’s 12-years ago. What’s going to happen over the next ten years? I don’t think any of us want to go there!

For a sense of just how much money is dripping away into interest payments on accumulated debt exceeding $15 trillion we can’t do better than Bryson’s fantasy analogy of earning one buck for each dollar you could initial to determine how long it would take you to earn just a trillion dollars:

If you initialed one dollar per second, you would make $1000 every seventeen minutes. After 12 days of nonstop effort you would acquire your first $1 million. Thus, it would take you 120 days to accumulate $10 million and 1,200 days–something over three years–to reach $100 million. After 31.7 years, you would be as wealthy as Bill Gates. But not until after 31,709.8 years would you count your trillionth dollar (and even then you would be less than one-fourth of the way through the pile of money representing America’s national debt). That is what $1 trillion is (p. 52).

As I’ve said, sometimes it’s serendipity to read a book later rather than sooner. Unfortunately, not many in the right places seem to be reading–or listening–at all. I think of other problems experiencing the “kick-the-can-down the road” syndrome,” for example, accelerating climate change, a nuclear Iran, a world with insufficient water, population overload.

An ounce of prevention is worth a pound of cure.

How banks war on you and me

According to Wikipedia, “Bank robbery is the crime of stealing from a bank during opening hours.” Let me try a new definition: “Robbery is theft from the people during opening and closing hours.” Yes, banks are quite capable of committing crimes, and often do, as bullies motivated by greed. Banks, in case you missed it, were the primary culprits in fomenting our economic downturn in 2008, the worst America has faced since the Great Depression and likely to continue for several years. In the process, they’ve been able to pull off nearly a trillion dollars in bail out money to cover their profligate scheming and spending, passing their debts on to the citizenry; another two trillion has been spent in trying to re-right the economy. What is more, along with behemoth corporations, banks are kingpins in a concerted effort to dismantle government regulation, giving them a freer hand in accumulating profit.

The banking sector is grateful for our help, screwing us at every turn in efforts to extract still more from the masses they’ve victimized, moving with alacrity in foreclosing on money that shouldn’t have been loaned, often for houses no longer worth their original loan amounts, and doing so without properly reviewing delinquent mortgages (i.e., robo signings). With regard to bank issued credit cards, despite government efforts to safeguard consumers from excessive interest escalation, the banks have found other ways to accumulate capital, imposing charges, for example, on using tellers rather than ATMs and fees on checking accounts below a designated amount. Take Bank of America, for example. It had originally opted to charge debit card users $5 monthly. Public outrage, however, curtailed its implementation. Look for the banks to move more quietly to introduce other charges. You name it, they’ve got a gimmick, proving it’s easier to catch a greased pig than a banker in his Mercedes.

Although our government rightly views consumer spending as a key catalyst to stimulating the economy, banks have made it difficult for many to borrow money, especially for mortgage loans, requiring up to 20% down payment. Obviously, this leaves out many young people and middle class wage earners. Home construction, along with the auto and aircraft industry, is a key component of the American economy. Currently, banks are sitting on a mound of money while looking for better investment returns elsewhere. You and I don’t figure into the equation.

Make no mistake about it: both Wall Street and the banks created the bubbles that got us here, resulting in millions without work and depleted federal and state coffers. It’s gotten so bad that many cash-strapped states are now resorting to selling off their infrastructure such as highways to raise revenue and avoid upkeep outlays. Ultimately this represents an impetus yet again in the dismantling of government, transferring the people’s assets to the private domain. It’s among a speculator’s greatest dreams, and don’t think for a moment that Wall Street and the banks don’t have their eyes on it.

Bank manipulation, or fraud, isn’t anything new. Take for instance, the banking scandals of the 1980s involving many savings and loan institutions. Insiders would falsify the books, making a failing bank appear healthy. Ultimately, the failing bank burdened the federal treasury with making good on consumer deposits up to $100,000 under USFDC guarantees. That means you and I paid the bill for their malfeasance. Hey! Sounds a lot like those recent bailouts. It continues to be difficult, however, for the courts to prosecute since the statutes require proof of intent to deceive.

Fortunately, we have a few watchdogs looking out for our interests, though scarcely enough, given the systemic problem of banking kleptomaniacs. Last week, Massachusetts Attorney General Martha Coakley sued five of the nation’s largest banks, alleging illegal foreclosures and deceptive mortgage servicing.

This suit seeks accountability against the banks for both cutting corners and also rushing to foreclose on homeowners without following the rule of law. There is no question that the deceptive and unlawful behavior by Wall Street and the large banks played a central role in causing this economic crisis. We believe they are not too big to have to obey the law.

The suit names Well Fargo, Bank of America, J. P. Morgan Chase, Citigroup, and GMAC.

The Tea Party has it all wrong. We don’t need less government. We need more.

Only the rich get to see Europe

I had promised my sister-in-law, ailing in Germany, that my wife and I would be visiting her next June. That may not be possible.

I couldn’t believe my eyes when I checked into Orbitz this morning and discovered the cheapest fare was $902 with United/Continental. Wait! It gets better. That’s just the airfare. Add taxes, $617.19, and you’re looking at $1,519.19 per person. In other words, the taxes are two thirds the actual fare. I think that’s outrageous.

I decided to find out why the high taxes. It’s the EU countries that are doing this. Scrapped for cash to finance their deficit welfare-state budgets, they’re looking everywhere. Tourists don’t vote. Voila! Well, and I think I’m not alone, I’ll vote with my feet.

Have they no clue they’re busting their own economies? No more flotillas of Americans and Canadians. Already, you can hear the screams of the European travel industry, not to mention airlines. So far, to no avail.

It’s amazing. I can book a trip from Lexington, KY, all the way to gorgeous Hawaii for just 754 rt, taxes included.

What a mess Europe’s gotten itself into. For decades since WWII, they’ve pretty much thought they had a free lunch, given their generous government outlays. Did they really think Disney World would go on forever? As is, they’ve got this heavy value added tax on virtually everything you buy, their touted free medical care is escalating in cost, and all of this while cutting their defense spending, already meager, by 50% in some countries. What a milk toast ally!

They don’t work as hard as Americans. Most retire 30 years and out. Vacations average 6 weeks, versus two for Americans, many of them not taking any vacation.

What’s awful is that their sorry mess could plunge all of us on this side of the pond into recession again. But what do you do about people who riot in the streets whenever austerity measures are adopted?

And there’s a warning in all of this for America to get its own financial house in order to avoid becoming a version of Greece, Italy, Portugal, Spain, and Ireland. My own state of Ky is nearly 8 billion dollars delinquent in funding pensions for its public employees, including teachers.

Republicans, cutting spending without revenue increases through higher taxation won’t get the job done.

Democrats, increasing taxes without meaningful cuts in spending only delays our day of reckoning.

Better book that trip to Hawaii–don’t I wish–before Congress fancies imitating our European brethren and we all go down the tubes.