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OTHER
8/11/04 <link>
While the U.S. media continues to snore, it
took a well-known CEO to point out the obvious - that Democrats are
indeed better than Republicans for the U.S. economy. I guess I'll take
every CEO I can get!
Kudos to Leo Hindery -
former CEO of TCI and AT&T Broadband for pointing out something I've
documented
extensively at this website: that Democrats are indeed better than
Republicans for the U.S. economy, in virtually every single metric of
importance!
Don't believe it? Click
here for the rundown. Here's
Hindery writing in the Financial
Times (via Economics Prof. Brad Delong who aptly
says "If You Want to Live Like a Republican, Vote Like a
Democrat") - with bold text being eRiposte's emphasis:
Within an hour of John
Kerry's selection of John Edwards as his running mate, the US Chamber
of Commerce said it was forced to abandon its position of
"neutrality" because Mr Edwards was "hostile to
business". I could almost hear the laughter in corporate
boardrooms across the country. To argue that the Chamber intended to
be, or has ever been, politically "neutral" reminds me of
the film Casablanca when Claude Rains expresses shock that
gambling was taking place in Rick's Café.
The line revealed the
dirty little secret of the US Chamber of Commerce. It is run by the
wealthy chief executives of the nation's biggest companies.
It is easy to see why
enormously rich businessmen believe more personal income and lower
taxes are good for them. But what is good for an individual chief
executive's wallet does not translate into being "good for
business" or for the nation's economy.
What businesses and
the economy need are full employment, or as full as possible, and
strong consumer demand, generated by a combination of consumer
confidence and fair compensation. The Bush-Cheney ticket is failing
that test. They adopt "anything-goes-for-big-business"
policies, continue to push for ever-lower tax rates for the wealthiest
Americans, defend self-serving executive compensation packages and
condone benign regulation of corrupt practices.
The latest sign of
how what is really good for ordinary citizens and the economy is being
flipped on its head is George W. Bush's spin on sluggish job-growth
numbers. Now, he contends, that bad is good. In response to the far
lower than expected employment numbers for June, he said: "Steady
growth. That's important. We don't need boom-or-bust-type
growth."
But when the number of
new jobs created this year fails to keep up with the growth in the
adult population - a trend confirmed by last Friday's job numbers for
July - a little more boom and a little less steady stagnation would
certainly be helpful.
Certainly the
unemployed and businesses that need to sell products and services to
people with incomes are getting weary of the disappointing growth. For
the first time in more than seven decades, there are fewer jobs at
this point in an election year than there were when the current
president was inaugurated. A net 2.6m manufacturing jobs have been
lost since 2001.
And anyone whose job
has been outsourced to other countries should appreciate Mr Kerry's
call to end tax loopholes and benefits that provide an incentive for
shipping jobs overseas and keeping the profits there.
Compounding the
problem, far too many of the jobs being created are low- wage
positions with few benefits. Overall, wages for non-supervisory
workers have failed to keep up with inflation over the past year.
But jobs and wages are
not all that matters. Instead of Mr Bush's big tax cuts for the top 2
per cent of Americans, the Kerry-Edwards ticket would reform
healthcare. That would make health insurance more available and
affordable for millions of Americans and cheaper for businesses. The
other 98 per cent of Americans and the businesses whose healthcare
costs would be lower should welcome the choice between better
healthcare and tax cuts for the wealthy.
The business community
has also traditionally, and rightly, been concerned about massive
government borrowing. But under the Bush administration, we have seen
huge budget surpluses turned quickly into crushing deficits. That,
too, takes a toll on consumer and business confidence.
Make no mistake
about it. There is a big distinction between the US Chamber and local
Chambers. The local Chambers honestly focus on what is good for their
communities. They understand that jobs and wages are essential for
their business members to have customers and for their cities and
regions to thrive.
Yes, the US Chamber
would like to distract attention from the economy and scare Americans
about the Democratic ticket. But in this election year, voters must
make a distinction between policies that will create jobs and value
for shareholders and organisations that speak and act at the whim of
entrenched management and the economic elite.
Today, the Bush
administration and the US Chamber are trying to twist even the
questionable adage of Calvin Coolidge that "the business of
America is business" into something far worse, namely that
"the business of America is about super-rich CEOs and
executives". Instead, we need a team who will, as Franklin Delano
Roosevelt did, "save capitalism from the cap-italists".
Americans have a
fundamental choice to make in November, and the economy will be an
important issue. The US Chamber hopes voters will - ignoring the
facts, history and the candidates' records - assume that Republicans
are better for the economy than Democrats. But the voters should avoid
this knee-jerk reaction, and make the distinction between what is good
for the elite few and what is good for the economy as a whole. Then
it will be clear who will really do the best job of looking out for
them and who will get our economy moving again.
2/16/03 <link>
A
survey of President Bush's economic team appointees/nominees is
available here.
1/9/03 <link>
Rank-and-file
tech workers significantly benefited from stock options in the 90s
The San Jose Mercury News reports on research from a new book that tech
workers at the 100 largest Internet companies benefit quite handsomely
during the past stock market boom, due to the major use of stock options
in those companies. They point out that while top executives cashed out
obscene sums even when their companies never made a profit,
rank-and-file workers also benefited. "...'As
far as we can determine, never before in the history of the modern
corporation has an entire industry handed over so much potential
ownership to a broad cross section of employees [our emphasis],'
write Rutgers University professors Joseph R. Blasi and Douglas L. Kruse
and Business Week reporter Aaron Bernstein. Their book, 'In the Company
of Owners: The Truth About Stock Options,' hits bookstores today..." Here
are some statistics reported in this article (quoted directly).
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Tech
workers at these 100 companies pocketed $78 billion -- in boom times
and bust. This windfall from 1994 through 2001 -- which
represents actual sales, not just paper profits -- was worth a cool
$425,000 on average. But it was often more. Portal Software of
Cupertino boasted of creating 350 millionaires, even though it has
lost virtually all its value since the stock market peaked in March
2000 and has never posted an annual profit. A Mercury News
examination in December showed that 21 Portal insiders cashed in
$704 million in stock, led by founder John Little, who unloaded
$127.5 million of shares. Rank-and-file workers below the top-five
executives weren't left table scraps, however. The authors estimate
they pocketed $1.3 billion -- or $1.4 million each.
-
The
tech workers lost fortunes, at least on paper. By July 2002, 83
percent of the remaining options they hadn't cashed in were
``underwater,'' meaning workers would have to pay more than the
stock was worth. As a result,
workers saw the value of their in-the-money options cascade from
$175 billion at the market's peak to just $4.4 billion. That meant
workers who once dreamed of spending a $1 million jackpot instead
might get a $25,000 payoff. In Silicon Valley, that's the difference
between plunking down cash for a high-priced house vs. a minimal
down payment on an older tract home.
-
The
high-tech firms put nearly twice as much company ownership in the
hands of officers and workers.
All told, they
controlled 33 percent of the company stock and options, nearly
double the 16 percent stake for the benchmark group of traditional
companies (our emphasis).
In the tech group, workers controlled a bigger slice of the pie than
the top bosses (19 percentage points vs. 14) at the end of 2000. The
authors acknowledge that many investors are bitter that tech
companies showered options on workers; some of the stock option
profits came at the expense of ``dot-conned investors'' as tech
stocks melted down. ``Shareholders are rightly very angry about
their losses in light of the gains of any employee of companies
where the stock went down,'' Blasi said. ``This is going to lead to
a general reckoning of our whole system of corporate governance,
executive compensation and stock options.'' ``But,''
he added, ``it would be wrong to simply single out broad-based stock
options as the gang member you're going to punish and let the others
walk.''
We have benefited significantly in the past from stock
options. We think that if options are granted fairly and accounted for
fairly - in order to encourage employees to be faithful and to reward
them - it is good for the economy and the future of business. There is
no better way for even the lowest earners to potentially raise their
income significantly.
12/12/02 <link>
Discrimination
in hiring
A new piece of research suggests some prospective employers discriminate
against African American job applicants by association with their names
in resumes. "...Apart from their names,
applicants had the same experience, education and skills, so employers
had no reason to distinguish among them...Applicants with white-sounding
names were 50 percent more likely to be called for interviews than were
those with black-sounding names. Interviews were requested for 10.1
percent of applicants with white-sounding names and only 6.7 percent of
those with black-sounding names...."
Read the article to see why this research was better done than previous
ones.
12/2/02 <link>
Report
says immigrants significantly responsible for 90s economic boom
The report says that 50% of the labor force growth in the 90s was from
immigrants and they filled what would have otherwise been significant
labor shortages that could have stalled the boom. "...'The
American economy absolutely needs immigrants," said Andrew Sum,
director of the labor market center. "I realize some workers have
been hurt by this, and some people get very angry when I say this, but
our economy has become more dependent on immigrant labor than at any
time in the last 100 years.'...The center's report was commissioned by
the Business Roundtable, a group of corporate chief executives....".
10/25/02 <link>
(updated 4/27/03)
How can the Government stimulate this economy on a large scale?
Robert Shapiro has pointed out (MSNBC),
that in the past decade the U.S. economy has been driven by innovation
particularly in the information technology arena, which has in turn
fueled a continuing productivity boom. If cost-cutting and pure profits
become the principal priorities for both short-term and long-term, we
stand to risk starving the goose that lays the golden eggs, by burning
out an already over-productive set of employees while simultaneously
moving more and more of their jobs overseas. Especially in the difficult
economic climate of today, it is easy to lose focus on the innovation
that keeps the United States aloft.
Some people have the view that economies are cyclical and that
Governments can do nothing about it. There is nothing farther from the
truth. There is a lot that Government can do to keep the economy afloat
in tough times and even stimulate it significantly. A splendid
example is the series of interest rate cuts which lowered borrowing
rates, allowed massive mortgage refinancing, industry-record automobile
vehicle sales (unfortunately not of those of the highest gas mileage) and kept consumer spending robust through the last year and a
half. The problem is that the current focus seems to be largely
on tax cuts (and reducing corporate legal liabilities) as the only
real economic "policy" initiative. In a simplistic sense
(which shows our bias for fiscal conservativeness) we offer an example:
imagine if our companies decided that the best way to combat growing
red ink (akin to budget deficits) is to give more bonuses or
raises to the top executives along with much lesser (or negative)
bonuses/raises to rank-and-file workers (somewhat akin to selective tax
cuts), while simultaneously spending more money (akin to
higher spending). Can anyone imagine any
company of today even doing that, let alone succeeding with that
philosophy? (Well, on the first part, many
companies do that.) As Mr.
Krugman said, "...If Milton Friedman
weren't still alive, he'd be spinning in his grave. His legacy has been
betrayed — not by big-government liberals, but by the conservatives
about to take power. Nowadays Mr. Friedman is mainly famous as an apostle
of free markets. But through much of his career he was best known as the
champion of the conservative doctrine known as monetarism. Basically,
monetarists wanted to get the government out of the business of short-term
economic management. First and foremost this meant rejecting the use of
fiscal policy — discretionary tax cuts or spending increases — to
fight recessions. By and large this was an argument that the monetarists
won on the evidence. Few economists now accept Mr. Friedman's further view
that even monetary policy should be placed on cruise control. Alas, it
turns out that a stable money supply is no guarantee of a stable economy.
But almost all economists now agree with the position that monetary
policy, not fiscal policy, is the tool of choice for fighting
recessions..." Tax cuts
may be good in times of surpluses or when spending is balanced and
reasonable during recessionary periods, but we are not in either of those situations today. The
short-term stimulus portion of the 2001 tax cuts may have been OK at the
time they were passed, but
the rest of the tax cuts are largely wasteful and must be repealed for the good
of the larger economy, future growth and associated greater wealth (we say that even though we
would benefit a lot from these longer-term tax cuts). That should amongst the first
steps to getting the economy back on track. Second, tax cuts do not
really address the fundamental engine of creativity, change and growth in our
economy: innovation. Today, startups that largely drive
innovation (how often does one hear of big established companies caring
to innovate on their own?) are squeezed more and more for funds. These
startups rarely make much money in the first place, let alone be able to
pay taxes or benefit from tax cuts. If we continue to ignore them and
focus more on largely preserving the profits of big players (who are
often less innovative and outsourcing jobs anyway), the results could be
quite detrimental to the United States' future economic leadership and
superiority. There are many areas of innovation that could use major
infusion of support from the Government - and we're not talking of
financial support alone, although that would certainly help. We are
talking about enforcing current laws properly and passing new laws if
needed, that would allow innovation to get transformed into product
leadership, faster than countries outside the United States can gain a
foothold in those areas. A few key areas that come to mind immediately
are ((Disclosure:
we would benefit from many of these suggestions):
1. Universal broadband access: Currently, there
appears to be a lack of seriousness in really stimulating
innovation and growth in the broadband industry. At a time when
component and bandwidth costs are down sharply, it is no small wonder
that we pay the same or higher prices for broadband access. This is a
clear indication that market forces are not working efficiently. With
Michael Powell fighting for more media consolidation at the FCC the
challenges we face in stimulating innovation in this industry are higher. A
number of industries would be positively impacted by lower broadband
access, and faster speeds. Content distribution companies, currently
fighting lawsuits, could easily adopt a cable-TV-like model to bill ISPs
to recover costs of music/video downloads, as
we have proposed earlier. All these
steps could re-energize the semiconductor, telecommunications, internet, content creation
and content distribution industries and bring
innovative content and products to our electronic doorstep.
2. Development of novel and new drugs:
We have highlighted earlier the
use
of lawsuits by large drug companies to stifle both innovation and
competition, at a time when we also hear the rise of greater
antibiotics-resistance of virulent bacteria (see here,
and here)
and higher risks of bio-terror. Major drug companies use means such as
blocking of generic drugs, keeping smaller competition in frivolous litigation for years, charging high prices for so-called "new"
drugs which are not really that new, etc. This is fundamentally made
possible by the current laws governing this industry. Our Government can
stimulate the pharmaceutical and biotech industries, especially startups, by
making some small but significant changes to these laws that would
reduce monopolistic or oligopolistic practices, promote innovation and
lower drug prices, at a time when it is sorely needed. Such
actions would energize the pharmaceutical, biotech, medical care and insurance
industries.
3. Support for alternative energies and motor vehicles: On
alternative energies, it is disappointing that this administration's
almost exclusive focus (see exception below) is fossil fuels, at a time when
Europe is leading the charge to move away from such fuels. The
recent push by President Bush in favor of hydrogen-powered fuel cell cars
is good, but this is not what will reduce our short-term dependence on
oil. Remarkable
progress is possible in reducing health-impacting pollution while
simultaneously reducing our dependence on Middle-Eastern oil, by moving
aggressively towards alternative energies. When California first passed
the Clean Air Act decades ago and when minimum mileage requirements were
set for vehicles by the Federal Government (also a long time ago), various
industries lobbied falsely saying how their costs would
be unmanageable and how this would cause massive job losses and the
like. Well, we know where these industries have been since - they
have more revenues and more profits. It is time to stop simply
kowtowing to these industries and promote alternative energies through
appropriate laws, and associated tax credits or deductions both for consumers and businesses, for
encouraging them to move in that direction. Such
actions would significantly stimulate the energy and automobile
industries for innovation and growth, but it will also lower consumer
and business costs in a few years and reduce health costs by lowering
pollution.
4. Upgrading national security related IT infrastructure: This is
particularly important for National security, given the disturbing
findings of the Hart-Rudman panel, which basically states that all
our key agencies are generally still disconnected from each other, even
a year after 9/11. Such
actions would enhance our national security considerably and benefit the
technology and security industries as a whole.
5. Enforce antitrust laws and penalties more strictly: Nothing is
more critical to preserving innovation and stimulating small business
growth than ensuring that large companies don't abuse market power to
overwhelm or destroy weaker, but more innovative, competitors. While we
have no objection to large companies profiting legally, we do not
support illegal or unethical behavior (bordering on illegal) to destroy
weaker competitors. In this context, we found the recent Department
of Justice decision to simply slap Microsoft on the wrist very
disappointing. Unless antitrust laws are enforced strictly across the
board, we would send a signal to small business owners and innovative
startups that we are not interested in their monumental contributions to
innovation and growth.
We could go on and on. The bottomline? Being wedded almost exclusively
to (tax-cut-heavy) supply-side economics is no panacea for either
short-term economic growth or long-term innovation and economic
leadership. George
Bush (Sr.) was correct when he said supply-side economics is
"voodoo economics". If we are to compete with the likes of
the China of the future, a visionary plan to stimulate innovation and
growth is sorely needed.
UPDATE 12/13/02:
That innovation is key to economic growth was recently opined
by AMD CEO Jerry Sanders. Rep. Mike Honda recently wrote
in Electronics News that regulatory reform in the broadband industry
is sorely needed.
9/24/02 <link>
Best
employers for working mothers
The rankings are in!
9/1/02 <link>
First
chip company CEO!
Certainly took us by surprise that it took so long for the chip industry
to appoint a female as the CEO. Christine King has pulled off an impressive feat in her career, starting
where she did as a single mother on welfare. A story worth reading.
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