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Click here for a continuously updated eRiposte compilation on 
who has done better on managing the U.S. economy: 
Democrats or Republicans 

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).

  • 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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