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Should You Be Subsidizing Executive Compensation In The Name Of Job Creation?
On Friday every main stream media organization was hyperventilating over the amazing NFP number and the Unemployment rate. Three years after the great recession ended JOBS were created. Hallelujah - end of story. But has anyone really thought about what kinds of jobs are being created (other than Zerohedge). Has anyone thought about how their tax dollars are being used to support the very generous compensation packages of Executives (higher stock prices are always good for executives who are compensated in stock) while the “newly employed” are compensated with barely sustenance level wages and NO benefits. Has anyone raised the notion in this election cycle about how the “soft landing” in American living standards, is going to affect GDP growth going forward, considering that the US is an economy based 70% on consumption.
On Friday Caterpillar announced they were closing a factory in Canada. They had wanted the workers to take a 50% pay-cut plus a substantial cut to benefits. The workers understandably were not excited at the prospect of going from earning $67,000 a year to $28,000. One might think that Caterpillar was a struggling company, asking workers to accept a 50% pay-cut, one couldn’t be more wrong. Profit was up 36% in 2011 vs 2012. Oddly the CEO’s (also Chairman of the Board) pay package in 2010 (latest available numbers) was quadrupled from 2009, to a total of $22.5 million including a $16 million stock grant.
Caterpillar's decision, ending a standoff with locked-out workers huddled around barrels of burning scrap wood outside the London factory gates, may benefit another downtrodden manufacturing city: Muncie, Ind., where Caterpillar last year opened a locomotive plant and where it is trying to fill jobs at about half the pay workers in Ontario received. At a job fair in Muncie Saturday, Caterpillar will be offering jobs at that plant at wages ranging from $12 to $18.50 per hour. Wages for most workers at the Ontario plant are about 35 Canadian dollars an hour.
If Caterpillar does move theses jobs to Munice what does it stand to get from the City and the State?
When Caterpillar agreed to revitalize a former Westinghouse electrical-equipment plant in Muncie that had been idle for 12 years, state and city officials provided incentives that could reach about $28 million, assuming Caterpillar meets its goals for adding as many as 650 jobs. Those incentives include tax credits, infrastructure improvements and worker-training funds.
If Caterpillar increases its investment in Muncie to replace the Ontario capacity, Muncie officials said it may qualify for further incentives. "We're going to do all we can to help them," said Jay Julian, chief executive officer of the Muncie-Delaware County Economic Development Alliance.
So the State will pay $28 millon for the privilege of having Caterpillar employee 650 people at about an average yearly salary of $24,000 (a level that the federal government defines as just a hair above the poverty level)? By the way, the CEO could pay all 650 salaries for one year and still have almost $8 million left over.
Some will say a job is a job is a job. But is a skilled labour job that barely pays $100 a day before taxes (state taxes),really something state’s should be begging for? Does the USA really want to start applauding the creation of poverty level jobs? Are new households created on $24,000 a year? Is demand stimulated with $24,000 a year.
Further who do you think is going to be left to pay the tab for these workers’ medical care, and pension benefits? Yes dear taxpayer that would be you. You, who paid for the privilege of having these jobs placed in your state to begin with, are now subsidising the compensation (benefit) packages of all the “newly employed”. The Corporation, well they don’t really pay as much taxes as they used to (corporate tax receipts as a share of profits are at their lowest level in at least 40 years), all those tax breaks/loopholes etc, really do add up.
U.S. companies are booking higher profits than ever. But the number crunchers in Washington are puzzling over a phenomenon that has just come into view: Corporate tax receipts as a share of profits are at their lowest level in at least 40 years.
Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008.
This is reverse socialism. It is the redistribution of wealth from the lower to the upper class with explicit State support. It is the sort of wealth redistribution that if allowed to go unchecked leads to social instability.
So in this the election season, we will all be told which Person or Party will be the best job creator. President Obama will take a victory lap as a “job creator in chief.” We will hear much about the “re-shoring” of jobs.We will hear about GE revitalizing manufacturing in the USA (they have closed 29 factories in the US since 2009). We will cheer the amazing profitability of GM ($45B tax break courtesy of the US taxpayer).The narrative on taxation will include the common line that Corporate taxes are to high and capital gains tax should be zero. What we won’t hear about is Corporations, like Caterpillar, taking money from workers and taxpayers, to enrich Corporate profits, and Corporate executives. We won’t hear about a CEO who got his pay quadrupled, and in turn cut his workers salary by 50%. Most of all we won’t hear about the soft landing in living standards for 80% of Americans.
Sources:
http://online.wsj.com/article/SB10001424052970203889904577200953014575964.html
http://online.wsj.com/article/SB10001424052970204662204577199492233215330.html
http://online.wsj.com/article/SB20001424052748704462704575590642149103202.html
»
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You need to read up on Frederic Bastiat and his "Negative Railroad" passage:
http://en.wikipedia.org/wiki/Bastiat
http://en.wikipedia.org/wiki/The_Law_(1850_book)
Enjoy!
I appreciate the comment.
If you don't mind you tax dollars being used to compensate CEO's and executives of incredibly profitable companies, then that is your perogative.
It is interesting to me that it is usually those making under $50,000 a year that are subject to the most "capitalism".
>>>Do we need more 24,000 dollar workers? Absolutely. How else are we supposed to compete as a REAL economy with other countries unless we can return to being a nation that ACTUALLY PRODUCES GOODS NOT SERVICES.<<<
This is nothing but the predator class seeking new prey financed by welfare for the wealthy.
Spin it anyway you want. Most here are smart enough to see through this scam.
Are you saying we should enslave our population because the Chinese are enslaving theirs? All in the name of "Free Trade" and "globalism."
On point, Stuck on Zero. The dude who said this below is almost starting to sound like that Apple-NYTimes article (The Chinese workers can go 10-12 hours, 6 days a week and make less - we need to start doing this to compete!).
This also assumes that you actually need experience and knowledge to head a multinational. We all know today that the only skill to thrive as a head of a super large corporation in a cooperatin super large secotr is to buy yourself some politicans, policy, and job creation blackmail.
Try being a samll business owner today and competing on a fair, level playing field. Come back to me in today's environment and see how well that works out for you.
It's working great, thank you. Although I agree that Government should not be practicing Fascism by bribing private corporations, the only realistic way to stop it (you and me brother, we are small fry) is to get off the employee treadmill and start your own business. We are too powerless to change the world.
Correct me if im wrong but your post seems to say that you want to artificially subsidize unprofitable goods production?
You a soviet central planner or something?
Helecopter Ben explained after the recent FOMC meeting that he realizes Fed policy is not good for savers but it is necessary for the greater good.
How do I opt out of having this idiot as by financial planner!
Among those sacrificing for the greater good is my 83 year old aunt, burning through her savings at $80K per year paying for healthcare while making essentially nothing in interest on her savings while the purchasing power of the principal is being decimated by 4+% inflation.
Her lost interest plus lost buying power is running at a rate over $50K per year as Ben's wealth extraction machine pumps her dollars over to JP Morgan, Goldman Sachs, Bank of America..... The greater good.
Take the hint, buy PMs.
yeah, reverse socialism, except leave off the reverse.
Socialism unfettered is what you should be calling this.
Err, no its the opposite of socialism.
Capitalism Unfettered is what you have now (like italy in 1937)
I pity our children, they will have to clear all this shit up and capitalism/socialism will be a distant memory to them, survival will be the only way of life.
Unless the USA has a magical plan to reduce global demand and reverse the 7% year on year decline in oil finds.
No profit in renewables, they cannot be part of a capitalist economy (fixed or free)
Thats why only (socialist) states fund it, cheap energy for the masses means no more profit for oil companies, the auto industry and of course TPTB.
Unfettered capitalism would mean that unprofitable businesses and insolvent banks are allowed to FAIL. Unfettered capitalism would mean no government support for favored businesses. Unfettered capitalism would mean no no-bid contracts for companies doing business with the government. We are a lot closer to fascism than unfettered capitalism.
Unfettered Capitalism means Unfettered Corruption to me, it seems to mean something else to you.
If it works so well why are the only services that matter in America all socialist?
Why dont you trust capitalism to run your Ambulance, fire service, Military, police, NSA, CIA, FBI efficiently?
I agree the corporations would die tomorrow if we had a free market economy.
We dont tho, its controlled by special intests for the profit of the few.
Definition of capitalism, money is more important than people.
Definition of socialism, people are more important than money.
Between the two we walk the line.
Pay no mind to the incoherent socialist, where everything is better because some dictator points the gun in an apparently different direction.
Until they get a clue about their own violent predispositons, the logic of freedom and personal responsibility is beyond their grasp. All they care about is the fight over the gun, as force over others is all they can understand.
"own violent predispositons" - Are you blaming European genes or our social Environment?
"the logic of freedom- " ever heard of the European court of human rights?
"personal responsibility"
5% of the worlds population are eating up 25% of its resources.
"Capitalism Unfettered" never had it , probably never will.
Psssst....it's a myth.
http://solari.com/blog/sir-james-goldsmiths-1994-warning/
Business needed to teach the Americans a lesson some will say. The Senate was dismissed to local affairs long, long ago. Having survived affirmative action which did work over time I may add, and later CRA abuses and countless other social lessons we are reaping both sides wisdoms on Governance and Corporate Empire joined at the hip. The torte laws are still broken and the taxpayer was assured the pesky border issue would solve itself then as it was crammed into existance. Theory meets reality many years later in hubris from a few corrupted minds paid for by many now in so many ways every day. There scared shitless on the Hill now and passes what will be the utopian solution. There right, anything can be crammed down our throat or up our a$$. Killing acountability takes time, there very good at it. America is a ant farm for the socialist final solution wet dream just like some Eurotards. Many Americans are pissed at the voter who are totaly brain dead. Nobody I feel knows how long this can continue until the Consumer totaly shuts down as more are in silent rage and even more who simply do not care. To many have no option as wage slaves. Decades to break it, more to repair it appears if ever now. Mises was correct, the market or the government, there is no third way to contract and proper law. They will crush anyone now in its way I guess. They have gone rogue as we were warned. Indeed we deserve what is on the Hill. The cold war was real so left leaning cultures were bribed with GATT, NAFTA or whatever was needed to assert policy. There are rather few Governments who did not play the game either.
>>>...I may add, and later CRA abuses and countless other social lessons...<<<
The mortgage cos. that perpatrated the sub-prime fraud weren't subject to CRA. They actually took business from banks that had credible CRA lending programs because they made it too easy to get a home loan.
Do some homework. Get a clue.
They have trolls in michigan!?!
Damn funny post, its almost as if you have absolutely no idea what socialism actually is.
Do you believe that all resources located in America should be owned by the people who live there or some saudi based Energy company (haliburton).
Do you believe that all resources located in IRAN should be owned by the people who live there or some saudi based Energy company (haliburton).
In europe we fought two wars against imperialism, thats why europe is so scared/worried* about whats happening in USA right now, you are about to learn about fascism first hand, When the govt breaks down and the rule of law is a distant memory, corporations will take over and fascism will rule supreme, the 50** states will try to take back democratic control and fail....
*My kids will probably end up as UN peacekeepers sent over to try and save whats left of the USA from fascism.
**Be Honest, Hawaii isn't really an American state.
Funny thing is I feel were are on the same page but a few words apart and few decades to observation. I was thinking the same thing having to send mine over there for the same reason you think you have to send yours here. Are we saying things work until they run out of our money both printed out of the thin air from induced instabilitys? I think so, I will relink the observation from a europeon some agreed on as did myself. Same leaky boat we are in. Wages cut in half with government health care subsidy on the way, oh joy. I am trying remember when any governement had a viable solution. Also we predicted over a decade ago the Euro was failure. We concluded the barriers of culture was the key and a confederation of legal construct issues. If they can find a solution here and there both our kids can stay home. If you get a veto vote, good luck. At least we may have a opportunity to vote our problem out in time.
http://solari.com/blog/sir-james-goldsmiths-1994-warning/
We both see the problem for what it is, but we have different solutions to it.
Am irish/german parentage and UK Citizen/subject.
Anecdotal: spoke to a 62 yr old romanian woman who is a cleaner at our office about the euro financial crisis, she said she thought the purpose of EU was to prevent wars and keep the peace not to make us all rich.
EU court of human rights trumps any countries laws in my book, it guarantees the rights of the indivdual against the powers of the state better thany any other nation i have seen.
Even tho i disagree with Article 14, its in there to keep minorities safe from persecution and that means we keep it.
Goldsmith isn't taken as seriously over here as he is in America as his links to the BNP (Nazi Sympathisers) are made out to be worse than they actually were by the british press.
I still disagree with him tho:-)
US Health care is a wyrd one from this side of the pond, most in EU think healthcare is a human right for all citzens of the state.
The EU is definitely a social constuction which will move to a more socialist model in order to provide for its citizens needs, the question is will it do that by becoming energy and food independant (Like the Swiss) or by taking from others what it needs by force.
I was visiting Austwich back in the 90's and watched a tv news report in warsaw hotel showing german tornado's bombing serb infantry to prevent ethnic cleansing of muslims in kosovo.
Funny how the world turns.
Plus serbia was outside the system and needed to brought in and removed from russian sphere of influence.
Funny how the world turns...........
The EU is definitely a social construction which will move to a more socialist model in order to provide for its citizens needs, the question is will it do that by becoming energy and food independent (Like the Swiss) or by taking from others what it needs by force.
Excellent and unique point. A EU move towards REAL SOCIALISM is the last thing that elites in US would expect now that they convinced most American public that living in a tent and PRIVATE charity soup kitchens is the best and the only thing that a good American should expect from their government.
Wow long post, can you tell im currently unemployed?
Well, at least you aren't contributing to the current fiascos going on!!! I love being unemployed! No dictator holding me hostage 12 hours a day for a buck that is becoming worthless. I got into unbelievable shape, learned how to cook, put in flooring and make car repairs. Now, I am back in school working on my second degree in mortuary science while drooling over all the college hunnies (hopefully my wife won't see this post)! It just doesn't pay to work anymore. Luckily, all I have expense wise is everyday necessities and a modest 15 year mortgage. I'm going to feel bad for all my friends come June when I'm sitting on the beach in phenomenol shape drinking margarities and watching the bikini bodies walking by while they are sweating, balding and getting fat at the office! Keep your head up!!!
Am enjoying my time off, Healthier and Wiser every day.
Damn ironic given i'm the "lefty-liberal" of my social group!!!
LOL
"Also we predicted over a decade ago the Euro was failure"
Interesting that you say that, with "barriers of culture and a confederation of legal construct issues"... I'd bet this kind of sentences make you sound very intellectual where you come from...
so are you advocating an "American solution" for us "Eurotards" and "Europeons"?
well, have a look at those four minutes of history:
http://www.youtube.com/watch?v=iRzr1QU6K1o
August 15th, 1971, Nixon Ends Bretton Woods International Monetary System
what were your predictions, then? how far have you progressed? do you really believe the "Europeons" are less free than you? do you really believe that "Eurotards" currently have worse culture wars than you are having? do you really believe that after Nixon's decision we were supposed to do... what? just adopt the dollar like Montenegro adopted the EUR?
My, my, my aren't we a little huffy today ? Look, the Europeans have some issues. But, let's start back in the early part of the last century about 65 years before Nixon with the stupid wars that were started by the " Eurotards" ( as you say ).
It was evident then, as it is now, that Europeans CANNOT live up to their contractual ( treaty) arrangements and the cross collateralized ideas about how to prevent wars, financial collapse or disease and pestilence. And, let's add to the fact EU arrangements do not account for the lack of cultural sovereignty between countries in the EU ( euro ) arrangements. So yes, the EU collapse was entirely predictable.( Not to mention the Europeans complete lack of understanding of trade balances, GDP or how to run an economy in general.
BTW, you seem to suffer from Opticus Rectilius. That's a condition where the optic nerve is connected to jYOUR asshole and the outlook is shi**y. Your post screams "Look at me, Look at me" I'm a sphincter".
It's no wonder our ancestors left Europe.About the only thing Europeans can do is run train schedules on time, serve a decent cocktail and run a circus.
Q~ "do you really believe that after Nixon's decision we were supposed to do... what? just adopt the dollar like Montenegro adopted the EUR?"
A~ Mais évidemment embrasseur d'anus : - ) Have a nice day !
MI,
did you take your meds today?!?
Why yes I did. 10 mg of my Crestor. Thanks for your kind regard in the matter.
But, but .... this is the law of the universe ... the will of God .... it's the free market at work ....
and, and, we need cuts ,,,,
cut regulations ....
cut wages .....
cut jobs .....
cut benefits ....
we're good at it ....
cut and run .....
we are the 1% and we salute you .... as we move offshore!!!
But don't cut my bonus, options, share grants, or salary. That's "class warfare"!
Or Capital Gains tax rate preference
At some point, the US Government will be more than happy to treat those businesses that do go offshore no differently than OBL.
The sooner, the better.
Thanks lizzy, even though I did find it depressing. This was a pretty great country once, and I'm old enough to remember it. My grandkids are in for some 'interesting times' - what a curse!
NPH
I'm sure that if Indiana doesn't want these jobs some other state will take them off their hands. What difference does it make how much the CEO earns if he's generating profits for his company and it's shareholders?
What a loon..must be Mitt Rommney trolling at ZH.
As the CEO of my business, I give thought to the fact that my hard working loyal employees mostly have mortgages to pay, and have children to support. There is a child or two behind most of the faces I see every day. Who want to be able to feed, clothe, provide medical care, and save a bit of money for skyrocketing college tuition. Like my parents and their parents did. In fact, I recognize my employees are actual human beings. I seem to be quite in the minority these days. A CEO taking home an 8 figure annual salary while cutting employee wages in half is a greedy pig who deserves to be slaughtered some day.
A CEO is, at the end of the day, the head salesman of a company. He produces nothing. He is responsible for sales strategy, in conjunction with his Presidents, VPs, etc., but it is rare for him to actually make the sale. He may approve or disprove new product designs, but he neither is the one doing the market analysis, nor the one actually designing the products. He also ultimately approves or disapproves the budget, but he does not actually run the numbers, or even negotiate budget priorities. When sales are poor, it is not his fault. When wages are not keeping up with inflation, it is not his problem. If the stock prices fall too much, he MIGHT be in trouble, but the worst case scenario there is that he will be given a severance package equal to the annual incomes of a significant portion of his workforce, and he can either find a similar job elsewhere, or go and join a few boards of directors.
The average Fortune 1000 CEO is a handsome man (or very occasionally woman) in an expensive suit with a pen who spends his time doing photo ops, golfing with other CEOs, and in general looking important representing the company. This is not true of all; some take a very active affair in running their companies, but all too many of them have all the courage and intelligence of an Italian cruise ship captain.
What I find so depressing about all this is that my step-grandfather was the president and CEO of a steel company until he died about ten years ago. He started out as a union caster on the smelter floor, went back to school to get a degree in materials science, worked his way up through engineering and into management, and eventually ended up becoming the CEO. He knew that company inside out and backwards, made sure that every year his workers got a ham for Christmas, and fought hard to insure that the company stayed competitive even as other steel companies were being sold to foreign investors or going out of business. His salary was modest in comparison to the obscene salaries of today, yet despite (or maybe because of) that he was a genuine asset to the company. Far better than the venal incompetent boobs today whose only real skills are the ability to lie about a company's performance to a cabal of overpaid analysts to keep the stock prices moving ever upward. Is it any real surprise that America has lost its competitive edge in the global marketplace?
Bootlicker.
Ask Louis XVI.
Oh God...
http://www.chemistryland.com/CHM130W/02-MMM/Metric/KingLouis16.jpg
I'm pretty sure that pretty boy lost his head, as ticks and fleas should.
It matters since wealth extraction from the economy is not the same as wealth production.
Our society is having hard time coming to grips with the fact that what was beneficial in the past is not any longer.
You speak the truth. :D
That's some fcuk'd up sh1t going on at Caterpillar but its surely not the only mob doing this.
Great eye opener of an article but, Zerohedge does that all the time.
What a coincidence, Indiana becomes a right to work state, and Presto, jobs that were lost to Canada come back.
And, once the Canadian Dollar weakens, they may flow right back again.
The Reuters article is misleading (what a surprise); Indiana has always been a Right to Work state. I lived there for 11 years in the 80's and it was RTW then.
What happened was that union proponents were making gains in the bad economy as assembly jobs kept fleeing offshore, so TPTB felt the need to re-emphasize that Indiana is not going to become a Union state with 13 highly-paid union stewards and everyone else unemployed.
It makes no difference whether the state lets the union thugs in or not. Unionizing will not add jobs, and the state's workforce is ill-prepared to compete. Sorry, that's just the facts.
Indiana= the Mississippi of the north.
Did Rush Limbaugh give you those facts?
I don't think you could be a wart on a union electrician's ass.
Thanks for clarifying that.