Tuesday, December 4, 2012 - The Clock is Ticking

The Clock is Ticking

by Sinclair Noe

DOW – 13 = 12,951
SPX – 2 = 1407

NAS – 5 = 2996
10 YR YLD - .02 = 1.61%
OIL - .71 = 88.38
GOLD – 19.20 = 1697.80
SILV - .75 = 33.01

So, President Obama presented an opening offer in the fiscal cliff talks; Speaker Bohener said it wasn't serious and the financial and political reporters passed along the complaint that it was a recycled version of an old plan; before the election those same reporters spent the year passing along the complaint that Obama had no plan. Then Obama complained that the Republicans didn't have a counter offer, and they finally came up with a counter but it didn't have any specifics, but one area is that they want cuts to Medicare, even though before the election they were outraged that Obama was cutting Medicare. The current Republican position seems to be that the fiscal cliff’s instant austerity would destroy the economy, which is odd after four years of Republican clamoring for austerity, and that the cliff’s military spending cuts in particular would kill jobs, which is even odder after four years of Republican insistence that government spending can’t create jobs. And remember, this is all about the debt ceiling and tax cuts and spending cuts.

And the political and financial reporters pass all this stuff on, with a countdown clock ticking in the lower right screen. It’s irresponsible reporting. Mainstream media outlets don’t want to look partisan, so they ignore the BS hidden in plain sight, the hypocrisy and dishonesty. It's a big cliff, taxmageddon scam. This year the Big Apple ball will slowly drop down on Time Square to ring in the destruction of the economy. The Big Pine Cone will drop in Flagstaff and it will fall over the cliff. Malarkey.

Let all this serve as a reminder that the news in this country most of the time doesn't have the sensibility to know when they are being lied to and so they pass along the lies as news. And the whole game is a big masquerade, a three card monte scam. Does anyone recall how the Bush tax cuts were passed? The 2001 cut was passed based on the claim that the government was running an excessive surplus; the 2003 cut on the claim that it would provide an economic boost. Then the surplus went away, and the economy did not perform very well. The worst example was the Campaign to Fix the Debt. You remember the 71 CEOs that went to the White House and said it was imperative to cut Social Security and Medicare. If you have no defense, you have to go on offense.

The 71 Fix the Debt CEOs who lead publicly held companies have amassed an average of $9 million in their company retirement funds. A dozen have more than $20 million in their accounts. If each of them converted their assets to an annuity when they turned 65, they would receive a monthly check for at least $110,000 for life. The Fix the Debt CEO with the largest pension fund is Honeywell's David Cote, a long-time advocate of Social Security cuts. His $78 million nest egg is enough to provide a $428,000 check every month after he turns 65. Forty-one of the 71 companies offer employee pension funds. Of these, only two have sufficient assets in their funds to meet expected obligations. The rest have combined deficits of $103 billion, or about $2.5 billion on average. General Electric has the largest deficit in its worker pension fund, with $22 billion.

That's right, 2 out of 71 major corporations have actually funded their pension plan promises to the people who make the companies run. Only 2 out of 71 intend to fulfill their contractual obligations to their workers. So, what is their big concern? Well David Cote, the CEO of Honeywell says: “We have a significant problem with entitlements. Medicare, Medicaid in - in particular. Those things need to get resolved together. If we could actually develop a four trillion dollar credible market plan that would cause everyone out there to say, wow, we can govern again.”

Got it? If you've underfunded your pension plan, don't focus on that, instead attack the government health care plan. Here's an even better idea; let's broaden the debate on entitlements, by bringing in the fact that state and local governments give away about $80 billion per year to companies as enticements to create jobs that often later vanish. And the federal entitlement programs to big corporations? Five of the corporations whose CEOs signed the Fix the Debt letter paid ZERO federal income taxes on $62 billion in total profits and received $27 billion in tax subsidies over the last four years. Six of the corporations whose CEOs signed the Fix the Debt letter were members of the WIN America Coalition, which lobbied Congress to pass legislation (S.1671) that would allow U.S. companies to dramatically reduce their tax rate on $1 trillion in foreign profits brought back (“repatriated”) to the United States. The measure would reduce the 35 percent corporate tax rate to an 8.75 percent effective tax rate on the repatriated profits. How about we end the corporate welfare to the CEOs in limosines?

The companies are glad to take government money in the name of job creation. But then they talk about the "free market" when shuttering factories and firing workers. If we're going to be talking about "makers" and "takers," we should broaden that discussion, too.

For all of the noise they make about the federal budget deficit, US companies are not exactly doing much to help. In fact, many of them have been making the problem worse in recent weeks by quickly shoveling cash to investors to take advantage of low tax rates before they rise, potentially costing the government billions of dollars in much-needed tax revenue. All told, companies so far have given shareholders roughly $24.2 billion in special or early dividend payments, potentially saving those shareholders -- and costing the government -- $6 billion or more in taxes. So far, 144 publicly traded U.S. companies have announced special one-time dividends to give cash to shareholders before an expected increase in the dividend tax rate next year, amounting to $21.4 billion. Oracle just made an announcement today; Oracle CEO, Larry Ellison stands to pocket about $200 million. Maybe he can go buy another island.

These are just some of the reasons why these corporate leaders have no credibility when they blather on about "fixing the debt." They bankrolled the politicians that created the debt through a tax system that gave them myriad ways to avoid paying their fair share to support the country. Then they shipped good-paying jobs overseas and depressed the wages of the jobs left behind so that workers had less that they could afford to pay in taxes as well. All in the name of shareholder value.

There is a way to fix the debt, but it is not their way.

Meanwhile, there are some problems with the economy that have been moved to the back burner, or even off the stove. Don't forget; people got no jobs, or they have part-time work, and people got no money, or not enough money, or they're buried in debt, mortgage debt, student loan debt. Of course, if we actually did worry about growth and did something about it, that would go much further toward reducing the deficit than cuts to social programs. "The boom, not the slump, is the right time for austerity.” 

 Maybe we should invest in the country. Maybe we could invest in infrastructure, maybe we could invest in education. Maybe we don't have as big a financial crisis as a crisis of innovation. There is a serious innovation crisis, the consequences of which will be with us long past the financial crisis. In 1950 we got the transistor, in 1960 we got the integrated circuit and in 1970 we got the microprocessor. Not much lately, (and those were all minor compared with Bessemer, internal combustion and electrification). Nobody's footing the bill for the big breakthroughs, we're not getting the big breakthroughs. Looks like we starved that beast!

Maybe we should all tune out the fiscal cliff nonsense for a while, and stop believing the insanity that the deficit will eat us whole and swallow our little children. The fiscal cliff is an artificial demon. Even though we've known the deadline was approaching, it wasn't until after the election that the fiscal cliff narrative took over the media discourse. One all-consuming narrative ended, and another instantly took its place.

Each day we move closer to "the cliff," the media will breathlessly report on how the White House and Republicans are defiantly squared off against each other. The debate the country should be locked in right now isn't about the fiscal cliff and the deficit but about how to grow the economy; how to employ people in productive jobs; and the only way to grow the economy is to grow the debate beyond the artificial playground the politicians and the corporate welfare queens would have us believe the game is being played.