Category Archives: Economy

How Performance-Based Compensation Is Killing America.

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Sometime in the late 70s, I met with a client to discuss his marketing plans for the year.  When I asked about the company’s long-term plans, the client said that his Fortune 500 Company no longer does long-term planning.  When the client noticed my obvious surprise, he told me that things were changing too quickly.  He went on to explain that the company’s CEO is now compensated with a base salary and performance-based stock options.  The higher the stock price, the more the CEO would be paid.

Now more than 30 years later, the effects of performance-based compensation are obvious.

CEOs now base their companies’ success on the share price of securities.  Not on brand value, number of offices and employees, company holdings and investments, or sales.  As a result, many CEOs are now willing to mortgage the future of their companies in order to maximize share price.  Of course, one way to accomplish their short-sighted goal is to increase productivity, aka employee layoffs.  Another popular method is to cut or eliminate employee benefits.  Yet another method is to export jobs to countries that have a plentiful supply of low-cost workers, no labor unions and few regulations.

There is no loyalty to long-time employees, vendors, communities, the nation or the environment.  The only thing that matters is the stock value and how that translates into executive compensation.  The average tenure of a CEO with any one company is slightly more than 8 years.  As a result, they often don’t care about what happens to that company 10, 20 or 30 years from now as long as they have time to cash in their stock.  If the company is aquired or merged, that only means the stock price is likely to go up.

If we want to take back our country from these greedy few, we have to change the way performance is measured.  The price of a share of stock is not enough.  We must also measure the value of corporations to our nation – the number of jobs provided, impact on our environment, contributions to communities, value of natural resources consumed, and taxes paid.

Until that happens, you will continue to see CEOs lead our nation in a race to the bottom.

The Teapublican Book of Lies.

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You know those things Teapublicans present as facts that just never quite make sense?  The ones that are repeated day after day on Fox News Channel and right wing radio?  The conservative ideas that have been tried and failed, but keep coming back?

I’ve taken 50 of those so-called “facts,” researched them, and presented my findings in a new book:  The Teapublican Book of Lies.  It’s a sort of handbook for debates with your conservative friends and family members.

Pardon the shameless self-promotion, but you can buy the book from Amazon.

A Real Memorial For Our Warriors.

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I’m writing this on Memorial Day, the annual celebration of those Americans who died in military service.  On this day, some Americans fly the flag.  Some attend memorial services.  Some place flowers on graves.  But most have a picnic, attend a baseball game, go shopping, take a mini-vacation or otherwise enjoy a day off.

What would be more fitting is to change our national mindset toward war. 

Some time ago, I realized that our nation has been at war for all but 33 years of our existance.  When we’re not at war, we’re preparing for war or meddling in the affairs of other nations.  We have fought against Native Americans, the British, Spanish, Mexicans, Libyans, Philippinos, Chinese, Japanese, Italians, Germans, Koreans, Vietnamese, Panamanians, Iraqis, and Afghans.  We have threatened many more.  We have even fought each other.

Some of these wars were necessary.  Many were not.

It’s time that we came to the realization that the US is a warrior nation.  We have spread our influence around the globe at the end of a gun.  It’s no coincidence that the world’s only military superpower is also the world’s greatest economic power.

We have created an American Empire in the mold of the Roman Empire.  But there’s an ominous warning in that comparison.  You see, the Roman Empire also ruled through military conquest.  Eventually, it over-extended its resources and collapsed of its own weight.  It simply could no longer afford the military and the political infrastructure needed to keep its subjects in line.

If the US doesn’t want to fade into history, we need to heed that warning.

Instead of a three-day weekend in recognition of those who have fallen, we would better honor our military heroes by reimagining our future; by seeking to avoid conflicts through diplomacy and true leadership; by refusing to use our military in support of our economic interests (aka greedy corporations); by relegating war to the avenue of absolute last resort; and by committing to never again send our sons and daughters to fight in an unnecessary war halfway around the world until all other options have been expended.

I can think of no better way to honor our fallen warriors than to dramatically reduce the number who join their ranks in the future.

Cutting Defense Spending Does Not Have To Compromise Military Readiness.

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Although Teapublicans insist on cutting government spending despite our fragile economic recovery, they categorically refuse to consider cuts to our defense budget.  They claim such cuts will leave the US vulnerable to attack.  So, when they passed the Ryan budget plan in the House, they included significant budget increases for the Pentagon.

In doing so, they disregarded a Pentagon report requested by Senator Bernie Sanders that shows, over the past decade, the government has awarded contracts totaling $1.1 trillion to defense contractors and their parent companies found guilty of defrauding the government.  In other words, when a military contractor is found guilty of defrauding the government, we demand a settlement.  Then we give them an opportunity to do it again!

If Teapublicans are serious about cutting deficits, the military/industrial complex is the very first place they should look.  Not the last.  The military budget is so bloated the Pentagon can’t even determine what happened to the $60 billion or so that has gone missing in Iraq and Afghanistan!

The money that can be saved by cutting Medicare, Medicaid and Social Security pales by comparison to the money that could be saved just by increasing oversight of military spending.  Moreover, the money spent on safety nets tends to go right back into our economy, while much of the money wasted on military fraud tends to line the pockets of CEOs and foreign dictators.

Of course, Teapublicans don’t want to stop with cuts to safety nets.  They want to hack away money from education, too; money that is truly an investment in our future.  Money that will pay us back in innovation and future increased tax revenues, as opposed to excess military spending that will result in more fraud and waste.

Both parties say this election will determine the future of our nation for generations.  The question is what future do you want?  More military and more wars?  Or a better standard of living for our youth and our seniors?

It seems like an easy choice for me.

This Is A Reason To Vote For Romney?

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Teapublican presidential candidate, Mitt Romney, has said that anything more than 4 percent unemployment is a failure for the Obama administration.  (It should be noted that the US has rarely achieved such a low unemployment figure.)  Now Mitt says that by the end of the first term of a Romney presidency, unemployment should be somewhere around 6 percent!

Hmmm…so Romney is already predicting that his first term will be a failure?

Even more puzzling is the fact that the Congressional Budget Office (CBO) estimates that continuing the policies of President Obama will result in an unemployment rate of 6 percent by 2015 – a year before the end of President Obama’s second term!  So, if this election is all about jobs as Mitt Romney has said, tell us again Mitt:  Why is it we should vote for you?

Requiem For The American Dream.

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This isn’t so much a blog post as an obituary.  The American Dream was defined as the ability for Americans to rise above their parents’ experience.  The ability to, as the result of education and hard work, become a success.  It is measured by the distribution of wealth and upward mobility.

In both of those measurements, the US now trails most of the world’s advanced nations.  A report by the Organization for Economic Co-Operation and Development (OECD) found that social mobility between generations is dramatically lower in the US than Denmark, Australia, Norway, Finland, Canada, Sweden, Germany and Spain.

The American Dream didn’t pass into history as the result of natural causes.  It was starved to death by Teapublicans who signed Grover Norquist’s “no new taxes” pledge.  It was bludgeoned by the likes of George W. Bush, Richard “The Dick” Cheney and their cartel of oil companies and military defense contractors.  It was driven off a cliff by greedy Wall Street bankers and their enablers such as former Senator Phil Gramm.

Republicans may have led the attack on the Dream. But many Democrats participated. President Clinton signed the Republican bill that revoked the Glass-Steagall Act allowing Wall Street bankers to gamble with your money and our futures.  He also signed a Republican bill opening commodity markets to gambling.

Many Congressional Democrats cast their votes alongside Republicans to starve government through the Bush tax cuts.  And they added their names to legislation approving the invasion of Iraq.

As the result of these actions, corporations were allowed to rake in large profits while sending our jobs offshore.  They were allowed to stash profits in offshore accounts to avoid paying taxes.  Banks were allowed to privatize their profits and socialize their failures.  The wealthy got even wealthier while paying lower taxes.  Banks got homeowners to sign mortgages at inflated interest rates, then took their homes to support the banks’ gambling habit.

The only question left is what now?  Will we allow economic disparity to grow dividing our nation into the haves and have nots?  Or will we resurrect the Dream?  The coming elections will provide the answers.

A Message To Moderate Republicans:

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To those long-time Republicans who fondly remember the Party of Lincoln, the party that held the Union together against the forces of slavery, the party that supported the “live and let live” principles of Goldwater, the party that stood with Reagan against the Soviet Union:  I have some very bad news for you.

That Republican Party no longer exists.

It was hijacked by neo-cons who started a “pre-emptive” war and resorted to torture in defiance of the Geneva Conventions.  These “new conservatives” bought votes with their unfunded Medicare drug plan.  They abandoned fiscal responsiblity by running up huge deficits and massive debt.  And they drove our economy off a cliff.

But they aren’t the only hijackers of your once proud party.  Your party has also been taken over by a group of intolerant zealots who intend to force their own unforgiving brand of Christianity on everyone; people who want to create a nanny state that dictates behavior, particularly that of women, gays and the poor.

Then, in 2010, your party embraced the “Tea Party” and yet another extreme agenda.  These people hate – I mean HATE – our government and anyone who supports it.  They hate public education, “entitlements” and government regulation – even to preserve the environment.  They refuse to compromise.  If anyone even mentions the word, they’re labeled RINOs (Republican in name only) and pushed aside.  They hate immigrants and people of color – any color but white.  And, if they don’t get their way, they threaten to exercise their “Second Amendment rights.”

Despite your best intentions, you won’t be able to fix the Republican Party from within.  There are simply too many of them and too few of you.  There is no Ronald Reagan waiting in the wings to save your party.  Instead, you have “leaders” such as Newt Gingrich, Michele Bachmann, Rick Santorum and Paul Ryan – the rising star who follows the self-centered principles of Ayn Rand, instead of those of Lincoln, Goldwater and Reagan.

Sooner or later, you’ll realize that the only real options left for moderate Republicans are to become Independents with no hope of choosing candidates, to form a new party, or to join the Democratic Party which has become the party of fiscal responsibility.

As someone raised Republican turned Independent turned Democrat, I can assure you that you will be very welcome in our party.

What Politicians Aren’t Telling You About The Economy.

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As a result of the 2008 economic crash created by the lack of regulation of Wall Street gamblers, new home construction has slowed to a relative trickle.  According to the National Associaton of Home Buildiers (NAHB), the number of housing units started in the U.S. totaled only 609,000 in 2011.  That compares to 1,131,000 in 2006 as measured by the US Census Bureau and Department of Housing and Urban Development.

Using NAHB estimates that for each new home built three jobs are created, these numbers represent a loss of more than 1.5 million jobs.  They also represent a loss of $67,000 in federal taxes and $23,000 in state and local taxes for each home not built!

And that’s just part of the problem.  In addition to the jobs lost that are directly related to home construction, there are job losses for landscapers, pool builders, movers, the makers and sellers of furniture, window treatments, appliances and more.  Indeed, a writer for The Outer Banks Voice tracked the number of people involved in building his new home in 2010.  He counted a total of 219!

Now multiply that number of 219 times the 522,000 fewer homes built in 2011 than before the Great Recession and you see the scope of the problem.

But there is some good news.  NAHB estimates 1.7 to 1.8 million new homes are needed each year to accommodate population growth and replacement of older housing stock.  So we are creating tremendous pent-up demand.  Sooner or later, the housing market is going to explode.  But it’s going to take time.  Those who bought homes between 2005 and 2008 were burned by home ownership.  They were taken advantage of by unethical mortgage lenders.  They were foreclosed by uncaring banks.  And even if they didn’t lose their homes, they have found that their homes are worth far less than before.

How do you get these people to forget the recent past and jump into the market again?  Given the low prices of homes and low interest rates, there are plenty of incentives.  But, unfortunately, it’s going to take years.

Americans tend to have short memories, but not when it comes to their money.

How “Starve The Beast” Became “Starve The Poor.”

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For years, Teapublicans have marched to a tune called “Starve The Beast.”  The premise is that government has gotten too big and expensive so, in order to bring it under control, they must deprive it of the revenue needed to fund it.  As band-leader-in-chief, President George W. Bush cut taxes, primarily for the wealthy.

As a result of those tax cuts, two unfunded wars and a bill designed to buy the votes of seniors in time for the 2004 election, the Bush administration squandered the Clinton-era budget surpluses and led us into massive deficits and an ever-growing national debt.

Rather than being alarmed by these Bush decisions, Teapublicans reveled in them.  And, when the economy collapsed in 2008, Teapublicans recognized two opportunities:  One, by blocking every attempt to speed up the recovery, they hope to make President Obama a one-term president.  Two, by howling about the enormous deficit and debt they created, they hope to make it easier to cut government and the things Teapublicans seem to hate most: Medicare, Medicaid and Social Security.

They say Americans can no longer afford such programs.  They point to the long-term “instability” of Medicaid and Medicare while failing to admit that much of that instability is caused by the skyrocketing medical and pharmaceutical costs they refuse to address.  I believe their hatred for “Obamacare” is driven by the fact that it will help mitigate costs, thereby saving Medicaid and Medicare.

Likewise, Teapublicans seem to relish every new report on Social Security that shows the program running out of funds in the not-too-distant future.  They point to the large group of retiring Baby Boomers as the reason the program needs to be privatized (gotta get it out of the clutches of big government, you know).

What they fail to mention is how easily Social Security could be permanently fixed.  Either increasing individual contributions to the plan by little more than 1 percent or removing the cap on incomes above $106,000 would protect Social Security for future generations.  But that wouldn’t allow Teapublicans to meet their long-term goals of privatizing Medicaid, Medicare and Social Security.

As for the people whose health care would be left at the mercy of large, greedy insurance companies and the retirees who might be relegated to dumpster-diving the next time the stock markets crash, no worries.

Teapublicans are more than willing to starve the poor in order to Starve The Beast.

Sen. Phil Gramm. A Legacy Of Failures.

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Unquestionably, Gramm’s actions as a US Senator were failures for consumers and our economy. But given the massive profits of the “too big to fail” financial institutions, they were great successes for Wall Street and large corporations.

In 1999, then Republican Senator Phil Gramm co-sponsored the Gramm–Leach–Bliley Act, aka the Financial Services Modernization Act, aka the Citigroup Relief Act which was enacted by the 106th US Congress and, unfortunately signed into law by President Bill Clinton. It repealed part of the Glass-Steagall Act of 1933 which had successfully protected consumer finances by erecting firewalls between banks of deposit, security investment companies and insurance companies. The Gramm–Leach–Bliley Act removed those restrictions allowing financial institutions of all kinds to consolidate.

The bill was crafted to provide legal cover for Citigroup which, a year earlier had been formed by the merger of Citicorp and Travelers Group. For the first time since the Great Depression, the merged organization combined banking, securities and insurance services that included Citibank, Smith Barney, Primerica and Travelers.

For Wall Street, it was the best legislation money could buy.

But Sen. Gramm’s meddling on behalf of large financials didn’t stop there. In 2000, he sponsored the Commodity Futures Modernization Act which was also signed into law by President Clinton. It weakened yet another post-Depression law, the Commodity Exchange Act of 1936, freeing over-the-counter derivitives transactions between “sophisticated parties” from regulation under federal securities laws. It is the law that permitted credit default swaps.

Combined, the two Gramm-sponsored laws created an environment of massive profits for Wall Street and led to the 2007 subprime mortgage crisis which cost the world economy an estimated $7.7 trillion! And if that doesn’t give you cause for concern, consider this:  Despite being the poster boy for our current economic problems, Gramm was selected as the senior economic adviser for John McCain’s presidential campaign.

Had McCain been elected with Gramm advising him, imagine where our economy might be now!