Saturday :: Mar 12, 2005

Fool You Once, Fool You Again, Fool!

by pessimist

Our good friends from the wrong-wing have some explaining to do. They regularly crow loudly about the reasons for corporate tax breaks being good for America, including the 'creation of jobs'.

What do they have to say now that their main propaganda organ The Wall Street Journal calls the bluff of this lie:

Layoffs Seem to Conflict With Tax Break Meant to Propel Job Growth
There is more evidence that a tax break intended to boost U.S. jobs isn't getting the job done.

In the past 10 weeks, nearly 300 companies have unveiled plans to capitalize on the one-year tax holiday, one of a number of business tax changes contained in the American Jobs Creation Act.

Under the repatriation provision, companies will pay a 5.25% tax rate on money they have earned and invested abroad and choose to bring back to the U.S., compared with the standard 35% corporate rate. Analysts expect the law will encourage hundreds of companies to return an estimated $320 billion to the U.S. economy by the end of the year.

But the law gives companies flexibility to use the cash for purposes with indirect links to job creation at best.

According to the Treasury Department, companies can use the cash for advertising and marketing, certain acquisitions, capital investment, research and development and "financial stabilization" such as debt reduction and payment of legal liabilities.

The Treasury's guidelines require only that companies attest that the spending "likely would have direct or indirect positive effects on employment in the United States."

This sounds like one of those disclaimer statements added to the end of investor come-ons that absolves the seller from any liability for misleading the investor should things not go quite as presented. Nothing can be taken at face value, and yet everything presented is so intended to be taken.

Let's see the strutting walk taken after all this boastful talk:

"The bill as enacted does not have a close link between repatriation and some form of job creation," says Stephen E. Shay, a tax partner with the Boston law firm of Ropes & Gray. "It's best characterized as a fig-leaf relationship." Mr. Shay adds that it is "not inconsistent with the law" for companies to cut jobs at the same time they are considering repatriating funds ostensibly meant to create jobs. They are just following the law as it is written, he says.

Consider several major companies that say they are considering bringing home hundreds of millions of dollars in foreign profits under a tax holiday that is part of the American Jobs Creation Act passed last year. These companies' example calls into question how effective "repatriation" will be in spurring new jobs, adding to already reported concerns about the wiggle room the law gives companies in how to spend the money.

National Semiconductor disclosed in January it may repatriate as much as $500 million in foreign earnings under the tax break. The same day, the company announced it would cut 550 jobs, or 6% of its work force, to cut costs and streamline operations.

These 550 jobs would each earn $909,090.90 if this $500 million windfall were spent on saving these jobs. If these funds were used to create full-time, minimum wage jobs, over 48,500 such jobs could be created.

Jeff Weir, a spokesman for National Semiconductor, says bringing home foreign profits won't necessarily lead to higher employment, "because the nature of the technology business is that we tend to produce more with fewer people over time." While National Semiconductor is hiring engineers in specific areas and has since 2001, its total employment is down to about 9,000 from 11,000 at the peak of the technology boom, he says.

What he's not stating clearly is that many of these engineeres are hired under L-1 visas, which enables National Semiconductor to pay these engineers in the currency of their homelands for work done in the US.

Sun [Microsystems Inc.] said in February that it could bring home as much as $1.1 billion in foreign profits. The company also said it had laid off 3,600 people -- about 10% of its work force -- during the previous nine months as part of a plan to reduce costs and improve efficiency. A Sun spokeswoman says the company's evaluation of repatriating foreign profits was going on separately from the announced staffing changes.

These These 3600 jobs would each earn only $305555.55 if this $1.1 billion windfall were spent on saving these jobs. If these funds were used to create full-time, minimum wage jobs, almost 106,800 such jobs could be created.

Colgate-Palmolive said in December that it expected to close about a third of its factories and eliminate about 12% of its work force -- a total of about 4,400 job cuts -- in a four-year restructuring plan. In February, the company disclosed it was considering bringing home $500 million in foreign profits. A Colgate-Palmolive spokeswoman won't comment on the company's plans for repatriation or job cuts.

These 4400 jobs would each earn only $113636.36 if this $500 million windfall were spent on saving these jobs. (Even this last pays a whole lot more than I'm currently making!)

If these funds were used to create full-time, minimum wage jobs, over 48,500 such jobs could be created.

If just these three examples were to actually create the maximum number of minimum-wage full-time jobs, that would equal over 203800 new jobs - or roughly 2/3 of the February 2005 jobless number.

But don't let facts and previous statements ever get in the way of profit-making!

DuPont Photomasks Inc. is repatriating $24 million in foreign profits, some of which it is applying to a $30 million expansion of production capacity at its Round Rock, Texas, plant. But the company also announced in January that it would close its Kokomo, Ind., plant -- eliminating 100 jobs, or about 6% of its work force -- and said it is expanding capacity at a Singapore plant. DuPont Photomasks -- photomasks are tools used for putting computer chip circuits on silicon wafers -- won't say whether the employment gains from the Texas expansion are enough to offset the Indiana losses.

Tom Blake, the company's vice president of marketing, says the changes are simply "a reflection of changes in the marketplace." The Kokomo plant produces an older technology and closing it was necessary to improve total productivity, he says, and the company is expanding in Asia because it is a fast-growing region. Indeed: DuPont Photomasks is in the process of being acquired by a Japanese company, Toppan Printing Co.

Note how this man doesn't mention that wages are lower in Texas than they are in Indiana, in part because Texas is a Right-To-Work-For-Less state.

But the truth does sometimes emerge despite the best laid plans. Take this comment, for example:

National Semiconductor's Mr. Weir, who used to work on Capitol Hill, says repatriating earnings should be seen simply as a tax break. Calling the law "the American Jobs Creation Act" was [a] marketing [strategy], he says.
"I would not trust the title of any law and what it really says."

Nor should we trust any titled corporate executive and what s/he says.

If economic treason were a crime, maybe the executives who make these decisions could be brought up on charges in light of the information presented in this article:

Outsourcing Innovation

As the Mediterranean sun bathed the festive cafes and shops of the Cote d'Azur town of Cannes, banners with the logos of Motorola, Royal Philips Electronics, palmOne, and Samsung fluttered from the masts of plush yachts moored in the harbor. On board, top execs hosted nonstop sales meetings during the day and champagne dinners at night to push their latest wireless gadgets. Outside the city's convention hall, carnival barkers, clowns on stilts, and vivacious models with bright red wigs lured passersby into flashy exhibits.

For anyone in the telecom industry wanting to shout their achievements to the world, there was no more glamorous spot than the sprawling 3GSM World Congress in Southern France in February.

Yet many of the most intriguing product launches in Cannes took place far from the limelight. HTC Corp., a red-hot developer of multimedia handsets, didn't even have its own booth. Instead, the Taiwanese company showed off its latest wireless devices alongside partners that sell HTC's models under their own brand names. Flextronics Corp. demonstrated several concept phones exclusively behind closed doors. And Cellon International rented a discrete three-room apartment across from the convention center to unveil its new devices to a steady stream of telecom executives. The new offerings included the C8000, featuring eye-popping software. Cradle the device to your ear and it goes into telephone mode. Peer through the viewfinder and it automatically shifts into camera mode. Hold the end of the device to your eye and it morphs into a videocam.

HTC? Flextronics? Cellon? There's a good reason these are hardly household names. The multimedia devices produced from their prototypes will end up on retail shelves under the brands of companies that don't want you to know who designs their products. Yet these and other little-known companies, with names such as Quanta Computer, Premier Imaging, Wipro Technologies, and Compal Electronics, are fast emerging as hidden powers of the technology industry.

They are the vanguard of the next step in outsourcing -- of innovation itself.
When Western corporations began selling their factories and farming out manufacturing in the '80s and '90s to boost efficiency and focus their energies, most insisted all the important research and development would remain in-house. But that pledge is now passe.

As are the employees who were to fulfill that pledge.

Today, the likes of Dell, Motorola, and Philips are buying complete designs of some digital devices from Asian developers, tweaking them to their own specifications, and slapping on their own brand names.
It's not just cell phones. Asian contract manufacturers and independent design houses have become forces in nearly every tech device, from laptops and high-definition TVs to MP3 music players and digital cameras. "Customers used to participate in design two or three years back," says Jack Hsieh, vice-president for finance at Taiwan's Premier Imaging Technology Corp., a major supplier of digital cameras to leading U.S. and Japanese brands. "But starting last year, many just take our product. Because of price competition, they have to."

While the electronics sector is furthest down this road, the search for offshore help with innovation is spreading to nearly every corner of the economy.

On Feb. 8, Boeing Co. said it is working with India's HCL Technologies to co-develop software for everything from the navigation systems and landing gear to the cockpit controls for its upcoming 7E7 Dreamliner jet. Pharmaceutical giants such as GlaxoSmithKline and Eli Lilly are teaming up with Asian biotech research companies in a bid to cut the average $500 million cost of bringing a new drug to market. And Procter & Gamble Co. says it wants half of its new product ideas to be generated from outside by 2010, compared with 20% now.

Competitive Dangers

Underlying this trend is a growing consensus that more innovation is vital -- but that current R&D spending isn't yielding enough bang for the buck.

After spending years squeezing costs out of the factory floor, back office, and warehouse, CEOs are asking tough questions about their once-cloistered R&D operations: Why are so few hit products making it out of the labs into the market? How many of those pricey engineers are really creating game-changing products or technology breakthroughs?

"R&D is the biggest single remaining controllable expense to work on," says Allen J. Delattre, head of Accenture Ltd.'s high-tech consulting practice. "Companies either will have to cut costs or increase R&D productivity."

The result is a rethinking of the structure of the modern corporation. When the whole chain works in sync, there can be a dramatic leap in the speed and efficiency of product development. The downside of getting the balance wrong, however, can be steep.

Start with the danger of fostering new competitors. Motorola hired Taiwan's BenQ Corp. to design and manufacture millions of mobile phones. But then BenQ began selling phones last year in the prized China market under its own brand. That prompted Motorola to pull its contract.

Another risk is that brand-name companies will lose the incentive to keep investing in new technology. "It is a slippery slope," says Boston Consulting Group Senior Vice-President Jim Andrew. "If the innovation starts residing in the suppliers, you could incrementalize yourself to the point where there isn't much left."

Such perceptions are a big reason even companies that outsource heavily refuse to discuss what hardware designs they buy from whom and impose strict confidentiality on suppliers. "It is still taboo to talk openly about outsourced design," says Forrester Research Inc. consultant Navi Radjou, an expert on corporate innovation.

The concerns also explain why different companies are adopting widely varying approaches to this new paradigm. The key, execs say, is to guard some sustainable competitive advantage, whether it's control over the latest technologies, the look and feel of new products, or the customer relationship. "You have to draw a line," says Motorola CEO Edward J. Zander. At Motorola, "core intellectual property is above it, and commodity technology is below."

And further down yet are the futures of the employees.

Wherever companies draw the line, there's no question that the demarcation between mission-critical R&D and commodity work is sliding year by year. The implications for the global economy are immense.

Countries such as India and China, where wages remain low and new engineering graduates are abundant, likely will continue to be the biggest gainers in tech employment and become increasingly important suppliers of intellectual property.

Some analysts even see a new global division of labor emerging: The rich West will focus on the highest levels of product creation, and all the jobs of turning concepts into actual products or services can be shipped out.

Consultant Daniel H. Pink, author of the new book A Whole New Mind, argues that the "left brain" intellectual tasks that "are routine, computer-like, and can be boiled down to a spec sheet are migrating to where it is cheaper, thanks to Asia's rising economies and the miracle of cyberspace." The U.S. will remain strong in "right brain" work that entails "artistry, creativity, and empathy with the customer that requires being physically close to the market."

Read these 'right brain' jobs as advertising, public relations, and psychological manipulation of American consumers. Want to make money? Get into these fields - while you can! But Wait! That's not all! Act now, and enjoy the pleasures of screwing your fellow countrymen for your own gain!

You can see this great divide already taking shape in global electronics. The process started in the 1990s when Taiwan emerged as the capital of PC design, largely because the critical technology was standardized, on Microsoft Corp.'s operating system software and Intel Corp.'s microprocessor. Today, Taiwanese "original-design manufacturers" (ODMs), so named because they both design and assemble products for others, supply some 65% of the world's notebook PCs.

Now, Taiwanese ODMs and other outside designers are forces in nearly every digital device on the market. Building on their experience with PCs, they're increasingly creating recipes for their own gizmos, blending the latest advances in custom chips, specialized software, and state-of-the-art digital components. "There is a lot of great capability that has grown in Asia to develop complete products," says Doug Rasor, worldwide strategic marketing manager at chipmaker Texas Instruments Inc. TI often supplies core chips, along with rudimentary designs, and the ODMs take it from there. "They can do the system integration, the plastics, the industrial design, and the low-cost manufacturing, and they are happy to put Dell's name on it. That is a megatrend in the industry," says Rasor.

Taiwan's ODMs clearly don't regard themselves as mere job shops. Just ask the top brass at HTC, which creates and manufactures smart phones for such wireless service providers as Vodafone and Cingular as well as equipment makers it doesn't identify. "We know this kind of product category a lot better than our customers do," says HTC President Peter Chou. "We have the capability to integrate all the latest technologies. We do everything except the Microsoft operating system."

Now you know the secret as to why your cell phone works so well all the time!

Or stop in to Quanta's headquarters in the Huaya Technology Park outside Taipei. This year, Quanta is doubling its engineering staff, to 7,000, and its R&D spending, to $200 million.

This is the sort of high-wage job America is losing to foreigners, which then begs the following question: Just who are the advertisers, public relations specialists, and psychological manipulators going to work on if few people have anything more than subsistance wages available to them? Just what are they going to use to buy all these wonderful toys?

India is emerging as a heavyweight in design, too. The top players in making the country world-class in software development, including HCL and Wipro, are expected to help India boost its contract R&D revenues from $1 billion a year now to $8 billion in three years. One of Wipro's many labs is in a modest office off dusty, congested Hosur Road in Bangalore. There, 1,000 young engineers partitioned into brightly lit pods jammed with circuit boards, chips, and steel housings hunch over 26 development projects. Among them is a hands-free telephone system that attaches to the visor of a European sports car.

Something all of us minimum-wage Americans have parked next to the limousine in the garage attached to our everyday mansions! You should see what we have parked in the formal mansion!

Perhaps the most ambitious new entrant in design is Flextronics. The manufacturing behemoth already builds networking gear, printers, game consoles, and other hardware for the likes of Nortel Networks, Xerox, HP, Motorola, and Casio Computer. But three years ago, it started losing big cell-phone and PDA orders to Taiwanese ODMs.

Since then, CEO Michael E. Marks has shelled out more than $800 million on acquisitions to build a 7,000-engineer force of software, chip, telecom, and mechanical designers scattered from India and Singapore to France and Ukraine.

Marks has an especially radical take on where all this is headed:

He believes Western tech conglomerates are on the cusp of a sweeping overhaul of R&D that will rival the offshore shift of manufacturing.

Back about 1990, California was devastated by the exodus of aerospace firms to low-wage states or out of the country. We Californians already have some experience with what faces the nation from this new economic and technological peril.

When you get down to it, he argues, some 80% of engineers in product development do tasks that can easily be outsourced -- like translating prototypes into workable designs, upgrading mature products, testing quality, writing user manuals, and qualifying parts vendors. What's more, most of the core technologies in today's digital gadgets are available to anyone. And circuit boards for everything from cameras to network switches are becoming simpler because more functions are embedded on semiconductors.

Why then, Marks asks, should Nokia, Motorola, Sony-Ericsson, Alcatel, Siemens, Samsung, and other brand-name companies all largely duplicate one another's efforts? Why should each spend $30 million to develop a new smartphone or $200 million on a cellular base station when they can just buy the hardware designs?

The ultimate result, he says:

Some electronics giants will shrink their R&D forces from several thousand to a few hundred, concentrating on proprietary architecture, setting key specifications, and managing global R&D teams.

"There is no doubt the product companies are going to have fewer people design stuff," Marks predicts. "It's going to get ugly."

And that puts a whole lot of engineers, designers, and other high-tech jobs on the chopping block in the center of the Sacred Altar in the Temple of the Cult of Higher Profits:

While many Western companies are downsizing at home, they are boosting hiring at their own labs in India, China, and Eastern Europe. "Companies realize if they want a sustainable competitive advantage, they will not get it from outsourcing," says President Frank M. Armbrecht of the Industrial Research Institute, which tracks corporate R&D spending.

Companies also worry about the message they send investors. Outsourcing manufacturing, tech support, and back-office work makes clear financial sense. But ownership of design strikes close to the heart of a corporation's intrinsic value. If a company depends on outsiders for design, investors might ask, how much intellectual property does it really own, and how much of the profit from a hit product flows back into its own coffers, rather than being paid out in licensing fees? That's one reason Apple Computer lets the world know it develops its hit products in-house, to the point of etching "Designed by Apple in California" on the back of each iPod.

Lucent says outsourcing some development makes sense so that its engineers can concentrate on next-generation technologies. "This frees up talent to work on new product lines," says Dave Ayers, vice-president for platforms and engineering.

"Outsourcing isn't about moving jobs. It's about the flexibility to put resources in the right places at the right time."

And damn the torpedoes - or those affected by the decisions these people make.

It's also about brutal economics and the relentless demands of consumers. On top of this, superheated competition can reduce hit products to cheap commodities within months. So they must get out the door fast to earn a decent margin. "Consumer electronics have become almost like produce," says Michael E. Fawkes, senior vice-president of HP's Imaging Products Div. "They always have to be fresh." Such pressures explain outsourcing's growing allure.

As a rule of thumb, it takes around $10 million and up to 150 engineers to develop a new cell phone from scratch. If Motorola or Nokia guess wrong about the market trends a year into the future, they can lose big. So they must develop several versions.

With most of its 800 engineers in China and France, Cellon creates several basic designs each year and spreads the costs among many buyers. It also has the technical expertise to morph that basic phone into a bewildering array of models. Want a 2-megapixel camera module instead of 1-megapixel? Want to include a music player, or change the style from a gray clamshell to a flaming-red candy-bar shape? No problem: Cellon engineers can whip up a prototype, run all the tests, and get it into mass production in a Chinese factory in months.

Companies are still figuring out exactly what to outsource.

Hewlett-Packard, a company with such a proud history of innovation that its advertising tag line is simply "invent," also works with design partners on all the hardware it outsources. "Our strategy is now to work with global networks to leverage the best technologies on the planet," says Dick Conrad, HP's senior vice-president for global operations. According to iSuppli, HP is getting design help from Taiwan's Quanta and Hon Hai Precision for PCs, Lite-On for printers, Inventec for servers and MP3 players, and Altek for digital cameras. HP won't identify specific suppliers, but it says the strategy has brought benefits. Conrad says it now takes 60% less time to get a new concept to market. Plus, the company can "redeploy our assets and resources to higher value-added products" such as advanced printer inks and sophisticated corporate software, he says.

Who will ultimately profit most from the outsourcing of innovation isn't clear. The early evidence suggests that today's Western titans can remain leaders by orchestrating global innovation networks. Yet if they lose their technology edge and their touch with customers, they could be tomorrow's great shrinking conglomerates.

What is clear is that an army of in-house engineers no longer means a company can control its fate. Instead, the winners will be those most adept at marshaling the creativity and skills of workers around the world.

And as we have been seeing for several years now, this 'adeptness' in manipulating workers involves outsourcing and offshoring, forcing domestic workers to accept less in wages and benefits in order to temporarily save their own jobs. When these jobs do go away - as those in Carolina textile towns are now discovering - there isn't much coming back to replace them.

The prospects for the people of these towns are bleak at best. When a town has no new prospects for a good future, the young leave for greener pastures. I know - I was once one of those young people seeking a better future. But that was when the situation was a national one. now that the situatiion is international in scope, will the United States become a nation of impoverished elderly unable to earn a subsistance wage?

We might:

N.D. Drop in Child Population Leads Nation

Tony Nieman is going to miss the shrieks and laughter coming from the school playground in the tiny town of Calvin. Starting this fall, all 25 students, from kindergarten to high school, will go somewhere else to learn their ABCs. There just aren't enough of them to keep the school open. The school's students, who come from the town and the surrounding rural area, will now have to travel 18 to 50 miles to attend classes, principal Kurt Hayes said. The school has faced the possibility of being closed for 15 or 20 years, he said. "It took some time, but the reality has set in," he said.

Half of North Dakota elementary and high school students are enrolled in the eight biggest districts in the state, Decker said. "The rest are enrolled in the other 202 districts, and those are declining at a significantly faster rate than the 'big eight,'" he said. "If you look at the schools that have closed or are closing, the bulk of them were based on an agriculture economy," said Elroy Burkle, superintendent of the school in Calvin, in northeastern North Dakota, about 10 miles south of the Canadian border.

The town of Calvin, where Nieman is mayor, exemplifies what is happening all across North Dakota:

Young adults and young families with children are moving away to escape the harsh farm economy.

Now made worse for them as Bu$hCo has taken away their food subsidies to save those of the corporate farmers who don't need them.

Only a handful of people still live in Calvin — the latest count was 26. The town still has a gas station, a post office and a grain elevator. Nieman, the mayor, said he was sad to see the school go. But, he added, "it isn't going to hurt the town because it's already dwindled down to nothing."

Besides the school in Calvin, three other schools are slated to be shuttered this year because of declining enrollment, and five other districts are in the process of consolidating their schools, said Tom Decker of the Department of Public Instruction.

New census figures show North Dakota is losing more children than any other state. "What we're seeing is a tremendous loss of youth," said Richard Rathge, director of the State Data Center. "Young adults and young families are leaving and taking their children with them." From 2000 to 2004, North Dakota's population of children ages 5 to 17 dropped about 14 percent and the number of newborns dropped about 8 percent, the Census Bureau said in its report. The number of newborns in one year alone, 2003 to 2004, dropped 1.5 percent — the highest percentage in the nation.

As a whole, the state grew in population in 2004 for the first time since 1996, the Census Bureau said. It added 966 people for a total of 634,366. But Rathge said North Dakota's birth rate has declined nearly every year since 1982. Fargo, the state's largest city, has seen a 1.5 percent growth in young adults over the past few years, but most of them are not starting families, he said. "They are delaying marriage and childbearing until they get their careers started, which means a reduction in the number of children," Rathge said.

Currently, these people are putting off child-bearing or moving to other states which offer jobs that pay enough to support a family. Soon, will they only have the choice of remaining childless or emigrating to a foreign land in search of employment? Are we American workers soon to be the world's wetbacks? It's a LLOOONNNNGGGG swim to China. Habla Mandarin?

Nationwide, the Census Bureau said Thursday, the number of children ages 5 through 13 declined by 381,000 between 2003 and 2004 while the number of high school-age youngsters, ages 14 to 17, increased by 329,000.

These are the ones who will have to face the choice of poverty versus emigration. Either way, the nation loses. With states like North Dakota losing their regeneration capacity to finer future fortunes elsewhere, and with the good jobs fleeing the nation for economic reasons, one has to ask - whither the future of our young people? One columnist asks that very question:

Bush for kids?
President hides attack on future generations in child-friendly rhetoric

There are few phrases in the book of parenting that raise more suspicions among the young than the pronouncement that "I am doing this for your own good." It comes in a close second only to the declaration, "This is going to hurt me more than it will you." In this spirit of skepticism, I have been stalking President Bush's remarks about Social Security.

I have in my possession a list of the presidential promises that he has nothing but the best interests of the younger generation at heart. My list starts with the State of the Union address, when Bush exhorted us to "do what Americans have always done and build a better world for our children and our grandchildren." It goes on to the remark that "Our children's retirement security is more important than partisan politics." It concludes with his recent words in Indiana: "If I were a younger American, I'd be asking loud and clear 'What are you going to do about this train wreck that is headed my way?"'

Well, I still have trouble acknowledging George Bush as the pater of my familias. For openers, the Bush tax cuts of today are the tax burdens of tomorrow. That doesn't sound like a 'better world for our children and our grandchildren'. The federal deficit this year is $394 billion and climbing -- before you include the costs of war. But the conductor of this White House train wants to extend the tax cuts for first class and pass the debt to the youngest passengers in coach.

Who aren't going to have jobs that pay enough to survive on, much less create families with. Who is going to buy all those neat toys we just read about above? Certainly not these kids to whom Bu$h is promoting age-ist conflict:

As for our children being more important than partisan politics, one in six American children live in poverty but the 2005 budget already has kid-unfriendly cuts in programs such as subsidized day care, and the Republican Congress is looking at cutting off food stamps for 300,000 people in working families.

If the president's Social Security concerns are about our children's retirement, what about their childhood? There's been astonishingly little said about what privatizing would mean for the children -- 5 million of them today -- who get dependents' benefits because their parents are dead or disabled or retired. Little more has been said about the transitional costs of the privatizing scheme. Trillions to be paid by the tots.

These matters alone disqualify the president as the builder of "a better world for our children."

Death And Taxes

But for my money -- not to mention my grandchildren's money -- the Bush legacy as a man who planned for the kids' legacy falls apart when you look at the issue of estate taxes. The "death tax," as it is now slandered, was first written into law in 1916 during the Gilded Age. Americans were uneasy about inequality and an inherited aristocracy.

Fast forward to our new gilded age. In a telling way, the Social Security debate has now dovetailed with an estate-tax debate. Congress voted a couple of years ago to gradually raise the tax exemption so that by 2010, the estate tax will apply only to estates worth more than $3.5 million. That's just five out of 1,000 estates every year.

And these five will be wealthy enough to claim - maybe with some justification - that they are being discriminated against. Future Chief (in)Justice Antonin Scalia would - as he already has - utilize the Equal Protection Clause of the Fourteenth Amendment to find in favor of this claim, and eliminate the estate tax altogether - giving Bu$hCo the political cover they currently don't have:

On one side, the Bush administration wants to partially privatize Social Security and totally eliminate the estate tax.

On the other side, there is a proposal by former Social Security Commissioner Robert Ball and seconded by Wisconsin's Rep. David Obey to use the estate tax to fix the shortfall. Ball figures we can make up the funding gaps for the coming boomers by raising the wage cap on Social Security taxes to include workers who earn more than $90,000 and by rejiggering the cost-of-living adjustments. But the moral heart of the plan is to designate the tax on estates over $3.5 million to Social Security. It would target some of the inheritance of the richest sector of society for the security of the entire next generation.

Would it not be moral to have those who acquire that kind of money - often by outsourcing, offshoring, and rightsizing the nation's parents out of jobs - provide for the descendents of those who put them in the position of having that much wealth in the first place through their labor at lower-wage jobs?

I think it is! Show me the executive who does everything in his own company, without the added labor of anyone, and I will agree that this example (and exemplary) executive will have 'earned' all the money his company produces. Otherwise - STFU!

But I digress:

We have here two very different stories about doing what's best for the children. Two different stories about the kind of country we want our kids to inhabit. In one, we are only obligated to the children in our gene pool. In the other, we are connected as members of a community. In one we are all privatized and atomized. In the other we are bound together.

The debate about Social Security is intense precisely because it's about alternative visions. It's personal because it raises questions about what we owe our children, indeed, how we define "our children." By DNA? ZIP code? Class? Or country.

On my list of presidential quotes, there is a recurrent phrase Bush uses to describe Social Security as "a symbol of trust between the generations." But what we are seeing is an unrelenting attempt to bust this trust. That's the real train wreck.

Alas, I have to disagree - in part. This is only one of the loose rails causing the coming train wreck - one which is being exploited by Bu$hCo in their inept and ill-considered attempts to take over the world's oil reserves.

The elderly are to be abandoned using the strength and energy of the younger generations who have no real future nor the experience to see through Bu$hCo lies like their elders can.

I remember a favorite tale of the wrong wing which was disgorged with nauseating regularity during the Cold War. It told of a child - Pavlik Morozov - who lived in the Soviet Union and who informed the secret police of anti-Soviet activities by his parents as he was taught, and who was rewarded for this action with a statue in the square in his memory after he was killed in revenge by the citizens of his town.

Bu$h is seeking to inspire America's young people to perform a similar disrespectful act - selfishly tossing over the financial security promised to their parents - through promoting attitudes against the parents in the young as expressed by this young one:

Bush visits Indiana; defends privatization of Social Security

"The money is coming in, and the money's going out," the president said. "This is a pay-as-you-go system. It is not a savings system."

Jon Paul Surma, a 24-year-old entrepreneur from Rolling Prairie, Ind., said he didn't think he was going to get any returns on what he was currently paying. "Right now, I don't feel any ownership," Surma said.

"I feel like you guys are taking my money, and I'm not going to get any of it back."

Then there are those Red Staters who continue to support Bu$hCo actions which are distinctly not in their best interests:

Bush Touts Social Security Plan In South Bend

Bush said his first priority in traveling around the country is to get the word out that change is needed. "The fundamental question facing our society and facing our Congress is, are we willing to worry about taxpayers that have yet to come close to retirement? That's really what we're talking about," he said.

"I thought it was inspiring. I'm one of those who have always said I'll never see a Social Security check and I'm only 53," said Valerie Singell, a school bus driver from Elkhart.

Even Bu$hCo supporters can let a hint of the real situation slip out:

Gov. Mitch Daniels, Bush's former budget director, came the closest to offering a dissenting opinion. Daniels praised his former boss for taking on the issue and said he supports the idea of individual accounts but thinks more needs to be done. "I would support a means testing of some kind. That is to say I don't think a millionaire should take more out of Social Security than lower-income people who need the money more," he said. "I think probably some modest increase -- again, out there years in the future -- in the retirement age makes sense."

Means testing? It would only confirm that just about everyone who works will not have the means and will need Social Security at a time when there is less in the kitty than there is now! These two Democrats put it best:

"Let me tell you the motto of the 'ownership society': We're all in this alone." - Sen. Richard J. Durbin of Illinois, the Democratic whip

"Did you ever notice that those who would try to take Social Security apart are the people that will never need Social Security?"
- Sen. Byron L. Dorgan of North Dakota, Democratic Policy Committee chairman

But Bu$h isn't about to let these young know-it-alls that their future is being squandered in Iraq and Afghanistan right now. They aren't being told about Bu$hCo efforts to speed up the process of offshoring all those good jobs that these geniuses think they will have handed to them upon graduation. They aren't hearing about the loss of high wages due to competitive pressures. They probably don't know - and they should! - that they will leave college owing more than most students ever have in our history [PDF]:

The public believes that because a college education is so important to success in life, they must simply swallow the cost increases because they cannot afford not to get a postsecondary education. The college cost crisis is having its most devastating impact on U.S. students, who are most vulnerable to tuition hikes, since many are working their way through school on a shoestring budget.

“Already working 48 hours a week at a laminating company to pay for his full-time course load at Framingham State College, freshman Brian Avery sighed and shook his head at the prospect of state budget cuts boosting his bill by as much as $1,000 next year. ‘It just means more hours, more loans,’ he said. ‘It puts a damper on the mood around here. A lot of students here pay their own way, which is hard to do. This makes it harder.’” (Schworm, “Rising Costs Worry Students,” Boston Globe, May 1, 2003).

Over the past ten years, the rise in college tuition has outpaced increases in both family earnings and the Consumer Price Index. Most research states that ‘costs’ are reducing student’s options for higher education and that most private schools are not affordable for most families."
- Dr. Patrick Kirby, dean of enrollment services at Westminster College in Fulton, Missouri

That's how it is now, kiddies. It's only going to get worse in the future.

Do you REALLY buy into the Bu$hCo claim that you are going to have any money left at all to invest in these privatized accounts being promoted to you as the Be$t Thing $ince $liced White Anglo-$axon Prote$tant 'Bread' (dough, moolah, lucre, pelf, ...)?

Are you not seeing your promised economically-secure future being given away, as I pointed out above? Do you not see that your wage-earning potential drops daily, and that all Bu$hCo polices aren't helping that situation any? That - in fact - they are agravating the situation, by creating the desire in those nations which are funding this whole process to call in their chips and cut their losses? Remember the panic just this week over Chinese and Japanese comments concerning the dollar? Shortly after Korea made the same comments?

We're going to be expected to repay our doebts in some manner. Do you honestly think that the process of emptying Imperial Germany after WWI to pay the reparation costs imposed at Versailles can't happen to you when you are expected to repay Bu$hCo debts?

Sure - we aren't currently in a military war which we are losing to these debtors, but they do hold a huge amount of our debt. They can - and at some point will - demand repayment, which could - as during the post-WWI reparation period in Germany - force the US government to seize the private property of civilians to settle this debt.

Here's what happened to private civilian property which Germany had to use to pay the reparation obligations:


... Germany shall pay in such installments and in such manner (whether in gold, commodities, ships, securities or otherwise) as the Reparation Commission may fix ...


Germany further agrees to the direct application of her economic resources to reparation as specified in Annexes, III, IV, V, and VI, relating respectively to merchant shipping, to physical restoration, to coal and derivatives of coal, and to dyestuffs and other chemical products; provided always that the value of the property transferred and any services rendered by her under these Annexes, assessed in the manner therein prescribed shall be credited to her towards liquidation of her obligations under the above Articles.


In addition to the payments mentioned above Germany shall effect, in accordance with the procedure laid down by the Reparation Commission, restitution in cash of cash taken away, seized or sequestrated, and also restitution of animals, objects of every nature and securities taken away, seized or sequestrated, in the cases in which it proves possible to identify them in territory belonging to Germany or her allies.


The German Government will supply to the Commission all the information which the Commission may require relative to the financial situation and operations and to the property, productive capacity, and stocks and current production of raw materials and manufactured articles of Germany and her nationals, and further any information relative to military operations which in the judgment of the Commission may be necessary for the assessment of Germany's liability for reparation as defined in Annex I.


Germany undertakes to pass, issue and maintain in force any legislation, orders and decrees that may be necessary to give complete effect to these provisions.

This means that the government was obligated to act to settle these debts by whatever means necessary. This means you - and your property!



(a) Whatever part of the full amount of the proved claims is not paid in gold, or in ships, securities and commodities or otherwise, Germany shall be required, under such conditions as the Commission may determine, to cover by way of guarantee by an equivalent issue of bonds, obligations or otherwise, in order to constitute an acknowledgment of the said part of the debt.

(b) In periodically estimating Germany's capacity to pay, the Commission shall examine the German system of taxation, first, to the end that the sums for reparation which Germany is required to pay shall become a charge upon all her revenues prior to that for the service or discharge of any domestic loan, and secondly, so as to satisfy itself that, in general, the German scheme of taxation is fully as heavy proportionately as that of any of the Powers represented on the Commission.

(c) In order to facilitate and continue the immediate restoration of the economic life of the Allied and Associated countries, the Commission will as provided in Article 235 take from Germany by way of security for and acknowledgment of her debt a first installment of gold bearer bonds free of all taxes and charges of every description established or to be established by the Government of the German Empire or of the German States, or by any authority subject to them; ...



Germany recognises the right of the Allied and Associated Powers to the replacement, ton for ton (gross tonnage) and class for class, of all merchant ships and fishing boats lost or damaged owing to the war.

The German Government, on behalf of themselves and so as to bind all other persons interested, cede to the Allied and Associated Governments the property in all the German merchant ships which are of 1,600 tons gross and upwards; in one-half, reckoned in tonnage, of the ships which are between 1,000 tons and 1,600 tons gross; in one-quarter, reckoned in tonnage, of the steam trawlers; and in one-quarter, reckoned in tonnage, of the other fishing boats.


The ships and boats mentioned in paragraph 1 include all ships and boats which (a) fly, or may be entitled to fly, the German merchant flag; or (b) are owned by any German national, company or corporation or by any company or corporation belonging to a country other than an Allied or Associated country and under the control or direction of German nationals; or (c) are now under construction (1) in Germany, (2) in other than Allied or Associated countries for the account of any German national, company or corporation.


For the purpose of providing documents of title for the ships and boats to be handed over as above mentioned, the German Government will:

(a) Deliver to the Reparation Commission in respect of each vessel a bill of sale or other document of title evidencing the transfer to the Commission of the entire property in the vessel free from all encumbrances, charges and liens of all kinds, as the Commission may require; [which left the former owners still liable for any debts they had used their former property to secure - ed]


As an additional part of reparation, Germany agrees to cause merchant ships to be built in German yards for the account of the Allied and Associated Governments ...


... Germany agrees to cede to the Reparation Commission a portion of the German river fleet ...

This next could be used as a precedent against American multinational corporations moving assets offshore:


... Germany agrees to take any measures that may be indicated to her by the Reparation Commission for obtaining the full title to the property in all ships which have during the war been transferred, or are in process of transfer, to neutral flags ...



... the Commission shall consider the amount and number of the materials and animals mentioned in the lists provided for above which are to be required of Germany. Machinery, equipment, tools and like articles of a commercial character in actual industrial use are not, however, to be demanded of Germany unless there is no free stock of such articles respectively which is not in use and is available, and then not in excess of thirty per cent, of the quantity of such articles in use in any one establishment or undertaking. [immediately putting 30% of this private firm's workers into unemployment - ed]



Germany accords to the Reparation Commission an option to require as part of reparation the delivery by Germany of such quantities and kinds of dyestuffs and chemical drugs as the Commission may designate, not exceeding 50 per cent. of the total stock of each and every kind of dyestuff and chemical drug in Germany or under German control at the date of the coming into force of the present Treaty. [This could be interpreted to include patents and copyrights for intellectual properties - like computer operating systems. Think Bill Gates is kissing up to the Chinese with his investment capital for fun? - ed]

Here's a short summary of some of the private property that was taken away from German nationals to pay the reparation debt of their nation:

Germany had lost her main coal producing territories of Upper Silesia and the Saarland. In 1913, 139 million tons of coal were used in Germany for railroads, utilities, fuel, and agriculture; the Saarland and Upper Silesia had accounted for 60.8 million tons of this. With more than half of Germany’s coal taken away, they didn’t have enough coal to power the populated industrial country. With industry destroyed there was no way they could pay the reparations.

... they had left no industry to rebuild the economy with, Germany’s territory and population were greatly reduced, and there was tremendous resentment. The people were looking for a change as inflation had caused nation-wide starvation and there was great unemployment.

Ask any economist [and muckdog doesn't count until he provides bona fides] about the effects of reparations upon the workers:

3. Reparations, along with political instability and the economic losses sustained during the war, threw the German economy into "hyperinflation." Money lost value so rapidly that workers demanded they be paid daily. By the end of the week, Monday's earnings would be worthless.

Before the war a German mark was worth about 25 cents. By 1921 its value had fallen so sharply that it was worth barely more than a penny. By 1924 its value was so small it could only be written in scientific notation. This meant, among much else, that savings had become worthless.

It was a system which kept the international economy at constant risk.

As we have seen from recent news, the world's economic community isn't interested in a state of constant risk, especially when that risk is caused by the actions of a country which owes them a major tonnage of money. They can call a halt to this by calling in their loans, and they can demand payment in a manner similar to that imposed on Germany, as I present above. The US government is already in legal thrall to the WTO to abide by its decisions, which can be backed by the world's creditor country militaries if need be. Your job - regardless of pay - can be included as payment for the massive debts run up by the United States since the government was last in the black under Bill Clinton. There is only one person to blame for these debts - Red Stater pResident King George Warmonger.

Keep that in mind when you are working third shift making tacos to pay off your school loans. Just remember to take home the broken shells that should have gone into the trash.

You'll need them to feed the wife and kids.

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pessimist :: 3:44 PM :: Comments (8) :: Digg It!