President Obama has repeatedly warned of the corrosive effect that hidden corporate campaign donations could have in election campaigns, following a Supreme Court decision this year that for the first time allows companies, labor unions and other special interests to spend unlimited amounts of money on behalf of candidates and causes.
The ruling has already stirred controversy for big-box retailer Target (TGT) and media-giant News Corp. (NWS) after the companies made outsized contributions on behalf of Republican candidates. While that gush of money can be an effective new tool to sway elections, conservative business leaders are also using a more traditional tactic -- jawboning -- to appeal to voters to back pro-business GOP office seekers.
"Jobs Will Not Be Created Here"
One of them, Intel (INTC) Chief Executive Paul Otellini, delivered a speech last week in tony Aspen, Colo., offering a depressing set of observations about the economy and the Obama administration, CNET reported. Unless government policies are altered, Otellini predicted: "The next big thing will not be invented here. Jobs will not be created here." In addition, he said, the U.S. legal environment has become so hostile to business that there is likely to be "an inevitable erosion and shift of wealth, much like we're seeing today in Europe -- this is the bitter truth."
Another businessman, Michael Fleischer, president of New Jersey-based Bogen Communications International (BOGN), showed similar disdain for Obama in a recent op-ed in The Wall Street Journal (subscription required), in explaining why he isn't hiring new workers at a time when the country desperately needs new jobs.
When all costs are tallied, Fleischer explained, it costs $74,000 to put $44,000 in the pocket of a typical worker (whom he called "Sally") and to provide her $12,000 in benefits. Taking into account both federal and state taxes, government imposes a 33% surtax on Sally's job each year, he said.
Fleischer concluded his piece this way: "A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone, my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price."
Businesses Always Complain of the Cost of Doing Business
Of course, Otellini and Fleischer aren't saying anything new. Businesses large and small have complained for years about the cost of doing business in the U.S. Further, it's not unusual for them to use the cost associated with hiring and employing moderate-income workers to illustrate their points.
Such criticism, however, is just one side of the argument, says Christy Huebner Caridi, director of the Marist College Bureau of Economic Research in Poughkeepsie, N.Y.
"What they're not doing is putting it in context," she says. "If you're talking about cost, you really need to consider the output, or the productivity, of the workers."
A statistic called unit labor cost, routinely used by economists and reported in government data, gives insight into how onerous the price tag of employing workers today truly is. Unit labor costs include such things as contributions to worker's compensation, disability, unemployment insurance, social security -- all taxes placed on employers.
Conveniently Ignoring Labor Unit Costs
And here's the kicker: Despite all the bellyaching by business leaders, labor unit costs for U.S. employers have decreased dramatically during the last 20 years, largely due to increases in worker productivity. In other words, the cost of employing workers relative to how much they produce has been falling, Caridi says -- and has been for a long time.
For example, in the period from 1968 to 1987, when inflation and oil shocks were routine features of the U.S. economy, unit labor costs rose on average 5.6% a year. In the current era, 1998 to 2009, the statistic has risen just 1.7% a year on average, on par with the increases seen during the two robust decades following the end of World War II.
Still, Caridi notes that any cost -- including hiring and employing workers -- is going to affect businesses' bottom line. Also, the stagnating recovery has created uncertainty, "one of the biggest problems in any business," she says. No employer wants to hire and train new employees only to find that they aren't producing enough sales to justify the salaries paid to them.
Then There's Executive Compensation
That said, salvos that target the costs of average wage earners conveniently fail to note other significant expenses, including executive compensation, which has skyrocketed in recent years. Otellini, for example, earned nearly $15 million last year, or the equivalent of about 200 "Sallys." (Bogen Communications last disclosed Fleischer's annual compensation in regulatory filings for the 2002 fiscal year, prior to its delisting from the Nasdaq Stock Market in 2004.)
Also neglected are costs related to golden parachutes of failed executives, such as Hewlett-Packard's (HPQ) Mark Hurd, who, despite being fired, walked away with $37 million (500 Sallys). Then there are the costs associated with executive travel and relocation.
Corporations are correct in that they are overtaxed, Caridi says. But in hanging the argument on the backs of everyday workers without ever taking into consideration the millions spent on executive pay and perks, business leaders aren't just being less than forthcoming, she says. "The truth is it's very mean-spirited."
Here's news from the business world and other money matters to watch out for Friday (last updated at 7:33 a.m. Eastern time):
Gambling With Welfare Benefits: In the U.S., welfare payments are made electronically in the form of Electronic Benefits Transfer cards, which work similarly to debit cards. In two states, Michigan and California, controversy is brewing because many welfare recipients use ATM machines at casinos to withdraw their welfare payments. As DailyFinance columnist Michael Kaplan explains, politicians in both states are crying foul and want beneficiaries' ability to access welfare funds in gambling establishments to end.
Blockbuster To File Chapter 11: Once-dominant video-rental giant Blockbuster (BBI) is beginning the process to file a pre-planned bankruptcy by mid-September and is in discussions with stakeholders about potential restructuring plans, according to a Los Angeles Times report. Blockbuster seeks to restructure crippling debt of nearly $1 billion and escape leases on 500 or more of its 3,425 U.S. stores. The company has been signaling since March that it might file for bankruptcy.
3Par Backs Dell Takeover Bid: Data-storage maker 3Par (PAR) has agreed to accept an upgraded $1.8 billion takeover offer by Dell (DELL), which matches an earlier bid by Hewlett-Packard (HPQ). Dell's offer, which values 3Par stock at $27 a share, is three times more than the stock traded for before the bidding war broke out last week. 3Par, of Fremont, Calif., says its board continues to recommend the Dell offer.
Obama Vacation Home Sold: The Hawaii house rented by the Obama family for winter outings has been sold to new investors, Luxist reports. The five-bedroom home on Kailua Beach built in 2006 sold for $1.05 million less than its $7.95 million asking price. The listing agent declined to name the new owner, but sales documents show the buyer as Paradise Points Estates. Despite the sale of the "Winter White House," the agent said, the new owners are eager for the Obamas to return.
U.S. Homes Shrinking: McMansions, those popular gargantuan homes built on postage-stamp lots, appear to be going the way of Hummers. U.S. homesteads are shrinking as Americans downsize in response to the lackluster economy and high unemployment, WalletPop reports. The average size of a new home fell to 2,135 square feet in 2009, down from more than 2,300 square feet earlier in the decade.
Downward Revision In GDP Expected: The Commerce Department is expected to report Friday that U.S. economic growth in the second quarter was less robust than previously reported. Gross Domestic Product likely rose just 1.4% in the three months ending June, down from the previously reported rate of 2.4%. The expected drop affirms what many economists and consumers already know: that recovery appears on hold.
Global Stock Markets Weak: Stocks around the world mostly fell Friday on continued bad news about the global economic recovery and ahead of key economic data and a speech to be delivered later by Federal Reserve Chairman Ben Bernanke. Key European markets were flat, while those in Asia closed mostly lower. Stock futures on Wall Street were little changed. In his comments Bernanke will likely seek to soothe investors who are anxious about the U.S. economy and a possible double-dip recession.
Gulf Residents Question BP Cleanup: Oil may have stopped flowing into the Gulf of Mexico, but the controversy surrounding BP's (BP) use of a toxic dispersant to break up the oil is still erupting. As DailyFinance's Bruce Watson reports, though the oil giant reportedly stopped using the chemical dispersant known as Corexit more than a month ago, area residents claim it is still being sprayed from planes and boats.
USA Today To Cut Jobs: USA Today, the nation's second largest newspaper, is taking steps to dramatically overhaul its business, a makeover that will result in about 130 layoffs this fall, USA Today Publisher Dave Hunke told the Associated Press. The cuts amount to a 9% reduction in the 1,500-member workforce employed by the newspaper, which is owned by Gannett (GCI), the nation's largest newspaper chain.
Boeing Again Delays 787 Delivery: Boeing (BA) has once again pushed back the approximate date it expects to deliver its first new 787 jetliner, to the middle of the first quarter next year. The latest delay follows an announcement last month by the airplane maker that the first delivery would be pushed into the first few weeks of 2011 because of a series of issues. In a statement Friday, Boeing said it is working closely with Rolls-Royce to expedite engine availability, and that flight testing continues as planned.
Egg Prices Headed Skyward: The massive recall of tainted eggs is likely to push egg prices higher in coming weeks. Since the recall of 550 million eggs two weeks ago, wholesale egg prices in the Northeast and Midwest have soared nearly 40%, according to the U.S. Department of Agriculture. The news could be devastating for egg lovers, who have enjoyed five straight months of falling egg prices.
online stock trading
MS confirms new 360 controller Xbox 360 <b>News</b> - Page 1 | Eurogamer.net
Read our Xbox 360 news of MS confirms new 360 controller.
BBC Sharing <b>News</b> Videos With Russia's GZT.ru | paidContent:UK
The BBC has signed a deal to syndicate news video to the website of Moscow newspaper Gazeta. The arrangement will mean videos from BBCRussian.com appearing on GZT.ru, together with BBCRussian.com branding. BBCRussian.com is a service of ...
Hot Air » Great <b>news</b>: Record number of Americans on public dole
Great news: Record number of Americans on public dole.
No comments:
Post a Comment