Re-arranging the Deck Chairs Is Not a Net Positive

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So here we are. It is the middle of December 2011. The US (and global) economies still suck. The Federal Reserve continues to wring its hands and do pretty much nothing about maximizing employment (which means they are not doing their jobs).

These past few weeks, I've seen a number of articles in various news sites about various states offering "tax incentives" to businesses trying to get them to stay where they are or to move to another state. One of the first was when I saw reports in early October that the governor of the state in which I reside claimed that the Chicago Mercantile Exchange could be moving to Florida. Then at the end of November, I noticed that Cincinnati and Ohio had "lost" Chiquita Brands to North Carolina:

Chiquita Brands International Inc. decided to leave Cincinnati for many reasons, but the biggest one is undeniable: Money.

Lured by the promise of big savings, better air service to Europe and Latin America and a more diverse workforce, Chiquita announced Tuesday that it plans to leave Cincinnati, site of its home office of 24 years, for Charlotte, N.C.

North Carolina offered a package of grants and tax incentives potentially worth $22.7 million over 11 years, enticing the relocation of the world's largest banana seller.

The counter offer from the state of Ohio and Cincinnati to keep the company downtown amounted to $6 million to $6.5 million, Chiquita chairman and CEO Fernando Aguirre told The Enquirer late Tuesday.

A couple of days later, I see where Ohio, having offered a fraction of what North Carolina had offered for Chiquita had turned around and offered Sears hundreds of millions to move from Chicago to Columbus. At the end of the article on the Sears offer, I found this telling little nugget of information:

The largest incentive package in Cincinnati - a 2003 deal worth up to $52 million to keep Convergys Corp. downtown - was hotly debated for months before being approved. The deal kept Convergys downtown, but the company hasn't grown here, and instead has cut its city workforce from 1,500 to 1,000.

Tax incentives are a quick, short-term strategy to boost job numbers, but they don't always work in the long-term, said Wendy Patton, a former Ohio Department of Development official.

Just last week (December 7), the NY Times had an article on Fortune 500 companies being able to avoid paying any state taxes for years at a time, no matter how profitable they might be:

As states have struggled to balance their budgets by cutting services, laying off workers and raising taxes, a study to be released on Wednesday suggests that many profitable Fortune 500 companies have not been paying as much in state corporate income taxes as the average levied on American companies, with some big firms paying none at all in recent years.

A few companies, including DuPont, reported paying no state corporate income taxes from 2008 to 2010 even as they reported profits, according to the study, which was conducted by Citizens for Tax Justice and the Institute on Taxation and Economic Policy, nonprofit research organizations in Washington that advocate a more progressive tax code. (A spokeswoman for DuPont said that she had not seen the study, but that “DuPont complies with all tax laws and regulations” wherever it operates.)

...snip...

To gauge how much Fortune 500 companies are paying in corporate income taxes, the study looked at the 265 of them that are both profitable and disclose their state tax payments. It found that 68 reported paying no state corporate taxes in at least one year between 2008 and 2010. All together, the study found that the companies reported $1.33 trillion in domestic profits from 2008 to 2010, but paid states only about half of what they would have if they had paid at the average corporate income tax rate of all states — reducing their state taxes by some $42.7 billion.

Today, the NY Times had a related article on the battle between states for corporate business:

As the unemployment crisis grinds on, states are trying to both lure and retain businesses by offering tax breaks, grants, cheap loans — just about anything (short of candy and foot massages) they can think of. But how many jobs do these expensive incentives actually create?

And are the jobs any good?

Economic development programs cost states and cities billions of dollars a year, but many programs require little if any job creation, fewer than half call for wage standards, and fewer than a quarter require the companies to provide health care for their workers, according to a study of program requirements scheduled to be released Wednesday by Good Jobs First, a nonprofit research organization that tracks corporate subsidies. Some merely require companies to invest in plants or new equipment, which could actually enable them to reduce their head counts.

In doing some quick checks of der Google for this post, I noticed that Indiana had also made a play for the Chicago Mercantile Exchange. Fortunately for the good folks of Indiana, Ohio, and Florida, the Illinois legislature has bowed to the corporate blackmail:

While a tax-break package aimed at keeping Sears Holdings Corp. and Chicago's financial exchanges from exiting the state cleared the General Assembly on Tuesday, Illinois' business tax policies will continue to be a hot-button issue in the coming year.

Lawmakers from both sides of the aisle said they expect the parade of companies seeking special relief to continue, creating pressure to further examine how the state taxes business.

At this point in our national economic crisis the image that keeps coming to mind with all of these tax incentives for companies to stay or go is so much re-arranging of the deck chairs. These jobs are not net new jobs for the nation and wind up costing jobs IMNSVHO because of the lost jobs and services in both the losing state and gaining state. The losing state winds up offering larger incentives to try to save jobs and for the folks in the losing state who have lost their jobs, here's the struggle to make ends meet with unemployment so more bankruptcies and foreclosures. For the gaining states, there are all the costs associated in providing the sweetheart deals to the corporations to get them to move means non-reimbursed expenditures for infra-structure and more wear and tear on existing systems. If the state manages to "save" the jobs by bowing to the blackmail, it is that much less revenue coming in that cannot be recovered. Lose-lose-lose for all but a few folks in corporate management (Bonuses!)

And because I can:

Sorry, but these numbers do not add up

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So, you may have noticed that the November jobs report from the Bureau of Labor Statistics is out today (via CNN):

Hiring accelerated in November, and the unemployment rate unexpectedly plummeted to its lowest rate in nearly three years.

Employers added 120,000 jobs in November, the Labor Department reported Friday, marking a pick-up in hiring from October.

Meanwhile, the unemployment rate fell to 8.6%, the lowest rate since March 2009 and a significant decline from 9% just a month before.

Sounds great, right? Well not so fast there Bunky (from the NY Times):

Still, serious concerns remain about the economy’s ability to weather a potential meltdown in Europe.

American governments at all levels continued to bleed workers, for one. And the decline in the unemployment rate had a down side: It fell partly because more workers got jobs, but also because about 315,000 workers dropped out of the labor force. That left the share of Americans actively participating in the work force at a historically depressed 64 percent, down from 64.2 percent in October.

Even excluding these hundreds of thousands of dropouts, the country still had a backlog of more than 13 million unemployed workers, whose spells of unemployment averaged an all-time high of 40.9 weeks.

Think about that for a moment. There were 120K new jobs for November while 315K left the workforce because they had given up on finding a job. It takes nearly 100K new jobs each month just to maintain the status quo. 120K new jobs for the month, while positive, is still a pittance of what is needed. And more than 2 1/2 times the numbers of folks who got jobs left the workforce discouraged.

MSNBC notes that even the "good news" needs to be tempered as:

The average number of hours worked remained flat in November, while wages fell by 0.1 percent.

More than half the new jobs November were added by retailers, restaurants and bars. Retailers added 50,000 jobs, the sector's biggest gain since April. Restaurants and bars hired 33,000 new workers. The health care industry added 17,000.

"The quality of jobs is not as great as you would like to see," said Mark Vitner, a senior economist at Wells Fargo Securities. "A lot of the jobs were probably part-time positions and that is one of the reasons average hourly earnings fell."

Besides the fall in the official unemployment rate from 9% to 8.6%, the U6 number as reported has also fallen for November from October's 16.2 to November's 15.6. I'm not at all sure how this can be unless the U6 has been undercounting folks (which is my supposition). Without having been undercounting people for both the U3 (official unemployment number) and U6 (un and underemployment along with 'marginally attached' i.e., those who have given up looking), it just does not seem like both U3 and U6 could fall for November when so many have left the workforce.

Wednesday (November 30), the LA Times had this opinion piece that seems to have a clearer perspective than the official number.

Yesterday's weekly Initial Unemployment Claims report was back above 400K.

While my prediction of a double-dip recession by the end of the year (made back in June) may not happen quite as soon as I thought, the overall economy is still struggling and there are still millions of people wanting to work, without work available.

Meanwhile, Newt Gingrich apparently wants to make children the primary wage earners for their families.

And because I can:

Corruption or Incompetence; the Economic Effects Seem the Same

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One of the on-going arguments across the blogosphere and even the entire world is whether the economic problems of the last ten years are more related to incompetence or basic corruption. I must say, just the last week has offered plenty of evidence for both views. For example, we had this article from Bloomberg yesterday (Tuesday, November 29) about how then Treasury Secretary Hank Paulson met with his hedge fund buddies and gave them the first class insider information on his plans to place Fannie Mae and Freddie Mac into "conservatorship."

Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.

The fund manager says he was shocked that Paulson would furnish such specific information -- to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

...snip...

And law professors say that Paulson himself broke no law by disclosing what amounted to inside information.

...snip...

At the time Paulson privately addressed the fund managers at Eton Park, he had given the market some positive signals -- and the GSEs’ shares were rallying, with Fannie Mae’s nearly doubling in four days.

William Black, associate professor of economics and law at the University of Missouri-Kansas City, can’t understand why Paulson felt impelled to share the Treasury Department’s plan with the fund managers.

“You just never ever do that as a government regulator -- transmit nonpublic market information to market participants,” says Black, who’s a former general counsel at the Federal Home Loan Bank of San Francisco. “There were no legitimate reasons for those disclosures.”

So, apparently what Paulson did was not illegal, yet there were and are no controls on Paulson or anyone else receiving this information. But it does smell of corruption. Or maybe Paulson was so incompetent as to believe that he was just sharing gossip with his friends that would harm no one.

Things to not be thankful for

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I, like so many of us, have much to be thankful for on this Thanksgiving 2011. I have the love of my family, even when we may not see each other for years at a time. I have my friends from all the times of my life, both "real" time and digital.

But for all the things we have to be thankful for, there are an equal number or more of things for which we cannot be thankful. Or at least, I cannot be thankful.

For example, while I can be thankful that the EPA may be willing to take a stand on fracking, I cannot be thankful that there will probably be gigantic loopholes in the rules that will mostly render them useless.

I can be thankful for FDL members helping out with #OccupySupply as well as being thankful for a District Attorney who knows how wasteful it is to arrest people for exercising their first amendment rights while not being at all thankful that we have elected officials so thin skinned as to demand an apology from a teenager speaking her mind.

I can be thankful for the sacrifice of a Bradley Manning while wondering how many folks who do not support Manning are in full support of people stealing emails from scientists because the scientists believe humans are causing climate change.

I can be thankful that US officials condemn Egypt for using excessive violence on protestors in Tahrir Square while wondering about the deafening silence from so many officials about the excessive force used to evict protestors in the US.

I can be thankful for the failure of the "super" committee to reach an agreement to further eviscerate the social safety net while being not at all thankful that so many of the Beltway Village Idiots Pundits and Politicians seem to think that people need the safety net because of some personal failings.

I can be thankful that some news outlets finally are reporting on the millions of working poor along with the millions of long term un and underemployed even while I try to not be thankful that Wall St wannabe MOTUs are joining the ranks as well. (It is difficult sometimes to not be as ungracious to them as they have been to us although I do try to keep from sending out to many negative thoughts as my karma does not need the bad reflections)

So yes, I am thankful for much this year as I am most every year at Thanksgiving. But there is as much to be unthankful for as there is to be thankful.

And because I can:

Occupy: Is this a wise use of resources?

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I, as have many of us, have been following the various #Occupy efforts with some interest. News coverage asking the plaintive whine "but what do they WANT?" combined with all the various attempts to make it all just a bunch of DFHs, druggies, and so on. (Rather defeated when even the Washington Post has articles like yesterday (Wednesday, November 16) where they lede with an admission that maybe the #Occupy folks did have some points in mind after all):

The movement began as a protest of major economic and political issues, but lately the most divisive issue has become the protests themselves. The Occupy Wall Street encampments that formed across the country to spotlight crimes committed on Wall Street have become rife with problems of their own. There are sanitation hazards and drug overdoses, even occasional deaths and sexual assaults.

So, in this one article, the Post manages to paint the original effort as valid but now has lost its way. In the overall online world there is an oft seen type of commenter known as a Concern Troll. That quoted paragraph from the Post seems to fit the definition to a tee.

Let's examine this a bit though. One of the themes of people like Mayor Bloomberg and Governor Cuomo as well as many other mayors and governors around the country is how things are so bad economically that the states must cut back in so many services, laying off teachers, first responders, cutting Medicaid eligibility, rolling back unemployment benefits, and generally destroying both the social safety net and wages and benefits for state workers. Yet here it is, New York City can incur millions of dollars in overtime costs going after unarmed, mostly peaceful protestors (according to this from WNYC it was over $5M by late October), yet city agencies are scrambling for funds:

The council’s concern over the issue comes as city agencies are scrambling to find ways to cut 2 percent of their current fiscal year budget and six percent in the next fiscal year. Those rollbacks are expected to help the city save $2 billion dollars overall.

As of this past Monday, Oakland had spent $2.4M dealing with Occupy Oakland and Portland, OR had spent $450K just for this past weekend's activities. Cincinnati has spent $128K in overtime. Jon Walker at FDL Action also asked yesterday where the money is coming from for these police actions.

You know how bad you think things are? They're worse than that.

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I was doing my normal review of news web sites this morning when I came across this headline at the Washington Post:

The median U.S. wage in 2010 was just $26,363

At first I was shocked by this but then, not so much. David Dayen had this post at FDL News back in September

There were a couple other pieces of big news from the release of Census data. First, real median household income declined in 2010 by 2.3%. The average household now makes $49,445 a year.

My bold. If you think about it, with the rise of multi-person earners in households, the two figures are not at all incompatible. Nevertheless, it is still a concern It reinforces the message being sent by the folks at the various #Occupy efforts around the country.

This post from NASDAQ.com points out some of the aspects of this:

Though the average wage of a single earner stood at $39,959.30 per year, that number was skewed by those at the very top of the survey - the 93,725 earners who took home more than $1 million annually. That top sliver - a fraction of a fraction of the top 1 percent - collectively took home $224.6 billion , or about $2.4 million per top earner.

...snip...

When one end or the other of a set becomes skewed, averages become extremely misleading. The $40,000-per-year figure seems reasonable until you realize that just over 66 percent of all workers come in under that number. As the SSA states, "by definition, 50 percent of wage earners had net compensation less than or equal to the median wage."

In more prosperous times, it might have been safe to assume that the average 4-person household contained two wage earners, but with U-6 unemployment at a seasonally adjusted rate of 16.5 percent in September, that's far from certain. It looks like half of all American families are a single layoff away from living in poverty.

n the meantime, the major banks earnings are boosted by an accounting quirk called the debt value adjustment, which means that their earnings rise if their creditors perceive their debt as riskier, and thus less valuable, TheStreet reports.

When two facts like these are set against each other, is it any wonder that the occupations in Zuccotti Park, Dewey Square and Grant Park continue to gather momentum?

According to this wiki, the 2011 poverty line for a single person is $10, 890 while for a family of four it is $22,350. In this post from last December, I did a "what-if" based on one person working a full-time, minimum wage job. Obviously, there are millions of people not even close to working a full time, minimum wage job.

This Google Docs Spreadsheet breaks out the income/population spread in $5K increments. This article from The Atlantic offers some perspective on the various group sizes.

Yeah, I'm part of the 99%. Why aren't you?

And because I can:

Only MOTUs and Banksters get TARPs.

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So there I was this morning, having completed my daily check for jobs in my chosen field of Software Quality Assurance and Testing (I do wish it would take longer than five minutes as that would mean there are actually some improvements in the economy but such is life), when I reached the NY Times and saw this article with the headline from Mayor Bloomberg that "‘Tent City’ Goes Beyond Free Speech":

“The Constitution doesn’t protect tents,” he said at a news conference in Queens. “It protects speech and assembly.”

The mayor expressed concern that those exercising a “right to be silent” might be getting drowned out amid the din of the protests.

“We can’t have a place where only one point of view is allowed,” he said. “There are places where I think it’s appropriate to express yourself, and there are other places that are appropriate to set up Tent City. They don’t necessarily have to be one and the same.”

A quick check of der Google shows that a lot of elected officials in places such as Durham, NC, Hennepin Co, MN, Seattle, WA, San Francisco and even Sydney, Australia are apparently in full agreement with Mayor Bloomberg. In fact, in this quick check, it was only Hartford, CT that did not seem to think tents and Tarps are the cause of the decline of Western Civilization. (I'm sure there are other cities fighting the use of tents and tarps and there may even be a couple of others allowing them besides Hartford).

David Dayen at FDL News notes that in fact there is only one tent in Zuccotti Park, a medicine tent. It seems folks owe a bit of thanks to Jesse Jackson for helping to block the NYPD from taking this tent down:

Bloomberg’s foray into originalism notwithstanding, the focus on tents also apparently extends to medicine. Because hours after the mayor made this statement, the NYPD tried to take down the medical tent at Zuccotti Park. Jesse Jackson, who was randomly on the scene in the middle of the night when this went down, helped save the tent, which is apparently not Constitutionally protected. Incidentally, the medical tent is the only tent at Zucotti Park. So he must really have it out for that tent. Such an eyesore!

So tell me Mr Mayor, where in the Constitution does it say that taxpayers have to bail out TBTF banks and give them a "TARP?" It seems that if Banksters and MOTUs get a TARP that protects their bonuses, surely folks who are protesting that largesse can have a tarp to protect themselves from the weather.

It seems to this ol' country boy that so many of the politicians around the globe are paid to be bullish and protect the MOTU and Banksters. Along with the Bloomberg article, today's NY Times had another article about how Gov Cuomo refuses to extend New York's "millionaire's tax":

Even as Occupy Wall Street stokes debate over income inequality, Gov. Andrew M. Cuomo dug in his heels on Monday against extending a so-called millionaires’ tax on high-earning New Yorkers, saying the income tax surcharge would place New York at a competitive disadvantage with neighboring states.

The problem when politicians are so bullish about the MOTU and banksters? When there are a lot of bulls around, there's bound to be a lot of bull shit around.

H/T Peterr for the post title

And because I can: