Firms See Long-Sought Goal in Sight: Major Pay Cuts

Firms See Long-Sought Goal in Sight: Major Pay Cuts – The outlines of a massive new structural downshift in wages are emerging more and more clearly. The largest wage-cutting wave since the Great Depression has already been sweeping the United States for the last couple years in response to the Great Recession. At small firms, many of these pay cuts have been viewed as a temporary means of reducing costs until the recession is fully ended. The pervasiveness of this trend undoubtedly leads much of the public to assume large corporations are merely seeking the same temporary relief as small firms when they demand concessions in high-profile negotiations. The workers’ pay will surely rise back to previous levels when the situation improves for the company, as occurred during the 1980s, right? Not this time around.The recession camouflages a far more insidious and long-lasting corporate strategy: Instead of temporary pay cuts to get through a few tough months, major corporations have something very, very different in mind.

Cagle Blogs » How does Congressman Glenn Beck Sound?

Greece, Ireland, and Then? –  In May, the International Monetary Fund and the European Union thought they had solved Europe’s financial troubles. They crafted a $150 billion bailout for Greece, part of a $1 trillion rescue fund for vulnerable countries using the euro. With defenses like that, no investor would bet against Europe’s financial stability.  Six months later, Greece is still tottering, and the Irish financial crisis shows that their deterrent was neither as persuasive nor as effective as they thought.  The bailout recipe for Greece, and now Ireland, has a fundamental problem: It fails to acknowledge that these deeply indebted countries will not recover until they reduce their crushing public debt, which in both cases is on its way to hit a staggering 150 percent of gross domestic product within three or four years. Ireland’s total foreign debt, public and private, amounts to 10 times its G.D.P.  Growth could help, raising tax revenues and cutting the ratio of debt to G.D.P. But neither Greece nor Ireland is growing. And the draconian austerity budgets that are the price for the rescue deals — Ireland has promised to cut its budget deficit to 3 percent of G.D.P. by 2014, from 32 percent this year — will make things worse.

 How Germany got it right on the economy – Germans have something to honk about. Germany’s economy is the strongest in the world. Its trade balance – the value of its exports over its imports – is second only to China’s, which is all the more remarkable since Germany is home to just 82 million people. Its 7.5 percent unemployment rate – two percentage points below ours – is lower than at any time since right after reunification. Growth is robust, and real wages are rising.  It’s quite a turnabout for an economy that American and British bankers and economists derided for years as the sick man of Europe. German banks, they insisted, were too cautious and locally focused, while the German economy needed to slim down its manufacturing sector and beef up finance.  Wisely, the Germans declined the advice. Manufacturing still accounts for nearly a quarter of the German economy; it is just 11 percent of the British and U.S. economies (one reason the United States and Britain are struggling to boost their exports). Nor have German firms been slashing wages and off-shoring – the American way of keeping competitive – to maintain profits.

Can the EU survive? – For nearly two years now, I’ve been worried that one or more of the Eurozone countries might do an Argentina. I’ve been asking whether the Eurozone could survive. I think it’s time to change the question. Can the EU survive? I don’t know the answer. But I think there’s a serious risk that it won’t. And I think the EU would have a better chance of surviving if the Eurozone were killed off quickly.The whole purpose of the EU was to stop the European countries fighting one another. That’s certainly a laudable purpose. But good fences make good neighbours. And a big argument over which neighbour owes how much to which other neighbours is not conducive to a peaceful neighbourhood. And there’s going to be a very big argument if and when some Eurozone countries and their banks cannot pay their debts to other Eurozone countries and their banks. Not to mention their debts to the ECB. This will be much worse than UK and Iceland: because there’s much more money at stake; because there are more players involved; and because everybody owes everybody money, so if A can’t pay B then B can’t pay C, and so on. It’s not just an argument about debts and defaults. It’s an argument about who is responsible for unemployment, austerity, and recession. Each country will blame other countries for its economic troubles.

Consensus???!!! – Consensus is hard to find in Washington these days. There wasn’t that much just before before this month’s election, and there is a lot less after it. President Obama is willing to compromise on extending the Bush tax cuts and on cutting spending, but many Democrats won’t follow his lead. Similarly, any deals by soon-to-be House Speaker John Boehner are likely to run afoul of newly elected Tea Party Republicans or of a filibuster by their compatriots in the Senate. It’s going to be very difficult to find 60 votes in the Senate for anything controversial during the next two years. The middle has gone out of American politics, and the extremes work against compromise. Failure to govern can be a good thing if the ship of state is on a safe and sustainable course, but it isn’t.

The war of politics and finance -There is talk of upping the euro bailout fund: European Central Bank council member Axel Weber said governments can increase the size of the European Union-led bailout fund if necessary to restore confidence in the euro. “Seven hundred and fifty billion should be enough to assure the markets,” Weber said at the German embassy in Paris late yesterday. “If not, it will have to be increased.” The Spanish approach the same issues with another tone:Spain has warned financial traders betting against its debt that they will lose money, in a defiant challenge to the markets which are driving Madrid’s cost of borrowing sharply higher.José Luis Rodríguez Zapatero, Spanish prime minister, on Friday ruled out any rescue package for the country even as the premiums demanded by investors to hold Spanish sovereign debt over that of Germany’s rose to euro-era highs.
Dying with debt: A dirty little retirement secret – Retired Americans are racking up credit-card debt like never before, be it for vacations or medical expenses, and a surprising number have no intention of paying it off before they die. Nearly 40% of retired Americans said they’ve accumulated credit-card debt in their twilight years — and aren’t worried about paying it off in their lifetime, according to a survey released by CESI Debt Solutions. "At the end of the day, some people of a certain age say, ‘It’s too late in the game for me to do anything about it. I can’t win. So I’m just going to stop playing the game,’" said Neil Ellington, executive vice president at CESI.But remember that this is the generation that frowns upon talking about money — and certainly would be embarrassed by any potential money problems. Add in a recession that slashed many retirement accounts in half and that leaves a generation sinking deeper into debt, with a diminishing timeframe to do anything about it — and too much pride to talk about it.

Children ‘to be hit by IMF plans’ – Thousands of children will be hungry and cold if the Government rolls out cost-cutting plans signed off by the International Monetary Fund (IMF), it has been claimed. On Monday, the IMF issued an academic paper, signed off by lead negotiator in Dublin Ajai Chopra, that minimum wage and dole payments should be cut. A leading children’s rights campaigner warned any cuts in social welfare payments or the minimum wage will directly affect underprivileged youngsters across the country. Fergus Finlay, Barnardos chief executive, called on politicians not to agree to any plan that will plunge households further below the breadline. He said: "There are thousands of families in Ireland who live at or below the poverty line. That means there are thousands of children below the poverty line. Those children are hungry, cold and at risk of ill health because they live in damp unheated houses. I can’t think of a single good reason to make things worse for those children."

Affordable Care Act Repeal Unlikely, Unpopular: Nobody is head over heels in love with the Affordable Care Act, but McClatchy notes that much of the discontent is from the left and the public constituency for repeal is quite small: On the side favoring it, 16 percent of registered voters want to let it stand as is. Another 35 percent want to change it to do more. Among groups with pluralities who want to expand it: women, minorities, people younger than 45, Democrats, liberals, Northeasterners and those making less than $50,000 a year. Lining up against the law, 11 percent want to amend it to rein it in. Another 33 percent want to repeal it. Among groups with pluralities favoring repeal: men, whites, those older than 45, those making more than $50,000 annually, conservatives, Republicans and tea party supporters. Nothing surprising about the demographics here or the outcome. If you polled me on this, I’d count myself as someone who wants to expand the law. To give a more nuanced view, though, I think there’s room for both expansion and curtailment. .

GOP Wants ‘Rigorous’ Oversight Of Consumer Agency In a challenge to the recent financial reform legislation, House Republicans sent letters asking inspectors to exert "rigorous" oversight on the new Consumer Financial Protection Bureau. Reps. Spencer Bachus (R-Alabama) and Judy Biggert (R-Illinois) sent letters to the inspectors general at the Treasury and the Federal Reserve, the Wall Street Journal reports. The letters, which ask for information about how the agency is being set up, are the first major example of how Republicans, who now control the House but not the Senate, plan to challenge the summer’s financial reform through non-legislative means. "History indicates that the process of setting up a new government agency is extraordinarily challenging and difficult," the two lawmakers wrote, according to Bloomberg. "To date, we know very little about the activities being undertaken by the Treasury to establish the Bureau."

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