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It’s Time to Stop Digging

1:48 pm in Economy, Government, Media, Politics by dakine01

Well, the Republican Congressional Arson Committee was out-voted Wednesday and the government shutdown has ended and the debt ceiling has been raised. At least for a few months. Now come the analyses striving to set the Conventional Wisdom.

First up we had this from McClatchy on Tuesday, before the shutdown had been ended:

WASHINGTON — It may be one of the most serious missteps of the federal government shutdown.

After weeks of planning, the nation’s spy chief sent home nearly three-quarters of the workers at the government’s intelligence agencies when faced with the partial shutdown. The move, James Clapper later admitted himself, put the United States at greater risk of terrorist attacks. He then reversed course and brought thousands of employees back to work.

Fix The Jobs THEN Fix The Debt

Fix The Jobs THEN Fix The Debt

Of course, as I noted in this post the other day, when there is a shutdown, the managers are almost required to make things as painful as possible for the maximum numbers of people to show the people pushing for the shutdown what happens. For myself, I would have preferred more oversight people kept working than those within the NSA and other members of the so-called “Intelligence Community” being allowed to spy on average citizens within the US, but that’s just me.

Tiger Beat On the Potomac (h/t Mr Pierce) offers up an “Anatomy of a Shutdown.”

Bloomberg reports on the “Republican Civil War“:

A battle for control of the Republican Party has erupted as an emboldened Tea Party moved to oust senators who voted to reopen the government while business groups mobilized to defeat allies of the small-government movement.

CNN’s article on the ending of the shutdown was a bit pessimistic:

The debt cushion now extends through February 7, with current spending levels being authorized through January 15.

That means a few months of breathing room, but little more. After all, the bill doesn’t address many of the contentious and complicated issues — from changes to entitlement programs to tax reform — that continue to divide Democrats and Republicans.

Ah yes, our old friend “entitlement reform.” What a hoary old chestnut that is turning out to be. Why just yesterday the folks at “Fix the Debt” (Alan Simpson and Erskine Bowles’s attempt to stay relevant and invited on talking head shows) held a “Twitter chat.” As Business Insider noted, it did not go well:

“Fix the Debt” just felt Twitter’s sweet, trollish wrath.

Championed by Alan Simpson and Erskine Bowles, Fix the Debt — which The Nation magazine called a “fearmongering campaign to convince Americans that the deficits the United States has run throughout its history have suddenly metastasized” — held a Twitter live chat this afternoon to discuss next steps in America’s ongoing fiscal squabble.

And it didn’t go so well, with the #fixthedebtqa soon teeming with jokesters and those very much against Fix the Debt’s message.

My phrase of choice for people such as Simpson and Bowles and the rest of the austerity freaks is “willfully obtuse.” Between the shutdown, sequester, and overall fear-mongering of the last few weeks, the general economic consensus is the US economy took a $24B hit. Now, anyone who has read my posts these past few years is aware that I am not a big fan of most CW spouting economists but given how often they are surprised at the end results of things, my WAG is the $24B figure is probably conservative.

A note for the Fix the Debt folks (and Paul Ryan who used a Wall St Journal opinion piece to push for “entitlement reform”,) Harry Reid is quoted as saying, it ain’t happening. Now, Reid has backed off some of these type statements in the past, so we just have to make sure to hold him to his words.

I continue to be dumbfounded at the words and actions of people who think nothing of cutting funds for the elderly and the poor in order to throw more money at the DoD or Banksters or BigAg or Big Pharma or Big Insurance. As I noted here a few months ago, most people receiving Social Security are getting what amounts to less than a minimum wage. For many that is the only income they have. And as Forbes notes yesterday, minimum wage workers are not getting rich (though businesses that rely on them are and sticking the taxpayers with the bill.)

So all of you Beltway Village Idiots Pundits, Politicians, and Courtiers, why don’t we do something unique from these last half dozen year. Let’s create some decent paying jobs, build the economy in the US, send a few economic criminals to jail rather than giving them multi-million dollar bonuses, and see what the result is for the economy and those “entitlement” programs. You might be surprised that jobs would mean people paying in would extend the life of these programs with no action required to fiddle and fuck with them.

Besides, if the Russian astronomers are correct, we might be hit with an asteroid in August of 2032, making things moot.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor
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A 9/11 Takeaway: Media Consolidation in Action

12:51 pm in Media by dakine01

Online News

Online News

A couple of years ago, just before the 10 year mark after the 9/11 attack, I wrote this blog post, “A Personal Reflection on September 11, 2001.” If you haven’t read it, please go and do so and I’ll wait for you. It won’t take too long.

You’re back? Cool. But just in case you didn’t want to take the time to read, I want to quote my final paragraph:

The other thing that has stood out in my mind since September 11, 2001, besides wondering about the folks I passed each day going to and from work, was seeing the affects of media consolidation. Like many people, my attention span is not always able to stay with one thing for all that long sometimes. I recall channel surfing that morning and afternoon. I think except for Turner Classic Movies and maybe the Weather Channel, most every other cable and broadcast network available was broadcasting their parent’s top news anchors. TNT and TBS were with CNN. ESPN, ESPN2, Disney Channel all had ABC News. CBS News was on MTV, VHI, BET and the other Viacom networks. Fox News was on FX, Fox Sports, National Geographic, and some others. NBC News was on USA, Bravo, MSNBC, CNBC, and others. I had sixty some channels available to me on the Springfield cable system yet there were only five news sources showing.

This has been the biggest takeaway for me from that day — the media consolidation where the local cable system had over sixty available channels yet only five available news options. We see it in some respects each and every Sunday with the Sunday Talking Heads but those shows are generally speaking to the inside the Beltway Village Idiots Pundits, Politicians, and Courtiers. For most of us, it takes a day of tragedy such as September 11, 2001 to really see media consolidation in action.

While there has been some movement of individual cable networks between and among these five major media companies, and even sales from one owner to another (such as GE selling NBC/Universal to Comcast), the following links will give you a good idea of who owns what in the media these days. I am using the wiki for most of these links out of standard laziness.

Time Warner Assets (parent of CNN)

Viacom Assets (CBS)

Disney Assets (ABC)

News Corp Assets (Fox)

Comcast Assets (NBCUniversal)

Columbia Journalism Review has this list of the above companies as well as many other media companies that extends beyond just the cable networks I have been talking about here.

I do not have a solution. I wish sometimes that the various news divisions within these organizations still reflected the pioneers of broadcast journalism. Even as he sometimes did commercial shows, Edward R Murrow brought in depth reporting. Walter Cronkite did a few appearances in network shows and movies but maintained his credibility. NBC gave us Chet Huntley and David Brinkley then John Chancellor. I would hesitate to designate any current news anchors from these big 5 broadcast media groups as an heir to these men. Instead of a Huntley or Brinkley, we get Disco Dave Gregory and his dance party. Instead of a Howard K. Smith or Harry Reasoner we get The Clinton Guy Shocked by Blow Jobs (h/t Mr Pierce).

Infotainment at best. Pablum for the masses for the most part.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor
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August 2013 Jobs Report: “Good” News That Isn’t

11:27 am in Economy, Jobs, Unemployment by dakine01

Well the August Jobs Reports are in, and, as usual, the numbers were not as expected. From Reuters:

Unemployment Report

Unemployment Report

U.S. employers hired fewer workers than expected in August and the jobless rate hit a 4-1/2 year low as Americans gave up the search for work, complicating the Federal Reserve’s decision on whether to scale back its massive monetary stimulus this month.

Nonfarm payrolls increased by 169,000 jobs last month, the Labor Department said on Friday, falling short of the 180,000 Wall Street had expected and adding to signs that economic growth may have slowed a bit in the third quarter.

CNN points out that the growth for June and July was revised downwards by 74K jobs but they also highlighted (my bold):

Meanwhile, the unemployment rate fell to 7.3%, but the decline came for the wrong reasons, as 312,000 people dropped out of the labor force. Only 63.2% of Americans now participate in the labor force — meaning they have a job or are looking for one. That’s the lowest rate since August 1978.

Reuters also notes the drop in participation in the workforce in a sidebar article here:

The share of Americans aged 25 to 54 who had jobs or were looking for work dipped to 81 percent in August, the lowest level since 1984, a time when fewer women were in the workforce. In another worrisome sign, the share of these prime-age workers who actually had jobs has stagnated at around 76 percent since early last year, well below its 2003-2007 average of around 79 percent.

Most of the reports in TradMed outlets have also commented on the impact of the (lack of) jobs reports on the Federal Reserve “stimulus” (from McClatchy):

The Fed has been purchasing, at a pace of $85 billion a month, government and mortgage bonds in a bid to drive down lending rates in the economy and force risk taking by investors. They must seek better returns than they have been getting on bonds, thus juicing the stock market and commodities such as crude oil and a range of farm products. Fed Chairman Ben Bernanke, who is concluding his term, wants to begin weaning the economy off of this support before his successor takes over.

Of course, this “stimulus” has not really helped the millions of long term un and underemployed, even though a large part of the Federal Reserve “mission” is maximizing employment.

The stock market continues to show its disconnect with most of the economy as it has gone up in response to the jobs report number (via Bloomberg):

U.S. stocks rose to a two-week high as slower-than-forecast jobs growth eased concern about reductions in Federal Reserve stimulus, overshadowing an escalation in tension between America and Russia over Syria.

So, because the Fed may not be able to stop its “stimulus” (read: easy money for the banksters and Wall St), stocks are going up in celebration. Yeah, that makes sense. After all, the casinos always like to show their appreciation for the marks customers.

Bloomberg has an opinion piece up by a Justin Wolfers, who says to concentrate on the revisions. Of course, he also seems to think public sector jobs are not “real” jobs when it comes to the economy:

There is one further detail worth emphasizing. While there were 74,000 jobs revised away this month, more than half were in the public sector, suggesting that we shouldn’t be too hasty in marking down expectations of ongoing private-sector employment growth.

Now, I am one of those who refuses to give up my search for full time employment, preferably in my chosen field of Software Quality Assurance. I am a stubborn SoB and even when I keep receiving discouraging results, I will not fold. I’m sure many people would claim that I am being unrealistic in my desires to find work in my field. But am I any more unrealistic than the CEO of Morgan Stanley who declares:

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McJobs: Bad and Getting Worse

1:37 pm in Economy, Jobs, Media, Politics, Unemployment by dakine01

A couple of years ago, you might remember that McDonalds got a lot of publicity out of a one day hiring binge. I wrote about it here with a follow-up about the Washington Post noticing that it was a “McJobs” economic recovery a couple of weeks later. So here we are, two years later and where exactly are we?

At best, we are treading water. At best.

Today, NBC News‘ web site had this article titled ”In tough economy, fast food workers grow old” discussing the reality of older workers working in the fast food world. They had a companion article on fast food jobs as portrayed in the movies over the past couple of years (presumably in an attempt to off-set the negative implications of the original) but the stories in the first article should be heeded:

In many ways, she is a typical fast-food worker: She’s older than you’d expect, has more years of schooling and works in the industry not for entry-level experience, but to try to keep her head above the financial storm that threatens to swamp her.

Due to the lingering effects of the Great Recession, the Hollywood image of the care-free, freckle-faced, teenage hamburger flipper is no longer the norm. Only 16 percent of fast food industry jobs now go to teens, down from 25 percent a decade ago.

And many of the older workers are educated. More than 42 percent of restaurant and fast-food employees over the age of 25 have at least some college education, including 753,000 with a bachelor’s degree or higher, according to the U.S. Bureau of Labor Statistics.

Jobs: Recovery is at Hand!

Jobs: Recovery is at Hand!

Yes, fast food jobs are not just for teenagers anymore.

I’ve actually noticed a few articles these past few months discussing working poor, low wage jobs, and the on-going unemployment crisis. First up is this from the Washington Post in January on the growing ranks of working poor:

Nearly a third of the nation’s working families earn salaries so low that they struggle to pay for their necessities, according to a new report.

The ranks of the so-called working poor have grown even as the nation has created new jobs for 27 consecutive months and is showing other signs of shaking off the worst effects of the recession.

As I discussed a couple of years ago, minimum wage is not a salary where someone is going to get ahead.

At the end of March, NBC News had an article looking at the growing ranks of poor families in the suburbs:

The number of suburban residents living in poverty rose by nearly 64 percent between 2000 and 2011, to about 16.4 million people, according to a Brookings Institution analysis of 95 of the nation’s largest metropolitan areas. That’s more than double the rate of growth for urban poverty in those areas.

At the end of this article, there were links to some further articles including, “‘By the grace of God’: How workers survive on $7.25 per hour” and “Media coverage of poverty: Why ‘so little’?” (coverage of a Dan Froomkin essay.)

On April 1 (and not an April Fools Day joke) CNN had an article on the lousy pay at the 10 most common jobs in the US:

Food prep workers are the third most-common job in the U.S., but have the lowest pay, at a mere $18,720 a year for 2012. Cashiers and waiters are also popular professions, but the average pay at these jobs tallies up to less than $21,000 annually. There are 4.3 million retail sales workers out there, making them the most common job, but the position pays only $25,310 for the year.

As a companion to the incredibly shrinking pay checks and the increase in the working poor, there are also the stresses put on workers by the jobs. First up here is this article from NBC News in early January, “Temp employees more likely to succumb to workplace hazards: Read the rest of this entry →

This is the “new normal”

12:19 pm in Economy, Jobs, Unemployment by dakine01

Roadside 'Jobs' sign stuck in an old couch

Photo: Doug Geisler / Flickr

The ADP Report on private sector jobs came out today and showed an increase of 158K jobs. David Dayen at the FDL News Desk discusses this report and the Bureau of Labor Statistics report that will be issued tomorrow morning (Friday, November 2):

Plug this all in and what have you got? The consensus forecast calls for an increase in 125,000 jobs. That would be an increase from last month’s increase of 114,000, but below the increases in July and August (August and September will get revised in the report). This generally matches what we’re seeing in the ancillary reports, and shouldn’t be a number that would arouse joy or sadness in either Presidential campaign. However, with the volatility of last month’s topline unemployment rate, derived from the household survey, I wouldn’t be surprised if you saw it increase from the current level of 7.8%.

Either way, it’s a preliminary report, and we probably shouldn’t put as much weight on it as we will, especially with the political implications headed into the election.

While the weekly report of initial unemployment claims was lower than expected (economists surprised!), even this moderately good news is not all that great.

The reality for many millions of us among the long term un and underemployed is the good jobs just are not there. At the end of August, Catherine Rampell of the NY Times had an article headlined “Majority of New Jobs Pay Low Wages, Study Finds.” As I noted in this post, it was very similar to an earlier post from April ’11 I had written that was based on a Washington Post article. Both the Times article and the Post article were based on reports from the National Employment Law Project.

Sunday in the NY Times, Steven Greenhouse had this article on how employers in retail and hospitality industries use (and abuse) part time workers:

But in two leading industries — retailing and hospitality — the number of part-timers who would prefer to work full-time has jumped to 3.1 million, or two-and-a-half times the 2006 level, according to the Bureau of Labor Statistics. In retailing alone, nearly 30 percent of part-timers want full-time jobs, up from 10.6 percent in 2006. The agency found that in the retail and wholesale sector, which includes hundreds of thousands of small stores that rely heavily on full-time workers, about 3 in 10 employees work part-time….snip…

A 2011 survey of 436 employees at retailers in New York City, as diverse as luxury establishments on Fifth Avenue and dollar stores in the Bronx, found that half of the city’s retail workers were part-time and only one in 10 part-time workers had a set schedule week to week. One-fifth said they always or often had to be available for call-in shifts, according to the survey, which was overseen by researchers at City University of New York.

…snip…

Mr. Flickinger, the retail consultant, said companies benefited from using many part-timers. “It’s almost like sharecropping — if you have a lot of farmers with small plots of land, they work very hard to produce in that limited amount of land,” he said. “Many part-time workers feel a real competition to work hard during their limited hours because they want to impress managers to give them more hours.”

What? Could someone have actually spoken a truth here? The modern day wage slave, complete with sharecropping as the ideal.

While CNN has an article this morning attempting to paint the rosy glasses scenario on how the jobs are not all part time minimum wage, even they have to acknowledge the reality of the lower wage since 24% of the “new” jobs are in hospitality and retail:

Read the rest of this entry →

Oh Noes! Wall Street Might Not Get Their Bonuses!

3:26 pm in Uncategorized by dakine01

So I was doing my standard web surfing this AM after I had checked the (non-existent) jobs listings when I saw this from Bloomberg with the title, “Half of Wall Street Employees Expect Bigger Bonuses”:

Almost half of Wall Street employees expect their year-end bonuses to be higher this year than they were a year ago, according to an eFinancialCareers.com survey.

Of the 911 U.S. financial professionals who responded to the e-mailed survey, 48 percent anticipate a higher payout, up from 41 percent in a similar survey last year, the job-search website said today in a statement. Employees of hedge funds and other asset managers were more optimistic than those at banks and broker-dealers, according the statement. Of the respondents, 82 percent work for U.S.-based companies.

Well imagine my surprise this afternoon when I see this one from Bloomberg titled “Wall Street Bonus Pool Seen Shrinking for Second Straight Year”:

Wall Street’s cash bonus pool is likely to fall for a second straight year as the financial industry grapples with market turmoil, economic weakness and new rules, New York state Comptroller Thomas DiNapoli said.

Revenue and compensation trends have “edged downward” since February, when DiNapoli estimated that the 2011 pool for Wall Street declined by 13.5 percent to $19.7 billion, the comptroller said today in a report.

The New York Times presented it this way this afternoon:

It still pays to be on Wall Street.

Even as the financial industry in New York has slashed jobs by the thousands, the average worker who remains is collecting a near-record paycheck.

In a report released on Tuesday, the New York State Comptroller, Thomas P. DiNapoli, said that the average pay package of securities industry employees grew slightly last year and was up 16.6 percent over the past two years, to $362,950. Wall Street’s total compensation rose 4 percent last year to more than $60 billion.

CNBC appears to be trying to split the differences with this report titled “Wall Street Expects Bigger Bonuses But May Not Get Them” as they report on the same survey that Bloomberg covered in the first link:

Revenue is down on Wall Street but expectations for bonuses are up — at least for some workers who have seen their pay shrink since the financial crisis explosion.

A survey from eFinancial Careers shows 48 percent of workers on the Street are looking for higher bonuses than 2011. Expectations are high even as investment banking revenue is down 11 percent for the same period last year while the securities industry overall saw revenue fall 7 percent in the first half.

At the same time, some of the larger firms have been doing better as the headwinds from the European debt crisis subside and hopes grow that the industry will close the year out strongly.

Meanwhile as Wall Street whines its way along, our (not-so-favorite) Masters of the Universe, Lloyd Blankfein and Jamie Dimon are once again daring to spout their nonsense. Jon Walker at FDL Action presents this:

What I find most ironic about these CEO deficit hawks complaining about the “uncertainty” that is hurting the economy is that they are the ones responsible for helping to create said uncertainty to begin with. The deficit obsession created the uncertainty about raising the debt ceiling. Similarly, they constantly pushed for a big deficit deal resulting in the creation of the sequesters, which are seen as a big source of the fiscal uncertainty at the moment. The main “uncertainty” about government policy right now is how the government will clean up the mess created by past efforts to force a deficit deal.

But hey, MotU never have to be accountable for destroying the economy. After all, they deserve those millions dollars of bonuses right? Destroying the global economy is hard ass work so they must be compensated for it.

Meanwhile, CNN actually touches base with the real world with this article on part time jobs being the new normal in employment. Notice how much attention is paid to the ravings of Blankfein and Dimon and the Wall St WATB versus the attention paid to the rest of us in the real world?

And because I can:
Happy Birthday John. RIP

Cross posted from Just A Small Town Country Boy by Richard Taylor

And the Occasional Truth Gets Spoken

6:12 am in Economy, Financial Crisis, Jobs, Unemployment by dakine01

Every now and then, I seem to run across news articles and/or headlines that seem to be just a bit of an understatement even as they are quite factual. Usually it seems, we get things like this one from NBC News yesterday:

New jobless claims take surprise jump

New claims for unemployment benefits took an unexpected jump in the latest week, raising more concerns about the struggling job market and providing further incentive for the Federal Reserve to jump in and help the economy.

As I have written before, it surely does seem as if the economist are ALWAYS surprised. Which still makes me wonder how they manage to keep their jobs as in most career fields, if you are always surprised by what happens, pretty soon you’re looking for a new career.

A couple of days ago, I saw this piece from Alison Linn at the Today show with the headline:

Many in middle class say they are doing worse financially

The Great Recession and weak recovery have left slightly fewer Americans feeling like they are part of the middle class, and many who do still identify themselves as such say they are now worse off.

A new and comprehensive survey on how the middle class feels, released Wednesday by Pew Research Center, finds 42 percent of people who identify themselves as middle class say they are in worse shape financially than before the recession began. About 32 percent are in better shape, and the rest either don’t know or see no difference.

I am part of that 42% though in fact, I have been forced to accept that by income, I am no longer remotely close to “middle class.” I am poor.

NBC News had this piece last night that is very much a companion to the Linn piece:

Stronger economy delivers smaller paystubs for most of us
With recoveries like this one, who needs recessions?

The average household income has fallen steadily for nearly everyone since the start of the economic expansion in June 2009, with average income dropping 4.8 percent in the three years since the upturn began, according to a report released Thursday.

High unemployment, outsourcing of jobs and generally slow economic growth have restrained income for households during one of the weakest and most prolonged recoveries on record, according to the report from Sentier Research.

Last summer, I wrote this post about the interconnectedness of the global economy. Today, the NY Times has this article on how China is now having to deal with surplus inventory:

GUANGZHOU, China — After three decades of torrid growth, China is encountering an unfamiliar problem with its newly struggling economy: a huge buildup of unsold goods that is cluttering shop floors, clogging car dealerships and filling factory warehouses.

The glut of everything from steel and household appliances to cars and apartments is hampering China’s efforts to emerge from a sharp economic slowdown. It has also produced a series of price wars and has led manufacturers to redouble efforts to export what they cannot sell at home.

This actually does make me wonder how long this headline from CNN will be true:

Romney: ‘Big businesses are doing fine’

It is a global economy and eventually what happens to one piece of that global economy WILL trickle down to the rest of the globe. Meanwhile we get to see pics of Prince Harry acting like a single, 27 year-old man visiting Las Vegas.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

Recovery? What recovery?

10:29 am in Economy, Jobs by dakine01

Author’s Note: Please take a few minutes and Join the Firedoglake Membership Program today. FDL provides the tools that help me and others extend our reach with our rants so we need to support FDL when we can.

This morning (Sunday, April 8) I was at the laundromat here in beautiful downtown Ruskin, FL and picked up a copy of the local, Tampa area Jobs Finder free newspaper. I’m sure most all of you have seen these free papers for your local area.

As I skimmed this paper, it reinforced for me that there is no economic recovery, at least not in this part of Florida. When I picked the paper up, I noticed it was awfully skinny so I counted pages. Eight whole pages. With large ads covering each page so I counted up all the ads. Thirty-nine ads for 8 pages. Then I looked even closer. Two ads were for the paper itself. Another two ads were for “start your own cleaning company” services. Then I counted nineteen ads for various types of training programs. Not for jobs. For for-profit training programs that might, maybe, if you can afford it and complete it, maybe get you a minimum wage job if you can survive to complete the six month to a year plus training program being offered.

No ads for local delivery drivers. No handyman type ads. No manual labor/construction service ads. No help wanted for local businesses and restaurants. No ads for jobs for any of the thousands of job types one usually sees in these types of free newspapers.

Now granted, this is obviously anecdotal but I would wager that in a lot of parts of the country, this is the current norm. It isn’t much better with the ads on Craigslist or Monster or other online job search services. One of the metrics I use to check for job market improvements is the number of job ads from body shop/consulting services/head hunter agencies versus the number of ads from employers directly. My WAG is that the former ads are running nearly 10 to 1 over the latter. Businesses that are hiring directly are still able to be extremely picky about who they interview and hire.

But I guess we are not to worry. Everything must be getting better since the Beltway Village Idiots Pundits and Politicians seem to be in full pearl clutching mode after DNC Chair Rep. Debbie Wasserman Schultz went on CNN this morning and accused the Republicans of rooting for the economy to fail. Oh the horror of it all. Too bad that it seems to be beneficial to both parties to have the economy in doldrums. They all seem to forget that the 25M to 30M long term un and underemployed are each and every one, living, breathing, feeling human beings and not just statistics on the page full of numbers

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

Capitalists: Venture vs. Vulture

11:48 am in Economy, Government, Jobs by dakine01

Author’s Note: Please take a few minutes and Join the Firedoglake Membership Program today. FDL provides the tools that help me and others extend our reach with our rants so we need to support FDL when we can.

So there I was, surfing around the intertoobz this morning when I came across this headline at CNN:

Stop vilifying venture capitalists

I have to admit, I was a bit taken aback at the headline as it surely did not reflect anything I had read.

In reading the piece, it starts off in a fairly standard fashion:

From 1984 to 1999, Mitt Romney was in charge at Bain Capital, an investment firm that sought out small and sometimes troubled companies that, with careful management and Bain-provided cash, offered the chance for big profits. Bain, like many venture capital firms, invested in startups with the hope that the profits they made on the successes would outweigh the losses they incurred on the failures.

Venture capital markets are simple things. Two groups of people who want to create new businesses come together. Venture capitalists have money but lack ideas. Entrepreneurs have ideas but lack money. When they get together, they trade and new businesses are born.

Then I realized that the author was not really saying much I could disagree with – other than his implication that Bain Co. was this benign entity only helping entrepreneurs to find the needed funding to bring their ideas to market as wiki defines it.

Today’s Boston Globe addresses this in this article.

Mitt Romney has long called himself a venture capitalist, experience he says helps him understand the economy better than other candidates for president. But he spent much more of his career in leveraged buyouts than in the investments in start-up companies known as venture capital.

Romney’s one true venture deal was Staples Inc., the office supply superstore, two years after he started Bain Capital. He wasn’t the first to discover Staples; another Boston venture firm introduced him to Staples founder Tom Stemberg. But Romney did lead the deal in 1986 in classic fashion – at first investing $650,000 in the start-up, then becoming its chief cheerleader and assisting with strategy to expand the seller of paperclips and pens.

…snip…

With leveraged buyouts, the investment firm purchases a mature company, partially with its money and with debt it transfers to the company. The new owners then usually streamline the business and seek to resell it.

For example, in the same year that Romney invested in Staples, he led the firm in its $200 million acquisition of Accuride, a wheel rim maker that was part of Firestone. Bain put down only $5 million and borrowed the rest, using junk bonds from Drexel Burnham Lambert. Eighteen months later, Bain resold the company and reaped $121 million in its first taste of the big time in the go-go 1980s.

Soon after, Romney steered Bain Capital more toward debt-driven buyouts. There was more money at stake and less risk for Bain than betting on untested technology.

My bold. And there you have it. While maybe starting life as a “venture capital” firm, Bain Co under Romney quickly turned to being Vulture Capitalists using the leveraged buyout.

At this point, I guess I should queue cue the chorus of voices shouting “FREE MARKET! FREE MARKET!”

Point of fact – there is no such thing. The LBO gets to use the debt interest to write down their taxes. By “streamlining” the business, the methods have often included cutting wages and benefits, selling off assets, and dumping pensions onto the taxpayers through the Pension Benefit Guarantee Corp. Dean Baker explains it quite nicely here and here. From the first link:

If private equity firms were successful in making companies more efficient and lowering prices to consumers, then it could lead to more jobs in the economy, even if there were fewer workers directly employed in the firms under its control. (This does not really apply in the current economy, where inefficiency means more workers are employed. This is good in the context of a poorly managed macroeconomy with high unemployment.)

However private equity firms do not profit just by making firms more efficient. Private equity also profits by financial engineering. For example, it is standard practice for private equity firms to load their firms with debt. This means that interest payments, which are tax deductible, are substituted for dividend payments, which are not tax deductible.

Private equity companies also often force firms into bankruptcy to offload debt. This can often include pension obligations, which are then taken over by the Pension Benefit Guarantee Corporation. Insofar as private equity companies are drawing their profit from this sort of financial engineering, it is not providing a benefit to the economy. In fact, it is a direct drain on the productive economy.

So much for the nonexistent “free market.” If a firm has to offload their debts and pensions on the taxpayers, there ain’t a diddly damn thing free about it.

While I am still trying to figure out how it is possible for the LBO group to incur debt for an entity that they are acquiring (don’t you have to actually own something before you can mortgage it?), I’ll close this little rant with this article from today’s Cincinnati Enquirer headlined “Tax breaks for jobs: Half fall short.” A story for another day.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

Limited Good Economic News Won’t Last

10:11 am in Uncategorized by dakine01

"Perishable!" by Young Master Sunshine on flickr

"Perishable!" by Young Master Sunshine on flickr

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You might have seen some headlines from yesterday on the weekly report of Initial Unemployment claims about those claims “falling sharply” (Reuters headline phrase):

Applications for unemployment benefits fell by 37,000 to a seasonally adjusted 391,000 in the week ending September 24 from an upwardly revised 428,000 the prior week, the Labor Department said on Thursday. 

My first prediction today is that the 391K figure first announced will be revised upwards when next week’s report comes out. My second prediction is whatever good news that can be wrung from this report will have a limited overall effect.

CNN’s report was a bit more circumspect with this:

The recent drop to 391,000 maked the lowest level since the week of April 2, when 385,000 new claims came in. 

Still, economists cautioned against getting too excited about the better number. It’s just one week of data, and according to a government spokesman, seasonal adjustments could have impacted the calculation.

…snip… Read the rest of this entry →