by Jack
I just wanted to briefly touch on some of the new rules for our new downsized economy. These are not really my ideas, these are just common sense things and the kind of things that we can expect because of our changing demographics and our new economy. We’re downsizing in income, in taxes and in growth and that’s a fact that will not change for quite awhile. Big changes in the way we handle our personal finances and the way the government spends will be critical for our future survival
The new key word for everyone is: Sustainability.
Sustainability is based on a very simple concept: Everything we need for our survival demands the proper use and or management of both our economic and natural resources, government has been doing a terrible job at both! Sustainability creates and maintains the socioeconomic conditions under which humans can exist in harmony with nature and each other, government has not brought us any sort of sustainability at any level – instead, it’s brought us to the point of an economic Armageddon.
Things that must change or the country we know now will someday soon…cease to exist. The following are sorted at random and not in order of importance, I’ll let you do that:
1. Over compensation to CEO’s, that includes, but is not limited to salaries, benefits and retirement. It is not sustainable for CEO’s and a collusion of Board Members to loot their struggling companies for millions whiles share prices plummet and stockholders suffer.
2. Over compensation of labor, especially union labor, wages in the future must be directly tied to his/her worth to the companies bottom line, anything else is unsustainable.
3. Public sector employment must be limited to a sustainable ratio with the private sector. Can’t have too much on the public dime, its not sustainable. Also see rule #2.
4. Personal credit debt must not exceed 1/3rd of your savings. Anything less creates an undue burden on the strength of the nation’s economy. As a nation of debtors we’ve become too vulnerable and subject to economic upheaval- this will change.
5. Savings must equal 90 days of salary. Anything less creates an undue burden on the strength of the nation’s economy. If you refuse to protect yourself its your call, just don’t expect anyone to bail you out; in the new economy it won’t happen.
6. Government must live within its means, with rare emergency exceptions. No wiggle room here – it’s do or die.
7. Government must never borrow from fully funded and otherwise solvent programs such as social security. Borrowing makes these programs unsustainable.
8. Elected officials pay (and retention) should be based on merit and value to the constituency. Failure to meet minimum standards of ethics and job performance must result in termination and not necessarily waiting until the next election.
9. It is the nature of government to grow, without a proper check and balance system government becomes an unsustainable burden on the public and our freedom. Our check and balance here is not working – it must be fixed.
10. The law of supply and demand can’t be violated, even if you are the government.
11. Charity begins at home. We can’t create wealth by giving it away – that’s a sustainable foreign policy. 11. (a) Non-citizens working here and sending their wages to another country must pay a 40% withholding tax, if we don’t do that we’re helping to shift our wealth out of the reach of our own citizens and this is self destructive and makes for an unsustainable economy all others pay a fair tax, see 14.
12. Regarding welfare, able bodied persons must work for food, shelter and clothing in order to reduce it’s cost to those who are funding it, the taxpayers.
13. There is a limit to our economic resources, therefore allocations of our tax money by government must be based upon merit or need, balanced against future maintenance cost and our ability to pay for it. 13.(a) Prison inmates must be at the lowest end of the allocation scale for healthcare, food, shelter and comfort.
14. Regarding income taxes. A consumption tax is the most fair, the more you spend the more you pay. No more complicated forms and tax exceptions or exemptions, no more costly IRS overhead sucking up a huge portion of our tax dollars. It’s either a fair and simple tax or it’s not sustainable.
15. At age 18 everyone owes a year of government service, either in the military or in civil service, but everyone by age 18 must contribute something. If you don’t have a vested interest in your home then there’s no pride of ownership and sustainability is in doubt. We own this country – this is how we must remind every young person entering the work force.
Here are the stats for our economy from 2008 to 2012 we can all use when presenting our arguments.
Check out the charts in the link!
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“A Scorecard on the Economy Under Barack Obama”
By Louis Jacobson
Published on Friday, June 1st, 2012
See how the economy has changed since Obama was elected in 2008.
In the hotly contested presidential campaign between President Barack Obama and Mitt Romney there is one undisputed point: the central issue is the state of the American economy.
End of agreement.
Were the countrys economic troubles deeper than expected when Obama took office in January 2009? Were his ideas and actions effective in righting the nations economic ship? Are things getting better? If so, are they getting better fast enough?
From both parties, the political rhetoric will be contentious for the next five months and, by its very nature, oversimplified. But below the fury there are objective metrics as to how the economy has performed on Obamas watch and where it stands today.
PolitiFact.com, the independent fact-checking operation of the Tampa Bay Times, has produced a scorecard key economic measures to track where the economy stood a year before Obama took office, where it was when he assumed power and how it has trended through May 2012.
Full article with must see charts here:http://www.politifact.com/truth-o-meter/article/2012/jun/01/scorecard-economy-obama/
A very sobering article by Pat Buchanan
Here
Here is an article that everyone should read if they want to understand how the government’s policies have made the economy worse off. All the politicians should certainly read it.
The last paragraph is very important:
What we desperately need is not a misleading debate between stimulus and austerity, but a return to an economy that is allowed to transparently price credit, risk, capital, and labor, so the discipline and feedback of reality can inform our choices about investments of scarce capital and resources.
Jack, with your pull maybe you can get LaMalfa or Annestead or whoever the winner is to read this article.
http://www.theamericanconservative.com/articles/neo-keynesian-trap/
Joseph I’m pretty sure I don’t have any more pull than any other voter, but I would be happy to encourage them read the article. It is incredibly important and thank you for bringing it to our attention. -Jack
Eventually everyone comes around to what we have been saying since last September. It took less time than we thought it would.
Now is too late.
Joseph “The Keynesian Trap” is an excellent article. I always appreciate learning more about what works and doesn’t work, this article supplies both.
OCCUPY, first, I don’t think its too late…I think its close, but I think we can still turn it around, if we have the collective will. But, Americans have this thing for closing the barn door after the horse is out, so I am concerned and it may take a catastrophe to change our thinking.
Secondly, and I say this respectfully, I was well aware of the “virtual theft” committed by many greedy CEO’s and I said years ago, not just when Occupy rolled around. I honestly said so regularly. (A voice in the wilderness, but I said it anyway)
Soaps and I have both been playing the stock market for decades and we knew all about those obscene, unjustifiable, selfish, gluttonous salaries, that theft committed by those with the keys to the company safe. These self serving CEO’s stocked up their company board of directors with their own kind from other corporations run by people just like them. Then with a quid-pro-quo handshake, they wound up serving on boards for their pals. It was all a very cozy, very corrupt and yet perfectly legal. And they fleeced their stockholders with impunity for years. The answer given to those who cried foul, those were fleeced…”Well then don’t invest in those companies.” Which is 100% correct under the rules of free and open trade, but when there isn’t transparency and nothing is free and open, how does the stockholder know whats going on until it’s too late? Answer: He doesn’t. He relies on the data available and takes his chances. This is but one of the many reason why our little investors have not only lost confidence in the market, they lost their saving. It’s an outrage that should never have happened. Of course there will be a day of reckoning, unfortunately I am afraid we will all be punished for the excesses and frauds of those few.
Jack will executive compensation now play an important part in your investing (if you do continue to invest)? With the internet CEO compensation is just a click away.
I’m interested to know how you think a company should determine what a CEO is paid. Also you wrote, “And they fleeced their stockholders with impunity for years.”
How did you arrive at this conclusion?
Also I’d like to know to what degree you think CEO pay has shorted investors…can a number or percentage be placed on it?
How can an investors pressure boards to lower compensation for CEO’s and what good do you think would result from lower CEO compensation?
I know it’s a lot of questions but, if you can answer, I’d appreciate it.
Hi Tina, wow, you posed a lot of deep questions. I hope I am up to answering it right! lol Okay, you asked…
“I’m interested to know how you think a company should determine what a CEO is paid.”
A CEO should be paid as a reasonable ratio of the median of the company employees. Common sense places this ratio at around 20 to 35X that median pay, maybe even more. He should be entitled to normal benefits and this includes a bonus if the company beat projected profit expectations, and so should all employees.
Reality: CEO’s (on average) don’t make anything close to 20-35 times median employee wages, its much more! Oh sure, CEO’s from around the world do fine on that ratio, but not here! Here’ they must live like robber barons. How about this guy, Stephen J. Hemsley, United Health Groups CEO, he makes 1670 times his typical employee salary. A 1670 to 1 ratio! Obscene, unnecessary, unwarranted, demoralizing, greedy, and excessive. By the time he retires he will have taken roughly $1.4 billion out of the company and will he have contributed something special, maybe he founded the company, maybe he had a great invention, maybe he developed all new marketing or built a fabulous business plan? Nope, he’s just the CEO and for that he makes $101,965,000 a year! He couldn’t survive on $2 or $3,000,000 a year…or we couldn’t possibly find anyone good enough for a measly $2,000,000 or $3,000,000 a year!
That’s the mindset and it’s wrong.
Almost every major US company is doing this one-upsmanship with the bosses salary. CEO salaries were climbing into the stratosphere for the last 30 years in a game akin to keeping up with the Jones’.
“And they fleeced their stockholders with impunity for years.” How did you arrive at this conclusion?
It was an inescapable conclusion as I watched stocks drop and corporations fail over fraud and then the real facts surfaced and here’s a corrupt CEO’s who robbed the company coffers and still drew millions in fat salary! Greedy people never can have enough can they?
Then there are CEO’s like B of A’s, Fannie Mae’s, Freddie Mac’s, they made it into the highest top forty of all big CEO salaries when their companies were not even profitable? The CEO of Bank of America brought home $6,450,000 in cash earnings last year and that was 144 times of what the typical Bank of America worker earned. Meanwhile, the company was over-budget by $2,238,000,000. Nice job, eh?
If I didn’t have a sense of proportion and conscience maybe I would like earning thousands of dollars a minute like some of these guys. However, I think I would probably wind up being more like Steve Jobs, his last year’s salary was $1.
“Also I’d like to know to what degree you think CEO pay has shorted investors…can a number or percentage be placed on it?” I’m sure there is such information out here somewhere, but I’m not sure I can find it in any reasonable amount of time. All I can do is look at the headlines and read about what the CEO’s took in salary before the companies went under, TYCO, Enron, Standford Trust, Bernie Madoff’s, Olympus, Lehman Brothers, CMS Energy, etc.
At the heart of every financial scandal is a loss of trust. And what do you see when you find a scandal…an overpaid CEO looting the company
I think the average ratio between CEO and median employ wages is about 300X…but, there is no study that I know of that equates value along with such salaries. John Stumpf at Well Fargo makes 1000 times more than his average employee…is he worth it? The stock is priced about what it was back in 2004. They were hammered like most bank stocks in 09. Sorry, but I don’t see any remarkable leadership here.
Wikipedia notes: Over the past three decades, executive pay has risen dramatically relative to that of an average worker’s wage in the United States[2], and to a lesser extent in some other countries. Observers differ as to whether this rise is a natural and beneficial result of competition for scarce business talent that can add greatly to stockholder value in large companies, or a socially harmful phenomenon brought about by social and political changes that have given executives greater control over their own pay.[3][4] Executive pay is an important part of corporate governance, and is often determined by a company’s board of directors.
“How can an investors pressure boards to lower compensation for CEO’s and what good do you think would result from lower CEO compensation?” Investors almost can’t pressure them short of a mutiny and that almost never happens, but when times are tough like they are now maybe we will see more mutinies? I hope so. Typically you little investors have about as much control as fleas have on the dog. They are mostly along for the ride and know very little about the inner workings of the businesses that they own stock in.
Of course all investors want to make a few bucks and if they do, they are happy enough, but too often they miss the bigger picture. Their company might have paid out far better and had greater solvency and less risk if they didn’t have to contend with mega-salaries for the CEO, CFO, etc., and if the board of directors wasn’t a stacked deck working for management and not for shareholders as they were designed to be.
“What good do you think would result from lower CEO compensation?” I think it would be a good step to restoring investor trust. CEO’s should not be totally insulated against any major economic downturn like French Royalty. You can enjoy a lot of insulation free from worry and play like a king, if you’re making 30 million a year or more! CEO should be more in tune with the real world and real incomes. The worth of the labor of the little guy might be better appreciated if the CEO lived in our world. For the stockholder it would send a strong signal of high integrity and caring that would inspire others. The millions put back into the company instead of the CEO’s pocket might go a long way to making a difference in many lives than just one life. I think it would be a very moral, ethical way to live and I don’t think it would diminish the work ethic of a CEO on bit. A good person he works as a CEO works because he wants to meet the challenges and win! He/she wants his/her company to succeed against the odds and that should be a first priority, not the compensation package.
Well, I’m kinda worn out. Whew…that was a lot for comments. I hope you will accept where I am coming from, because we can both find more points and counter-points and this could go on forever with no real resolution. This is just my opinion…right or wrong, but I think a lot of people share this opinion and they’re angry and they vote. I think a change is coming.
Jack thank you for taking the time and trouble to answer all of my questions. I promise I won’t hit you with counters, LOL.
What I don’t understand is how, in our free society, anyone could, or would want to, attempt to control salaries and other compensation in private businesses. These are decisions made by the people at the top. Little guys are not forced to invest in them or to work for them. The alternative to this freedom is oppressive government intrusion. The only option I can see for people who love freedom and have this concern is social pressure and the individual choice to invest or seek employment in any company.
It does seem like a lot of people are angry but I don’t see that it’s made things different so far.
In terms of investors like yourself I would bet you will include in your research how CEO’s and other top employees are compensated so you can avoid those where it’s really excessive. That way you can personally stick to your values and make a bit if a statement.
Tina, you raised a new point… so I get to answer! : ) Why do we want to control salaries? I don’t. Well, let me rephrase that I sure don’t want government to control salaries!!!!
I do want those board of directors to live up to their obligations as they see the error of their ways.
I do want stockholders to become better informed about scandalous behavior within their vested companies and I am sure they would if the crooks engaged in transparency…but they don’t…transparency undermines their plans! We need the gov. to do a better job at enforcing the rules for transparency. We don’t need new laws either, just enforce the old laws. Gov. has been awful about detecting frauds until too many little investors are wiped out.
I do want government to take extremely harsh punitive action against anyone who dares cook their books, lie to investors, scams, dips into the company coffers or does ANYTHING to compromise the trust of shareholders or the integrity of the stock market.
We’ve had way more of our share of major corporate scandals and I think its because of the kind of college grads we turned out in the 60’s, 70’s and 80’s. They were too focused on getting as much as they can, anyway they can…by hook or by crook. Maybe the corruption was there in the 50’s and we just didn’t notice, I dunno, but we are noticing now and there is too much of it. And I grant you maybe it’s a very low percentage of companies that are run by robber barons, but how many cases of mad cow does it to undermine the entire meat industry?
And here’s my new point. In the final analysis it’s all about how much we value honesty, integrity, moderation, common sense and respect for others.
Jack there’s not a doubt in my mind that you value honesty, integrity, moderation, common sense and respect for others.
I think greed has been celebrated, also there is a lot of pressure to be a star in your field. I read today that we have an abundance of people getting business degrees and that certainly hasn’t helped.
We need laws that are simple to read. It costs companies billions of dollars every year just to comply with regulations and tax laws. It seems they’ve been written to enable bad behavior and ensure that books are difficult to audit.
Certainly we should punish those who break the law.
“…costs companies billions of dollars every year just to comply with regulations and tax laws. It seems they’ve been written to enable bad behavior and ensure that books are difficult to audit. Certainly we should punish those who break the law.” -Tina
Tina, thank you for acknowledging my good intentions and I say that knowing the double edge sword that goes with good intentions!
I totally agree with you on the above quote, well said.
I just wanted to add one thing so there is no confusion about my unusual conservative opinion on CEO wages. By me expressing outrage and indignation on what I believe are unprecedented, extravagant and virtually gluttonous CEO wages, I am trying to bring about the pressure from the private sector for a needed change. I don’t want government to do anything except be competent and fair in their administration. -Jack
The actions of the private sector boards have also contributed to similar actions of public sector in local school boards, city councils and state govts. The argument to double and triple top management salaries was/is used and approved to attract the most qualified. Just look at the salaries of the CSU systems presidents salaries that have been in the news recently. (Didnt Chicos city council pay a CEO recently $200k? Dont remember the title or exact salary, but do remember the uproar over it.)
Jacks stats on the median salary of the non-management workers Ill bet is similar to the private sector. Being one of those non-management workers for many years we would laugh and cry when we got a 1-2% pay raise telling each other wed treat a co-worker to lunch at McDonalds with it, knowing the top CEO got thousands from the same 1-2% raise.
What Im saying is that entitlement mentality of, keeping up with the Jones, they got theirs, Im getting mine set by the private sector has spilled over into the public sector contributing to the huge salaries for managers/supervisors, became the foundation for teachers to justify their salary contract negotiations and resulted in the student tuition increases and reduction of courses and student support services.
The front-line worker that has direct student contact has always been the first one let go or had their hours reduced to below the minimum needed to qualify for benefits. Unless the boards and councils wake up and stop trying to win their next election the students are the ones who will continue to suffer. This also applies to city, county and state services.
The election is tomorrow. Choose wisely.
Here is what is happening in San Jose that validates my earlier comments of what elected public councils and boards have allowed to happen. Now its up to the same people that voted the council members in to office to resolve the budget shortfall.
In the end, no matter how the vote goes, no one wins. Where are the adults in the room that need to say, No instead of pandering for their next election. Most school board and city council members are on the bottom rung of their political career ladders.
http://www.mercurynews.com/pensions/ci_20732035/san-jose-pension-fight-could-have-nationwide-implications?source=rss
San Jose pension fight could have nationwide implications:
The eyes of the nation are on San Jose as a landmark June 5 measure to trim soaring pension costs puts residents of the 10th largest U.S. city at the center of a $1 million-plus battle for their votes.
The city’s yearly pension bill has more than tripled from $73 million to $245 million in a decade, far outpacing the 20 percent revenue growth and gobbling nearly a quarter of the city’s general fund. A city audit blamed the rise on a combination of benefit increases, flawed cost assumptions and investment losses.
Peggy: “Being one of those non-management workers for many years we would laugh and cry when we got a 1-2% pay raise telling each other wed treat a co-worker to lunch at McDonalds with it, knowing the top CEO got thousands from the same 1-2% raise.”
I think everyone has felt that way at one time or another.
Some of this may come from greed, or even just unthinking exuberance about leading the high life, but there are other real world realities that come into play.
A lot of people can do the work of the non-management worker. If they quit or move on there are others to take their place. The number of people who are competent to be the CEO of a large global company are a lot fewer in number. It’s a supply and demand issue. Also when compensation is quoted quite often the bulk of what is received is in stock and stock options and other perks. (Some of those CEO’s lost half or more of their worth in the crash when those stocks crashed), The cost of compensating a CEO is a drop in the bucket compared to the total amount required to compensate all of the work force. A business looks at employee costs in total as an expense against the bottom line. High taxes, inflated healthcare costs, and the cost to comply with health and safety regulations all diminish compensation to employees. In other words what a business must spend to employ hundreds of people is much greater than the employee realizes and is a factor in what has kept employee compensation low. Public sector high wages has exacerbated this because our taxes are needed to meet those obligations.
I’m more concerned with the governments ability to prosecute law breakers. A complex system of laws has only provided cover for extreme behavior. Jon Corzine can’t find $1.8 billion of client money. CAN’T FIND?
http://money.cnn.com/2012/06/04/news/companies/mf-global-corzine/index.htm
Incredible! Also incredible is that this Corzine scandal hasn’t been a major story on a daily basis…but of course he is a Democrat and therefore excused from harsh public scrutiny and disdain in the media.
I am very glad to see some conservatives here refusing to turn a blind eye to corporate greed and income inequality. Peggy is also right about the outrageous salaries for CSU presidents. It is totally unethical for them to receive pay increases at a time when thousands of students are finding themselves unable to pay for college.
Agree that Corzine should be investigated just like Madoff was. Holder should as DOJ being doing his job. But, we know as long as he and Obama are in control thats not going to happen. They cant take the risk of the outcome after Biden saying Corzine was someone he trusted and talked to all the time.
With the elections tomorrow I was trying to make the connection that what takes place in private board rooms also takes place in public school boards, city councils and state-level govt chambers.
Those individuals who are in charge ARE responsible for the mess the cities, states and nations financial mess. But, we as the voters are even more responsible since we are the ones who elected them.
Therefore, the same mind-set that allowed the public sector salaries to reach the unbelievable levels that they are today also exist in the public sector. On a smaller scale yes, but the public CEOs salary of $100k in 2003 that is now $500k and paid for by our taxes are to high too. And while we cant do much of anything about the private sectors salaries, we sure can with our votes do something with the public ones.
Didnt mean to go off track, just bring what I thought was a related issue into the discussion.
Peggy Corzine is being investigated but we sure aren’t hearing much bout it in the media…not like we did with Madoff. And you’re right, it’s because he is a high profile Democrat.
Peggy I thin the abundance of the eighties gave a lot of people the impression that they could demand more no matter what. It is too easy to think the apex is the way things will always be. Governments need to do a better job of evaluating everything that costs the taxpayers.
The hand shake that governments have engaged in, both with unions and the private sector, have done great damage. Government has no business making deals with any entity. The words “public servant” have a meaning that few any longer seem to remember, much less honor. Those with the responsibility for spending and managing tax money should be bound by the highest levels of integrity and honor as well as a great sense of independence.
Private sector companies depend on income from willing purchasers and investors. While they have a fiduciary responsibility to investors all are aware that their investment contains a certain amount of risk. So there is that difference between the public and private sectors.
Our country is suffering from a lack of ethics and values that has colored every segment of our society.