BY the time President Obama gave his State of the Union address last year, the speech felt like an old friend. It had been part of my life — from the brainstorming sessions in late November 2009 to the last minute fact-checking. I knew when all of my favorite lines were coming. That led to an awkward moment during the address when I sprang to my feet, applauding the president’s tacit endorsement of the free-trade agreement with South Korea, before noticing that the only other person cheering seemed to be Ron Kirk, the special trade representative.
It’s Your Money
September 23, 2019
When I first meet people
They always ask…
So… what do you do…
I respond…
We save companies money…
That normally gets a positive response…
People like to save money…
Now….
Do you have time for a quickie quiz…
How many of you have signed a contract…
Thought you got a good deal
Possibly a great deal and…
Never looked at the paperwork again
Can I see a show of hands…
You…
Yea…. you over there
Is your hand up or are you scratching your head…
It looks like you wanted to put your hand up
Come on…
Let’s be honest
We all have done it…
I believe that all of us have good intentions…
But let’s face it we just get busy
No matter how you planned your day
Something happens and you are once again
Putting out fires
The first thing we do with any potential client
Is validate what they are currently paying
Are you paying the exact rate you signed for…
Believe it or not…
This is not always the case
I have people tell me….
Yea… we signed a contract and I was told
We are paying well below market prices
That is always great to hear
But let’s see if that is their reality…
Do you mind if I see your contract…
And could we also get a copy of your latest bill…
I can’t tell you how many times
We find that people are being charged
The wrong rate
And most of the time it is for more than
What you signed for
We always direct them to call the provider
And clarify…
Why are we paying this higher rate…
Our contract states we should be paying xxxx amount
Guess what the response normally is…
Oh, we’re sorry
That was billed improperly
Let us correct that…
We can give you a credit
Or send you a refund
How nice of them….
If they were under charging you
I bet they would contact you and say
We have a problem
However, if they are over charging you
You don’t hear from them
This is your money…
Don’t be afraid to ask for it…
HBS clients have received thousands of dollars in refunds
Always be aware of what you are paying…
And if you are not sure…
Give us a call
HBS leaves no stone unturned in our search for savings
We find ways to save you money
We Are at Your Service
September 13, 2019
Many people I speak to
Admit to budgeting by….
How much did we spend last year…..
How do you know what you spent last year….
Was the correct amount
Is that your comfort level…
In today’s growing market
It is good to look at all your business costs…
Do not take what you paid last year
As the cost of doing business
HBS specializes in validating what you currently are paying and
Providing savings on everyday costs that many people take for granted…
• Communications…Voice…Cloud Solutions…Internet / Data Connectivity
• Utilities… Gas and Electric Supply / Demand Solutions…Renewable Energy
• Unemployment Tax…How do you know your current unemployment rate is correct…
• Sales Tax…State Tax laws are complicated…You may be paying too much and not knowing it
• Property Tax…Many businesses continue to pay property taxes on prior assessments
Our clients are always surprised
When they first learn how much they are able to save…
We invite you to be our next success story
You too…
Can increase your efficiencies and
Lower your everyday business costs
We are at your service…
Data Up
May 29, 2014
I remember the good old days
Back in early 90’s
The internet was new
Everyone was trying to get online
And we were all using…..
Dial up
Honey…
I just dialed up the internet
I am going to run to the hardware store
We should be connected….
By the time I get back
Yawn…….
After tolerating the dial up
For several years
The phone company
Came up with a new way
Of delivering the internet over copper
Welcome to the world of DSL
A big small step forward
Is there anyone out there still using DSL?
As we continued to thirst for
Faster access to information
Fiber was introduced
While copper was like driving down
A one lane road
Fiber was like driving on
A 24 lane highway
However;
As access to information
Was getting faster and faster
The cost was getting
Higher and higher
Deregulation was introduced
To bring competition to the field
Competition was designed to control prices
For a time
This apparently was not happening
What should we be looking at…
When we are buying access to information
Do we look for the lowest price?
Do we pay the higher price?
Is more better?
Are all speeds the same?
Should I want a faster download speed?
Or
Faster upload speed?
These are all questions everyone should be asking
We find
That many people are not asking these questions
Advertising is designed to
Spark an interest
Make people call
Get customers in the door
But as we know
Cheaper is not always better
You have to understand
What are your needs
There is no one size fits all solution
At HBS we listen
We evaluate what you are currently doing
Determine how to deliver
What you want
Designed to meet your needs
Several years back
Businesses were paying over $1000 a month
For fast data access
Slowly the prices began to come down
As competition entered the field
But companies were still paying
$600 – $700 a month for fiber
Enter…..
Comcast and Fios
You say Tomatoe ….
I say Tamatoe….
Both are good companies
Making a push to
Saturate the commercial market
Looking to capitalize on price and speed
Comcast and Fios
Are both tripping over themselves
Offering high speed data access
At a fraction of the cost
There are currently big savings
To be found in the data delivery field
HBS represents both Comcast and Verizon
Our services extend to lighting up
A center city building
Bringing access to all the tenants
To bringing phone and data capabilities to your office
Many clients are beginning to use Comcast and Fios
For redundancy
(As a fail over should their T1s or PRI go down)
Some keep the voice on their T1s or PRIs
And move their data to Cable and Fios
Not only will we guide you to the best solution
We will manage the installation
Delivering the product to your location
Getting you up and running
Providing service support
As the need arises
HBS is here
To guide our clients thru the
Maze of information
Delivering smart solutions
To your business
Unemployment Insurance Cuts Come After Tax Cuts: Report
August 3, 2012
As reported in Huffington Post
WASHINGTON — In March, the commissioner of Georgia’s Department of Labor, Mark Butler, explained how the state’s unemployment insurance trust fund had gone broke.
“In an attempt to curry favor with Georgia businesses, Gov. Roy Barnes declared a ‘tax holiday’ before Barnes’ failed 2002 re-election campaign,” Butler wrote. “Businesses stopped paying into the trust fund. By the time we hit the Great Recession –- and many, many Georgians became unemployed through no fault of their own — the $2 billion Unemployment Insurance Trust Fund had been reduced by $1.3 billion.”
“Plainly speaking,” Butler added, “Georgia had not saved for that rainy day.”
Georgia lawmakers agreed to much of Butler’s plan to restore the trust fund to solvency — cutting the duration of benefits in an effort to save money. The legislature also modestly increased the amount of wages subject to the state payroll taxes that fund the unemployment system.
While the cuts to unemployment benefits were relatively drastic, the tax cutting that preceded them was typical. Most states failed to make prudent decisions about funding their unemployment trust funds over the years, according to a comprehensive report from the National Employment Law Project, a worker advocacy group.
States now owe $43 billion to the federal government, according to NELP policy analyst Mike Evangelist, and it’s likely lawmakers will rely more heavily on benefit cuts than tax hikes in order to get out of debt.
“Over the past 30 years, support for accepted norms in the UI program has been systematically eroded, with state lawmakers now more willing to go after long‐standing features of the program, such as the duration of state benefits or suitable work protections that were previously seen as untouchable,” Evangelist wrote in the report.
Businesses pay both state and federal unemployment taxes for each worker on payroll — state taxes fund the first 26 weeks of benefits for laid off workers, and federal taxes pay for extra benefits that Congress puts in place during recessions. When a state unemployment trust fund runs dry, the state can borrow from the federal government to pay benefits. If a state borrows for too long, federal payroll taxes go up.
When under pressure to refill trust funds, it used to be that state lawmakers would seek savings by tightening eligibility rules. But this year Georgia joined six other states states that had cut the standard 26 weeks duration of benefits for the first time ever. While each state differed in how they cut benefits, Georgia put benefits on a sliding scale that goes up and down with the state’s unemployment rate. When the rate goes down, the duration of benefits could be as low as 14 weeks. The upper limit is 20 weeks.
The states were strapped for cash because tens-of-millions of additional people filed claims, but also because of tax cuts.
According to Evangelist, 31 states cut unemployment taxes 20 percent or more between 1995 and 2005. And from 2000 to 2009, the overall percentage of wages subject to state unemployment taxes fell to the lowest level in the history of the federal-state unemployment system. In 2007, states were collectively $38 billion shy of recommended trust fund reserves.
Doug Holmes, an unemployment insurance expert who advocates for businesses, suggested states would be unwise to try and meet funding thresholds “because to do so would require dramatic increases in state unemployment taxes that would place these states in an uncompetitive position to attract and keep businesses in their states.”
It’s unlikely states will want to hike taxes to pay for unemployment, Evangelist wrote in his report. “Realistically, it is unreasonable to believe that states will close this gap without doing further harm to the UI program’s ability to sustain unemployed workers and their families through periods of temporary job loss.”
‘We’ll Fight This To The Death’: The Vicious Capitol Hill Battle Between Banks and Credit Unions
March 22, 2012
As reported by Zach Carter and Ryan Grimm of the HuffingtonPost
WASHINGTON — In early February, Alabama Republican Spencer Bachus called for a meeting between two of the most quietly influential interest groups in the nation’s capital: credit unions and community banks.
Bachus, chairman of the powerful House Financial Services Committee, was looking to ensure the passage of a slew of federal favors benefiting both sides. All the lobbyists had to do was show up at a meeting and figure out how to work together.
It was too much to ask.
The Credit Union National Association and the Independent Community Bankers Association immediately agreed to the sit-down, but as the meeting approached the community bankers abruptly cancelled the event, according to lobbyists and congressional staffers familiar with the plans.
“There was supposed to be a couple of joint meetings with different congressional offices and with the leadership of Financial Services. And the banks decided that we had too many bills in play and they didn’t want to meet with us,” says Linda Armyn, a senior vice president for Bethpage Federal Credit Union.
It’s no small matter to cancel on a committee chairman. ICBA had performed the Capitol Hill equivalent of cussing out the boss at an office Christmas party. Still, the group has no regrets.
“There won’t be any meetings. There won’t be any compromise. There won’t be any deals. There won’t be any discussions,” says ICBA chief economist Paul Merski.
To most folks, community banks and credit unions are indistinguishable. Both are often viewed as good-guy alternatives to Wall Street banks, eschewing the too-big-to-fail crowd’s phantom, subprime profits in favor of safe, consumer-friendly products. After the 2008 financial crash, that strategy allowed them to reap financial rewards and reputational halos. The “Move Your Money” movement and Bank Transfer Day shifted billions of dollars worth of business from Wall Street to these small lenders.
But community banks and credit unions each operate under different government charters and regulatory regimes. They compete for the same good-guy customer base, and are openly hostile with each other on Capitol Hill. Their mutual animosity is frequently unmoored from profit margins and bottom lines, a passionate conflict that at times seems like a Washington version of the Hatfields and McCoys.
“The credit unions have become the skunk at the garden party,” Merski says.
“The hypocrisy of the bank lobby appears to have no end,” Credit Union National Association (CUNA) CEO O. William Cheney said during a November hearing.
But while the dispute between the two groups goes back decades, their most recent clash serves as a window into the way American government works — or doesn’t work — in the 21st century. Legislative scuffles between entrenched interest groups occasionally gather enough momentum to attract public attention. Last year’s blowout over debit card swipe fees hijacked the Senate schedule for nearly six months, and the Stop Online Piracy Act sparked furious online protests.
Most of the time, the special interest stranglehold over Congress is exercised relatively quietly, in small-bore negotiations that never really get off the ground. Even if the bills go nowhere, they present lucrative fundraising opportunities for lawmakers, while devouring the time and attention that elected officials could be using to attend to the public good — say, solving the jobs crisis, ending homelessness or improving the standard of living for the one in four American children who currently live in poverty.
Instead, lawmakers expend tremendous amounts of energy trying to bridge emotional divides between favored interest groups that are accustomed to getting their way and have little interest in compromise — like, for example, credit unions and community banks.
Few fight harder in Washington than your cuddly local lenders.
“People always say it’s Wall Street, but the big banks aren’t the most potent lobbyists, because everybody hates them,” says Rep. Barney Frank (D-Mass.). “It’s the credit unions and the community banks because of their grassroots networks.”
A big bank like Citigroup appears to have oceans of lobbying clout that a small community bank lacks. But every congressional district has a community bank and a local credit union. As united forces, the ICBA and CUNA can (sometimes) defeat even their Wall Street competitors on the Hill.
This week, they will flex that muscle. CUNA expects 4,000 members of the credit union community to fly in to Washington for the group’s annual lobbying convention — including at least one from every congressional district.
Like the credit unions, community banks will be making their annual descent on Capitol Hill later this year. Both groups have profitable requests pending in Congress.
The Communities First Act, introduced in April 2011, reads like ICBA’s wish-list for the entire year. During a November hearing on the bill, Georgetown University Law School professor Adam Levitin criticized the bill as a set of unearned giveaways for small financial firms — tax cuts, accounting gimmicks to hide losses, weaker capital requirements and even immunity from some forms of scrutiny by the Securities and Exchange Commission. But whatever its impact on communities, the bill would undoubtedly help banks pad their profits.
“It does nothing for communities,” Levitin said, calling the bill “narrow, special-interest pleading.”
Credit unions, meanwhile, are seeking legislation that would allow them to expand their business lending operations. Credit unions are currently barred from issuing business loans in excess of 12.25 percent of their total assets, an arbitrary rule that banks were able to slip into a 1998 law over the objections of both credit unions and President Bill Clinton’s administration.
Over the past year, credit union lobbyists have amassed 121 co-sponsors — 46 Republicans and 75 Democrats — for the Small Business Lending Enhancement Act, a bill that would raise that business lending cap to 27 percent. Credit unions argue that allowing them to make more business loans will help small firms hire, claiming the bill will create 140,000 jobs.
Community banks and credit unions need each other. Neither the Communities First Act nor the Small Business Lending Enhancement Act is likely to pass on its own, prompting Rep. Bachus’ attempt to combine them. (Bachus’ office did not return requests for comment). The only trouble? The credit unions and community banks have been at each other’s throat for decades.
“It’s a very visceral reaction they have,” says Ryan Donovan, a top CUNA lobbyist, referring to community bankers. “The ICBA would rather have their entire legislative agenda burned than let our small bill pass.”
On the bill that would lift the lending cap on credit unions, ICBA’s Merski says,”We’ll fight this to the death because of the fundamental philosophical unfairness. It’s almost un-American, really.”
Banks have little to lose from the credit union bill, and large potential profits to gain from their own legislation. Credit unions do very little business lending. For the most part, they stick to simple, standardized consumer products like checking accounts, mortgages and credit cards. Credit unions are generally small, even compared to community banks, and account for just 1 percent of the commercial lending market nationwide, according to CUNA, with an average loan amount of only $220,000.
“We’re not talking shopping malls,” explains CUNA senior vice president for communications Mark Wolff. “We’re talking landscaping and bakeries.”
Even community banks that compete head-to-head with specific credit unions simply will not lose very much if the credit union bill passes. The credit union group only pegs the gains from their legislation at 140,000 jobs — a drop in the bucket relative to the jobs crisis. Yet the legislative arm-wrestling continues.
“If you look at the marketplace, the banks have 95 percent of the market share. There isn’t a whole lot of data that supports we’re taking their business,” says Armyn of the Bethpage Federal Credit Union. “I mean, we’re taking a piece of their business, but if you look at it on the grand scale, they still have 95 percent of the market share.”
But the battle isn’t really over balance sheets. It’s over those “philosophical” differences Merski cites. Talking to members of both groups, bankers essentially think credit unions are tax cheats, while credit unionists see bankers as greed-mongers.
Credit unions are nonprofits owned by their customers, a unique status among financial institutions which allows them to be exempt from income taxes. But a credit union charter comes with major drawbacks — they can’t pay dividends to shareholders, since they don’t have any shareholders, nor can their executives enjoy wild paydays in the form of stock options. They also only have one option for growth: profit. Banks can take on debt or issue stock to capitalize on profit opportunities, but credit unions have nothing but year-end earnings to draw on.
Bank executives do enjoy higher paydays. Among credit unions with at least $100 million in assets, the median CEO pay comes out to $211,558, according to CUNA. According to data compiled by SNL Financial, publicly traded banks with less than $10 billion in assets (a common threshold in regulation and legislation to define a “community bank”) pay out median CEO compensation of $385,577.
As with most CEO pay in the financial industry, the bigger the bank, the better the potential payday, but community banks with less than $500 million in assets still paid a median of $248,437 — about 15 percent better than the median for all credit unions over $100 million in assets, according to the SNL Financial data. The largest credit union is Navy Federal, with $46 billion in assets.
But both sides use such relative metrics to criticize the other.
“They don’t pay taxes!” says ICBA’s Merski.
“They don’t get that we really are a different model,” counters CUNA’s Wolff.
Both sectors, of course, have always been free to change their charters whenever they wish. Credit unions file to become banks all the time, and there is no law barring banks from adopting a credit union model.
This year’s skirmish between community banks and credit unions will almost certainly dwindle into obscurity, a common fate for special interest legislation. Next year the two groups will undoubtedly concoct new slates of legislative demands, as is the nature of lobbying. But the public has still paid the opportunity cost for the lobbying push.
The dispute between credit unions and community banks is one of an endless array of Washington feuds that tend to not connect with the broader public interest. Even if the two groups had been able to put aside their differences and move their legislation forward, the tangible benefits for everyday Americans would have likely been minor. It doesn’t make much difference for most businesses whether they get their loan from a small bank or a credit union, so long as they get their loan. And the benefits that ICBA was seeking amount to a set of unhelpful deregulation.
Even if the uncounted hours of attention that were devoted to introducing the bills, garnering co-sponsors, holding hearings and briefing lawmakers had borne fruit, the public would still have been left out of the equation. Similar disputes take place every year between dozens of special interests, on every committee in Congress. And, in this case, the special interests groups themselves say the fuss has largely proved to be just that.
“We all just want to move forward and grow,” says Armyn, the Bethpage Federal Credit Union executive, frustrated with the political gridlock. “To me, it’s just silly.”
States ignored warnings on unemployment insurance
April 28, 2011
As reported by Ebru News Feb 19,2011
WASHINGTON (AP) – State officials had plenty of warning. Over the past three decades, two national commissions and a series of government audits sounded alarms about the dwindling amount of money states were setting aside to pay unemployment insurance to laid-off workers.
“Trust Fund Reserves Inadequate,” federal auditors said in a 1988 report.
It’s clear now the warnings were pretty much ignored. Instead, states kept whittling away at the trust funds, mostly by cutting unemployment insurance taxes at the behest of the business community. The low balances hastened insolvency when the recession hit, leading about 30 states to borrow $41.5 billion from the federal government to pay unemployment benefits to their growing population of jobless.
The ramifications will be felt for years.
In the short term, states must find the money to pay interest on the loans. Generally, that involves a special tax on businesses until the loan is repaid. Some states could tap general revenues, making it harder to pay for schools, roads and other state services.
In the long term, state will have to replenish their unemployment insurance programs. That typically leads to higher payroll taxes, leaving companies with less money to invest.
Past recessions have resulted in insolvencies. Seven states borrowed money in the early 1990s; eight did so as a result of the 2001 recession.
But the numbers are much worse this time because of the recession was more severe and the funds already were low when it hit, said Wayne Vroman, an analyst at the Urban Institute, a liberal-leaning think tank based in Washington.
The Obama administration this month proposed giving states a waiver on the interest payments due this fall. Down the road, the administration would raise the amount of wages on which companies pay federal unemployment taxes. Many states probably would follow suit as a way of boosting depleted trust funds.
Businesses pay a federal and state payroll tax. The federal tax primarily covers administrative costs; the state tax pays for the regular benefits a worker gets when laid off. The Treasury Department manages the trust funds that hold each state’s taxes.
Each state decides whether its unemployment fund has enough money. In 2000, total reserves for states and territories came to about $54 billion. That dropped to $38 billion by the end of 2007, just as the recession began.
Over the next two years, reserves plummeted to $11.1 billion, lower than at any time in the program’s history when adjusted for inflation, the Government Accountability Office said in its most recent report on the issue. Yet benefits have stayed relatively flat, or declined when compared with average weekly wages.
“If you look at it from the employers’ standpoint, they’re not going to want reserves to build up excessively high because then there’s an increasing risk that advocates for benefit expansion would point to the high reserves and say, ‘We can afford to increase benefits,”‘ said Rich Hobbie, executive director of the National Association of State Workforce Agencies.
A review of state unemployment insurance programs shows how states weakened their trust funds over the past two decades.
In Georgia, lawmakers gave employers a four-year tax holiday from 1999-2003. Employers saved more than $1 billion, but trust fund reserves fell about 40 percent, to $700 million. The state gradually has raised its unemployment insurance taxes since then, but not nearly enough to restore the trust fund to previous levels. The state began borrowing in December 2009. Now it owes Washington about $588 million.
Republican Mark Butler, Georgia’s labor commissioner, said his state had one of the lowest unemployment insurance tax rates in the nation when the tax holiday was enacted.
“The decision to do this was not really based upon any practical reasoIt was based on a political decision, which I think, by all accounts now, we can look back on and say it was the wrong decision,” Butler said. “Now we find ourselves in a situation where we’ve had to borrow money and that puts everyone in a tight situation.”
In New Jersey, lawmakers used a combination approach to deplete the trust fund. The Legislature expanded benefits and cut taxes, as well as spending $4.7 billion of trust fund revenue to reimburse hospitals for indigent health care. The money was diverted over a period of about 15 years and helps explain why the state’s trust fund dropped from $3.1 billion in 2000 to $35 million by the end of 2010. The state has had to borrow $1.75 billion from the federal government to keep the program afloat.
“It was a real abdication of responsibility and a complete misunderstanding of how you finance an unemployment insurance fund to make sure you have sufficient money in bad economic times,” said Phillip Kirschner, president of the New Jersey Business and Industry Association. “In good economic times you build up your bank account, but in New Jersey, they said, ‘Well, we have all this money, let’s spend it.”‘
California took its own road to trust fund insolvency. Lawmakers kept payroll tax rates the same, but gradually doubled the maximum weekly benefit paid to laid-off workers to $450. The average benefit now is about $300 and is paid for about 20 weeks.
Loree Levy, spokeswoman for the California Employment Development Department, said lawmakers were warned of the consequences.
“We testified at legislative hearings that the fund would eventually go broke and would become permanently insolvent if legislation wasn’t passed to increase revenue,” Levy said.
California has borrowed $9.8 billion to keep unemployment insurance payments flowing. It owes the federal government an interest payment of $362 million by the end of September.
In Michigan, unemployment insurance tax rates declined from 1994 through 2001. The trust fund prospered during those years because of the healthy economy and low unemployment rate. Then the recession arrived and reserves plunged. In response, Michigan lawmakers passed legislation that lowered the amount of wages subject to unemployment taxes from $9,500 to $9,000. They increased the maximum weekly benefit from $300 to $362. The trust fund dropped from $1.2 billion to $112 million over the next four years. In September 2006, Michigan was the first state to begin borrowing from the federal government.
Other states held their trust funds purposely low as part of an approach called “pay-as-you-go.” Texas is a nationally recognized leader of this effort. Its philosophy is that, in the long run, it’s better for the economy to keep the maximum level of dollars in the hands of businesses rather than government. Texas had to borrow $1.3 billion in 2009. State officials have no regrets about their policy.
“By keeping the minimum in the (trust fund), Texas is able to maximize funds circulating in the Texas economy, allowing for the creation of jobs and stimulation of economic growth,” said Lisa Givens, spokeswoman for the Texas Workforce Commission.
The pay-as-you-go approach goes against the findings of a presidential commission that looked into the issue of dwindling trust funds in the mid-1990s.
“It would be in the interest of the nation to begin to restore the forward-funding nature of the unemployment insurance system, resulting in a building up of reserves during good economic times and a drawing down of reserves during recessions,” said the Advisory Council on Unemployment Compensation, which President Bill Clinton appointed.
Hobbie, from the association representing state labor agencies, said there’s no way to tell which approach is better over the long haul. He acknowledged that keeping reserves at the minimum in good times goes against one of the original aims of the program – to act as an economic stabilizer in bad times. That’s because businesses are asked to pay more in taxes, which leaves them less money to invest in their company.
A survey from Hobbies’ organization found that 35 states raised their state unemployment taxes last year.
Hobbie said he suspects that some states allowed reserves to dwindle out of complacency.
“I think we just got overconfident and thought we wouldn’t experience the bad recessions we had in, say the mid ’70s, and then this big surprise hit,” he said.
American Competitiveness, and the President’s New Relationship with American Business
January 23, 2011
Robert Reich
Fmr. Secretary of Labor; Professor at Berkeley; Author, Aftershock: ‘The Next Economy and America’s Future’
Posted: January 22, 2011 11:18 AM
Whenever you hear a business executive or politician use the term “American competitiveness,” watch your wallet. Few terms in public discourse have gone so directly from obscurity to meaninglessness without any intervening period of coherence.
President Obama just appointed Jeffry Immelt, GE’s CEO, to head his outside panel of economic advisors, replacing Paul Volcker. According to White House spokesman Robert Gibbs, Immelt has “agreed to work through what makes our country more competitive.”
In an opinion piece for the Washington Post announcing his acceptance, Immelt wrote “there is nothing inevitable about America’s declining manufacturing competitiveness if we work together to reverse it.”
But what’s American “competitiveness” and how do you measure it? Here are some different definitions:
- It’s American exports. Okay, but the easiest way for American companies to increase their exports from the US is for their American-made products to become cheaper internationally. And for them to reduce the price of their American-made stuff they have to cut their costs of production in here. Their biggest cost is their payrolls. So it follows that the simplest way for them to become more “competitive” is to cut their payrolls — either by substituting software and automated machinery for their US workers, or getting (or forcing) their US workers to accept wage and benefit cuts.
- It’s net exports. Another way to think about American “competitiveness” is the balance of trade — how much we import from abroad versus how much they import from us. The easiest and most direct way to improve the trade balance is to coax the value of the dollar down relative to foreign currencies (the Fed’s current strategy for flooding the economy with money could have this effect). The result is everything we make becomes cheaper to the rest of the world. But even if other nations were willing to let this happen (doubtful; we’d probably have a currency war instead as they tried to coax down the value of their currencies in response), we’d pay a high price. Everything the rest of the world makes would become more expensive for us.
- It’s the profits of American-based companies. In case you haven’t noticed, the profits of American corporations are soaring. That’s largely because sales from their foreign-based operations are booming (especially in China, Brazil, and India). It’s also because they’ve cut their costs of production in the US (see the first item above). American-based companies have become global — making and selling all over the world — so their profitability has little or nothing to do with the number and quality of jobs here in the US. In fact, it may be inversely related.
- It’s the number and quality of American jobs. This is my preferred definition, but on this measure we’re doing terribly badly. Most Americans are imprisoned in a terrible trade-off — they can get a job, but only one that pays considerably less than the one they used to have, or they can face unemployment or insecure contract work. The only sure way to improve the quality of jobs over the long term is to build the productivity of American workers and the US overall, which means major investments in education, infrastructure, and basic R&D. But it’s far from clear American corporations and their executives will pay the taxes needed to make these investments. And the only sure way to improve the number of jobs is to give the vast middle and working classes of America sufficient purchasing power to get the economy going again. But here again, it’s far from clear American corporations and their executives will be willing to push for a more progressive tax code, along with wage subsidies, that would put more money into average workers’ pockets.
It’s politically important for President Obama, as for any president, to be available to American business, and to avoid the moniker of being “anti-business.” But the president must not be seduced into believing — and must not allow the public to be similarly seduced into thinking — that the well-being of American business is synonymous with the well-being of Americans.
Hu Jintao State Dinner Meant To Better U.S.-China Relations
January 17, 2011
CHRISTOPHER BODEEN 01/16/11 08:24 PM 
BEIJING — Chinese leader Hu Jintao is being feted in Washington this week with a lavish state banquet at the White House and other pomp usually reserved for close friends and allies – all intended to improve the tone of relations between a risen, more assertive and prosperous China and a U.S. superpower in a tenuous economic recovery.
The shaky trust between the United States and China has been eroding recently because of an array of issues – currency policies and trade barriers, nuclear proliferation and North Korea – and both sides seem to recognize the need to recalibrate relations.
The U.S. is one of China’s biggest markets, with $380 billion in annual trade largely in Beijing’s favor. Washington increasingly needs Beijing’s help in managing world troubles, from piracy off Africa to Iran’s nuclear program and reinvigorating the world economy.
Hu sounded a conciliatory tone in a rare interview with U.S. newspapers ahead of his visit, saying the two countries could mutually benefit by finding “common ground” on issues ranging from combatting terrorism and nuclear proliferation to clean energy and infrastructure initiatives.
“There is no denying that there are some differences and sensitive issues between us,” Hu said in written answers to questions submitted by The Washington Post and The Wall Street Journal that were published over the weekend. “We both stand to gain from a sound China-U.S. relationship, and lose from confrontation.”
Hu called for more dialogues and exchanges to enhance “practical cooperation,” stressing the need to “abandon the zero-sum Cold War mentality” in U.S.-China relations.
Center for Strategic and International Studies scholar Charles Freeman, a former trade negotiator in the George W. Bush administration, said, “It is absolutely critical for the two sides to be setting a tone that says ‘hang on a second, we are committed to an effective, positive relationship.'”
The state banquet President Barack Obama is hosting will be Hu’s first. In the days before his visit, senior officials from both countries have spoken publicly in favor of better ties.
Secretary of State Hillary Rodham Clinton said in a speech Friday that the countries needed to manage their conflicts but their shared interests were so entwined as to constitute entanglement.
“History teaches us that the rise of new powers often ushers in periods of conflict and uncertainty,” Clinton said. “Indeed, on both sides of the Pacific, we do see trepidation about the rise of China and the future of the U.S.-China relationship. We both have much more to gain from cooperation than from conflict.”
Chinese officials have emphasized what they see as common concerns while acknowledging the complexity of the relationship.
“When the relationship is strained we need to bear in mind the larger picture and not allow any individual issue to disrupt our overall cooperation,” Vice Foreign Minister Cui Tiankai said in a speech Friday.
Such maxims, however, don’t apply to issues China defines as its “core interests,” including Taiwan, Tibet and the overarching authority of the Communist Party. That’s a condition Hu’s visit won’t change.
In his interview for the U.S. newspapers, Hu said the two countries should “respect each other’s choice of development path,” an implicit rejection of U.S. criticism of China’s human rights record and other internal affairs.
Hu, whose four-day trip starts Tuesday, is expected to talk up China’s intended peaceful rise in a speech to business leaders and opinion-makers in Washington on Thursday and to highlight the benefits of China’s market and investment when visiting Chicago.
Aware of China’s plummeting image in American opinion, Chinese Foreign Ministry functionaries have in recent weeks been looking for ways to make the usually stiff Hu, and China as a country, appear more human, something akin to reformist patriarch Deng Xiaoping’s donning a 10-gallon hat in Houston in 1979 just after the opening of diplomatic relations.
For the protocol-obsessed Chinese leadership, a highlight of the visit will be Wednesday’s state banquet – an honor denied Hu on his last trip to the White House in 2006. President George W. Bush thought state banquets should be reserved for allies and like-minded powers and instead gave Hu a lunch. Even worse, a member of Falun Gong, the spiritual movement banned by China, disrupted Hu and Bush’s joint appearance, and an announcer incorrectly called China “The Republic of China,” the formal name of democratically ruled Taiwan.
In this visit, no major agreements are expected. Talks over a joint statement ran aground until last-minute negotiations in Beijing last week. But the shared recognition to put things right and the bumpy relations of the last year augur for a better outcome.
The U.S. wants Beijing to move toward faster appreciation of its currency to boost U.S. exports and reduce unemployment. But in his written answers to the U.S. newspapers, Hu did not signal any significant changes in China’s currency policy.
China now holds the world’s largest foreign currency reserves at $2.85 trillion and a major chunk of U.S. government debt. At current rates, economists estimate China will overtake the U.S. as the world’s largest economy within 20 years, possibly by the end of this decade.
Hu said “the current international currency system is the product of the past,” but he did not dispute the U.S. dollar’s role as the global reserve currency. He said it “will be a fairly long process” before the Chinese renminbi can become an international reserve currency.
Beijing has largely rebuffed U.S. appeals for help in reining in bellicose North Korea, curbing Iran’s nuclear program and dismantling of trade barriers. Chinese officials and the nationalistic state-run media have criticized Washington’s renewed attention to Japan, South Korea and Southeast Asia, its arms sales to Taiwan and its continued naval patrols in the Yellow and South China seas as attempts to constrain China’s influence in its backyard.
What Obama Should Say About the Deficit
January 16, 2011
Economic View
By CHRISTINA D. ROMER
Published: January 15, 2011
This year, instead of being on the floor of Congress with the rest of the cabinet, I will be watching on television with the rest of the country. Instead of knowing what is coming, I can write about what I hope the president will say. My hope is that the centerpiece of the speech will be a comprehensive plan for dealing with the long-run budget deficit.
I am not talking about two paragraphs lamenting the problem and vowing to fix it. I am looking for pages and pages of concrete proposals that the administration is ready to fight for. The recommendations of the bipartisan National Commission on Fiscal Responsibility and Reform that the president created are a very good place to start.
The need for such a bold plan is urgent — both politically and economically. Voters made it clear last November that they were fed up with red ink. President Obama should embrace the reality that his re-election may depend on facing up to the budget problem.
The economic need is also pressing. The extreme deficits of the last few years are largely a consequence of the terrible state of the economy and the actions needed to stem the downturn. But even with a strong recovery, under current policy the deficit is projected to be more than 6 percent of gross domestic product in 2020. By 2035, if the twin tsunami of rising health care costs and the retirement of the baby boomers hits with full force, we will be looking at deficits of at least 15 percent of G.D.P.
Such deficits are not sustainable. At some point — likely well before 2035 — investors would revolt and the United States would be unable to borrow. We would become the Argentina of the 21st century.
So what should the president say and do? First, he should make clear that the issue is spending and taxes over the coming decades, not spending in 2011. Republicans in Congress have pledged to cut nonmilitary, non-entitlement spending in 2011 by $100 billion (less if recent reports are correct). Such a step would do nothing to address the fundamental drivers of the budget problem, and would weaken the economy when we are only beginning to recover.
Instead, the president should outline major cuts in spending that would go into effect over the next few decades, and that he wants to sign into law in 2011.
Respected analysts across the ideological spectrum agree that rising health care spending is the biggest source of the frightening long-run deficit projections. That is why the president made cost control central to health reform legislation. He should vow not just to veto a repeal of the legislation, but to fight to strengthen its cost-containment mechanisms.
One important provision of the law was the creation of the Independent Payment Advisory Board, which must propose reforms if Medicare spending exceeds the target rate of growth. But the legislation exempted some providers and much government health spending from the board’s purview. The president should work to give the board a broader mandate for cost control.
The fiscal commission recommended that military spending — which has risen by more than 50 percent in real terms since 2001 — grow much more slowly in the future. It also proposed thoughtful ways to slow the growth of Social Security spending while protecting the disabled and the poor. And it recommended caps on nonmilitary, non-entitlement spending.
President Obama needs to explain that while these cuts will be painful, there is no way to solve our budget problem without shared sacrifice. At the same time, he should give a ringing endorsement of government investment in infrastructure, research and education, which increases productivity and thus improves both our standard of living and the budget situation over time. And, following the fiscal commission, he should ensure that spending cuts not fall on the disadvantaged.
Finally, the president has to be frank about the need for more tax revenue. Even with bold spending cuts, there will still be a large deficit. The only realistic way to close the gap is by raising revenue. Some of it can and should come from higher taxes on the rich. But because there are far more middle-class families than wealthy ones, much of the additional money will have to come from ordinary people. Since any agreement will have to be bipartisan, Congressional Republicans will have to come to terms with this fact as well.
AGAIN, the fiscal commission has made sensible proposals. It recommended broad tax reform that lowers marginal tax rates and cuts tax expenditures — deductions and exemptions for mortgage interest, employer-provided benefits, charitable giving, and so on. Such tax reform cannot be revenue-neutral — it needs to increase tax receipts. But it can make the system simpler, fairer and more efficient while doing so.
Limiting the exemption of employer-provided health benefits would have the further advantage of making companies and workers more cost-conscious about health care.
Another revenue measure should be a tax on polluting energy. Basic economics says that something that has widespread adverse effects should be taxed. A gradual increase in the gasoline tax would raise revenue and encourage the development of cleaner energy sources. A broader carbon tax would be even better.
None of these changes should be immediate. With unemployment at 9.4 percent and the economy constrained by lack of demand, it would be heartless and counterproductive to move to fiscal austerity in 2011. Indeed, the additional fiscal stimulus passed in the lame-duck session — particularly the payroll tax cut and the unemployment insurance extension — is the right policy for now. But legislation that gradually and persistently trims the deficit would not harm the economy today. Indeed, it could increase demand by raising confidence and certainty.
The president has a monumental task. It’s extremely hard to build consensus around a deficit reduction plan that will be painful and unpopular with powerful interest groups. The only way to do so is to marshal the good sense and patriotism of the American people. That process should start with the State of the Union.
Hutchinson Business Solutions 