Althouse: "The treatment of workers by American corporations has been worse — far more treacherous

July 31, 2010

"The treatment of workers by American corporations has been worse — far more treacherous — than most of the population realizes."

"... Many of those workers were cashiered for no reason other than outright greed by corporate managers. And that cruel, irresponsible, shortsighted policy has resulted in widespread human suffering and is doing great harm to the economy."

Anguishes Bob Herbert in a column called "A Sin and a Shame." How is it a sin — greed! — or treachery for a business to operate efficiently by laying off employees when there is less work to be done? Herbert does say that there was a disproportion between the number of people who were laid off and the decrease in the amount of work that needed to be done. That is, the workers who kept their jobs became more productive. But what is the evil in that?

168 comments:

Alex said...: Well it's evil to lay off unproductive workers and lay even more work on your productive ones, preying on their fear.; 7/31/10, 12:44 PM
Peter Friedman said...: One could conceive of a world in which a tenured law professor believed that an employer's desire for more money at the cost of an employee's livelihood was greed. Apparently, this one isn't that world. After all, the market forces that drive that employer's desire for more money at the expense of his employee's livelihood creates the best of all possible worlds, and to believe otherwise is just plain silly, right?; 7/31/10, 12:54 PM
I'm Full of Soup said...: Has the NYT asked Herbert to increase his weekly output from two crappy cut & paste columns to three?; 7/31/10, 12:58 PM
tim maguire said...: Peter Friedman's right. A business's desire to not go bankrupt is evil and a sin and a shame. Why lay off some workers when, with a little liberal thinking sprinkled in, they could lay off all their workers?

I'm with ya, Friedman! Let's send them all to the poorhouse. It's the only fair thing to do. God forbid those people go to work somewhere where they're more useful.; 7/31/10, 1:02 PM
Synova said...: A friend of mine got laid off just before his stock options came through. That is something I consider outright criminal.

But laying people off because there is less work? Excuse me?; 7/31/10, 1:07 PM
traditionalguy said...: The capitalistic notion of efficiency as good and workers as surplus was an engine of progress for 140 years. The black-hole for today's US citizens is that suddenly Chinese workers, Vietnamese workers, Mexican workers, etc are receiving jobs and using our latest technology that was once used in the USA. That is a conspiracy of sorts. Our Soros style leaders now see only a flow of trade and money all across the globe. The Americans working in world trade dependent industries have for 15 years seen NO REASON to support any American's need for a job. So America needs a quickie divorce from them. Elect Palin in 2012. They do not love us, but she will make them fear us. She will not be an easy mark to be bribed as were the Clintons, the Bushes and Soros-Obama. They say the Clintons are worth 200 million today. Who bribed them and what did they get for their money?; 7/31/10, 1:07 PM
YoungHegelian said...: Are there corporations out there filled to the brim with greedy bastards, who care little for employees or stockholders? You betcha!

But, do people like Bob Herbert have no experience with the local DMV, the cops, or the taxing authorities of their county, state, or fed governments? Do they really think the heavy hand of governmental authority falls any lighter on the populace than the corporate hand?

It's a lot easier to find another job than to escape the power of the State.

Another missive from the bubble world, it seems.; 7/31/10, 1:19 PM
Donna B. said...: "Increases in the productivity of American workers are supposed to go hand in hand with improvements in their standard of living."

Thus it makes sense that the least productive workers will be laid off when their employers sense a threat.

And Obama has a record of threatening employers large and small.; 7/31/10, 1:23 PM
JAL said...: I have developed an aversion to the use of the word "workers."

Most often it is used by lefty libs in trying to push the class warfare meme a bit more. Usually the lefty libs are from the north east, the west coast, or the upper arm pit of America.

I live in the part of the country where people really have worked in factories. People really have been / are let go because of less work in the plant.

Our family also has been involved working at several small companies ("small business America") where guys with an idea and a heavy dose of entrepreneurship started something that gave employment to hundreds of people.

We never expected to have employment if the company didn't have contracts. That just can not be done.

These comapnies weren't like the US Government which (thanks BHO and Dem Congress /s) just keeps spending the citizen taxpayers' money and raising the "credit card" limit so they can more than max it out and our kids will be owned by them. You can't run a business like that.

Are there crappy companies and bosses? Sure But government is crappy too. Same humans in both. (Ever tried to deal with Social Security? Hahahaha! You're going to love "Health Care Reform.)

This broad brush twisting of economics offers what as a solution? Everyone is guaranteed work for the rulers for life? And who pays them?

Communism/socialism is a perpetual motion machine which like all perpetual motion machines is impossible to maintain. It Does.Not.Work.

On the other hand, I do not know the ins and outs of Lincoln Electric in Cleveland. From what I have heard they do not lay off workers. But it's tough to get hired there -- because --they want *productive* employees. And when they are running full swing it is MANDATORY overtime for everyone. The rewards are generous, the demands high.

The "workers" today are being betrayed and sabotaged by our elected leadership. Companies are hamstrung and regulated to death and then punished for trying to make enough to pay taxes on and pay the taxpayers who will fill the DC and state coffers.; 7/31/10, 1:25 PM
The Drill SGT said...: Corporations are akind to animal species. Both comply with natural laws (e.g Darwin's).

They are for the most part, not monopolies. They compete against others in the market place.

Those that are efficent make profits for their investors (those pension funds, retired pople, and ordinary people that Herbert likes when they aren't evil shareholders), keep growing and survive.

Those that don't get more efficent, lose market share and die, laying off all their workers, abandoning their pensions and destroying the capital of their stockholders.

Herbert s advocating Statism, not capitalism. What he wants are large flabby semi-monopolies that are easy for government to oversee and skim from, rather than a dynamic marketplace with new firms growing and others dying off.

Ultimately, those sectors of the economy that liberals praise (e.g. government, academia, not-profits ) depends on the profit making sector to be in a word:

profitable.

unless businesses are efficent, there are no profits for shareholders and no excess profits to be skimmed off by the leaches.; 7/31/10, 1:30 PM
MaggotAtBroad&Wall said...: Bob Herbert should blame his hero Obama. Someone with a Lexus-Nexus should count how many times Obama used the phrase, "the worst financial crisis since the Great Depression" to sell voters on the need for the $800 billion payoff to state and local union workers known as "stimulus".

And now that Obama scared employers into laying off so many people, they're not going to be hired back nearly as fast. Congress and Obama created a huge new incentive to for employers to substitute technology for labor where it can because technology doesn't need health insurance. It doesn't go on vacation, it doesn't require employers to pay for unemployment insurance, social security or Medicare. Tech doesn't call in sick. It can work 24/7 and doesn't demand overtime.

In 1900, something like 75% of the population engaged in agriculture. Through advances in new technologies like irrigation, fertilzer, pesticides, and mechanization, yields have skyrocketed but only about 2% of the population is engaged in farming. If we would go back to farming with mules like they did 100 years ago, we'd have 0% unemplyment and we'd be much poorer as a nation.

Maybe Bob Herbert wants to go back to farming with mules?; 7/31/10, 1:32 PM
Kev said...: (the other kev)

The sad thing about Herbert is that when he's dead, no one will remember a damn thing he wrote. And I think deep down he knows that, which is why he gets more unhinged as he nears his ultimate destination.; 7/31/10, 1:35 PM
Anonymous said...: Herbert has never apparently run a popsicle stand. A manager's first responsiblity is to equity holders. Most human capital is an extraordinarily valuable asset. Employees earn more by becoming a more valuable asset. Layoffs are incredibly expensive, but not as expensive as keeping unutilized assets when there is no upside. Businesses keep unproductive labor when there is reasonable expectation of near term upside. No one relishes the thought of hiring and training new people, let alone trying to measure the cost of lost experience and institutional knowledge. The layoffs this go around were egregious because managers rightly aniticipated a long and deep recession. You'll begin to see new hires when current productivity is maxed out and near and mideterm demand exceeds capacity. End of story.; 7/31/10, 1:37 PM
Texan99 said...: A lot of people seem to believe that the primary function of their employer is to provide for their personal welfare. Actually, they often have the same attitude toward their friends, their neighbors, and taxpayers in general. Their own obligation to give endlessly for the welfare of others? Not so much.

Our employers are not philanthropies, and we are not their charity cases. It's a bargain: value for value, and either side can walk away. Is it "evil" for a worker to leave one job and take a better one, if he knows his employer really, really, really needs him?; 7/31/10, 1:52 PM
Sprezzatura said...: "That is something I consider outright criminal."

If this is not illegal, it sounds like an excellent business decision from the perspective of the corporation. All good Rs must understand that the corporation is not a charity. And, the corporation cannot be bothered w/ extra-legal niceties. There are no exceptions just because your ox may be the next in line to be gored.

To complete this logic-spiral a good R must strongly oppose laws that limit a corporation's freedom to do whatever it can to increase profits; otherwise you're a socialist, economic growth killer.

You see, as all good Rs know, the reason average Americans haven't participated in our nation's income growth (which has mostly gone to the top one percent) since the Reagan years is because the rich have been overly burdened w/ taxes and regulation. Average Americans will be able to participate in our nation's income growth if we further reduce taxes and regulations for the rich. [Synova's suggestion would be a great place to tap some unrealized profitability: how can we make it easier for corporations to get out of paying future promises to their employees, these are ripe profits waiting to be snapped up?]

All good Rs know that the trickle down part of Trickle Down economics will kick-in (three decades later) after some more tax cutting for rich folks and deregulation for corporations. [Presumably it is possible that some Rs don't believe that Trickle Down actually works. These Rs would openly acknowledge that the purpose of tax cuts for rich folks and deregulation for corporations is to create a Trickle Up. Unlike the Trickle Down folks, these Trickle Up Rs haven't been waiting around for decades to see their theories proven true, quite the opposite.]; 7/31/10, 1:53 PM
Wince said...: As Professor Sum studied the data coming in from the recession, he realized that the carnage that occurred in the workplace was out of proportion to the economic hit that corporations were taking.

Call it the Obama Effect.

Businesses see what's coming down the pike in terms of taxes, regulations, mandates and other "worker protections."

Merely in anticipation of this onslaught, businesses would be expected to cut ties even with workers who may still have positive marginal factor productivity, but now represent a greater source of uncertain risk exposure due to government policy.; 7/31/10, 1:56 PM
Texan99 said...: Synova, I don't think I understand your objection re the stock options. How is that different from laying someone off just before he's due for some kind of automatic raise? He's about to get more expensive, and his employer doesn't think it's a good trade-off any more. Would it be wrong for him to stay and take the options, then leave shortly thereafter? He and his employer worked out a deal about when and why the options would be granted, and the deal's terms are whatever they are.; 7/31/10, 2:00 PM
former law student said...: If UWLS smartened up and laid off half the faculty, increasing everyone else's workload by 50%, I'm pretty sure the professor would be able to grasp Bob Herbert's point.; 7/31/10, 2:01 PM
The Drill SGT said...: Old Dad said...You'll begin to see new hires when current productivity is maxed out and near and mideterm demand exceeds capacity. End of story.

and when managers can see far enough into the future to be able to see a stable taxation and regulatory period. Until then investments have too much risk.; 7/31/10, 2:04 PM
Sprezzatura said...: FLS,

I think that would be a 100% increase for the remaining folks, assuming the fired 50% did the same amount of work as the kept 50%.; 7/31/10, 2:05 PM
Joe said...: This comment has been removed by the author.; 7/31/10, 2:06 PM
Joe said...: Bob Herbert works for an evil corporation. Or is that one of the few that are good and kindly.

Academics are the worse in this regard and Herbert is merely echoing very tired talking points. Listen to advocates of tenure, corporations are just sitting around waiting to screw over their employees. My experience is quite the opposite; while there are jerk managers who lay people off who cross them, most corporations keep people too long (though sometimes lay off the wrong people and too many when they're finally forced to.)

A friend of mine got laid off just before his stock options came through. That is something I consider outright criminal.

Options are an incentive to help keep you around. If you negotiate them as part of your salary you are usually a clueless ass; if not, big deal. (This is like the whiners who don't get the BONUS they expected. It's a BONUS.)

Moreover, if you work in an at-will state, that's the risk you take. On the flip side, you can quit with no advance notice any time you want. (If I run a company and give you stock options and you say it's criminal to lay you off before they're exercised, I'll demand the right to throw you in jail if you quit or don't work to my level of satisfaction. Be careful what you wish for.)

Moreover, even if the options vested, he or she would have had 30 days or less to exercise them (or not at all if the company has strict trading windows.) And that assumes the stock price is above the strike price. If I had a buck for every worthless stock option I've had, I could buy a very nice car.; 7/31/10, 2:09 PM
Automatic_Wing said...: Bob is spot-on. Check out this example of greedy corporate sinfulness:

New York Times layoffs

Obama really needs to do something about these greedy corporate fat cats.; 7/31/10, 2:11 PM
Synova said...: "If this is not illegal,.."

1jpb, I'm certain that it is illegal. But the employee has to decide if he or she can afford the lawyers necessary to recover the value of the stock.; 7/31/10, 2:13 PM
Wince said...: The treatment of workers by American corporations...

Herbert's instinctive contempt for America shows. Notice he doesn't say the treatment of American workers by corporations.

So, if you are an American worker laid-off by a foreign corpoartion, tough shit?; 7/31/10, 2:14 PM
Freeman Hunt said...: It's healthy for the economy as a whole. The laid off people are temporarily greatly inconvenienced, but it means that their labor will be used somewhere else where it is of greater value. That's a good thing.; 7/31/10, 2:16 PM
MarkW said...: If UWLS smartened up and laid off half the faculty, increasing everyone else's workload by 50%, I'm pretty sure the professor would be able to grasp Bob Herbert's point.

If the UWLS did that, those faculty who were attractive to other schools would leave and only the least attractive would remain. The school would have to hire replacements for those who left, and the replacements would know they would have 2x the teaching load at a 'normal' law school. The school's quality, reputation, and the quantity (and quality) of student applications would plummet. It is possible it would not attract enough students to fill the classes and pay the bills (or justify the money the state allocates to it). The reason employers don't lay off half their employees and double work loads is that it would destroy the company.

But if a company really *did* find it could do all the work with half the employees (perhaps because of improved tools or processes), and those they retained remained effective and happy in their jobs, then the business should reduce staff (if only through attrition). If they don't, a more efficient competitor without all the extra workers will show up and and make them do it (or put them out of business).

However, there certainly ARE organizations that employ far more people than necessary at a far higher cost, but these are rarely for-profit businesses. Yesterday, for example, I saw a city truck here delivering new recycling bins. They needed two people (one to drive, and one to deliver the bins). They had 6. One was driving, another one was delivering bins, a 3rd was going out with a bar-code reader and scanning bins that had been set on the curb (why they weren't they bar-coded before they left the truck?) And 3 workers were apparently just along for the ride.

For profit businesses don't operate that way--charging customers far more than necessary. Governments do it all the time.; 7/31/10, 2:19 PM
Eric said...: First Prince Charles and now Bob Herbert? Oh, oh, I know today's theme: Morons.; 7/31/10, 2:23 PM
Joe said...: Oh Lordy; stock options are essentially cost free to corporations, which is why they like them so much. Stock purchase plans are another example. (The accounting reasons, especially for the latter, aren't obvious. Among other things is has to do with how a corporation deals with the stock it retains.)

Laying someone off before they vested isn't remotely illegal or even unethical and likely had no bearing on the decision. It just is. What happens in the case of termination of employment is spelled out plain as day in the contract the person signed. It's pure hypocrisy to complain a corporation is being mean while attempting to void a contract YOU signed.; 7/31/10, 2:23 PM
former law student said...: Productivity doesn't mean shit, by the way. The US manufacturing worker was a model of productivity -- more productive than any German or Japanese -- second only to the Dane. But still, the manufacturing sector employs only 20% of Americans today, because American industry would rather hire five Chinese than pay one American salary.

The 80 percent of the economy who are service workers should be shaking in their boots, by the way, because they are by no means the most efficient in the world. Pogo might not have to worry about working for less, as he's replaced by remote diagnosticians and prescribers, with surgical tourism for those who need an operation.; 7/31/10, 2:23 PM
cryptical said...: fls: That'd only be true if the student count dropped 50%. Less work, less workers needed, same amount of work per worker. Simple concept, eh?; 7/31/10, 2:24 PM
Alex said...: FLS - you still haven't explained to me why American industry is a welfare agency. Companies do not owe you anything.; 7/31/10, 2:25 PM
The Crack Emcee said...: He thinks this is France, where it should be impossible to lose your job under any circumstances, and all the bosses are "evil".

BTW - since I quit my job, I've gotten lots of job offers. I took two: one from someone I met online a while back, and another from a former colleague who heard I quit and wanted me at his new location because he says I'm "a classy guy." He even offered me a car to take the position.

So much for the Bob Herbert's of the world.; 7/31/10, 2:26 PM
Anonymous said...: Corporations bad. Governments good.

Because the City of New London's taking of Kelo's house was a kind and benevolent act, not a treacherous assault by an evil corporation.; 7/31/10, 2:26 PM
The Crack Emcee said...: Oh - and the guy who thinks I'm "classy"?

He's a Democrat who used to insist on debating politics with me.

I start in a week.; 7/31/10, 2:28 PM
former law student said...: MarkW doesn't grasp the race to the bottom nature of American employers today. Employers do as little as they can get away with. Law professors are fungible -- there are hundreds of top-flight lawyers working insane hours who would trade places in a minute. Look at the practitioners who manage to publish law review articles in their free time.; 7/31/10, 2:28 PM
fivewheels said...: Re: the other side of the bargain.

The last two times I changed jobs, I left my previous employer a bit in the lurch. That's almost tautological, though -- if you're any good at what you do, leaving is going to hurt your employer. And if you weren't valuable, the next place probably wouldn't want you.

I left one place just a few months after I had been promoted, and it was my second promotion in a year. I did feel bad, but since the new job was 1.8x salary, I had to go.

How evil was that? A little, maybe, but I've come to terms with it.; 7/31/10, 2:28 PM
Alex said...: FLS - and employees slack off whenever they can - it works both ways.; 7/31/10, 2:29 PM
former law student said...: That'd only be true if the student count dropped 50%.

You gotta be kidding, right? With all the featherbedding in academia?

Teach three classes at a time instead of two, and add students to each class. Classes that don't attract at least 100 students get cut out. Or law schools partner up on such, using videoconferencing to include the other roomfull.; 7/31/10, 2:32 PM
Alex said...: what is it FLS - nobody gave you that extra special attention in school? You are not a special snowflake.; 7/31/10, 2:35 PM
Automatic_Wing said...: MarkW doesn't grasp the race to the bottom nature of American employers today.

So tell us, O wise one, why the same logic didn't apply in the past. How come we're all so much richer than our great-grandparents, when by your reasoning our living standards should be spiralling farther downward with each passing year.; 7/31/10, 2:35 PM
Sprezzatura said...: Joe,

Why are you saying that it's no big deal (from the perspective of the corporation) if a corporation dilutes its common shares by distributing stock options, which are exercised? Presumably you know that nothing is more important for a corporation than it's return to the share holders, which is directly diluted by...er... dilution.

Sheesh.; 7/31/10, 2:36 PM
Alex said...: How is improving productivity and innovative practices a "race to the bottom"? I guess obsoleting the horse & buggy was a "race to the bottom" by Henry Ford.; 7/31/10, 2:37 PM
Anonymous said...: Expect to hear more of this sort of bulldada as long as we're in this jobless recovery. Since corporate earnings have always been more volatile than wages and salaries, it's easy for the ignorant and/or cynical to make invidious comparisons between the rapid recovery of beaten-down profits and the slower recovery of payrolls-- especially at a time when government is paying people unprecedented amounts of money not to work.; 7/31/10, 2:40 PM
Trooper York said...: I think Mr. Herbert just got his notice that he is being laid off.; 7/31/10, 2:41 PM
Trooper York said...: No one from the New York Times should be allowed to ever talk about how to run a business. They don't have a clue. They should stick to what they know best.

Endangering the lives of US Service men by publishing government secrets.

The only thing worse than a journalist is a lawyer.; 7/31/10, 2:43 PM
Dust Bunny Queen said...: People should not be allowed to opine on business unless they have actually BEEN in business.

Running a company for profit in a competetive world full of tax laws, stupid workplace rules and government intervention is not the same thing as sitting in your academic bubble supported by tax dollars and government subsidies.

What sounds good in theory and in the classroom....stinks to high heaven in the real world.; 7/31/10, 2:46 PM
jamboree said...: Is this simply to open discussion or are you stupid?

I'm not that used to this blog apparently.; 7/31/10, 2:48 PM
jr565 said...: They should have had job banks like the automotive companies have. That way, if there isn't enough work the company can pay for the employees to sit around and read the paper or do crossword puzzles at full pay.
It certainly didn't hurt the autocompanies. But, even if it did, it's still ok because the govt can always go in and bail the company out.; 7/31/10, 2:48 PM
Joe said...: Why are you saying that it's no big deal (from the perspective of the corporation) if a corporation dilutes its common shares by distributing stock options, which are exercised?

No, I'm saying that options are just another tool in a corporations accounting and tax methods. As a stockholder, I often approve stock option plans since the risk of dilution on the open market is far outweighed by the economic advantages to the corporation.

Many employees who exercise their options actually sell them immediately; this allows a corporation to either put stock on the market, take it off the market or never do a stock transition at all.

(And if the stock goes down below the strike price, only a fool would exercise their options, so the risk of dilution in that situation is essentially non-existent.); 7/31/10, 2:50 PM
former law student said...: by your reasoning our living standards should be spiralling farther downward with each passing year.

The rich are getting richer while the rest of us are getting poorer:

http://www.businessinsider.com/15-charts-about-wealth-and-inequality-in-america-2010-4

And great-gramps was still in the shtetl, being pursued by cossacks. So I guess I am better off, having running water and all.; 7/31/10, 2:54 PM
SteveR said...: The fact is, if Bob Herbert still has a job, corporations are doing far more in treating workers well than they deserve, much less than can be economocally justified.; 7/31/10, 2:55 PM
former law student said...: Many employees who exercise their options actually sell them immediately;

They historically had to sell enough so that they could pay taxes on their short-term gain. Many dot-commies actually had to pay tax on the unrealized gain after their companies went bust, and the stock became worthless.; 7/31/10, 2:57 PM
LonewackoDotCom said...: I have to take Althouse's side on this. It was only a few years ago that the tea partiers were about real liberty, such as pushing to allow children to work as many hours as they want and setting up workhouses for indigent children. It's time to bring back the TeaParty glory days!

Now, some might point out that those who pushed for better working conditions and job stability were actually doing a great service to society and reducing the possibility of things like riots and other forms of social instability. But, those who say that are COMMUNIST SOCIALIST TROTSKYITES!!!!!!!!!!!; 7/31/10, 2:59 PM
former law student said...: if Bob Herbert still has a job

The miracle is that Ross Douthat still has his job. The standard for conservative pundits is considerably lower these days: Jonah Goldberg and Douthat are surely several rungs below Safire, WFB, George Will, or Bob Novak.; 7/31/10, 2:59 PM
Wince said...: Freeman Hunt said...
It's healthy for the economy as a whole. The laid off people are temporarily greatly inconvenienced, but it means that their labor will be used somewhere else where it is of greater value. That's a good thing.

Sure, layoffs due to market forces do result in workers migrating to healthier companies selling products and services in greater demand using new skills and better technologies.

But let's take Herbert at his word that the workers he's talking about were still productive and adding to profits in their old jobs. He attributes that anomaly to Amemican corporations being sinful.

A more rational explanation is that the expected value of a worker's marginal product, no matter where he works, is being eclipsed by the uncertainty and risk engendered by exogenous governmental policy changes, the consequences being most apparent at the lower end of the skill spectrum.

The latter Obama Effect is a net cost to society, not a reallocation of resources within a growing economic pie.; 7/31/10, 3:01 PM
former law student said...: Put it this way: If Obama (or Posner, or Easterbrook) could put in a full day of law practice and then teach a class at the University of Chicago (ranked just a wee bit higher than the pride of the Cheeseheads), then any prof should be able to teach three classes a semester.; 7/31/10, 3:04 PM
Texan99 said...: LoneWackoDotCom: I don't see a strong connection between laws that protect children and laws that treat adults like children. But assuming there were one, and the inevitable result of child-protective legislation would be that all the adults had to give the right to be treated like adults, then I'd say society would risk coming out on the short end of the stick going down the child-protective route in the first place.; 7/31/10, 3:05 PM
MaggotAtBroad&Wall said...: Oh no! China is stealing our jobs!

The facts are the U.S. is the largest manufacturing economy, by far. And we have remained a huge force of the global manufacturing economy due to productivity gains.

I'll summarize below what is depicted in Mark Perry's charts compiled from BLS and Federal Reserve data in this link:

http://mjperry.blogspot.com/search?q=manufacturing

Around 1972, 18 million people were employed in manufacturing. They produced about $1.4 trillion of output (in 2005 dollars).

Today, less than 12 million people are employed in manufacturing, but they produce $3 trillion of output (also using 2005 dolllars as the base).

That works out to about $80,000 of output/employee almost 40 years ago vs. $280,000 of output/employee today. And many of those poor mistreated souls in those unionized manufacturing jobs got nice pay raises along the way that enabled them to buy homes and summer homes, boats, vacations, send kids to college to be indoctinated in leftist ideology that capitalism is evil, etc.

It's not that the Chinese stole their jobs, it's that productivty enhancing technology stole their jobs. And we're all better for it through improved standards of living.; 7/31/10, 3:06 PM
Automatic_Wing said...: The rich are getting richer while the rest of us are getting poorer:

That is fucking absurd. We're orders of magnitude richer than any pre-WW II generation. You do realize that many Americans didn't have running water either back in the days your great-gramps was hiding from cossacks?; 7/31/10, 3:07 PM
Freeman Hunt said...: fivewheels brings up the important other side of this.

You can quit your job anytime you want. No company can force you to work at job against your will no matter how much your leaving will hurt the company.

As we're not slaves, that is as it should be. And the company's owners, not being slaves either, don't have to employ people they don't want to employ.; 7/31/10, 3:17 PM
lucid said...: Herbert either does not understand even the first thing about basic economics or he is a proponent of an extreme form of socialism--one that has resulted in great poverty and social deprivation (except for those like Herbert who are in the political class) wherever it has been tried.

It is pretty upsetting that this guy has any influence.; 7/31/10, 3:21 PM
mesquito said...: We don't realize how trecherous American corporations are. We're stupid.

"Many" workers were cashiered because of "greed." How many? Herbert has no fecking idea.

How does this hurt the economy? It just does, you see.

***
Now I'm having one of my periodic, ugly reveries about affirmative action.; 7/31/10, 3:27 PM
Fen said...: Obama is matchless. He's been at constant war against business, now DHOTUS needs them to trust him enough to go out on a limb, to take risks that will snowball into economic recovery.

Remember all that talk of "smart" diplomacy? Ha.

The kind of people who run business and hire workers aren't suckers. Its not gonna happen.

Although I wonder now if this article is the start of more JournoList-type propaganda aimed at scapegoating business owners.; 7/31/10, 3:27 PM
I'm Full of Soup said...: Get ready for the next liberal agenda. They have been harping the last two weeks about the alleged $2 Trillion sloshing around in corporate bank accounts.

Obama will propose some type of surtax on that money and on so-called excess profits to penalize these "evil" corporations. And Bob Herbert will love it.; 7/31/10, 3:27 PM
I'm Full of Soup said...: Fen- just saw your comment. You said it better than I could.; 7/31/10, 3:28 PM
Skyler said...: Greed is a very good motive. But the incentive system for corporations is somewhat perverse, there is no yin to the yang of greed. There is no danger to being a CEO that would serve to mollify the pure risk-taking greed that we have seen.

We have gone so far to shield corporate officers with our laws that they have literally no reason to avoid risk. They will still be millionaires, they will not lose their homes or cars or even any convenience at all. But the people they lay off because they made stupid business decisions will lose everything in this economy because jobs are very hard to find.

Greed is good, but so is risk. It serves to keep the risks sensible.; 7/31/10, 3:30 PM
NotWhoIUsedtoBe said...: One cheer for Herbert, pretty much alone last year, for noticing the enormous loss of jobs in this country. It was amazing how little coverage there was of the worst job losses since the 1930s.

Other than that, meh, normal class warfare BS.; 7/31/10, 3:33 PM
Fen said...: Hey Bob Herbert of the NYTs

Are you now or have you ever been a member of any JournoList Cabal?

Just checking. I'm sure you understand. Seems alot of your peers at Wapo and NYTs think its okay to conspire with Team Obama, and then sell that propanda to the public as "honest: information brokers.

And are your assets protected from RICO?; 7/31/10, 3:35 PM
Unknown said...: During the 90s and 00s, a lot of companies carried more people than they really needed. Now that money is tight and the outlook murky at best, they're getting rid of workers they can't afford.

The problem is that, at some point, the workers they're keeping (or the 6 month temps they hire that have to learn the system) are going to break under the workload.

1jpb said...

If this is not illegal, it sounds like an excellent business decision from the perspective of the corporation. All good Rs must understand that the corporation is not a charity. And, the corporation cannot be bothered w/ extra-legal niceties. There are no exceptions just because your ox may be the next in line to be gored.

...

You see, as all good Rs know, the reason average Americans haven't participated in our nation's income growth (which has mostly gone to the top one percent) since the Reagan years is because the rich have been overly burdened w/ taxes and regulation. Average Americans will be able to participate in our nation's income growth if we further reduce taxes and regulations for the rich. [Synova's suggestion would be a great place to tap some unrealized profitability: how can we make it easier for corporations to get out of paying future promises to their employees, these are ripe profits waiting to be snapped up?]

All good Rs know that the trickle down part of Trickle Down economics will kick-in (three decades later) after some more tax cutting for rich folks and deregulation for corporations. [Presumably it is possible that some Rs don't believe that Trickle Down actually works. These Rs would openly acknowledge that the purpose of tax cuts for rich folks and deregulation for corporations is to create a Trickle Up. Unlike the Trickle Down folks, these Trickle Up Rs haven't been waiting around for decades to see their theories proven true, quite the opposite.

pb&j wants us all to believe that only the Ds will give us economic Nirvana through National Socialism the way George Mitchell's tax increase on the rich didn't cause a recession.; 7/31/10, 3:37 PM
Fen said...: You said it better than I could.

Thanks. I'm only good for about one redeaming post per month.

Whew! Glad I got it out of the way on the 1st :); 7/31/10, 3:38 PM
Fen said...: Aw hell... thats Monday; 7/31/10, 3:38 PM
NotWhoIUsedtoBe said...: Fen-

He can't have been a member.

1. He's too old.

2. He's too black.; 7/31/10, 3:41 PM
Fen said...: /cut-n-paste for just about every MSM thread this year

Hey _____ of the ____

Are you now or have you ever been a member of any JournoList Cabal?

Just checking. Seems alot of your peers at Wapo and NYTs think its okay to conspire with Team Obama and then sell that propaganda to the public as "honest" information brokers.

And are your assets protected from RICO?; 7/31/10, 3:42 PM
Beth said...: Skyler at 3:30 - sensible and wise.; 7/31/10, 3:46 PM
Ipso Fatso said...: Maybe Herbert has a lifetime employment guarantee like his sistren at the The Boston Globe. Then maybe he should volunteer to take half pay so the some poor ink stained wretch can have a job. I won't hold my breath.; 7/31/10, 3:56 PM
Sprezzatura said...: ed,

Are you saying that you support more (unpaid for) tax cuts for the rich and more deregulation (thereby following the trend started by Reagan) because this will (eventually, though not yet--w/ thirty years passing) Trickle Down?

Or

Are you saying that you support more (unpaid for) tax cuts for the rich and more deregulation (following the trend started by Reagan) because this will (continue to) Trickle UP?

For myself, I'll (retroactively, since I was a Clinton hater at the time) take the reasonable fiscal policies of Clinton that reversed the fiscal legacy of Reagan (i.e. doubling the deficit as a percentage of GDP and tripling the debt).

So what do you think will result from more tax cuts for rich folks and deregulation? Trickle UP or Trickle Down?; 7/31/10, 4:01 PM
Daniel12 said...: This comment has been removed by the author.; 7/31/10, 4:10 PM
Daniel12 said...: Well, I can't blame some of you for being apparently illiterate, since Ann herself seems to have been unable to read the column before sounding off on it. March to the beat of the leader, and all.

The key point Herbert makes is that the job losses far exceeded profit losses, and profit returns have far exceeded job gains. But hey, there's nothing wrong with a jobless recovery. And everyone who lost his or her job was unproductive and deserved it. In fact, thank god for the recession, which allowed overburdened businesses to cull the fat. Have I got it right?; 7/31/10, 4:11 PM
Trooper York said...: The problem is not that the tax cuts are for the wealthy. That's total bullshit. The onerous taxes that are being levied by this administration will strangle business especially small businesses in their crib.

Why hang an anchor around the neck of the productive members of society?

So he can redistribute the wealth in schemes like the Pigford scam and to pay off government workers.

Redistribution is what the Democrats are all about. He told you that straight out.

If you like that, than you must love him and his job killing ways.; 7/31/10, 4:12 PM
Bruce Hayden said...: The rich are getting richer while the rest of us are getting poorer.

I would agree maybe with the former, but the only way that you can make the later statement is if you only look at maybe taxable income.

You just have to look at what the "poor" have these days, and compare that to what they would have had in a similar situation 10, 20, 50, 100 years ago to realize the absurdity of your second assertion. The "poor" today have stuff that the middle class didn't have 20 years ago - cell phones, computers, Internet access, etc., as well as cars, air conditioning, adequate food, clothing, housing, health care (maybe not as good as everyone else's, but they aren't paying for it either), etc.

That the rich getting richer is bad though is a classic fallacy. It comes, I would suggest, by reading a lot of Marx into Keynes, and not really understanding what the later was saying.

Rewarding people for hard work and taking chances is essential to making the economy work. And the chance to get filthy rich super charges this. Taxing all that away, of course, significantly reduces this incentive.

But probably more importantly, what is missed by classic Keynesians is that in the longer run than say a quarter or maybe a year, a dollar in the pockets of the rich guy does more for the economy than a dollar in the pocket of the poor guy. Because the money doesn't stay in the pockets of the rich guy, but rather, what he doesn't spend gets either put in the bank or invested, and if it is put in the bank, it is also invested, though as a loan/debt, instead of potentially equity. Businesses need both, and small and medium sized businesses are are desperate for both right now. If the rich hid their money in their mattresses, or buried it in their back yards, the Keynesians would be right. But they don't.

Southwest Airline's shortest route on the west side of the country is between Reno and Oakland, and San Jose and SFO aren't much further away by air. Add in that we have a Silicon Valley office. So, we see a lot of the effects of rich people investing their money. One of the things that has made Silicon Valley the hub of innovation around the world for the last 30-40 years is that there are a huge number of very rich people trying to find a way to make even more money, and they do this, in part, by being the angel and venture capital investors who put the money into the small start ups that turn into the Googles.

The class warriors think that if they could just get ahold of all that surplus money floating around, they could do a better job at building our economy. They can't. Not even close. Instead, you get a $41,000 Chevy Volt that has equivalent amenities as that company puts in its $15,000 vehicles. You have ethanol and "green energy" subsidies, and you have Obama and Ayers blowing $50 million in Annenberg money to no discernible long term benefit to the community.

This is what happens when you have people who are controlling the investment and spending of other people's money, with no real skin in the game. And is why rich people investing their own money (or paying a professional to do so) are always going to do far, far, better at creating jobs.; 7/31/10, 4:16 PM
Unknown said...: 1jpb said...

ed,

Are you saying that you support more (unpaid for) tax cuts for the rich and more deregulation (thereby following the trend started by Reagan) because this will (eventually, though not yet--w/ thirty years passing) Trickle Down?

Or

Are you saying that you support more (unpaid for) tax cuts for the rich and more deregulation (following the trend started by Reagan) because this will (continue to) Trickle UP?

For myself, I'll (retroactively, since I was a Clinton hater at the time) take the reasonable fiscal policies of Clinton that reversed the fiscal legacy of Reagan (i.e. doubling the deficit as a percentage of GDP and tripling the debt).

So what do you think will result from more tax cuts for rich folks and deregulation? Trickle UP or Trickle Down?

I know the National Socialism pb&j preaches will break us. Most people did well in the Reagan years, but the Demos have to whine about something. All Willie did was cut defense by 40% (which was a huge mistake), the rest was done by Gingrich and Co.

But pb&j only wants to play sophistic games; he wants everyone to forget the phrase, "A rising tide lifts all boats", and raising taxes on "the rich" stifles economic growth since most of those nasty rich are the ones who provide jobs. The Demos are the ones who enact PayGo and then don't abide by it. People like Tom Coburn and Jim Bunning are the ones who want things paid for.

This is a guy who claims he saw Reagan waving at a blank wall at the worst of his Alzheimer's and thought it was funny. Another 'compassionate' Lefty.; 7/31/10, 4:17 PM
Trooper York said...: Government destroys jobs not creates jobs. Except for government workers who come with an ever increasing ridiculous pension load that is destroyed so many states and citys that it will soon be a Katrina style disaster.

No rational business man would expand or invest while these pirates are here to rape and pillage in guise of "fairness."

Now is the time to hunker down and hide out. They can't force you to make a bad investment. At least not yet. But I don't put anything past this rapacious assholes.; 7/31/10, 4:20 PM
NotWhoIUsedtoBe said...: Daniel- so what?

Businesses don't exist to employ people. They employ people to do something. If they can do it without more people, they do. I don't hire someone to do my laundry.

It's like forgetting that the public school system exists for some other reason than to employ teachers.; 7/31/10, 4:22 PM
David said...: Suggestions for Bobby:

1. Start pronouncing your name "Hay-Bear."

2. Move to France.

3. Check the layoff record and CEO pay of your employer and its subsidiaries.

4. Quit job in protest.

5. To the barricades . . . .; 7/31/10, 4:27 PM
Trooper York said...: "It's like forgetting that the public school system exists for some other reason than to employ teachers."

No that's what the public school system does these days. Employs teachers and pays off their unions. That's why they hate charter schools that would do a better job of teaching kids. That's why they have to kill it. Because the public sector is all about the jobs for the unionized workers. The original purpose is not even secondary. It is third or fourth or fifth in importance.

Teaching children is the Potsie of the purposes of public education.; 7/31/10, 4:27 PM
Texan99 said...: This comment has been removed by the author.; 7/31/10, 4:28 PM
Bruce Hayden said...: Are you saying that you support more (unpaid for) tax cuts for the rich and more deregulation (thereby following the trend started by Reagan) because this will (eventually, though not yet--w/ thirty years passing) Trickle Down?

Sorry. But it works. No matter how many liberals repeat the talking point you just did, trickle down economics works.

And I love the way that you have turned the debate around. You implicitly start with the assumption that the money is the government's, and that we only should have what they deem that we should be able to keep. But what you are glossing over is that the level of GNP that the government is now grabbing has jumped several percentage points under Obama. And, your so you are starting there as your base point.

What must be remembered is that using the much discredited "static analysis" required by the politicians controlling the CBO, the Bush tax cuts only put us in a couple hundred billion dollar deficit over most of his term, and that was to fight two wars at one time. The reality, under the more realistic dynamic analysis, is that they more than paid for themselves.

But all of a sudden, we have massive new spending as our base line, and these tax rates, that have been in place for most of a decade, are now considered a "cost".

Let's instead do what we know works - keep the tax rates we have in place, don't increase tax rates in the midst of a major recession, and, in particular, don't drastically increase tax rates on investment, savings, inheritance, and hard work, at a time when that money is much better spent by those who own it, than by government bureaucrats and functionaries who have overriding political considerations. And, then, let's cut spending at least back to the levels we had before the Democrats took over Congress in 2006.; 7/31/10, 4:29 PM
Texan99 said...: 1jpb: Tax cuts don't have to be paid for. Spending has to be paid for. Spending should be cut when tax revenues decrease.

Daniel: If job cuts exceeded profit losses, so what? Businesses are making do with the minimum cost structure possible and building up cash reserves as a hedge against what's coming down the pike. One thing they'd like to be assured of is the ability to make future payroll for the workers they really need, even if the government throws them for another loop or two over the next several years. The more disquiet they feel about the lunacy heading their way, the more cash they want to pile up to be ready for it.

Businesses don't exist for the purpose of ensuring that their capital is employed in such a way as to ensure the hiring of the greatest number of people.; 7/31/10, 4:30 PM
NotWhoIUsedtoBe said...: I confess to actually liking Bob Herbert. He's earnest, he believes in something other than the Democratic party, and he's old enough not to be following whatever trendy meme is flowing through the media that day.

That said, he's
boring as hell.; 7/31/10, 4:40 PM
Kev said...: (the original Kev)

Herbert has never apparently run a popsicle stand.

Neither has nearly anyone in the current administration. I'd love to see real-world experience as a prerequisite for working for the government, if there could be a way to do it without everyone crying about discrimination. (Me, I'd like to discriminate against the unproductive class when it comes to people who get to spend my money, but that's another story.); 7/31/10, 4:40 PM
Bruce Hayden said...: The key point Herbert makes is that the job losses far exceeded profit losses, and profit returns have far exceeded job gains. But hey, there's nothing wrong with a jobless recovery.

I really don't see the relevance of job losses far exceeding profit losses. Profits are the difference between costs and sales, and thus say nothing of sales levels.

But if you want to put blame anywhere for the "jobless recovery" and the alleged profit hoarding, look no further than the Democrats in Washington, D.C. Pretty much everything they have done, since Obama moved into the White House, has directly or indirectly helped cause that.

Several things that they have done have been major contributors to this. First, there are massive new regulations on businesses, most notably ObamaCare and the financial regulatory "reform" bill that recently passed into law. All of these significantly hurt small and medium businesses, while not hurting mega-businesses all that much.

Add to this the uncertainty that their actions have engendered. Both those bills, along with the tens of thousands of lines of regulations that will soon be forthcoming as a result, the potential of Cap and Tax, Card Check, Patent Reform (I know no one else thinks this is important, but I do - and the pending legislation is again heavily slanted towards the biggest businesses), etc., the EPA implementing is CO2 regulations, etc. have all caused massive uncertainty for businesses trying to plan for the future. You can also add in here the abandonment of the Rule of Law in the GM and Chrysler bankruptcy cases done to protect the unions there over creditors who had, by law, superior claims.

You wonder why these businesses are hoarding cash right now? The highly uncertain business environment alone explains much of it.

Then, you have to add in all the tax increases that have gone into effect, as well as those that are imminent, and those that are possible. Worse, some of these are draconian for small businesses - capital gains going up some, dividends jumping from 15% to 39%, and death taxes jumping from 0% to over 50%. The same people who are being vilified for not hiring fast enough, and hoarding cash are precisely the people who will be paying these much higher taxes.; 7/31/10, 4:45 PM
Dust Bunny Queen said...: Are you saying that you support more (unpaid for) tax cuts for the rich and more deregulation

I think you are very economically confused. Tax cuts are not "paid for".

SPENDING is what is paid for by excess taxes.

Tax cuts might necessitate SPENIDNG CUTS. Good.

We spend too much on stupid shit.

So what do you think will result from more tax cuts for rich folks and deregulation?

Define wealthy.

Income is not wealth. It is income that if you have some left over after paying your bills AND taxes, you can create wealth.; 7/31/10, 4:57 PM
Dust Bunny Queen said...: I meant to say: excess SPENDING is paid for by excess taxes.; 7/31/10, 5:02 PM
Trooper York said...: "We spend too much on stupid shit."

BINGO!!!!!!!!!; 7/31/10, 5:03 PM
I'm Full of Soup said...: "The key point Herbert makes is that the job losses far exceeded profit losses...and profit returns have far exceeded job gains."

There is no way in hell Herbert could prove that statement is factual.

I think Herbert uses talking points from the far left liberals like John Podesta and the Soros Machine.; 7/31/10, 5:05 PM
I'm Full of Soup said...: "Stupid shit" - come on they are called govt grants!

Actually, that might be a great idea. Pass a law that we can no longer use the socialist term "grant" and henceforth, they must be called "stupid shit"!; 7/31/10, 5:08 PM
MarkW said...: MarkW doesn't grasp the race to the bottom nature of American employers today. Employers do as little as they can get away with.

Everybody does (or pays) as little as they can get away with and still get what they want or need. When I go shopping, I try to get the best deal. When I hire a contractor, I also want a good deal, but I don't necessarily go with the lowest quote--I want quality work done. The same is true of employers today (and yesterday and tomorrow). Businesses would love to hire the best employees for the lowest possible salaries, but they can't get the best employees that way.

Law professors are fungible -- there are hundreds of top-flight lawyers working insane hours who would trade places in a minute. Look at the practitioners who manage to publish law review articles in their free time.

Well it certainly sounds like you know the secret to running a top flight law school at half price. But keep it quiet--knowledge and expertise like that is extremely valuable. Hire a bunch of those lawyers working insane hours who would just jump at the chance to join your new law school, make them all happy with the cushier new sane-hours deal you offer while you, in turn, rake in the dough because you know you're only paying them HALF what they would earn elsewhere.; 7/31/10, 5:10 PM
rhhardin said...: If worker's weren't cashiered, there wouldn't be any workers.

Everything works on there being a surplus of value on each side of every transaction.

Herbert's is an honest stupidity, I think; rather than the usual willing stupidity.; 7/31/10, 5:10 PM
rhhardin said...: Eat of the tree of knowledge of economics.; 7/31/10, 5:11 PM
Anonymous said...: Stimulus fails to stimulate. Scapegoat needed.; 7/31/10, 5:20 PM
Anonymous said...: Daniel said, "The key point Herbert makes is that the job losses far exceeded profit losses, and profit returns have far exceeded job gains. "

Tex99 answered it well, but I would add that businesses are hording capital because they're having problems feeling comfortable with their return on investment models.

There not comfortable because the range of possible outcomes under various assumed scenarios is too wide.

The reason it is too wide is because nobody has any clue what this jackass administration and congress are going to do next?

And on the bills that have been passed, no one knows what administrative edicts will result from the near absolute delegation of congressional power to the administrative branches.

And nobody knows which laws or administrative rulings will survive the courts.

Look, when somebody like Obama comes on board and starts knocking down walls and jack hammering foundations, everyone is bound to freeze until they can see what is ahead.

It's the unpredictability, stupid.; 7/31/10, 5:23 PM
Sprezzatura said...: ed,

I saw Reagan waving at a blank wall in 1990. This was well before the diagnosis, he wasn't even that far out of office. The place I saw him was at the Goodwill Games, he was on the back side of northern stadium bleachers of the UW (W as in WA, not WI) football stadium. He and I were in a very tightly (by pre 9-11 standards) patrolled area, so there were very few folks around, and there was nobody in front of Reagan.

And, I never thought that it was funny. It seemed, and still seems, weird.

Also, we have statistical proof that the Reagan revolution has resulted in Trickle up of the majority of our nation's income growth for the last thirty years. And, he managed to triple the debt of our country while doubling the deficit as a percentage of GDP while he was in office. BTW, an extra deficit-financed jolt of 3%GDP/year (Reagan started w/ 3% deficits and left w/ 6% in a time of peace and prosperity--by comparison w/ two wars, the full force of the budget busting Bush tax policies, and the biggest financial setback since the Great Depression (which caused deficits to increase because a)revenue fell of a cliff, and b)automatic stabilizers and stimulative spending were implemented) we are near a deficit of 9%, which is only 3% higher than Reagan was running during normal times) had better result in a decent growth rate (not that Reagan's growth rates were "through the roof", he was 0.27% GDP growth per capita ahead of his three predecessors (2.77 v 2.50), which is an expensive/ineffective way to spend a borrowed 3% of GDP).

And, you seem to have forgotten that WJC (And, Bush I) raised taxes. But, Bush II took care of that, didn't he?

If Rs cared about pay-go they could have proved it when they have been in power.

All of y'all who don't think tax cuts need to be paid for,

I hope none of you are complaining about deficits. Your mantra about tax cuts not needing to be paid for is precisely what makes the R party play you for suckers. You folks actually believe that the Rs have any intention of cutting spending to compensate for tax cuts. What is your faith based on? Reagan didn't do it. Bush II didn't do it.

And, about a week ago the official R response to BHO's weekly video message said that BHO was going to hurt seniors by cutting 500 billion from medicare. And, don't forget the POTUS-in-waiting and her "death panels." But, you folks think that the Rs are going to cut entitlements (the biggest future deficit issue) to pay for more tax cuts for rich folks--not to mention the ones that are currently paid w/ deficits.

The hand that burns never learns, w/ many of you.; 7/31/10, 5:41 PM
AC245 said...: You see, as all good Rs know, the reason average Americans haven't participated in our nation's income growth (which has mostly gone to the top one percent) since the Reagan years is because the rich have been overly burdened w/ taxes and regulation.

If all Ds are as astoundingly stupid and economically illiterate as 1jpb, then it suddenly makes sense why they're trying their damnedest to roll America back to the Jimmy Carter era and demolish the increases made in standards of living over the past 30 years.; 7/31/10, 5:43 PM
Sprezzatura said...: AC,

Thanks for the statistical data to support your point.

Oh wait, that was in my comment...never mind, please continue w/ your regurgitated, untested, and unsupported dogma. How does that go: 'we must have more (currently unpaid for, i.e. deficit financed) tax cuts for rich folks and we must have more deregulation (because it was the lack of these things that caused our current financial meltdown) or else we will be living in the JC era.'; 7/31/10, 5:56 PM
JAL said...: "We spend too much on stupid shit."

Yeah. We can't pay our bills and POTUS is forking over $1.2 mil for bike paths.

I think the Constitution says the federal government is supposed to provide for the common defense.... The rest of the stuff?

Pfhett.

Someone in DC needs to learn how to prioritize.; 7/31/10, 6:00 PM
AC245 said...: Thanks for the statistical data to support your point.

Oh wait, that was in my comment.

1jpb, I did you a courtesy by not dissecting your 7/31/10 5:41 PM Stalinesque rewriting of history (complete with accusations that your opponents were mentally unstable and the airbrushing away of facts inconvenient to your version of history).

I would have started by pointing out what was either your enormous duplicity or enormous historical ignorance in pretending that the Cold War never occurred...; 7/31/10, 6:02 PM
Anonymous said...: Of course, joblessness is a hideous problem that probably affects some 40-50 million Americans directly, perhaps, more, but it's wrong to blame corporate profits or corporate liquidity. Does anyone truly believe that if the potential for acceptable return on investment existed that companies would not be pursuing that return--hiring, investing, expanding?

Corporate profits are essential. They provide a hedge against increased job loss. Imagine unemployment in the 25% range. The misery is practically unimaginable.

Profits also support granny's dividend check, and the millions of 401 k's. Would you take another mega hit to your 401 k to support increased hiring which would also tap cash reserves potentially exposing large chunks of the workforce to even worse lay offs?

Are their short term greedy corporate managers who are more interested in next quarter's profits than long term profitability. Hell yes, just as there are crappy grievance mongering employees who spend as much of the work day as possible cruising the internet.

You think this sucks, try a world where no one is makinng money.; 7/31/10, 6:06 PM
I'm Full of Soup said...: 1jPB:

I can see you aren't "In The Mood" tonight?; 7/31/10, 6:30 PM
former law student said...: Well it certainly sounds like you know the secret to running a top flight law school at half price.

The test prep house Kaplan really knows the secret to running a top flight law school at half price.

But the ABA law school accreditation committee -- dominated by law school profs* -- won't be accrediting Kaplan any time soon.

*http://www.abanet.org/legaled/committees/comaccredit.html

Because, you see, Kaplan is lacking in the physical facilities department, for one thing. They make their students provide their own quiet space to study.

But the big shortcoming is Kaplan's shocking shortage of full-time faculty, to provide the same experience as, say, the Valpo School of Law, or Southwestern in LA. (OJ prosecutor Marcia Clark graduated from Southwestern. OJ defenders Johnnie Cochran and Robert Shapiro went to Loyola (LA) Law School); 7/31/10, 6:44 PM
former law student said...: This comment has been removed by the author.; 7/31/10, 6:46 PM
former law student said...: POTUS is forking over $1.2 mil for bike paths.

Everywhere I go, I see public works built under the FDR administration: post offices, zoos, museums, park fieldhouses -- still in use, still serving the public. I hope Obama builds a similar legacy.

7/31/10 6:46 PM; 7/31/10, 6:47 PM
LonewackoDotCom said...: Texan99: you're saying that from 2010. I have little doubt that 150 years ago - in the mindset of 150 years ago - the 'partiers would not only have supported child labor, but would have tried to smear the opponents of child labor as whatever the smears were back then.; 7/31/10, 6:50 PM
Sprezzatura said...: AC,

I'm in the mood for jabbering w/ you even though I have zero expectation that you can reciprocate w/ anything more than unthoughtful and unreferenced talking points.

But, my mood is also one of distraction since I'm multitasking as I get ready to hang w/ non-digital folks. But, until then, here is a chart that covers GDP since for the entire Cold War. You'll see that the rate of increase moderates from 1980 onward. So, obviously Reagan's predecessors didn't use the Cold War as an excuse for weak financial performance. And, they didn't add Reagan's Keynsian jolt by adding an extra three percent of GDP to the governments deficit (i.e. going from 3% to 6%).

BTW, what is your opinion of Reagan's response after the only time he and America were devastatingly attacked (10-23-83) during the Reagan years? How did the war against Hezbollah go? Reagan called talked tough to them and financed Star Wars and the rest. Since tough talk and paying off military suppliers is what destroyed the evil empire why didn't it work on Hezbollah? Could it be because the evil empire was on it's last leg, after nearly fifty years and Hezbollah wasn't? Nah.; 7/31/10, 6:55 PM
Sprezzatura said...: And, on that chart check out the gov expenditures. They go up for Reagan and Bush II. They go down for Clinton.

You folks are being played by the GOP.; 7/31/10, 6:57 PM
Texan99 said...: LoneWhacko, you argued that anyone who doesn't want the government to do a better job protecting employees probably favors child labor. I pointed out that one has very little to do with the other, but that if progressives such as yourself truly are unable to tell the difference, then maybe child labor laws will turn out to be far more damaging to society than anyone ever dreamed. If the price of child labor laws is that grownup laborers can't be treated like grownups, or that government can't see fit to protect children without confusing adults with children, maybe we'd have done better to find a non-governmental solution to child labor.

None of that is necessary, though, because a government run by anyone but progressives will have no trouble telling the difference.; 7/31/10, 7:00 PM
I'm Full of Soup said...: Damn govt expensitures went down under Clinton? Jeez I'd bet govt spending has not gone down under any president.; 7/31/10, 7:04 PM
Eric said...: Increases in the productivity of American workers are supposed to go hand in hand with improvements in their standard of living.

No, not really. Productivity, as economists measure it, is just the unit output over unit work. Over the short term it's nothing more than a secondary indicator of labor cost. When labor becomes more expensive, companies make capital investments to avoid employing people.

That's why French workers are the most "productive" in the world, but an American vacationing in France would be hard pressed to come to the same conclusion with the layman's understanding of the term.

The Economist had a relevant article a few years ago. In the New York Hilton there were six people employed to wash dishes, while in Paris the company had purchased a fancy machine for hundreds of thousands of dollars and employed two people to run it.

An economist would say the two employees in Paris were three times as efficient as their colleagues in New York. But in the real world the Paris Hilton employs fewer people because labor law in France makes employing people very expensive.; 7/31/10, 7:06 PM
I'm Full of Soup said...: Or Eric- as open borders advocates might say "those were the jobs that Frenchmen would not do" :); 7/31/10, 7:32 PM
AC245 said...: 1jpb, it was smart for you to completely abandon the shoddy revisionist history you tried to pass off in your 7/31/10 5:41 PM comment.

But it's tedious that, like the other leftists, instead of apologizing for your errors all you've done is moved to a new pile of bullshit and started furiously shoveling anew.

I have neither the time nor inclination to fisk your most recent comments, so I'll just add two key pieces of information to the latest disinformation you proffered:

And, on that chart check out the gov expenditures. They go up for Reagan and Bush II. They go down for Clinton.

1. Check out which branch of the government passes the spending and revenue bills (hint: it's not the Executive), and
2. Check out which party was in control of that branch when the expenditures went up under Reagan and down under Clinton.; 7/31/10, 7:40 PM
Phil 314 said...: Mr. Herbert is spot-on. The profit motive only leads to poverty, death and destruction.

Clearly a better system would operate under the principle of:

From each according to his abilities, to each according to his needs; 7/31/10, 8:01 PM
Ralph L said...: if a corporation dilutes its common shares by distributing stock options
Distributing options is not the same as issuing new shares. Most corporations hold some of their own shares; if they don't, the option contract means they have to buy some to sell to the option holder.

They historically had to sell enough so that they could pay taxes on their short-term gain. Many dot-commies actually had to pay tax on the unrealized gain after their companies went bust, and the stock became worthless.
This does not jibe at all with my understanding of capital gains taxes. Exercising the option is not a taxable event--selling the shares would be.; 7/31/10, 8:07 PM
GMay said...: Jesus, even the NYT is admitting trickle down works. Some of you need to recycle your talking points.; 7/31/10, 8:08 PM
GMay said...: And since we're trotting out charts that mention GDP, let's take a look at some projections:

Even the CBO predicts we're fucked.; 7/31/10, 8:12 PM
former law student said...: even the NYT is admitting trickle down works

Yes, I'm sure the John Galliano workers in France and the Dries Van Noten workers in Belgium will be sad to know that rich women in Birmingham, Michigan, will be cutting back their purchases.; 7/31/10, 8:46 PM
Pastafarian said...: Daniel said: "The key point Herbert makes is that the job losses far exceeded profit losses, and profit returns have far exceeded job gains."

I really hate it when you post something about business, Althouse.

As a small businessperson, I find the comments from your left-wing commenters, whose business experience consists of selling girl scout cookies door-to-door when they were 10 years old, painful to read.

Daniel, do you suppose that some of the people that were first layed off were in some part of the business that didn't directly impact production, like middle management or marketing? That's called "hunker-down mode".

Gosh, well, that explains that little mystery. Kthxbye.

FLS said: "Productivity doesn't mean shit, by the way. The US manufacturing worker was a model of productivity -- more productive than any German or Japanese -- second only to the Dane. But still, the manufacturing sector employs only 20% of Americans today, because American industry would rather hire five Chinese than pay one American salary."

Um, no.

Apparently, FLS, you don't know what productivity means. Let me give you an example: 50 years ago, a complex machined part would be produced with cam-driven machines in several operations by several workers.

Today, that part is produced complete in one operation on a CNC machine tool, by one guy, who's also running 3 other machines just like it.

But why am I wasting my time? You'll probably have to google "CNC". You've probably never machined anything before in your life. And you, and pb&j, and all the other lawyers and academics and thumb-twiddlers here will continue to produce opinions out of your asses on actual real work that you've never even seen done.

"Productivity doesn't mean shit". I've got to remember that little gem.; 7/31/10, 9:06 PM
Automatic_Wing said...: Yes, I'm sure the John Galliano workers in France and the Dries Van Noten workers in Belgium will be sad to know that rich women in Birmingham, Michigan, will be cutting back their purchases.

Yeah, why would someone working in the European fashion industry care about rich American women spending money? The Europen fashion industry needs rich American women like fish need bicycles, etc.; 7/31/10, 9:45 PM
GMay said...: former law student offered from left field: "Yes, I'm sure the John Galliano workers in France and the Dries Van Noten workers in Belgium will be sad to know that rich women in Birmingham, Michigan, will be cutting back their purchases."

And I'm sure that's relevant in a thread about American corporations and follow-on commentary about Reaganomics.

Honestly FLS, if you're going to offer some pretentious commenrtary, at least make an effort to tie it into the subject to which you respond.; 7/31/10, 10:31 PM
GMay said...: Pastafarian said: "I find the comments from your left-wing commenters, whose business experience consists of selling girl scout cookies door-to-door when they were 10 years old, painful to read."

For the love of all that is holy don't read the comments section of the original NYT article then. They'll make you want to gnaw out your own eyeballs.; 7/31/10, 10:56 PM
DADvocate said...: Well it's evil to lay off unproductive workers and lay even more work on your productive ones, preying on their fear.

This is close to the situation where I work, which happens to be a 100% employee owned company.

A year ago, we had a layoff. Our sales and orders have now returned to pre-layoff levels but staffing has not. Virtually all staff is salaried. There is not a time clock in the building. Now we're consistently working over 40 hrs a week, some as much as 60 with the only monetary reward being the hope of a larger year end bonus and higher stock values. Working this much and this hard for possibly no reward is not right.

Although we're employee owned the higher ups who own the majority of stock are no better than the top dogs in any other company. Only a dozen or so of the 250 full-time employees have a chance of having a say in what happens.; 7/31/10, 11:18 PM
Texan99 said...: DADadvocate: Boo hoo. I've never had a job that I could limit to 40 hours a week. If you want an easier job, go get one and free up your position for someone who's unemployed and wants to work hard.; 8/1/10, 12:23 AM
Stability of Art in Unstable Times... said...: Now we're consistently working over 40 hrs a week, some as much as 60 with the only monetary reward being the hope of a larger year end bonus and higher stock values. Working this much and this hard for possibly no reward is not right.

Congratulations! You just described the precise situation of nearly every small-business owner in America.

Maybe they should all shutter their businesses, fire your asses, and go work for someone else.

Let's see how that works out.

Heh. "Employee-owned." Well, welcome to ownership.

WV: Locke; 8/1/10, 2:53 AM
Kev said...: Teach three classes at a time instead of two, and add students to each class. Classes that don't attract at least 100 students get cut out.

Yeah, that would work really well for, say, a string quartet class.; 8/1/10, 3:08 AM
Opus One Media said...: You can ride in the car with Meade and take trips to your heart's content. We enjoy the travel-diaries. Just don't listen to him on economics and if you do listen to him, don't repeat what he has to say.; 8/1/10, 6:52 AM
Opus One Media said...: @GMay...

I'm confused. A long time ago Reagan economics was discounted as one of the great political frauds of all time...yet some cling to it like a wet diaper clings to a baby.

Get over it. Move on.; 8/1/10, 6:56 AM
Opus One Media said...: Synova said...
"But laying people off because there is less work? Excuse me?"

Laying off workers because there is less work is what happens. Laying off workers to increase the profit line isn't what happens. It is a result of no conscience and no concern. It is on the backs of workers who increase productivity without reward that profits grow.

If you have another explantion of how the system works, I'd like to hear it. Raw material prices are fairly stable. The inflation idex is nil. companies are making good profits. worker paychecks are flat.

now what is your point again?; 8/1/10, 6:59 AM
lucid said...: What Obama and Pelosi have managed to do is to create instability with regard to property rights.

A stable legal system that is predictable on property rights is necessary to economic growth anywhere in the world.

By moving unions ahead of bondholders in the GM bankruptcy, firing CEOs at GM and BP,takng over banks and GM, talking about redistributing the wealth, implementing punitive taxes on the financial industry, forcing "health care" down the troats of an unwilling citizenry, "informing" BP that they had to put billions in a government controlled fund, threatening businesses from the White House, etc., etc., Obama and Pelosi are threatening the stability of the property rights that make economic activity possible.; 8/1/10, 7:27 AM
Opus One Media said...: lucid said...
" Obama and Pelosi are threatening the stability of the property rights that make economic activity possible."

that is pure horseshit propaganda and you know it. if you don't "know it" then you are an idiot unworthy.; 8/1/10, 7:34 AM
Fen said...: Why so hostile Libtard? Do the big words make you frustrated? Try it in small doses: prop-er-ty rights. Better?

But if you want to speak to propaganda:

From each according to his abilities, to each according to his needs

...is the motto of thieves and pikers.

Its quaint in print, but we've seen how it works in real life: the parasites leech all motivation from the system as the work horses either collapse from carrying the added dead weight or wise up and quit.

Hey, its been an entertaining thread. I expected the Left to be clueless about business, but I didn't realize until today how ignorant they are of the basic fundamentals.; 8/1/10, 8:12 AM
Tank said...: Herbert is a commie. That's HIS position, not my opinion. He has the outlook you would expect.

Businesses are there to provide a means of salary and bene's to "workers" and, if they make a few autos, that's just a side issue. Profit is not an issue, and is to be deplored as "stealing" from the "workers."

It all shows what a dunce the guy is. He believes this.; 8/1/10, 8:14 AM
Opus One Media said...: Fen said...
"the parasites leech all motivation from the system as the work horses either collapse..."

well said Fen. Well said. I just wish some of those wall street boys you love so much would think of that..."are there no workhouses"?

there is nothing more irksum than an idiot without a grasp at reality. comprende vous?; 8/1/10, 8:33 AM
Stability of Art in Unstable Times... said...: Laying off workers to increase the profit line isn't what happens.

Damn, House. There can't just be one of you. You're stupid enough to be twins!; 8/1/10, 9:17 AM
SGT Ted said...: Laying off workers is a sin?

Why is Bob Herbert trying to inflict his religion and morality on other people?

Just another column from someone do doesn't really like freedom. Who thinks that corporations are jobs programs for the private sector.; 8/1/10, 9:22 AM
Anonymous said...: I don't like layoffs, but sometimes they are necessary. But if they are so necessary and yet the company's stock price does not improve because the market says, "Excess employees was (were?) not your problem," then the CEO should not still get his $12 million bonus.; 8/1/10, 9:49 AM
Hari said...: The real problem is that Herbert is completely unaware of the simple economic explanations for why the reduction in the labor force would exceed the reduction in output.

Consider an overly simple model of a firm with 40 workers. Assume all workers perform the same task, but that the productivity of workers varies. To make the numbers simple, assume 10 workers produce one unit per day; 10 workers produce two units; 10 workers produce 3 units; and 10 workers produce four units. The 40 workers produce a total of 100 units per day.

Now assume that demand for the company’s products drops by 10 percent. In Herbert’s world, the “good” company lays off no more than 10 percent of its workers. In order to pass the Herbert test, one worker from each of the four groups would need to be laid off, bringing the company’s employment and output both down by exactly ten percent (to 36 workers producing 90 units). This to Herbert is good and fair. It is also completely irrational. The only fair (fair to the workers and fair to the stock holders) way to handle the downturn is to lay off the least productive workers first. In this simple example, this would mean all 10 of the least productive workers.

While the real numbers are not this simple, the concept is. In this example, demand drops 10 percent, 25 percent of the workers get laid off (the 10 who produce one unit per day) and the output of the remaining workers (who continue to produce at the exact same rate as before) goes from 2.5 units per day to 3.0 units per day. (The remaining 30 workers produce 90 units per day.) The workers who remain don’t become individually more productive, rather their average output rises because the least productive workers have been removed from the mix.

Of course, real examples are far more complex. The point is that in any downsizing, the decrease in the labor force will always exceed the decrease in output, unless management sees its business as producing patronage jobs (e.g., government).; 8/1/10, 9:50 AM
jungatheart said...: HDH: "that is pure horseshit propaganda and you know it. if you don't "know it" then you are an idiot unworthy."

Please walk me through the flaws in his argument.; 8/1/10, 10:06 AM
Texan99 said...: Class Factotum said: " . . . then the CEO should not still get his $12 million bonus."

That's a decision for the owners of the business, not you, not the employees, and not the U.S. government. When you own a business, feel free to limit the bonuses you pay to retain your senior staff.; 8/1/10, 10:07 AM
Opus One Media said...: Old Dawg (Hari) said...
"This to Herbert is good and fair."

That isn't what he said and your observation/conclusions are bullshit.

You talk about piece cost in production without factoring overheads and non-productive expenses - (management for instance).

Labor reductions are NOT across the board but often center on replacing experience with cheaper. Second, management makes the cuts but doesn't 'take the cuts'.

You really need to stop drinking Faux Noise and Glenn Beck to get your core information. Herbert didn't lie in his column. You lied about Herbert's column.; 8/1/10, 10:09 AM
Opus One Media said...: Where did all you shithead libertarian types come from? Someone plow a field of rocks.

Jesus.; 8/1/10, 10:10 AM
GMay said...: HD Alva House bumbled: "I'm confused. A long time ago Reagan economics was discounted as one of the great political frauds of all time...yet some cling to it like a wet diaper clings to a baby."

Awww House, don't get pissed because the NYT happens to find fault with your talking point. You have a link you'd like to post, or maybe a sharply worded letter to the editor you want us to proofread?

Or do you just want to keep talking out of your ass?; 8/1/10, 10:23 AM
Fen said...: Libtard: Where did all you shithead libertarian types come from? Someone plow a field of rocks.

Awww. The little parasite is throwing another tantrum. He's all pissy because taxpayers are working enough to carry his lame ass.; 8/1/10, 10:48 AM
Opus One Media said...: Fen et al...

is this this best cheese you got? how sad.; 8/1/10, 11:01 AM
SGT Ted said...: heheh all the neo-commies making their flat earth arguements is a crack up.; 8/1/10, 11:19 AM
Ritmo Re-Animated said...: So says someone with the tenure that protects her own job performance from being assessed in terms of its productivity.

When's the last time you published anything for real?

As far as Herbert's column goes, if the companies in question had any sense, they'd just have everyone cut back their work hours equally, preventing anyone from going unemployed and giving them all the peace of mind and leisure that currently only the owner seems to expect.

Of course, it also makes good business sense to forego the need to rehire later - not that Althouse cares about that any more than she does the harm to society of large-scale unemployment.

If I were a resident of Wisconsin I'd petition my government to stop allowing my hard-earned tax dollars to fund this unproductive and craven Nancy Grace look-alike's time playing hooky on the web. Where's Pogo when you need him to bitch about lazy government contractors sucking off the gummint teat?; 8/1/10, 12:14 PM
Hari said...: HDHouse,

Actually, I think this is exactly what Herbert is saying. He is arguing that corporations have laid off more workers than necessary, and he bases this conclusion on the percentage decrease in demand versus the percentage of workers who have lost their jobs. He concludes that the fact that the percentage decline in employment is greater indicates that corporations have behaved "sinfully."

Of course my simple example does not take into account all factors of production. It is a simple example to illustrate the point that if you layoff the least productive workers first, you end up laying off a greater percentage of people than the percentage decline in demand. This is a just a mathematical fact.

Your position that management is a "non productive expense" is great!; 8/1/10, 12:14 PM
Trooper York said...: "Ritmo Brasileiro said......
If I were a resident of Wisconsin I'd petition my government to stop allowing my hard-earned tax dollars to fund this unproductive and craven Nancy Grace look-alike's time playing hooky on the web. Where's Pogo when you need him to bitch about lazy government contractors sucking off the gummint teat?"

Ooooooooohhhhh! That's gonna leave a mark.; 8/1/10, 12:18 PM
Opus One Media said...: thanks olddawg..

actually in our local school district 11% of the yearly expenditure of nearly 50 million dollars goes to the superindendent 4 assitants, 4 principals and 8 assistant principals plust a staff of 22 who support them. None of them every every ever see a child except for discipline. we have 2400 kids in the system and spend roughly 20,000 per student....we also just built a 1.6 million dollar synthetic field for a football team that plays 4 home games a year...

i love education and i love kids and we are so far out of wack it makes me crazy.; 8/1/10, 12:43 PM
Ritmo Re-Animated said...: Every now and then Skyler says something pretty darn sensible.

Greed is a very good motive. But the incentive system for corporations is somewhat perverse, there is no yin to the yang of greed. There is no danger to being a CEO that would serve to mollify the pure risk-taking greed that we have seen.

We have gone so far to shield corporate officers with our laws that they have literally no reason to avoid risk. They will still be millionaires, they will not lose their homes or cars or even any convenience at all. But the people they lay off because they made stupid business decisions will lose everything in this economy because jobs are very hard to find.

Greed is good, but so is risk. It serves to keep the risks sensible.

I think he meant to say that it serves to keep the "greed" sensible, but whatever. Point taken. It's amazing how many of the commentariat don't get that. I like it when Skyler gets heterodox.

The best (and most successful) boss I ever had saw a moral judgment to be made against executives that are so reckless with their companies and employees. I guess that's why he was so successful and engendered so much respect among those who worked for him and those he worked with.

The wacklords of Althouse seem to believe that respect is a one-way street.; 8/1/10, 1:13 PM
Ritmo Re-Animated said...: Ooooooooohhhhh! That's gonna leave a mark.

On her or on me? I'm only stating something that should be obvious to any lifeform with the self-awareness of at least a slug or greater. Why didn't the commentariat pick up on it, though - is what I wonder? It's completely true. It's also completely in-line with basic Tea Party rhetoric.

When you're as creative as the Blogress, I guess it's easy to make mistakes. But they're not hard to pick up on. She flubs the truth (or at least the bigger picture) almost all the time. I've caught it before and just think an acknowledgment of it would be nice. But that's up to her, of course.; 8/1/10, 1:17 PM
Trooper York said...: I just don't think it is fair to pick on the blogger lady for her hobbies. Every other teacher in America is a lazy prick who should be fired. At least she set up a place so we could bullshit.

I mean fair is fair.; 8/1/10, 2:35 PM
Ritmo Re-Animated said...: Come on. I don't care if she has a blog or when she updates it. The issue is what she has done to advance legal scholarship, as someone pointed out a couple years ago during the election season before his comments (and Simon's unhinged and violent responses along with them) were deleted. Although, it does seem that she's updated her CV since then - at least up through 2007, so perhaps some work is being done. I'll let the voters of Wisconsin judge its quality. Her blog is a separate issue.; 8/1/10, 2:52 PM
Joe said...: Exercising the option is not a taxable event--selling the shares would be

Yes it is and is one of the biggest blunders the inexperienced often make when exercising their options.

Your options have a specific price attached to them. When you exercise the right to buy those options, you must pay income tax on the difference between the strike price and the current stock price. (The company will write off this difference--see the advantage now?)

Note that this first round of taxation for the employee is treated as income tax, NOT capital gains. If you purchase the shares, rather than have them sold immediately, you will then pay capital gains (or take losses) bases on the base price at the time of the transaction.

So, let's say you have the option to buy 100 shares of stock at $1. The stock goes to $2. You exercise your option.

You could instruct the company to cash out the options immediately. Assuming there is no transaction fee (which will likely never happen), you end up getting a check for $100 and that is counted as normal income.

You could also tell the company that you want the stock, in which case you have to write them a check for $100 (plus the transaction fee) and you get stock worth $200. However, you must still pay income tax on the $100 difference.

(Either way, the company can write off the $100 "loss" and they may use stock internally held stock or stock purchased off the open market--in a cash out, they may choose to do only a paper transaction with no transfer of actual stock, which is the most common thing to do.)

But what if the next day the stock drops back to $1 a share? You sell your 100 shares for 100 dollars and realize a capital loss of $100. However you CAN'T offset your income tax gain from the original purchase since you can only offset capital gains with a capital loss (and you can't carry losses forward.)

This is exactly how a lot of dot com employees screwed themselves over. Instead of just cashing out, they thought they'd be better off owning the stock itself. The stock then crashed, leaving them with no way to pay the income tax incurred during the exercise (and no capital gains to use to offset their capital losses.)

(One way companies screw themselves over is to offer more options than they own, in which case they have to come up with real cash to purchase it off the open market. I don't know the legalities of this, but do know that every company I've worked for that offered options had pools of stock for options. If that pool ran dry, which it did at one company, no new options can be given. Odds are the board will then create another pool at a different price. Thus as an employee you could end up with multiple options at different strike/exercise prices. Failure to recognize this and if the accounting department doesn't pay attention, you could end up costing yourself a lot of money if you exercise options for a loss.); 8/1/10, 5:36 PM
Hari said...: HDHouse,

Based on your data, thirty nine administrators cost an average of $141,000 per year ($5.5 million total). Assuming your school district has one teacher for every 24 students and assuming those teachers cost an average of $100,000 each ($10 million total) then there is still an additional $34.5 million being spent in your school district.

Put another way, at $50 million for 2400 students, there is enough money to have one $83,333 teacher for every four children. If the students were to get 6 hours per day of personal tutoring for a 180 day school year, there is enough money in the budget to pay a private tutor $23 per hour for one-on-one instruction for every single student.; 8/1/10, 5:52 PM
Phil 314 said...: Second, management makes the cuts but doesn't 'take the cuts'.

I'm assuming you've never worked in a company that went through workforce reductions.

Frankly, my experience would inform me that middle management is one of the FIRST targets.; 8/1/10, 7:02 PM
Ralph L said...: Joe, thanks for the explanation. I don't remember it working that way in the 80's when I had some stock options, but I recall they changed the way that companies account for options in the 90's. It seems grossly unfair to tax an unrealized gain--I guess the government wants to discourage it.; 8/1/10, 10:36 PM
Fen said...: HDHouse: is this this best cheese you got?

No. But for you a fly swatter is all thats required. Up your game.; 8/2/10, 7:05 AM
Anonymous said...: How about those newspapers that went out of business, leaving all their staff in the lurch? Greed? Evil? Hmm?; 8/2/10, 12:55 PM
Show you said...: Apparently, this is not the world. After all, market forces that lead to the employer's desire for more money at the expense of their employee.
When we play the runescape, we need the RS Gold to help us become more powerful, as the same, we also need the cheap tera gold to spend less money to get the gold. When we feel tired we need the game to relax, we need the eden gold to play the game and we did this just
for fun and don’t become addiction about it!; 10/14/11, 2:12 AM