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Relief for Job Hunters

By YU WONG
THE WALL STREET JOURNAL ONLINE


The American job market may finally be catching up with the economy's growth.

The Labor Department reported Friday that U.S. nonfarm payrolls grew by 274,000 jobs in April, beating prognosticators' average forecast by nearly 100,000, according to a Dow Jones Newswires/CNBC poll. That wasn't all. Job gains for March were revised to 146,000 from an initial estimate of 110,000 and payrolls for February were revised to show an increase of 300,000, better than the 243,000 reported earlier. The average monthly payroll gain so far this year is 211,000, about what the U.S. economy needs to add to show the recovery remains on track.

In addition, the unemployment rate, which comes from a smaller survey of households, held steady at 5.2%. And inflation pressures in the jobs report were mild: average hourly earnings rose five cents, or 0.3%. to $16.00, counterbalancing concerns after Thursday's report on worker productivity showed rising labor-cost pressures in the first quarter.

All in all, it's the best job-market news we've had in a while.

The payroll data are considered the tail-end indicator of growth. Basically, jobs are about the last thing companies want to add, just as payrolls tend to be the first thing cut in a downturn. As a lagging indicator of where U.S. growth stands, the payroll numbers point to recent corporate optimism and necessity. There is only so much a company can do in terms of cutting costs and boosting productivity before it needs to hire more people to meet projected demand.

The report may help vindicate Federal Reserve Chairman Alan Greenspan's decision to focus on inflation worries instead of recent indications of a soft patch in the economy. But the question remains whether demand can be sustained at a healthy job-creating pace in the face of persistently high energy costs and rising interest rates. That falls largely on the shoulders of U.S. consumers, whose spending is a pillar of the economy that continues to hold steady.

Tax Break Gives Huge Benefits to Drugmakers - New law allows corporations to pay 5.25% instead of 35% on foreign profits that are returned to US
by Alex Berenson
http://www.commondreams.org/headlines05/0508-06.htm
A new tax break for corporations is allowing the biggest American drugmakers to return as much as $75 billion in profits from international havens to the United States while paying a fraction of the normal tax rate.

The break is part of the American Jobs Creation Act, signed into law by President Bush in October, which allows companies a one-year window to return foreign profits to the United States at a 5.25 percent tax rate, compared with the standard 35 percent rate.

Any company with profits in other countries can take advantage of the law, but the drugmakers have been the biggest beneficiaries because they can move profits overseas relatively easily, independent analysts say.

The money the companies are bringing home has come from many years of using legal loopholes in the tax law to aggressively shelter their profits from U.S. taxes, tax lawyers say. While the companies' tax returns are private, fragmentary information about their tax payments is buried inside their annual financial statements.

Those figures show that the drugmakers have told the Internal Revenue Service for years that their profits come mainly from international sales, even though prescription drug prices are far higher in the United States than elsewhere and almost 60 percent of their sales take place in America.

Representatives of most of the big drug companies declined to comment beyond their annual reports, but in a statement Eli Lilly noted that several factors depressed its United States profits, while Pfizer said it was following the intent of the law.

Though the companies stand behind their accounting, financial analysts and tax lawyers say that the drugmakers' claims defy reality and that their profits come mostly from sales in the United States. But the IRS lacks the resources to challenge the companies effectively, the analysts and lawyers say. As a result, the six major companies -- Pfizer, Johnson & Johnson, Merck, Bristol-Myers Squibb, Wyeth and Lilly -- collectively pay a federal tax rate of less than 15 percent on their worldwide profits, and some companies pay much less.

Already, four of the six drugmakers have collectively announced plans to return $56 billion in profits to the United States. Two others say they are still considering but could repatriate an additional $18 billion. Had the six companies faced standard federal taxes on those profits, they would have paid $26 billion to the United States. Instead, they will pay less than $4 billion. Chris Senyek, an accounting analyst at Bear Stearns, said drug companies would probably make up about half of all the money repatriated by publicly traded companies.

During this window, returning money to the United States is to the advantage of the companies because they can spend the cash here rather than having to use it overseas as tax laws generally require. Lawmakers have said their main intention for the law is to encourage U.S. companies to build new operations and hire workers. Congress passed the law in response to pressure from the European Union to resolve a long-running trade dispute.

Although the act is intended to create jobs, Pfizer said last month that it would cut its annual costs by $4 billion over the next three years. Pfizer, which will repatriate at least $28 billion under the act, did not say how many jobs it planned to eliminate, but analysts expect the company to shrink its workforce by thousands of people. Senyek said the law would create an insignificant number of jobs because companies can easily work around provisions in the law meant to stop them from using the money for dividends to shareholders rather than new hiring.

After the break expires, companies will probably go back to stockpiling profits overseas as they wait for another tax holiday in a few years, tax lawyers say.

The major drugmakers use a variety of complex but legal tactics to move profits from the United States to low-tax countries like Ireland and Singapore where they have large manufacturing operations, said H. David Rosenbloom, director for the international tax program at New York University Law School.

"The law is complicated, but what's going on is perhaps less complicated, " he said. "They're doing everything they can to maximize their profit in Ireland and minimize the profit in the countries where the sales occur."

The government can challenge the way the companies allocate their profits internally. But the companies have usually been able to defeat the IRS, Rosenbloom said.

"There's a limit to what they can do, because these cases are huge. They're very expensive," Rosenbloom said of the IRS.

The companies declined to discuss the specific strategies they use to minimize taxes. But the result of their efforts can be seen in a remarkable set of figures inside their annual financial reports.

Pfizer, the world's largest drug company, said that in 2004 it had only $4.4 billion in pretax profits in the United States, compared with $9.6 billion internationally, though most of its sales came in the United States. The company says that its profit margins on international sales were almost three times as high as on U.S. sales.

Other companies reported similar trends. The biggest imbalance occurred at Eli Lilly, which reported that it had about $200 million in profits from U. S. sales in 2004, compared with $2.8 billion in profits from sales everywhere else.

Collectively, the six drugmakers paid about $6 billion in federal and state taxes, a fraction of their pretax worldwide profits of $43 billion.

Real Wages Fall at Fastest Rate in 14 Years
by Christopher Swann
http://www.commondreams.org/headlines05/0511-08.htm
Real wages in the US are falling at their fastest rate in 14 years, according to data surveyed by the Financial Times by the Economic Policy Institute.

Inflation rose 3.1 per cent in the year to March but salaries climbed just 2.4 per cent, according to the Employment Cost Index. In the final three months of 2004, real wages fell by 0.9 per cent.

The last time salaries fell this steeply was at the start of 1991, when real wages declined by 1.1 per cent.

Stingy pay rises mean many Americans will have to work longer hours to keep up with the cost of living, and they could ultimately undermine consumer spending and economic growth.

Many economists believe that in spite of the unexpectedly large rise in job creation of 274,000 in April, the uneven revival in the labor market since the 2001 recession has made it hard for workers to negotiate real improvements in living standards.

Even after last month's bumper gain in employment, there are 22,000 fewer private sector jobs than when the recession began in March 2001, a 0.02 per cent fall. At the same point in the recovery from the recession of the early 1990s, private sector employment was up 4.7 per cent.

“There is still little evidence that workers are gaining much traction in their negotiations,” said Paul Ashworth, US analyst at Capital Economics, the consultancy. “If this does not pick up, it raises the prospect of a sharper slowdown in consumer spending than we have been expecting.”

Economists are divided over the best source for measuring pay increases in the US, since the government releases three main measures. A gauge of average hourly earnings is released with the employment report. This rose by 0.3 per cent in both March and April and 0.1 per cent in February. Even with a slight rise in the hours employees are working, from 33.7 to 33.9, this suggests wages are struggling to keep pace with inflation. The gauge covers non-supervisory workers, about 80 per cent of the workforce.

The Bureau of Economic Analysis figures for personal income showed wages rising at close to 6 per cent in 2004 but slowing down since. This measure also showed wages rising by just 0.3 per cent in each of the past 2 months. This is a broader gauge and includes small businesses and professional partnerships, but it measures total corporate wage bill rather than wages per person.

The Employment Cost Index, seen by some as the most reliable measure, excludes overtime and professional partnerships.

Wall Street Journal May 13, 2005

Moving Up: Challenges to The American Dream;

Escalator Ride: As Rich-Poor Gap Widens in the U.S., Class Mobility Stalls; Those in Bottom Rung Enjoy Better Odds in Europe; How Parents Confer an Edge; Immigrants See Fast Advance

[Summary]

The promise that a child born in poverty isn't trapped there remains a staple of America's self-portrait. President Bush, though a riches- to-riches story himself, revels in the humble origins of some in his cabinet. He says his attorney general "grew up in a two-bedroom house," the son of "migrant workers who never finished elementary school." He notes that his Cuban-born commerce secretary's first job for Kellogg Corp. was driving a truck; his last was chief executive.

Despite the widespread belief that the U.S. remains a more mobile society than Europe, economists and sociologists say that in recent decades the typical child starting out in poverty in continental Europe (or in Canada) has had a better chance at prosperity. Miles Corak, an economist for Canada's national statistical agency who edited a recent Cambridge University Press book on mobility in Europe and North America, tweaked dozens of studies of the U.S., Canada and European countries to make them comparable. "The U.S. and Britain appear to stand out as the least mobile societies among the rich countries studied," he finds. France and Germany are somewhat more mobile than the U.S.; Canada and the Nordic countries are much more so.

Even the University of Chicago's Prof. [Gary Becker] is changing his mind, reluctantly. "I do believe that it's still true if you come from a modest background it's easier to move ahead in the U.S. than elsewhere," he says, "but the more data we get that doesn't show that, the more we have to accept the conclusions."

[First in a Series]

The notion that the U.S is a special place where any child can grow up to be president, a meritocracy where smarts and ambition matter more than parenthood and class, dates to Benjamin Franklin. The 15th child of a candle-and-soap maker, Franklin started out as a penniless printer's apprentice and rose to wealth so great that he retired to a life of politics and diplomacy at age 42.

The promise that a child born in poverty isn't trapped there remains a staple of America's self-portrait. President Bush, though a riches- to-riches story himself, revels in the humble origins of some in his cabinet. He says his attorney general "grew up in a two-bedroom house," the son of "migrant workers who never finished elementary school." He notes that his Cuban-born commerce secretary's first job for Kellogg Corp. was driving a truck; his last was chief executive.

But the reality of mobility in America is more complicated than the myth. As the gap between rich and poor has widened since 1970, the odds that a child born in poverty will climb to wealth -- or a rich child will fall into the middle class -- remain stuck. Despite the spread of affirmative action, the expansion of community colleges and the other social change designed to give people of all classes a shot at success, Americans are no more or less likely to rise above, or fall below, their parents' economic class than they were 35 years ago.

Although Americans still think of their land as a place of exceptional opportunity -- in contrast to class-bound Europe -- the evidence suggests otherwise. And scholars have, over the past decade, come to see America as a less mobile society than they once believed.

As recently as the late 1980s, economists argued that not much advantage passed from parent to child, perhaps as little as 20%. By that measure, a rich man's grandchild would have barely any edge over a poor man's grandchild.


"Almost all the earnings advantages or disadvantages of ancestors are wiped out in three generations," wrote Gary Becker, the University of Chicago economist and Nobel laureate, in 1986. "Poverty would not seem to be a 'culture' that persists for several generations."

But over the last 10 years, better data and more number-crunching have led economists and sociologists to a new consensus: The escalators of mobility move much more slowly. A substantial body of research finds that at least 45% of parents' advantage in income is passed along to their children, and perhaps as much as 60%. With the higher estimate, it's not only how much money your parents have that matters -- even your great-great grandfather's wealth might give you a noticeable edge today.
Many Americans believe their country remains a land of unbounded opportunity. That perception explains why Americans, much more than Europeans, have tolerated the widening inequality in recent years. It is OK to have ever-greater differences between rich and poor, they seem to believe, as long as their children have a good chance of grasping the brass ring.

This continuing belief shapes American politics and economic policy. Technology, globalization and unfettered markets tend to erode wages at the bottom and lift wages at the top. But Americans have elected politicians who oppose using the muscle of government to restrain the forces of widening inequality. These politicians argue that lifting the minimum wage or requiring employers to offer health insurance would do unacceptably large damage to economic growth.

Despite the widespread belief that the U.S. remains a more mobile society than Europe, economists and sociologists say that in recent decades the typical child starting out in poverty in continental Europe (or in Canada) has had a better chance at prosperity. Miles Corak, an economist for Canada's national statistical agency who edited a recent Cambridge University Press book on mobility in Europe and North America, tweaked dozens of studies of the U.S., Canada and European countries to make them comparable. "The U.S. and Britain appear to stand out as the least mobile societies among the rich countries studied," he finds. France and Germany are somewhat more mobile than the U.S.; Canada and the Nordic countries are much more so.

Even the University of Chicago's Prof. Becker is changing his mind, reluctantly. "I do believe that it's still true if you come from a modest background it's easier to move ahead in the U.S. than elsewhere," he says, "but the more data we get that doesn't show that, the more we have to accept the conclusions."

Still, the escalators of social mobility continue to move. Nearly a third of the freshmen at four-year colleges last fall said their parents hadn't gone beyond high school. And thanks to a growing economy that lifts everyone's living standards, the typical American is living with more than his or her parents did. People today enjoy services -- cellphones, cancer treatment, the Internet -- that their parents and grandparents never had.
Measuring precisely how much the prosperity of Americans depends on advantages conferred by their parents is difficult, since it requires linking income data across many decades. U.S. research relies almost entirely on a couple of long-running surveys. One began in 1968 at the University of Michigan and now tracks more than 7,000 families with more than 65,000 individuals; the other was started by the Labor Department in 1966.
One drawback of the surveys is that they don't capture the experiences of recent immigrants or their children, many of whom have seen extraordinary upward mobility. The University of California at Berkeley, for instance, says 52% of last year's undergraduates had two parents who weren't born in the U.S., and that's not counting the relatively few students whose families live abroad.

Nonetheless, those two surveys offer the best way to measure the degree to which Americans' economic success or failure depends on their parents. University of Michigan economist Gary Solon, an authority in the field, says one conclusion is clear: "Intergenerational mobility in the U.S. has not changed dramatically over the last two decades."

Bhashkar Mazumder, a Federal Reserve Bank of Chicago economist, recently combined the government survey with Social Security records for thousands of men born between 1963 and 1968 to see what they were earning when they reached their late 20s or 30s. Only 14% of the men born to fathers on the bottom 10% of the wage ladder made it to the top 30%. Only 17% of the men born to fathers on the top 10% fell to the bottom 30%.

Benjamin Franklin best exemplified and first publicized America as the land of the mobile society. "He is the prototype of the self-made man, and his life is the classic American success story -- the story of a man rising from the most obscure of origins to wealth and international preeminence," one of his many biographers, Gordon S. Wood, wrote in 2004.

In 1828, a 14-year-old Irish immigrant named Thomas Mellon read Franklin's popular "Autobiography" and later described it as a turning point in his life. "Here was Franklin, poorer than myself, who by industry, thrift and frugality had become learned and wise, and elevated to wealth and fame," Mellon wrote in a memoir. The young Mellon left the family farm, became a successful lawyer and judge and later founded what became Pittsburgh's Mellon Bank. In front, he erected a statute of Franklin.
Even Karl Marx accepted the image of America as a land of boundless opportunity, citing this as an explanation for the lack of class consciousness in the U.S. "The position of wage laborer," he wrote in 1865, "is for a very large part of the American people but a probational state, which they are sure to leave within a longer or shorter term."
Self-made industrialist Andrew Carnegie, writing in the New York Tribune in 1890, catalogued the "captains of industry" who started as clerks and apprentices and were "trained in that sternest but most efficient of all schools -- poverty."

The historical record suggests this widely shared belief about 19th- century America was more than myth. "You didn't need to be told. You lived it. And if you didn't, your neighbors did," says Joseph Ferrie, an economic historian at Northwestern University, who has combed through the U.S. and British census records that give the occupations of thousands of native-born father-and-son pairs who lived between 1850 and 1920. In all, more than 80% of the sons of unskilled men moved to higher-paying, higher-status occupations in the late 1800s in the U.S., but less than 60% in Britain did so.

The biggest factor, Mr. Ferrie says, is that young Americans could do something most British couldn't: climb the economic ladder quickly by moving from farm towns to thriving metropolises. In 1850, for instance, James Roberts was a 14-year-old son of a day laborer living in the western New York hamlet of Catharine. Handwritten census records reveal that 30 years later, Mr. Roberts was a bookkeeper -- a much higher rung -- and living in New York City at 2257 Third Ave. with his wife and four children.

As education became more important in the 20th century -- first high school, later college -- leaping up the ladder began to require something that only better-off parents could afford: allowing their children to stay in school instead of working. "Something quite fundamental changed in the U.S. economy in the years after 1910 and before the Great Depression," says Prof. Ferrie.

One reason that the once-sharp differences between social mobility in the U.S. and Britain narrowed in the 20th century, he argues, is that the regional economies of the U.S. grew more and more similar. It became much harder to leap several rungs of the economic ladder simply by moving.

The paucity of data makes it hard to say how mobility changed for much of the 20th century. Individual census records -- the kind that Prof. Ferrie examines -- are still under seal for most of the 20th century. Data from the two national surveys didn't start rolling in until the 1970s.
Whatever the facts, the Franklin-inspired notion of America as an exceptionally mobile society persisted through most of the 20th century, as living standards improved after World War II and the children and grandchildren of immigrants prospered. Jeremiads in the 1960s and 1970s warned of an intractable culture of poverty that trapped people at the bottom for generations, and African-Americans didn't enjoy the same progress as whites. But among large numbers of Americans, there was little doubt that their children would ride the escalator.

In 1992, though, Mr. Solon, the Michigan economist, shattered the conventional academic wisdom, arguing in the American Economic Review that earlier studies relied on "error-ridden data, unrepresentative samples, or both" and misleadingly compared snapshots of a single year in the life of parent and child rather than looking over longer periods. There is "dramatically less mobility than suggested by earlier research," he said. Subsequent research work confirmed that.

As Mr. Mazumder, the Chicago Fed economist, put it in the title of a recent book chapter: "The apple falls even closer to the tree than we thought."
Why aren't the escalators working better? Figuring out how parents pass along economic status, apart from the obvious but limited factor of financial bequests, is tough. But education appears to play an important role. In contrast to the 1970s, a college diploma is increasingly valuable in today's job market. The tendency of college grads to marry other college grads and send their children to better elementary and high schools and on to college gives their children a lasting edge.

The notion that the offspring of smart, successful people are also smart and successful is appealing, and there is a link between parent and child IQ scores. But most research finds IQ isn't a very big factor in predicting economic success.

In the U.S., race appears to be a significant reason that children's economic success resembles their parents'. From 32 years of data on 6,273 families recorded by the University of Michigan's long-running survey, American University economist Tom Hertz calculates that 17% of whites born to the bottom 10% of families ranked by income remained there as adults, but 42% of the blacks did. Perhaps as a consequence, public-opinion surveys find African-Americans more likely to favor government redistribution programs than whites.

The tendency of well-off parents to have healthier children, or children more likely to get treated for health problems, may also play a role. "There is very powerful evidence that low-income kids suffer from more health problems, and childhood health does predict adult health and adult health does predict performance," observes Christopher Jencks, a noted Harvard sociologist.

Passing along personality traits to one's children may be a factor, too. Economist Melissa Osborne Groves of Maryland's Towson University looked at results of a psychological test for 195 father-son pairs in the government's long-running National Longitudinal Survey. She found similarities in attitudes about life accounted for 11% of the link between the income of a father and his son.

Nonetheless, Americans continue to cherish their self-image as a unique land where past and parentage puts no limits on opportunity, as they have for centuries. In his "Autobiography," Franklin wrote simply that he had "emerged from the poverty and obscurity in which I was born and bred to a state of affluence." But in a version that became the standard 19th-century text, his grandson, Temple, altered the words to underscore the enduring message: "I have raised myself to a state of affluence . . . "
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Bineaz

Good article, thank you. I don't mean to contradict it, but...

You work your ass out earning money, then you brainstorm how to invest your money shrewdly for your kid's college fund.

Then your kid goes to some elite school for $40,000 a year....where instead of teaching him sciences they brainwash him with gender studies...

...But the market demands skills, which your kid wouldn't have. Those with the right connections would get nicely-paid jobs...

...But since they're ignorants regardless, they make idiotic decisions that ruin corporations over which they preside...

....And while your kid's desperately looking for a good job, those are occupied already, while all the good jobs below went to Bangalor.

So what do we have....We've got immensely rich universities (for example Harvard has $20 bil), politically correct busybodies teaching garbage and nicely paid for it; graduates who know nothing, or they were taught that the only way to survive is to merge and then cash your stock options, nobody's fucking thinking and innovating anymore; then you have the hollowing out of all good middle-level jobs, the fall of scientific standards...does NASA ring a bell? So should the intelligence level at the CIA...

Scary. Pardon my rash message, didn't have much time for a more thoughtful response.

No Leo, I understand where you're coming from. Ultimately it depends on our own abilities and initiative, though some start further up and some further back.

Considering where I came from, I'm doing alright. I've been able to put away some peanuts (8K or so) for my son. So do you have any ideas about college investments? ;)

I went through four years of undergraduate and three years of graduate education in this country. Not even once did I immerse myself in gender study. It just does not happen.

The problem is, in my opinion, the overloading of some professions with college students at the expense of others. Results are obvious when you attend a college graduation ceremony...

Rows upon rows of nurses, teachers, pre-meds, pre-laws guarantee a serious competition for the jobs in the field and a lower salary for the lucky ones. The unlucky ones manage Burger Kings.

Finally, the thin ranks of Engineering disciplines enter the dais, and what do we see? An abundance of Asian and Eastern European names and faces to go with them.

When I was being conferred my Master of Science degree in Computer Science, I had the only American (more or less) sounding name among the Masters program graduates in my department. And even I was not an American.

There will not be enough qualified aspirants for the engineering disciplines in this country (even my 67-year-old father with less than halting English and almost no knowledge of CAD was able to obtain employment in Civil Engineering field - granted, he had 28-year tenure back in USSR)

The employers will look for alternatives elsewhere and these alternatives will be available cheaper. And, say what you will, the quality there is often efficient to do the job, leaving the few American-based specialists looking for lower-paid jobs.

Bineaz

Oil sands in Alberta will do:)

The other day I got a link to some interesting site dedicated to young female classical musicians (some of them are hotter than the Suns' surface, but that's another rant for another day), touring and recording in the United States. I wasn't checking really carefully, but probably they're living in the States too. By the way, selling classic CDs with a semi-nude angels on a cover became quite common. Marketing 101.

Most of them are either Russians or Chinese, some odd German:)

Maybe, just maybe, we shouldn't panic too much, the world is changing rapidly and it's a natural human reaction that such changes cause much unease.

Always Low Wages. Always.
by Paul Krugman
http://www.nytimes.com/2005/05/13/opini ... ugman.html? (New York Times)
Last week Standard and Poor's, a bond rating agency, downgraded both Ford and General Motors bonds to junk status. That is, it sees a significant risk that the companies won't be able to pay their debts.

Don't cry for the bondholders, but do cry for the workers.

Standard and Poor's downgraded GM and Ford sooner rather than later because it believes that the public is losing interest in S.U.V.'s. But the companies were vulnerable because they still pay decent wages and offer good benefits, in an age when taking care of employees has gone out of style. In particular, they are weighed down by health care costs for current and retired workers, which run to about $1,500 per vehicle at G.M.

So the downgrade was a reminder of how far we have come from the days when hard-working Americans could count on a reasonable degree of economic security.

In 1968, when General Motors was a widely emulated icon of American business, many of its workers were lifetime employees. On average, they earned about $29,000 a year in today's dollars, a solidly middle-class income at the time. They also had generous health and retirement benefits.

Since then, America has grown much richer, but American workers have become far less secure.

Today, Wal-Mart is America's largest corporation. Like G.M. in its prime, it has become a widely emulated business icon. But there the resemblance ends.

The average full-time Wal-Mart employee is paid only about $17,000 a year. The company's health care plan covers fewer than half of its workers.

True, not everyone is badly paid. In 1968, the head of General Motors received about $4 million in today's dollars - and that was considered extravagant. But last year Scott Lee Jr., Wal-Mart's chief executive, was paid $17.5 million. That is, every two weeks Mr. Lee was paid about as much as his average employee will earn in a lifetime.

Not that many of them will actually spend a lifetime at Wal-Mart: more than 40 percent of the company's workers leave every year.

I'm not trying either to romanticize the General Motors of yore or to portray Wal-Mart as the root of all evil. GM was , and Wal-Mart is, a product of its time. And there's no easy way to reverse the changes.

What should be clear, however, is that the public safety net F.D.R. and L.B.J. created is more important than ever, now that workers in the world's richest nation can no longer count on the private sector to provide them with economic security.

When they reach 65, most Wal-Mart employees will rely heavily on Social Security - if the privatizers don't kill it. And many Wal-Mart employees already rely on Medicaid to pay for health care, especially for their children.

Indeed, a growing number of working Americans have turned to Medicaid. As the Kaiser Family Foundation points out, that's why children have for the most part have retained health coverage, despite a sharp decline in employer-based health insurance since 2000.

Yet our current political leaders are trying to privatize Social Security and reduce benefits. And they are slashing funds for Medicaid even as they give big tax cuts to people like Mr. Lee.

The attack on the safety net is motivated by ideology, not popular demand. The public isn't taken with the vision of an "ownership society"; it seems to want more, not less, social insurance. According to a poll cited in a recent Business Week article titled "Safety Net Nation," 67 percent of Americans think we should guarantee health care to all citizens; just 27 percent disagree.

The question is whether the public's desire for a stronger safety net will finally be seconded by corporations that haven't yet adopted the Wal-Mart model of minimal benefits and always low wages.

Last year Richard Wagoner Jr., G.M.'s chief executive, gave a speech about the costs of America's "Kafkaesque" health care system that sounded a lot like my recent columns. And his company has made it clear that it likes Canada's system: in 2002 the president of General Motors of Canada and the head of the Canadian Auto Workers signed a joint letter declaring that "it is vitally important that the publicly funded health care system be preserved and renewed."

But according to The Journal Register News Service, which covered Mr. Wagoner's speech, he "stressed later to reporters that he was not proposing a national health care plan." Why not?

The Wall Street Journal

Dollar Rebound Builds On Stronger Economic Data

By CRAIG KARMIN
Staff Reporter of THE WALL STREET JOURNAL
May 16, 2005

After a long stint as the 98-pound weakling of major currencies, the dollar has put on some muscle in recent months, forcing currency traders to revamp their outlooks and giving a break to Americans traveling abroad.

The U.S. currency jumped Friday to its highest level against the euro in nearly seven months, against the Canadian dollar in seven and a half months, and against the British pound in nearly six months. The euro, which was trading as high as $1.36 in January, was at $1.26 Friday; it has fallen about 7% this year against the dollar.

The U.S. Dollar Index against major currencies last Friday posted its first weekly close above its 55-week moving average since April 2002. That's a key resistance level, a kind of psychological barrier that helps define which way the market is moving. Breaking through it could persuade many currency traders that the dollar will continue higher. Commodity prices, which tend to move in the inverse direction of the dollar, also slumped last week.


Some think that 2005 could mark a transitional year, one in which the euro loses its role as the highest-flying currency against the dollar and Asian currencies take over the leadership role when the dollar turns down again, as dollar skeptics expect it to do.

"The euro's day in the sun could be coming to an end even if the dollar bear market continues," says Steven Sewell, chief currency strategist for Citigroup Inc. in London. He suggests that the yen will see the biggest gains once the dollar rally cools, pointing to Japan's exposure to the fast-growing Asian economies and potential gains in sympathy with any appreciation of the Chinese yuan.

Some strategists and currency managers attribute the dollar's newfound strength in part to encouraging U.S. economic data and worsening economic and political reports from Europe. They also cite a pause in the speculation that China is about to revalue its currency. Such speculation has been a source of downward pressure on the dollar.

Long-term structural issues, such as the trade deficit, still bedevil the U.S. currency. But a stronger dollar has an upside for the economy. It could ease concerns about U.S. inflation by reducing the cost of imports. A stronger currency also makes U.S. stocks and bonds more attractive to international investors.

Perhaps more important, it could take some heat off Asian and other central banks, which have been under pressure to diversify their foreign reserves into other currencies because a falling dollar was eroding the value of their holdings.

A stronger dollar could also make U.S. goods more expensive abroad, and so squeeze American exporting manufacturers. But after a long decline, the dollar would have to rise considerably before that becomes a major concern.

The dollar's unanticipated resilience suggests that global investors may be taking a more benign view of the U.S. economy and its structural imbalances than they did a few months ago. U.S. consumers' appetite for imported goods and the weak performance of American exports has sustained a huge trade deficit, but a recent narrowing of the gap has eased fears, at least temporarily, that ballooning deficits could spark a crisis. Fresh signs of jobs growth and strong retail sales have made concerns about an economic slowdown look slightly overblown.

Friday's report that April import prices were higher than expected has fueled expectations that the Federal Reserve will continue raising interest rates, which could attract foreign capital at a time when European and Japanese rates are stagnant.

Despite this change in sentiment, few analysts are ready to declare that the dollar bear market is over. U.S.-friendly data have turned traders' attention to cyclical factors -- such as comparative economic growth and interest-rate levels between the U.S. and its major trading partners -- that tend to favor the dollar.

The better-than-expected trade figures, meanwhile, moved the structural concerns of widening U.S. trade and budget deficits into the background. Analysts are skeptical that one trade report heralds a sustainable trend. They suggest that any ballooning of the trade gap in the months ahead could return the focus to America's structural imbalances, pressuring the dollar again.

But Europe has its own structural problems. Germany and Italy have slashed their economic growth forecasts. European surveys of consumer confidence and manufacturing activity show that sentiment is worsening. German bond yields recently fell to near 50-year lows, underscoring a growing interest-rate differential with the U.S. European finance ministers recently eased limits on budget deficits for the 12 countries participating in the euro, a move that was immediately criticized by the European Central Bank as fiscally irresponsible and potentially detrimental to the euro.

"There are plenty of reasons to believe the euro has topped out," says Adnan Akant, a managing director for Fischer Francis Trees & Watts, a New York-based money-management firm.

Recent upbeat U.S. economic data combined with weak numbers from Europe have prompted analysts at Barclays Capital and Bank of America to adjust their year-end forecasts of the euro in favor of the dollar. Barclays sees the euro trading at $1.25 six months from now, revised down from a previous $1.30 forecast, while Bank of America now sees the euro falling to about $1.20 over the next few months. Analysts at UBS indicated they will be watching closely to see if they need to change their forecasts, too.

Despite Europe's relentlessly sluggish economy, the euro was able to rally from 2002 to 2004 because most traders felt it looked undervalued at a time when the market became preoccupied with American economic imbalances. International investment flows also began to move from the U.S. stock market into German and other European bond markets, offering support to the euro at the expense of the dollar.

Technical factors also helped: The euro is the most easily traded currency against the dollar; and unlike many Asian central banks, the European Central Bank has mostly steered clear of intervention.

Those seeking to bet against the dollar may increasingly turn to Asia. The Bank of Japan, which actively bought dollars in 2003 and early 2004, has been showing a greater tolerance for allowing the yen to appreciate. Anticipation that China will revalue its currency peg to the dollar -- likely allowing the yuan to rise and fall with supply and demand -- also could provide a tailwind for the yen and other Asian currencies.

The Elephant in the Living Room
by Stop The Buck
http://www.stopthebuck.com/elephant.html
Since George W. Bush took office (the first time), our country has accumulated almost $2.3 trillion in new debt. In November 2004, we actually had to amend federal law to raise the national debt ceiling up to an astounding $8,184,000,000,000 (yes, that's TRILLION!). Aging fans of Reaganomics must be having a hard time reconciling this number since they predicted way back in 1981 that we'd grow out of this debt. Unfortunately, in the period from Fiscal Year 1982 to 2005, our national debt has grown almost twice as much as our GDP (7.1x growth in debt vs. 3.8x for GDP).

The Office of Management and Budget’s conservative estimates predict that our debt will reach approximately $10.5 trillion by fiscal year 2010. By that time, the annual, on-budget interest payment on this debt is estimated to be about $455 billion. This is just $30 billion less than the entire Department of Defense budget estimate for the same year. Ironically, if one of our creditors decides to stop buying our Treasury notes, we may have to actually use DOD assets to resolve the situation (note: this is a joke).



Do we really want to run our country such that we have to borrow 2 billion dollars each and every day just to keep our government running? While the People‘s Bank of China and the Bank of Japan are still eagerly gobbling up U.S. Treasury securities, this cannot last forever and China's rapid economic growth probably means that "forever" is sometime in the next 4-6 years. When China decides to let its currency float in the open market, instead of pegging it to the U.S. dollar as it does now, the result will be higher interest rates, as foreign banks stop accumulating and start selling their dollars.

Inevitably, the U.S. must pay the piper for the artificially buoyant economy we've grown accustomed to. Alan Greenspan, the Chairman of our Federal Reserve Board, knows that our economy, such as it is, has been built upon a house of cards. The problem is, however, that neither he nor our current president has the guts to do anything about it.

Greenspan has been bending over backwards for more than a decade to keep interest rates low and the housing market jumping. The continual increase in home equity over this period has been the true engine behind our economy. The problem is that this mathematical function has a limit and the rubber band will have to snap back at some point. Economically speaking, this is a normal cyclical activity, but we've been goosing the system for so long that the payback will literally be a bitch. The impact of China's eventual flight from the dollar will only make matters worse.

At this point, you're probably thinking, "So, what can I do?" Like most answers, there is some good news and some bad news. The good news is that at least part of your destiny is under your control. Do whatever you can to pay off your debt or at least get it under control with a fixed-rate, low-interest loan. Maintaining a large amount of savings or liquid investments (i.e., cash), as always, is highly recommended. When the recession hits, you will be in much better shape to weather the storm.

The bad news, however, is that America is literally facing the elephant in the living room that it's been ignoring for more than a decade. If our government is to maintain any semblance of continuity and provide the services people have come to expect, it must raise taxes. The ray of light here is that we truly can afford such a hit if we start returning to a progressive tax system. If we ask corporate America and the wealthiest 1% of our citizens to simply pay the same tax rates they did only 20 years ago, our future train wreck can be avoided. Unfortunately, I doubt the current Congress or President Bush will consider such a plan.

Chicago Boyz

Stupid

The Administration is again trying to jawbone the Chinese into revaluing their currency, i.e., floating it in the expectation that it will rise against the US dollar and make our exports to China more attractive. So on the one hand we have this giant communist country, growing rapidly, very nationalistic and whose leadership is not uninclined to gin up external conflict (in part to deflect domestic attention from its own authoritarianism); and on the other hand we have some short-sighted American pols trying to buy votes from stakeholders in US manufacturing companies. (Our recent boosting of textile tariffs is part of the same pattern.)

Politicians and exporters always want to run a weak-dollar policy, but it's bad for importers, investors (remember who buys our bonds?) and most everyone else. We are attempting to contain China militarily and diplomatically while provoking it economically. That's just stupid.

Not to mention that it is believed that we ourselves are trying to artificially hold the dollar down. But, it's ok, China is not us, it is ok to ask from them not to do what we do in the earnest.

Back From Vacation

Gentlemen, I had a most relaxing vacation in Hawaii. There is nothing like the immaculate and pristine majesty of those islands. I would give anything to have an opportunity to be a permanent resident on Maui. Hell, I enjoy simply being on 10,000ft Mt. Haleakala hiking and star watching. They also happen to have a 1st class astronomy observatory.

Anyways, wish me luck again. I passed my 1st two Google interviews and have another battery of written problem solving demonstrations upcoming. I can't tell you how surprised they were to read my very foreign name only to listen to the locution of a real American...and a computer scientist to boot.

8) 8) 8)

Okay, forgive my patting myself on the back. But, I can tell you this: today's tech culture has gotten, shall we say, a bit arrogant. When I first started visiting Google, initially they were skeptical of my academic pedigree, as most Google employees...high enough already on a successful IPO...are MS or PhDs from Stanford, Harvard, Cal-Tech, Berkely, and so. Believe it or not, a good number have not heard of Jesuit run Fordham University in the Bronx, NYC. Evidently, they now have been assured of Catholic traditions in the math and sciences as well as disciplines like history, philosophy, and literature...as well as what an American fighting man brings to the table.



A good number are indeed foreigners or children of recent immigrants like Chinese and Indians. I too am concerned about the lack of Americans, relatively speaking, engaged in technology professions.

Like I said...Eugene withstanding...Americans still are by and large the best and brightest, at the cutting edge of innovation and leadership in the field. Okay, just kidding Eugene...I know about your 800 Math SAT.

:P

But seriously, long term, this will bite the US in the ass. I actually many times have come across a bit of ethnic banding in the profession, often to the detriment of productivity. Mind you, there are many brilliant and hard working foreigners and their recent generation children who command my respect and loyalty. It's just a shame that more American kids aren't taking this up.

Anyways, I shouldn't be too bold...I have a few more exams at Google. I'm tempted by the opportunity to post here and watch Google go gagga as Eugene stresses the system with his frantic searches.

Welcome back, Mate!

I'm glad you enjoyed your vacation, and I too would dearly love to visit Hawaii one day. The only place in the US I've ever visited is Florida, which I enjoyed very much. Perhaps I'll be living there myself in a few years as I have some relations living there

Good luck with your Google interview. I'm pleased that all is going to plan. I agree with you that there is a culture of arrogance in certain quarters nowadays. I'm studying at a modest University myself, but I've met Oxbridge graduates who I could certainly give a run for their money (Graham Webber for one).

Anyway, I'm happy that you have returned and joined the "Allied" forces on these boards once again

Marko

Us Allied Forces, no pun intended, have to stay vigilant. In one fell breath Eugene will have us believe that German forces surrendered en-masse at Normandy out of sheer despair at the impending fight, but yet paradoxally proclaiming that they basically outfought American GIs unto the end of war...whereupon Barry will continue to excoriate the US in Iraq while ignoring the magnitude of the Islamic threat and extremists slaughtering indiscriminately and disproportionally...only to have Boye issue some expose about a Utopian...err, I mean European...socialist dream.

We shall fight them across ridiculous metaphors, irrelevant fragmented sentences, and loon asylum Klatuisms. We shall figh their doublespeak and doublethink. We shall fight their historical and moden revisionism.

We shall never surrender!

Mate

Welcome back. Glad you had a great time. Keep us googled, I mean updated:)

Leo

It's too bad good old Klatu isn't around. I think Barry actually misses him.

Something for Eugene, hope it's right thread....

The Japan Times article

Soviet concessions at Yalta

By GREGORY CLARK

U.S. President George W. Bush rained heavily on Russian President Vladimir Putin's 60th anniversary war-end parade when he said the United States had renounced the Yalta agreement that conceded to Moscow postwar control over Eastern Europe. Putin had every right to be annoyed.

Yalta was in February 1945, and Bush was born in June 1946. So he probably found it hard to realize that Yalta simply recognized a reality at the time -- namely that Moscow already controlled East Europe. And how about Moscow's many concessions at Yalta? Can they be revoked, too?

If not for those concessions, a slew of other territories -- Greece, Turkey, Iran, Manchuria, Finland, Berlin, much more of Germany, Austria, all of the Korean Peninsula, and even northern Hokkaido -- could have ended up under full or partial Soviet control.

The Anglo-centric view of world affairs has 20-20 hindsight where its own concessions are concerned, and zero-zero when it comes to concessions by the other side. Our Japanese friends share the same problem, and not coincidentally.

The same is true when it comes to recognizing the Soviet role in winning the war against Adolf Hitler. The Anglo-centrists lavish attention on Allied 1943 victories in North Africa and Italy, and the 1944 Normandy landings in particular. Some even like to see these events as crucial to Germany's defeat. But these battles were sideshows compared with Stalingrad and other Soviet battles on the Eastern front at the same time.

Hitler threw 80 percent of German military might, including a 3 million Nazi army, into the vain effort to defeat the Soviet Union. If even a small part of that effort had been diverted to oppose the Allied forces in western Europe and north Africa, today there would be no more talk about splendid Allied victories. We would all be learning German.

The crucial Kursk battle of July 1943 alone involved more than 50 German divisions, more than half of which were destroyed, setting the stage for the Soviet advance on Berlin.

Meanwhile, the simultaneous Allied landings at Sicily, often seen as a turning point in the Allied war against Hitler, faced only two German divisions and a few weak Italian divisions.

The Normandy landings, another claimed turning point, faced only 200,000 German troops and a handful of Panzer tank divisions. At Kursk alone the Soviets faced and defeated close to 800,000 enemy troops and 3,000 tanks.

By 1945 at Yalta, the U.S. and Britain had no trouble recognizing the debt the world owed to the Soviets for their role and sufferings in defeating Hitler. As Winston Churchill wrote at the time: "When Stalin entered the room we all rose and, for some reason, stood to attention."

Today, most of this seems to have been forgotten. We are reminded constantly of German brutality against the European Jews. There is even a word for it "The Holocaust." But there is no word for the equally monstrous gassings, executions and starvation of millions of Soviet citizens and soldiers captured by the Germans. Except for their sacrifices, there would not be a single person of Jewish origin alive west of the Urals today.

Some say Moscow's clumsy efforts to appease Germany with the Molotov-Ribbentrop pact of 1939 contributed to its later military problems. But the Soviets can and do claim that Western appeasement of Hitler at Munich, which came earlier, was, in the long run, much more harmful.

In Moscow, where I was stationed in the early 1960s, the resentments still boiled. One was over the enormous imbalance between Soviet and Western losses in the struggle to defeat Hitler. The ratio of military casualties was 9-1. Total Soviet population loss was put at over 20 million. Property damage was incalculable.

Resentments did not stop there. Like some Japanese, many wanted to believe that at Munich and elsewhere the West had deliberately sought to encourage Hitler to attack east rather than west.

Pro-German elements in London were long suspected of trying to get a truce with Hitler that would have allowed the Nazis to concentrate even more troops on the Eastern front. Former U.S. President Harry Truman's 1941 remark about being happy to see the Germans and the Soviets annihilating each other was well remembered.

The Allied delay in opening a second front against Hitler -- originally promised in 1942 and then in 1943 -- was an especially sore point. For two long years Moscow was forced almost single-handedly to bear the full brunt of the Nazi onslaught. The one saving grace was a Japanese decision to abandon plans to attack into Siberia, in favor of further advances into China.

When the second front finally arrived at Normandy in mid-1944, Soviet troops were already advancing on Berlin. Some believe that even Normandy would not have occurred if Soviet troops had not already been moving into Eastern Europe.

The final insult was Yalta, where a war-weary and weakened Soviet Union was forced to give up many of the fruits of its hard-earned victory -- plans for the future control of Germany especially.

True, nothing can excuse the brutality of subsequent Soviet behavior toward the East European peoples. But Moscow could at least claim that many of those peoples had assisted or condoned Hitler's attack, and that it had the right to make sure there could be no repetition -- a right that has been steadily eroded as these peoples line up to join NATO.

The U.S. in its various post-1945 efforts to extend hegemony over neighboring Latin American nations has had no such excuse.

Gregory Clark is a former Australian diplomat and vice president of Akita International University. A translation of this article will appear on http://www.gregoryclark.net

The Japan Times: May 19, 2005

Fifi

Now I see that you have graduated to revising and rehabilitating the Soviet Union. Eugene surely will give you an A grade.

Fifi

Shouldn't you be denouncing soviet aggression against Japan, considering the treaty both sides put their signatures to?:)

Say hi to your Japanese socialists and remind them that when it comes to WWII they have the right to remain silent. So do you, silly ignorant.

Leo

If not for those concessions, a slew of other territories -- Greece, Turkey, Iran, Manchuria, Finland, Berlin, much more of Germany, Austria, all of the Korean Peninsula, and even northern Hokkaido -- could have ended up under full or partial Soviet control.

Yes indeed, the Russians today should feel miffed that they didn't get to apply their brand or proletarian internationalism to the aforementioned countries. I am sure legions of people across the globe lament not having had an opportunity to experence Soviet communism as opposed to living in their own independent nations protected by the US?

Hell, Fifi should just ask the Poles, Bulgars, Latvians, and Lithuanians. However, I would advise him to ask as it were a purely academic question as opposed to a being a gesture of missed opportunity! Nah. On second thought, I prefer he learn the hard way.

:P

How magnanimous of Russia not to assert full control of Germany, only the Eastern part of it! I'm sure the former East Germans are forever grateful for those "concessions!"

Is it not true (and please, someone correct me if I am wrong), that after the war, Russians were trying to starve some Germans to death? Weren't Americans giving food (among other things) aid to the Germans after the war because of this Russian policy?

The Soviet blockade on Berlin ring any bells? I can understand their anger at Germany, but it speaks volumes about the benevolent nature of American and British foreign policy that we supplied Berlin after the war (Berlin Airlift) despite the Soviet blockade and despite all the crimes against humanity perpetrated by the Germans in the not so distant past (at that time).

Sorry, Zeus, but that article is so off-base and misses so many vital points, that I cannot take it very seriously. I never thought i'd see Soviet propaganda written by an Aussie :P

Marko

That's exactly what Stalin was trying to do to West Berliners. Hey, West Berlin surely seemed easier to him than Ukraine, right?

Berlin Blockade shall forever live as one of the brightest achievements of the United States and the United Kingdom.

Hey mate pat yourself on the back for me, and good luck.  Gotta love them Jesuits. My niece got her B.A from Marquette yesterday.