Month: May 2015

The more we learn about Obama’s trade deal, the worse it looks

Posted on by j.giglio

The Trans-Pacific Partnership (TPP) is a mega free-trade pact that would link 11 Asian countries and the Americas. The member countries have nearly 800 million people, an annual gross domestic product of about $28 trillion and they account for 40 percent of the global economy and one-third of world trade.

That’s the good news. But there are plenty of things about this deal that should give us pause.

TPP has been negotiated in secret since 2009. According to Vermont Sen. Bernie Sanders, the minimum wage in Vietnam- one of the parties to the deal- is 56 cents per hour.

TPP is the economic cornerstone of President Obama’s pivot to Asia. China is not part of the deal. Indeed, the pact is seen as a way to bind Pacific trading partners closer to the United States and counter China’s growing power in Asia.

Prospects for approval advanced last week with the Senate’s 62-37 vote to give this president and his successor so-called trade promotion authority, also known as “fast-track.” This authorizes the president to negotiate the trade agreement and bring it back to Congress for an up or down vote – no amendments or filibuster allowed. And you thought legislative power was vested in Congress. This approach is taken because if Congress were to amend the trade package, it would have to go back to the 11 other countries for approval.

The battle now shifts to the House of Representatives, where a tougher fight is expected. The president’s effort to pursue TPP has split his own party due to labor’s concerns that previous trade deals have cost jobs and depressed wages for American workers competing with low-wage countries.

The draft TPP document is under wraps. If lawmakers want to read it, they and a staff member can go to a security office in the Capitol as long as the staff member meets certain security requirements, but they cannot discuss the details of what they read.

Industry executives and their lobbyists, on the other hand, have had direct access to the text, advising administration negotiators on terms and provisions while the public is excluded from reviewing the draft. It’s not exactly a process that rewards collaborative behavior and promotes transparency.

What the public has learned about the TPP has come from documents publicized by Wikileaks. About 18 months ago, Wikileaks published a draft of the “intellectual property” chapter of the text that would likely lead to higher drug prices because the pharmaceutical industry gets stronger patent protections, which would delay cheaper generic versions of drugs.

Even better, an “investor-state dispute settlement” (ISDS) provision would allow multinational corporations to sue countries over laws that might reduce the corporations’ “expected future profits.” Foreign investors can also sue if a regulation gets in the way of their ability to profit from an investment. Picture Phillip Morris suing Australia for passing laws to discourage children from smoking.

And the court ISDS creates to hear such a suit consists of three private-sector attorneys serving as judges.

Sen. Elizabeth Warren, D-Mass., is especially concerned that allowing foreign companies to sue national governments in special tribunals would infringe upon American sovereignty and could unravel financial sector regulations. The president played junkyard dog on her in an interview with Yahoo Politics when he said: “Elizabeth is, you know, a politician like everybody else. She’s got a voice that she wants to get out there. And I understand that. And on most issues, she and I deeply agree. On this one, though, her arguments don’t stand the test of fact and scrutiny.”

The more you learn about the TPP, the worse it looks. Is it any wonder that the draft has been kept under lock and key?

Perhaps the only thing more improbable than the Seattle Seahawks passing on second and goal from the one-yard line in the Super Bowl is the notion that the American public benefits from the lack of transparency surrounding the Trans-Pacific Partnership.

originally published: May 30, 2015

Time to limit immigration of low-wage workers

Posted on by j.giglio

Politicians often remind us that we are a nation of immigrants. For much of America’s history,
immigration strengthened the nation’s economy. But that’s far less clear today.

In an era of global competition, the intake of low-wage immigrant workers who benefit big businesses at the expense of workers by depressing wages and increasing income inequality should be limited. The  war on terror also raises concerns about just who is coming to our country.

The French philosopher Auguste Conte is reputed to have said “demography is destiny.” American demographics have certainly changed dramatically over the last several decades.

According to the Census Bureau, in 2013 there were 41.3 million immigrants (legal and illegal) living in the United States, an all-time high and double the number in 1990, nearly triple the 1980 number, and quadruple the 1970 count of 9.6 million. Immigrants make up nearly 13 percent of the population, the highest share in 93 years. In 1970, fewer than one in 21 residents were born abroad. Today it is about  one out of eight.

When you add in their U.S.-born children, this group numbers about 80 million, or one-quarter of the overall U.S. population. The U.S. represents the destination of choice for the world’s migrant population. With less than 5 percent of the world’s population, we attract nearly 20 percent of its migrants .

In 2013, close to 47 percent of immigrants (19.3 million) were naturalized U.S. citizens. The remaining 53 percent (22.1 million) included lawful permanent residents, legal residents on temporary visas such as students and temporary workers, and illegal immigrants. The latter category is estimated at 11-12 million and represents about 3.5 percent of the American population.

Mexican-born immigrants accounted for approximately 28 percent of all immigrants to the U.S., making them by far the largest immigrant group in the country. India was the second largest, closely trailed by China, the Philippines, Vietnam and El Salvador. All told, the top 10 countries of origin accounted for about 60 percent of the immigrant population in 2013.

The demographic diversity of today’s United States is in many ways a direct result of the Immigration and Nationality Act amendments of 1965, which shifted U.S. immigration policy from a historic ethnic European population bias to one that favored a new stream of immigrants from developing countries in Asia and Latin America. Under the old system, admission to the U.S. largely depended upon an immigrant’s country of birth. The new system eliminated the nationality criteria and family reunification became the cornerstone of immigration policy.

The act was shepherded through the Senate by Ted Kennedy and signed by President Johnson at the foot of the Statue of Liberty on October 3, 1965. At the signing Johnson said, “This bill we sign today is not a revolutionary bill. It does not affect the lives of millions. It will not restructure the shape of our daily lives.”

But the law did change the immigration flow. For example, the European and Canadian share of legal immigration fell from 60 percent in the 1950s to 22 percent in the 1970s. By contrast, the Asian share of legal immigration rose from 6 percent in the 1950s to 35 percent by the 1980s and 40 percent in 2013.

Years later, Theodore White, the Pulitzer Prize-winning journalist and historian called the legislation “noble, revolutionary and one of the most thoughtless of the many acts of the Great Society.”

The evidence now suggests that immigrants are entering the U.S. faster than the economy can absorb them. An oversupply of low-wage immigrant workers has saturated the job market and depressed wages, thereby exacerbating income equality and the wage stagnation that has been a fact of life in the United States for over 40 years.

The time has come to tailor American immigration policy to the 21st century and put the economic interests of American workers at the center of immigration policy. For starters, this means limiting the entry of low-wage workers before the second coming.

originally published: May 23, 2015

When multiculturalism clashes with women’s rights

Posted on by j.giglio

Some forms of the multiculturalism many Americans favor can only intensify the challenge of reducing the various forms of gender discrimination still common in mainstream America. Consider the insistence by some groups that the cause of multiculturalism is best served by granting special “group rights” to cultural minorities (especially those composed of non-European immigrants) to help them preserve their distinctiveness in a society that emphasizes the white bread, homogenized, sitcom ideal of “real America.”

The problem is that part of the distinctiveness of these minority cultures sometimes stems from their traditional abuse of women by permitting oppressive practices such as forced marriage, female genital mutilation, and physical abuse. While we condemn atrocities done to women abroad, we largely ignore or rationalize discrimination at home.

Rosa Parks must have been spinning in her grave in 2011 when we learned that a Brooklyn public bus catering to a predominately Orthodox Jewish ridership had special rules requiring all women to sit in the back of the bus. Also, signs written in Hebrew and English directed women to use the back door during busy times.

Closely related, last month, a New York-to-London flight was delayed by an ultra-Orthodox Jewish man who refused to sit next to a woman because his religion precludes him from sitting next to a woman who is not a family member. The woman agreed to move. It wasn’t the only such incident of its kind. It’s another example of religious rights trumping a woman’s civil rights.

Apart from numerous instances of domestic violence and discrimination justified by religious beliefs and cultural practices, we witness the closing of the academic mind when Brandeis University last year rescinded its offer of an honorary degree to the Somali-born Ayaan Hirsi Ali because of her scathing criticism of Islam.

She experienced it firsthand when she says she underwent female genital mutilation at 5 and was targeted by the same Islamic militant who murdered Theo van Gogh. A note was pinned to his body saying she was next because of her criticism. For sure, Ms. Ali, author of the memoir “Infidel,” is a controversial public figure who has spoken and written powerfully about the culture of oppression affecting women in the Islamic culture at great personal danger. But universities are supposed to be about learning more, not less, and entertaining dissenting views.

Any government action to preserve these discriminatory practices among minority groups living in America is no more defensible than officially sanctioning discrimination in any form. Such actions would interfere with the already too-slow process of weaning mainstream America away from its historical patterns of male-imposed discrimination against women.

Government should insist that everyone living in the United States observe and obey all American laws regarding human rights without regard to membership in certain cultural minorities, religious sects or golf clubs. In short, no special treatment for any group that seeks to defend its abuse of women because it’s part of the group’s cultural distinctiveness.

Put differently, immigrant cultures with ingrained behavior patterns that are contrary to prevailing secular humanist views about the rights of women should not be tolerated. Such groups should not be exempt from American anti-discrimination laws. Minority groups living in America should not receive special rights to discriminate against women as a means of preserving their cultural distinctiveness.

The special rights case for allowing U.S. minority groups to continue practicing their own brand of discrimination against women is claimed by adherents as being consistent with liberal principles. Their main argument seems to be that liberal values require (among other things) tolerance and respect for diverse cultures.

If such tolerance and respect are to have any practical meaning, the practices of these diverse cultures must be consistent with tolerance and respect for all people.

Indeed, one argument for expanding women’s rights in America could well be its potential for restricting the ability of certain religious or cultural groups to encourage discrimination against individuals for reasons such as gender, race, sexual preference, lifestyle or business practices.

Feminism, therefore, could turn out to be nearly as liberating for men as for women.

originally published: May 16, 2015

The allure of Wall Street’s lusty pleasures

Posted on by j.giglio

Many people believe that a relatively few individuals were the real villains behind the financial heart attack of 2008: Those on Wall Street; in banks and other financial institutions; on the faculties of the nation’s leading graduate business schools, writing financial jabberwocky for small-circulation journals; setting policy in the West Wing of the White House and on Alan Greenspan’s Federal Reserve Board.

It’s popular to believe they hijacked the free market ideal because they could. It was American as handguns. They then proceeded to twist it to serve personal agendas at great cost to the. American people. Enough financial violence was done to make Attila the Hun look like Mother Teresa.

Some of these hijackers could have been hopeless psychopaths whose brains were wired in such a way that they actually got more pleasure scamming $10 from widows and orphans through elaborate Times Square shell games than by honestly earning $100 selling Bibles door-to-door.

In fact, everything needed to understand them is contained in several film noir classics.

Presumably, the only defense against such psychopaths is to isolate them before they can do too much damage. But the overwhelming majority of those assumed to have turned the free market ideal into a rip­ off of the American public probably started as fundamentally decent individuals, as morally straight as church deacons.

So what turned these Boy Scouts into shameless hustlers eager to sell their mothers 10 times over for a fast buck? The answer is clear enough to anyone who’s ever been bedazzled by Billy Wilder’s corrosively breathtaking  1944 movie “Double Indemnity,” with Barbara Stanwyck’s pathologically definitive scarlet woman promising poor schnook Fred MacMurray riches and sexual ecstasies beyond his wildest dreams if he helps her with a murderous insurance scam, all while working her own angles and making her own rules. If only he would bend a few rules. Just a little. Even for a short time.

Now imagine Stanwyck is America’s free market and MacMurray  is the Wall Street schmuck who should have known better.

Money and sex are hopelessly tangled in the male consciousness. So when a scarlet woman strutting in capitalism’s strapless red gown turns her wet-lipped allure loose on them and moves in close enough to fill their lungs with her dizzying perfume, what hungry Wall Street player is strong enough to resist her? Or even care when their homes and hearths and panoply of family values go rushing down the drain?

And if worse comes to worst, they can always stand up in court and plead the equivalent of Adam’s excuse when God scolded him for having eaten the forbidden fruit.

Barbara Stanwyck’s definitive portrayals of scarlet women throughout her .long career make these performances especially relevant in helping us appreciate why so many men in our male-dominated society remain confused little boys who get sex and money all mixed up. They become ·ready prey for the allure of money and power and all too eagerly sacrifice their careers, families, and very lives for the promise of a tainted dollar.

To our good fortune, many of these classic films noir are now available on DVDs and various video ­ streaming services. So be on the lookout for “The Lady from Shanghai,” “The Maltese Falcon,” “Out of the Past,” “Touch of Evil,” “The Killers” and many others.

Nothing beats movies from the classic noir era when it comes to exploring the darker side of human nature and providing us with psychological insights into why so many Americans are driven to behave like schmucks. Or at least they offer some convenient and reassuring explanations. 

originally published: May 9, 2015

How Wall Street execs cook the books

Posted on by j.giglio

One reason no one much likes corporate America these days is executive compensation. The subject is rarely out of the headlines and serves as compost for many articles and books written in pornographic detail.

CEO compensation discussions have struck a particularly pessimistic note since the 2008 financial crisis, when the high cicerones of finance rolled the dice, pocketed their winnings and relied on taxpayers to make the markets right again.

In the 1970s and ’80s, public corporations began adding stock options to already generous CEO salaries and bonuses, with the hope of giving them an incentive to boost corporate fortunes as measured by increases in the company ‘s stock price. Instead of promoting shareholder interests, the approach has created an incentive for executives to manage corporate resources to maximize management’s wealth.

Overall executive compensation jumped from a median of $1 million in 1980 to $10.8 million in 2013 for CEOs of companies listed on the Standard & Poor’s exchange, with stock-based compensation accounting for two-thirds of median CEO compensation. The ratio of executive pay to that of average workers has grown from 29.9-to-1 in 1978 to 295.9-to-1 in 2013.

American firms spent nearly $1 trillion last year on stock buybacks and dividends that elevate a firm’s stock price to new highs and help fuel a bull market in which captains of industry flourish regardless of a company’s underlying health.

For example, several weeks ago, General Electric announced that it will return $90 billion to shareholders through a series of dividends and share buybacks. Apple pursued a $90 billion stock buyback last year, Exxon Mobil spent $13 billion on stock repurchases, and IBM has spent $108 billion on buybacks since 2000.

But there are clouds. Does this strategy make productive use of the firm’s resources and create long­ term value? Should increased CEO compensation be tied to improvements in firm performance that result from factors such as low interest rates or an expanding economy that have nothing to do with an executive’s performance?  What is the overall impact of this incentive for senior management to “manage earnings” or to artificially  inflate profits?

Here’s how it works:

“Why do you suppose professional athletes are forbidden from betting on the games they play in?” “That’s easy. So they won’t be tempted to make their bets pay off by shaving points and so on.” “And yet we allow senior executives to bet on their games.”

“By buying stock in the companies they run?”

“Sure. We even encourage that kind of betting by showering them with stock options.”

“Even as they can manipulate the final score by cooking the books to drive up the company’s stock price.”

“All in compliance with Generally Accepted Accounting Procedures. So shouldn’t we prohibit managers from buying and selling stock in their companies, just like we prohibit professional athletes from betting on the games they play in?”

“Makes sense when you put it that way. How would you pay them?”

“Give them big cash salaries, plus generous bonuses based on how profitable their companies are over a longer period like five years. In other words, they don’t get paid for making decisions; they get paid for living with the consequences of their decisions. As an incentive for them to manage their companies wisely.”

“So their bonuses would be deferred?”

“Yes. That’s what you want -to encourage them to manage for the future.” “Not to mention removing the incentive to cook the books.”

“That goes without saying.”

There may be some cause for optimism. In an effort to restore public trust, the 2010 Dodd-Frank financial legislation gives stockholders of public corporations an advisory vote on the pay packages of CEOs and senior management. This power, known as “say-on-pay,” is a baby step toward reining in excessive CEO compensation that is disguised as performance based.

Perhaps it would make sense to make this provision mandatory. Sunlight, as the saying goes, is the best disinfectant.

originally published: May 2, 2015