Companies stash cash, but won't hire

[RandomGuy]

By GRAHAM BOWLEY

While many households and small businesses are being turned away by bank loan officers, large corporations are borrowing vast sums of money for virtually nothing — simply because they can.

Companies such as Microsoft are raising billions of dollars by issuing bonds at ultra-low interest rates, but few are spending the money on new factories, equipment or jobs. Instead, they are stockpiling the cash.

The development presents something of a chicken-and-egg situation — corporations keep saving, waiting for the economy to perk up, but the economy is unlikely to perk up if corporations keep saving.

This situation underscores the limits of policymakers' power to stimulate the economy. The Federal Reserve has held official interest rates near zero for almost two years, allowing corporations to sell bonds with only slightly higher returns — even less than 1 percent. But most companies aren't doing what the monetary policy was intended to persuade them to do: invest and create jobs.

The Fed's low rates in fact have hurt many Americans, especially retirees whose incomes from savings have fallen substantially. Big companies such as Johnson & Johnson, PepsiCo and IBM seem to have been among the major beneficiaries.

"They are benefiting themselves by borrowing and keeping this cash, but it is not benefiting the economy yet," said Dana Saporta, an economist at Credit Suisse in New York.

Corporations have been saving more money since the financial collapse of 2008. But a recent rush of blue-chip bond offerings — including a $4.75 billion deal last month by Microsoft, one of the richest companies in the world — has put even more money in their coffers.

Corporations now sit atop a combined $1.6 trillion in cash, equal to slightly more than 6 percent of total assets. In the first quarter of this year, that figure was 6.2 percent of assets, the highest level since 1964, when it was 6.4 percent.

When will corporations start spending that money — in particular, by hiring?

That speaks to what has become the great question of this long, jobless recovery: When will corporate America feel confident enough to put its cash to work, building factories and hiring some of the nation's 14.9 million unemployed?

Well-capitalized

Corporations will be strong, well-capitalized and ready to act aggressively when executives decide it is time to expand.



After running up sharply every quarter since mid-2008, the ratio of cash holdings to assets by corporations fell slightly for the first time in the second quarter of this year.

Although investment in factories and plants still languishes, companies have spent some money on investment in new equipment and software. That spending grew at an annualized rate of more than 20 percent in the first two quarters of this year.

But economists say such investment is still below its peak before the recession.

In addition, many of the new machines and computers may be replacing older machines companies put off retiring in the recession. Businesses are playing catch-up, and little expansion is occurring.

"They may actually be using this new investment to be more efficient and cut jobs," said Michael Gapen, an economist at Barclays Capital. "The mix of signals right now is still telling corporations to sit tight and wait."

Those signals included the direction of the housing market, the outcome of midterm elections, the effects on the economy as the fiscal stimulus wears off and any changes in tax policy, Gapen said.

They are deciding, "Why don't we just wait until the first quarter of next year?"

The cheap money may be having yet another effect unintended by policymakers eager to cut the 9.6 percent unemployment rate.

Several of the corporations borrowing billions on bond markets are using the money to put their financial house in order rather than to create jobs.

Microsoft said it was using some of its money to buy back shares, and it boosted its shareholder dividend by 3 cents a share.

Other companies are locking in longer-term borrowing, and some borrowing is financing an increase in mergers and acquisitions.

All this may enrich shareholders and cut company costs, but it does not necessarily lead to more jobs or represent the big investments in growth that could fuel a sharp economic recovery for everyone.

"They are still holding on to more cash in the same way that Noah built the ark," said David Rosenberg, chief economist at Gluskin Sheff & Associates in Toronto. "It is very telling."

In the case of Microsoft's bond offering, one factor might have been avoiding a big tax bill, said Richard Lane, who analyzes the software giant for Moody's. If Microsoft had needed cash, it could have pulled some from its operations abroad, but "borrowing new money on the debt markets is now cheaper than bringing its own money back from overseas," Lane said.

One of lowest rates

Microsoft's offering was only its second; its first was last year. The second offering included three-year debt at an interest rate of 0.875 percent, among the lowest on record for such borrowing.

According to the financial-data provider Dealogic, companies have borrowed $488 billion on the U.S. high-yield and investment-grade bond markets this year, 7 percent more than during all of 2009, and on track to at least match the $589 billion borrowed in the boom year of 2007, the highest on record.

Meanwhile, smaller companies continue to have trouble borrowing and America's households continue to cut debt and consumption.

Some economists fear that consumers' frugality will hobble growth further

http://seattletimes.nwsource.com/html/nationworld/2013067213_borrow04.html?prmid=related_stories_sec tion


--------------------------------------------------

A lot of larger corporations have been re-financing their debt at historic lows. This is a good thing going forward because it lowers their cost structures markedly.

Interestingly enough it also swings the debt/equity needle highly in favor of debt, simply because it is so cheap for large corporations.

I think what we are seeing is something of a perfect storm of contraction/stagnation.

Consumers, many saddled with declinine credit scores, have had to pay off debt and start saving cash for things. This has crimped demand, and will likely continue to do so.

Corporations for their part don't like uncertainty and have also been hanging back, preferring instead to buy other companies, rather than "invest" in the economic sense, i.e. build/buy new factories/stores/etc.

[TeyshaBlue]

Who wouldn't leverage money at 1%?

It's a no brainer...kinda like the insurance rate hike post healthcare reform attempt.


*edit...good lord, I can't spell attempt.*

[boutons_deux]

"insurance rate hike post healthcare reform attemtp"

attempt? it's real, not an attempt, just like they do every year, but this year they can falsely blame it on Magic Negro, as he hands them 40M new taxpayer subsidized clients.

[TeyshaBlue]

"insurance rate hike post healthcare reform attemtp"

attempt? it's real, not an attempt, just like they do every year, but this year they can falsely blame it on Magic Negro, as he hands them 40M new taxpayer subsidized clients.

No, I think it was an attempt at reform, and a weak and ineffective one at that driven by either a blinding ignorance of the underlying causes, or the willful act of kicking the problem down the calendar a few years.

Anything short of single payor is, IMO, bound for failure.

[Drachen]

Like you said, going forward this is a good thing for these companies. Hopefully (fingers crossed, but not holding breath), they are doing this to position themselves to make significant investments going forward. It is much smarter than the "borrow more to buy more" attitude that everyone wants them to take. It is bad for the economy in the short term, but it would seem that it is better in the long term.

[TeyshaBlue]

And honestly, why wouldn't a corp rake in cash @ 1%? It's a fucking printing press at that rate. Why a tiered rate structure couldn't be tied to corp infrastructure borrowing vs fiat loans is beyond me. Maybe that's too simple and I'm missing something.

[TeyshaBlue]

Like you said, going forward this is a good thing for these companies. Hopefully (fingers crossed, but not holding breath), they are doing this to position themselves to make significant investments going forward. It is much smarter than the "borrow more to buy more" attitude that everyone wants them to take. It is bad for the economy in the short term, but it would seem that it is better in the long term.

You might be right....certainly there is a cycle-time factor to this alright...it could be that we simply haven't waited the cycle out yet.

[Wild Cobra]

Why should corporations hire new employees just to have to pay more in taxes and everything else the democrats plan? Right now, it's far cheaper to pay people currently on the payrolls overtime than add more people to insure. I am currently working at least 44 hr weeks, and so are other people who want overtime. We had new equipment installed increasing our workload by more than 20%. We lost several people through attrition, and haven't hired anyone for more than two years. Nobody was laid off or fired where I work. Two that we lost simply moved to another facility, the others retired.

Why don't they higher more? My understanding is the new insurance costs on the horizon. This health care passed by congress I think helped killed the job growth, along with the expiration or the current marginal tax rates 1/1/11.

[George Gervin's Afro]

Why should corporatioons hire new employees jsut to have to pay more in taxes and everything else the democrats plan? Right now, it's far cheaper to pay people currently on the payrolls overtime than add more people to insure. This health care passed by congress I think helped killed the job growth, along with the expiration or the current marginal tax rates 1/1/11.

You mean pay any taxes..right?

[boutons_deux]

Corporate Profits 'Near-Historic' In Second Quarter, Thanks To Cost-Cutting

Corporate America finished the second quarter with "near-historic" profits, largely by cutting costs, laying off employees and streamlining operations, the Wall Street Journal reports.

Profits for companies in the S&P 500 soared 38 percent from the same period last year, hitting $189 billion, the WSJ says, the sixth-highest quarterly total ever. S&P analysts expect the trend to have continued in the third quarter.

Since 2008, corporate profits increased 10 percent -- but revenue was down 6 percent, the WSJ says. To achieve the impressive quarterly results, companies have had, as the WSJ puts it, to "streamline" their operations. This means firing workers, outsourcing labor and shuttering unprofitable (or less profitable) divisions.

The robust state of corporate profits presents a paradox: companies won't spend their money until the economy improves, but the economy won't improve until they spend their money. An increase in hiring, for example, would help drive a recovery. The New York Times reports this "chicken-and-egg" phenomenon, noting that near-zero interest rates have encouraged companies to borrow money and simply hoard it because, as the NYT puts it, "they can." Combined, companies have $1.6 trillion in cash, the paper notes. In the first quarter of this year, their cash reserves represented the highest percentage of assets since 1964.

"They are still holding on to more cash in the same way that Noah built the ark," Gluskin Sheff chief economist David Rosenberg told the NYT.

As HuffPost's Shahien Nasiripour reported in August, bank profits during the second quarter rose 21 percent to almost $22 billion, the highest level in three years.

All these corporate profits came as the country as a whole got poorer. The net worth of households and non-profits dropped 2.8 percent during the second quarter to $53.5 trillion, erasing two quarters of gains. The figure hadn't been that low since the third quarter of 2009.

http://www.huffingtonpost.com/2010/10/04/corporate-profits_n_748889.html?view=print

====

How's that Dope-y Strange-y Repug "Pledge" gonna work out for us? :lol

[MiamiHeat]

part of the grave problem with unregulated capitalism

Corporations are only interested in profit, and not in the well-being or general welfare of the population

[angrydude]

part of the grave problem with unregulated capitalism

Corporations are only interested in profit, and not in the well-being or general welfare of the population

are you suggesting we have unregulated capitalism?

:rollin:rollin:rollin:rollin:rollin:rollin:rollin: rollin:rollin:rollin:rollin:rollin:rollin:rollin:r ollin

[boutons_deux]

19 Mind-Blowing Facts About the Deindustrialization of America

http://www.alternet.org/module/printversion/148362

[Wild Cobra]

Yes boutons, such facts have been seen and predicted by many of us long ago. Too bad liberals don't listen, and continue policies that drive jobs out of America.

[boutons_deux]

What liberal policies drive jobs out of America?

(sorry, I have to call you your bullshit. I'll understand if you can't back it up)

[Wild Cobra]

What liberal policies drive jobs out of America?

(sorry, I have to call you your bullshit. I'll understand if you can't back it up)
I have stated in many past threads liberal policies that drive away employers. I'm not going to refresh your memory every time you forget.

[coyotes_geek]

Corporations are only interested in profit, and not in the well-being or general welfare of the population

Corporations don't behave any different than people do. We're all interested in our own well being.

[boutons_deux]

The problem with your bullshit equivalence that Corporate-Americans and Human-Americans are equal is that corporations have so much power, and more and power, that they cause a lot of damage that individuals simply can't.

[coyotes_geek]

The problem with your bullshit attempted rebuttal is that corporations are run by human individuals.

[boutons_deux]

I have stated in many past threads liberal policies that drive away employers. I'm not going to refresh your memory every time you forget.

You're SO nasty to me. Why?

[MiamiHeat]

The problem with your bullshit attempted rebuttal is that corporations are run by human individuals.

ill break it down for you then

1) The populace needs employment to earn a living, right? Otherwise, starve and go homeless.

2) Societies can provide employment by providing services to the populace.

3) Corporations take hold of these service providing positions, therefore, they have all the power when it comes to employment and by consequences, the general welfare of the population.

Therefore, you can either have

A) selfish for-profit only corporations that care only for themselves and profit. This HURTS the populace by consequence, since logic dictates that you can make more profit by cutting salaries, restricting benefits, overworking your employees, maximizing productivity with minimal staff.....which is exactly what we have in america.

or

B) Corporations that are free to function as they please until there is a serious economic crisis in the nation. The government can then step in and force them to behave in a manner that benefits the population FIRST

I will never understand why anyone can support such a greed, vile system of running the economy. So many people have suffered in this nation for hundreds of years due to the nature of capitalism.

[Wild Cobra]

You're SO nasty to me. Why?
Because you're just a babbling bag of gas. Repug this, repug that without a sense of honesty. I swear, your hot air would be put to better use in a power generation facility.

[RandomGuy]

No, I think it was an attempt at reform, and a weak and ineffective one at that driven by either a blinding ignorance of the underlying causes, or the willful act of kicking the problem down the calendar a few years.

Anything short of single payor is, IMO, bound for failure.

I agree.

The problem with health care reform isn't that it was socialism, it that it wasn't socialistic ENOUGH.

Yeah, I said it. There's the gauntlet...

[boutons_deux]

The problem with your bullshit attempted rebuttal is that corporations are run by human individuals.

mgmt people have a very different set of priorities and ethics, which they can hide in sycophantic group decisions where responsibility is diffuse and often hidden, as managers than they do a private individuals.

[RandomGuy]

ill break it down for you then

1) The populace needs employment to earn a living, right? Otherwise, starve and go homeless.

2) Societies can provide employment by providing services to the populace.

3) Corporations take hold of these service providing positions, therefore, they have all the power when it comes to employment and by consequences, the general welfare of the population.

Therefore, you can either have

A) selfish for-profit only corporations that care only for themselves and profit. This HURTS the populace by consequence, since logic dictates that you can make more profit by cutting salaries, restricting benefits, overworking your employees, maximizing productivity with minimal staff.....which is exactly what we have in america.

or

B) Corporations that are free to function as they please until there is a serious economic crisis in the nation. The government can then step in and force them to behave in a manner that benefits the population FIRST

I will never understand why anyone can support such a greed, vile system of running the economy. So many people have suffered in this nation for hundreds of years due to the nature of capitalism.

Always remember that publicly traded companies are primarily owned, often literally, by widows and orphans.

The majority of stocks in this country are owned by pension funds of one sort or another.

It is a bit of a dichotomy, but one has to keep that in mind before really villifying corporations. True, corporations can be greedy and stupid, when run by greedy/stupid people. Lord knows there seems to be no shortage of those.

BUT

We are not entirely immune to the benefits those corporations provide, even poor people who might not directly own stock.

[Wild Cobra]

BUT

We are not entirely immune to the benefits those corporations provide, even poor people who might not directly own stock.
Very true.

People like Miami want to in essence, steal my retirement savings.

[boutons_deux]

"Always remember that publicly traded companies are primarily owned, often literally, by widows and orphans."

bullshit. link?

"benefits those corporations provide"

Whatever they are, they don't exempt them from vilification, doesn't give them license to pollute up water, air, land, and to steal from and defraud citizens, to disenfranchise citizens' votes, not to protect their employees from injury and death. All of corporate crimes are committed in pursuing profits, esp for the greedy, wealthy mgmt.

Corporations simply won't behave in any interests except that of profits.

[Wild Cobra]

Corporations simply won't behave in any interests except that of profits.
You have such a bigoted narrow minded view. Corporations are responsible to their stock holders. However, that doesn't mean they all operate as you think. many corporations do good things for their communities, charities, etc. and still return a profit to their shareholders.

[MiamiHeat]

Very true.

People like Miami want to in essence, steal my retirement savings.

no, i want to keep our current system where anyone can be rich and successful

but people would like to add many regulations and obligations to corporations that want to operate in this country.

the greed, "profit above all" mindset has to go in times of economic crisis or when the general population has a pressing need.

[MiamiHeat]

You have such a bigoted narrow minded view. Corporations are responsible to their stock holders. However, that doesn't mean they all operate as you think. many corporations do good things for their communities, charities, etc. and still return a profit to their shareholders.

All of those things are tax-write offs. :lol

and the world will be burning in hell before it is saved by the goodwill of greedy businessmen.

Henry Ford himself, started out as a great philanthropist and angel to the workers of america. Eventually though, he forgot where he came from. He changed into the same greedy pigs we have today.

When workers lobbied for Unions, guess what Ford did? Hired gun wielding goons to ASSAULT and INTIMIDATE anyone who even MENTIONED unions in his factories.

Look man, Wild Cobra. You are a soulless, immoral individual if you care more about your own self than you do about others.

[boutons_deux]

You have such a bigoted narrow minded view. Corporations are responsible to their stock holders. However, that doesn't mean they all operate as you think. many corporations do good things for their communities, charities, etc. and still return a profit to their shareholders.

you have such ivory tower ideological bullshit bias for institutions and against individuals.

[Stringer_Bell]

the greed, "profit above all" mindset has to go in times of economic crisis or when the general population has a pressing need.

Prisoner's dilemma, yo. Profit above all is the truth, especially in a crisis. You gotta store your nuts for the winter.

[Wild Cobra]

Look man, Wild Cobra. You are a soulless, immoral individual if you care more about your own self than you do about others.
No. The soulless immoral people are those like you, who want to do things with "other people's money."

[MiamiHeat]

No. The soulless immoral people are those like you, who want to do things with "other people's money."

Yes, you are a soulless immoral individual who cares more for himself than you do about other people and their suffering. This is a great indicator that you have never seen the truth about the world. You have lived a sheltered life, it looks like. Thank your parents for that, but they did you a disservice by not teaching you about it, in my opinion.

About your savings, I'm talking about regulating corporate activities for the benefit of the population

not taking anything away from citizens.

[LnGrrrR]

Gotta say, I can't fault corporations too much. If they're making MORE profit now by streamlining their processes... well, that's good on them. Sucks for the American worker, of course.

[Drachen]

Gotta say, I can't fault corporations too much. If they're making MORE profit now by streamlining their processes... well, that's good on them. Sucks for the American worker, of course.

Yeah, I am pretty sure that simply the act of borrowing the money will eventually lead to profit. If you can borrow a ton of money which isn't due for 10years at 1% and the economy starts rebounding, this may cause the inflation rate to go back to 3-4% which means effectively you are borrowing at a negative interest rate. Additionally, if you are using this money to refinance higher debt, then the positives are far greater. I believe that this will essentialy create a situation of greatly increased free cash flows which will have to either be spent on new projects, employment, etc. or sent to investors in the form of dividends, share buybacks, etc. Either way, the money gets into the hands of people.

If we are going to go about giving money away, I personally would prefer the more direct route than routing through a corporation due to the differing time horizons (it seems less efficient to go through a corporation), but I guess discounting the time period, it is about the same eventual effect.

[CosmicCowboy]

"Always remember that publicly traded companies are primarily owned, often literally, by widows and orphans."

bullshit. link?

"benefits those corporations provide"

Whatever they are, they don't exempt them from vilification, doesn't give them license to pollute up water, air, land, and to steal from and defraud citizens, to disenfranchise citizens' votes, not to protect their employees from injury and death. All of corporate crimes are committed in pursuing profits, esp for the greedy, wealthy mgmt.

Corporations simply won't behave in any interests except that of profits.



Seriously. Boutons...how old are you and what do you do for a living?

[boutons_deux]

Can't fault corps for making profits, but in many cases, it's profits at the expense of air, water, land, employee health, safety, and against the health of the country.

Citizens have no right to a job, and corps have no obligation to provide jobs.

The question is philosophical. Should a country organize itself in the interests of all its citizens, or let the powerful, super-wealthy orgs and individuals run the country into the ground?

America is fucked, the mythic American Dream has evaporated for lower 95%, and I can't see any possibility of unfucking it, because the top 5% have all the power that matters.

This isn't just a somewhat-deeper, longer economic trough. It's a sea change, and the sailing will be very poor for millions.

There's amazing agreement here about how wealth should be distributed, and amazing ignorance about how it IS distributed.

http://pre.cloudfront.goodinc.com/posts/post_full_1285695177Realvs.ImaginedWealthDistribut ionintheU.jpeg

http://www.good.is/post/americans-are-horribly-misinformed-about-who-has-money/

[Wild Cobra]

Can't fault corps for making profits, but in many cases, it's profits at the expense of air, water, land, employee health, safety, and against the health of the country.

Citizens have no right to a job, and corps have no obligation to provide jobs.

The question is philosophical. Should a country organize itself in the interests of all its citizens, or let the powerful, super-wealthy orgs and individuals run the country into the ground?

America is fucked, the mythic American Dream has evaporated for lower 95%, and I can't see any possibility of unfucking it, because the top 5% have all the power that matters.

This isn't just a somewhat-deeper, longer economic trough. It's a sea change, and the sailing will be very poor for millions.

There's amazing agreement here about how wealth should be distributed, and amazing ignorance about how it IS distributed.

http://pre.cloudfront.goodinc.com/posts/post_full_1285695177Realvs.ImaginedWealthDistribut ionintheU.jpeg

http://www.good.is/post/americans-are-horribly-misinformed-about-who-has-money/
This all sounds good, but really. Just how would you implement such a thing. To what degree of authoritarianism would you use to destroy liberties for the pursuit of happiness?

Please...

What is your game-plan if you were King.

[LnGrrrR]

This all sounds good, but really. Just how would you implement such a thing. To what degree of authoritarianism would you use to destroy liberties for the pursuit of happiness?

Please...

What is your game-plan if you were King.

That's the big question though. How could we more evenly stratify our economy, while maintaining the greatest amount of liberty? If I knew that, I'd be a millionaire.

[Wild Cobra]

That's the big question though. How could we more evenly stratify our economy, while maintaining the greatest amount of liberty? If I knew that, I'd be a millionaire.
We all would.

I don't have the answers to fix everything. Very few actually. I do know that we are taxing ourselves out of prosperity. That much I see as certainty.

[Nbadan]

The whole taxing 'ourselves out of prosperity' issue is over-blown....if your paying over 30% in federal taxes, you simply need a new accountant and more tax exemptions...I don't know where the perfect level of wealth redistribution is, there are economists who study this shit all day, but the GOP tax cuts have led to a wealth redistribution to the top which has failed to create jobs, and led to decreased consumer demand....they should be repealed...

[TDMVPDPOY]

barrow at these rates while offloading it into a high interest savings account...companys come out on top again...

[MiamiHeat]

I believe that this will essentialy create a situation of greatly increased free cash flows which will have to either be spent on new projects, employment, etc. or sent to investors in the form of dividends, share buybacks, etc. Either way, the money gets into the hands of people.

....or the multinational corporations will use their funding to expand and develop foreign interests in China, India, etc.

[boutons_deux]

I do know that we are taxing ourselves out of prosperity. That much I see as certainty.

If Yoni or WC "knows" it, then it mus be wrong.

US has one of the lowest tax burdens of any industrial country, a key reason wealth has been redistributed to the top for the last 35 years.

[boutons_deux]

US Corps are firing in USA, hiring in Asia

"It's all the fault of the libtards and employees"
-- WC

U.S. jobs continue to flow overseas


Though some companies have actually moved operations back to American shores recently, the lure of cheaper labor in China, India and other foreign countries is more irresistible than ever.

October 6, 2010

Though some American firms are bringing overseas work back home, evidence is growing that companies are moving more jobs than ever to China and other countries — a trend that could exacerbate efforts to bring down the nation's stubbornly high unemployment rate.

One sign of increased offshoring is the rising number of applications for federal Trade Adjustment Assistance, which usually goes to factory workers who lost their jobs because their work was sent overseas or was undercut by cheaper imports.

For the six months that ended Sept. 30, workers at about 1,200 offices and plants nationwide were approved for federal Trade Adjustment Assistance. That's about 20% more approvals than in the same six-month period last year, according to the U.S. Labor Department.

In addition, the most recent Commerce Department data show that employment at the foreign subsidiaries and affiliates of U.S. multinational firms grew by 729,000 in two years, to 11.9 million in 2008 from 2006. Over that same period, domestic employment by such firms slipped by 500,000 jobs, to 21.1 million.

"The paradigm has shifted," said John Challenger, chief executive of outplacement and consulting firm Challenger, Gray & Christmas. "Most companies see the next phase or era of growth as global.… That'll still create jobs here, just not on the scale when they were focusing on growth in the U.S."

That trend could further stall the recovery, which many economists believe will continue to lack vigor while unemployment remains at current levels — 9.6% nationally and 12.4% in California. The government is expected to report Friday that the economy added few if any jobs in September.

Among the companies that have recently sent jobs overseas are Hewlett-Packard Co. in Palo Alto, CKE Restaurants Inc. in Irvine and Hilton Worldwide, the McLean, Va., hotelier that maintained a reservations center in Hemet employing 295 people.

Hilton's filing and comments indicated it was moving the center to the Philippines to save money. "Across all aspects of its business, Hilton Worldwide is committed to maximizing operating efficiencies while maintaining service levels," Hilton said in a brief statement.

Also moving to the increasingly popular Philippines this year were JPMorgan Chase's telephone banking operations, from Troy, Mich., and CKE is moving its technology assistance desk there.

HP is laying off an undisclosed number of human resources employees in California and nine other states, transferring their functions to Panama.

HP, CKE and Hilton would not provide details of the job moves, which were disclosed in recent government filings.

The offshoring of American production and jobs has been going on for more than two decades, with service firms more recently pushing the trend. Experts say more offshoring could help U.S. firms better compete in the global economy, thus boosting sales and profits that will sustain them and generate new business.

Eventually, stronger, expanding firms could create more opportunities for American workers, though that's not a sure thing. More and more, for example, upscale engineering and development for products manufactured in China are being done in China — not the U.S. — near the centers of production.

"When companies succeed abroad, people at home succeed," said Mihir Desai, a finance professor at Harvard Business School.

(You Lie)

Challenger agrees with that logic, but he also said that some companies continue to engage in "pure labor arbitrage," moving overseas simply for cost savings. That kind of rationale may do little for building long-term value in the company or its products and services.

Many others, he said, don't see much choice but to do more overseas given the prospects of a hobbled American economy.

( so the financial sector fucks Americans, then the industrial sector fucks them again. America The Beautiful )

But whatever happens long term, current high levels of offshoring will add to the nation's employment hardships for workers with college training as well as for lower-skilled workers.

PwC, the big accounting firm formerly known as PricewaterhouseCoopers, last spring and summer laid off about 125 support staff members in client services, transferring the work to Uruguay. Those positions were considered mid-level.

Dennis Donovan, a veteran corporate-relocation consultant, said many legal and engineering firms already have outsourced routine work overseas, and he sees a bigger wave of offshoring by the burgeoning healthcare industry. At the same time, he sees fewer companies moving overseas strictly on the basis of cost.

"Now it's R&D centers and also for market penetration," said Donovan, a principal at Wadley-Donovan-Gutshaw Consulting in New Jersey.

He said some American firms were beginning to move call centers and other back-office operations — or "in-sourcing" — back to the U.S. because costs in China, India and other top outsourcing countries had risen sharply and quality hasn't been consistent.

One example is Allstate Insurance Co., which in June opened a $12-million call center in San Antonio, where the company expects to have 600 employees by year's end. Customer sales and service reps earn a base salary of $27,000.

In picking Texas, the Northbrook, Ill., firm passed up sites in India and the Philippines, said Thomas Wilson, Allstate's chairman.

"I'm a believer in offshoring," Wilson said in an interview, noting that his overseas offices have helped Allstate operate around the clock and compete with rivals that also have gone abroad for services.

But even though labor will cost more in San Antonio than in India, Wilson hopes for a bit of a public relations boost from the move.

In a customer survey, he said, "81% of the people said they would think better of the company even if it costs more."

Even so, Wilson doesn't see his company's overall domestic employment changing much anytime soon. And although there are some examples of in-sourcing, their numbers don't add up to a lot compared with the jobs being lost.

President Obama has complained that the U.S. tax system encourages companies to invest and hire abroad, but a bill that would have ended certain tax credits and deferrals to companies expanding or moving overseas was voted down in the Senate last week.

http://www.latimes.com/business/la-fi-jobs-offshoring-20101006,0,3139059,print.story

[RandomGuy]

This all sounds good, but really. Just how would you implement such a thing. To what degree of authoritarianism would you use to destroy liberties for the pursuit of happiness?

Please...

What is your game-plan if you were King.

I would scrap most of the tax code, and all the gimmies. Flat income tax with exemptions on the first 50,000 of individual income. Leave the % at what it is about now, 22 to 28% (wieghted average tax burden) if memory serves.

This means I would tax dividends and capital gains at the same rate as earned income.

I would institute a government run single payor health insurance system and require everybody to pay into it.

I would pay for just about anything that your primary care physician thinks is necessary, no questions asked, no justification needed. Institute safe-gaurds against abuse of this, like doctors who simply "prescribe" non-necessary plastic surgery.

I would force everybody to plan for end of life care in order to receive any benefits out of this system at all.

I would pay the full college tuition/books costs of anybody who wants to be a primary care physician.

I would scrap the "fee for service" model of health care reimbursement, and replace it with a flat capitated rate, or somethign similar. It is still unclear how one would replace the fee for service model, but it is clear that it is a major driver of cost.

BAM.

[Wild Cobra]

I would scrap most of the tax code, and all the gimmies. Flat income tax with exemptions on the first 50,000 of individual income. Leave the % at what it is about now, 22 to 28% (wieghted average tax burden) if memory serves.

I would prefer a consumption tax that is tax free on necessities, but I can go along with a flat tax with only a personal exemption. Still, I would lower that to the poverty rate. Anyone above that figure should pay taxes in my view. I would also lower the tax rate. 22% to 28% is a high number once you remove everything you can exempt. Back in the early 90's, it was calculated that a 17% tax rate with the first $30k being exempt would cover the government needs. That $30k would now be around your $50k, maybe higher. I personally thing just under 20% would be good. I would start with the 18.3% average revenue/GNP figures.


This means I would tax dividends and capital gains at the same rate as earned income.

I can deal with that, but since dividends are effective taxed before distributed too, are you going to eliminate taxes on businesses?


I would institute a government run single payor health insurance system and require everybody to pay into it.

If you were to do such a thing, it either needs to be paid for from that tax system, or a separate tax deduction. I am against this idea and it ends up making it more expensive, but I'll play along for now.


I would pay for just about anything that your primary care physician thinks is necessary, no questions asked, no justification needed. Institute safe-gaurds against abuse of this, like doctors who simply "prescribe" non-necessary plastic surgery.

Still, this opens up a can of worms. College used to be affordable for middleclass families until the government formed the department of education.


I would force everybody to plan for end of life care in order to receive any benefits out of this system at all.

That could be a wide range of things. Planning and paying are two different things. Will this include assisted suicide?


I would pay the full college tuition/books costs of anybody who wants to be a primary care physician.

And if they don't complete the program?

Hey... Ever watch the pilot for Norther Exposure?


I would scrap the "fee for service" model of health care reimbursement, and replace it with a flat capitated rate, or somethign similar. It is still unclear how one would replace the fee for service model, but it is clear that it is a major driver of cost.

BAM.

We disagree most I think on health care. that's a big topic that I will stop there. Needs to be a different thread to continue with that I think.

You didn't address corporate taxes. I personally think corporations should be tax free. But it's also why I prefer a consumption based tax system. I really think it would make America more prosperous if we taxed consumption rather than production. I would like to bring manufacturing jobs back.

[Drachen]

I would prefer a consumption tax that is tax free on necessities, but I can go along with a flat tax with only a personal exemption. Still, I would lower that to the poverty rate. Anyone above that figure should pay taxes in my view. I would also lower the tax rate. 22% to 28% is a high number once you remove everything you can exempt. Back in the early 90's, it was calculated that a 17% tax rate with the first $30k being exempt would cover the government needs. That $30k would now be around your $50k, maybe higher. I personally thing just under 20% would be good. I would start with the 18.3% average revenue/GNP figures.

I can deal with that, but since dividends are effective taxed before distributed too, are you going to eliminate taxes on businesses?

If you were to do such a thing, it either needs to be paid for from that tax system, or a separate tax deduction. I am against this idea and it ends up making it more expensive, but I'll play along for now.

Still, this opens up a can of worms. College used to be affordable for middleclass families until the government formed the department of education.

That could be a wide range of things. Planning and paying are two different things. Will this include assisted suicide?

And if they don't complete the program?

Hey... Ever watch the pilot for Norther Exposure?

We disagree most I think on health care. that's a big topic that I will stop there. Needs to be a different thread to continue with that I think.

You didn't address corporate taxes. I personally think corporations should be tax free. But it's also why I prefer a consumption based tax system. I really think it would make America more prosperous if we taxed consumption rather than production. I would like to bring manufacturing jobs back.

My main problem with a consumption tax is that if a recession hits and consumers stop consuming, how does the government survive. I am sure you could say that the government would need to contract and I can agree . . . to a point, but think (percentagewise) about how much less consumers were consuming between 2007 and 2008, or 2007 and 2009. The government couldn't come near to contracting that much in such a short span of time.

[Wild Cobra]

My main problem with a consumption tax is that if a recession hits and consumers stop consuming, how does the government survive. I am sure you could say that the government would need to contract and I can agree . . . to a point, but think (percentagewise) about how much less consumers were consuming between 2007 and 2008, or 2007 and 2009. The government couldn't come near to contracting that much in such a short span of time.
No tax system is perfect. Besides, we borrow now anyway.

Who is more important?

The people, or the government?

[Drachen]

No tax system is perfect. Besides, we borrow now anyway.

Who is more important?

The people, or the government?

For most of our (human) history we have had a government. I would posit that both are important to the other. I know we borrow now, but I think it might have to happen in far greater amounts if consumption is taxed. Or the other side could be that even in a recession we will have more money due to no income tax and may still consume at a level above where we would if there were an income tax and so any recession would be far less severe than one with an income tax.

I am trying to see both sides of this. I still lean towards a flat tax, but could probably be persuaded for either.

[CosmicCowboy]

Whether it's a flat tax, a consumption tax or ANY tax that is simple and consistent it will be better than what we have. Our current tax system is the gun that congress holds to the head of business to enforce their extortion/bribery racket.

[Wild Cobra]

Whether it's a flat tax, a consumption tax or ANY tax that is simple and consistent it will be better than what we have. Our current tax system is the gun that congress holds to the head of business to enforce their extortion/bribery racket.
That I think is the major problem with our tax system. Congress uses it for power. Political control. Not for the welfare of the people.

[George Gervin's Afro]

That I think is the major problem with our tax system. Congress uses it for power. Political control. Not for the welfare of the people.


WC-there you go again, exposing your ass again by ASSuming untrue things. I never blindly support people that I don't personally know.

[Drachen]

That I think is the major problem with our tax system. Congress uses it for power. Political control. Not for the welfare of the people.

I agree with the two of you (WC, CC) on that. I don't know that anyone could disagree on that.

[George Gervin's Afro]

That I think is the major problem with our tax system. Congress uses it for power. Political control. Not for the welfare of the people.

I thought you didn't assume motives about people you don't personally know?

[boutons_deux]

Who is more important?

The people, or the government?

False choice, amazing consistency.