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About Liz Iacobucci

Liz Iacobucci is the former Public Information Officer for the State Employees’ Association of New Hampshire, SEIU Local 1984. Over the past three decades, she has served in government at the federal, state and municipal levels; and she has worked for both Democratic and Republican politicians.

This Thanksgiving: How To Talk About The Economy Without Getting Into An Argument

man yelling with megaphone

Is your family one of those families… where Thanksgiving dinner always ends up in a political argument?

First thing to remember is that arguing won’t get you anywhere. Research shows that when the people you’re talking with hold strong beliefs, arguing with them only makes it harder for them to change those beliefs. And “when people’s confidence in their beliefs is shaken, they become stronger advocates for those beliefs. … when faced with doubt, people shout even louder.”

Political scientists call it the “backfire” effect – and if you’re an activist, you need to know about it (and remember it). Also remember that there are neurological differences between “Republican” and “Democratic” brains… and there are behavioral differences… although scientists are still trying to figure out exactly what those differences mean.

no_megaphoneSo what are you supposed to do? If you’re, say, sitting around the Thanksgiving table when Great Uncle Chester starts berating your college-graduate niece about the fact that she’s living at home rather than in her own apartment…?

Start by finding common ground. There’s always something to agree on, if you just look hard enough. Even if it’s just a gentle restatement of what the other person said. “Yes, Uncle Chester, we all agree that college graduates should be able to find jobs that allow them to support themselves.”

Then, add a little reality in there. “But that doesn’t seem to be happening in the current economy. There are a whole lot of twenty-somethings who are still living at home.”

Try to use personal examples rather than just facts. “I remember what my neighbor’s son went through, when he graduated two years ago. It took him 18 months to find a job, and even then he earned barely enough for him to make his student loan payments.”

When you talk about facts, try to frame them as a question, not a statement. “Don’t you think that the economy has changed from when you graduated college? Remember how working in a bank used to be a highly-respected job? Did you know that, these days, almost one-third of bank tellers need food stamps?”

Don’t push too hard. With Uncle Chester, you might not be able to persuade him of anything other than that he should stop berating your niece. (And if you push any further, the conversation might get loud and become a “nobody’s going to win this” argument.)

But continue the conversation, if your audience seems receptive. “Did you know that, these days, banks are paying billions of dollars to stockholders, rather than paying their tellers a decent wage?”

— — — —

no_megaphoneDo you have a second cousin Mildred who insists that “cutting taxes for job creators” is the answer to everything?

Find something you both agree on. “Nobody likes paying taxes.”

Add a personal story. “I remember when we got President Bush’s ‘tax refund checks’ back in 2001 and 2008. It was nice to get the money, but I didn’t invest it. I don’t know anybody who invested it. Most people either kept the money in the bank or used it to pay down debt.”

Then, a little reality. “Did you know that Congress has been cutting taxes on ‘job creators’ since Ronald Reagan was President? Back then, they used to call it ‘supply side economics.’ But it didn’t fix the economy; all it did was create a huge budget deficit. So after a few years President Reagan gave up on the idea and increased taxes again.”

Is Mildred still listening? If she looks interested, rather than angry, give her a few more facts. “Did you know that corporations are spending literally trillions of dollars buying back their own stock? Rather than building new factories or hiring new employees, they’re buying back shares of their own stock in order to keep stock prices high.”

Is she still listening? “And corporations are even borrowing money – bonds they will be paying back for decades – in order to give money to their stockholders now. So I don’t think CEOs would really invest money from tax cuts in ‘job creation.’ Don’t you think they would just pay it out to stockholders?”

Is she still listening? “I wonder what would happen to our tax rates, if corporations were paying taxes at the same rate they used to, before the SEC started allowing companies to buy back their own stock. Don’t you think that we might be paying less in taxes?”

— — — —

no_megaphoneDo you have a brother-in-law who isn’t bothered by increasing inequality? Who thinks CEOs actually deserve to receive 373 times as much as their employees are paid?

Then you ought to read this Pacific-Standard magazine article about a recent International Monetary Fund report.

And you can start the conversation with something like, “We all agree that economic growth is a good thing.”

Then add a little reality. “Did you know that income inequality actually hurts our country’s economic growth?”

Add a story. “Gosh, I wonder if this is why Macy’s is having such a hard time. None of my friends are planning to do their Christmas shopping there.   It seems like everybody is shopping discount stores or making their gifts, this year.”

Use questions. “How can the economy recover, if ordinary people don’t have money to spend? Did you know that one in ten American jobs is in retail? What’s going to happen to that sector of the economy if wages stay stagnant?  What’s going to happen to the rest of the economy?”

Know your audience, and either stop (before things get loud) or keep going. “Did you know that increasing the income share to the bottom 20% – even just by a tiny bit – helps the whole economy grow?”  “Do you think that’s why the economy grew more, back when income was a bit more equal?”

— — — —

no_megaphoneAnd if the conversation turns to the Trans-Pacific Partnership (TPP) treaty… please be thoughtful and careful about what you say.

Personally, I’m tired of politicians pitting people against each other. And factory employees in Singapore are working to feed their families, just like we are.

The problem with the TPP isn’t overseas workers, it’s how much power the treaty would give to corporations. It’s how much power the treaty would give to big banks. It’s the idea of America giving up our right to enforce our laws, when those laws are inconvenient to multinational corporations. It’s the idea of turning over even more of our country’s sovereignty to international “investor-state dispute settlement” (ISDS) tribunals.  Read more about how the TPP empowers corporations on the Public Citizen website.

So please, if you’re opposing the TPP, don’t talk about how overseas workers are taking “our” jobs. The real problem is how much it will benefit corporations.

The real problem is that corporate profits are at all-time highs… while labor’s share of that bounty is pretty close to its all-time low.

And the TPP is likely to make that problem worse, not better.

But that’s not the fault of the migrant workers in a Malaysian electronics factory.

— — — —

Happy Thanksgiving! I hope the conversation around your dinner table is a peaceful one.

— — — —

no_fearBut if the conversation turns to Paris and Syrian refugees, please be especially careful. Fear is one of the most basic human emotions… it’s also one of the most destructive… and one of the easiest to manipulate.

Journalist Naomi Klein is the author of “The Shock Doctrine: The Rise of Disaster Capitalism.” She’s done a lot of research into how corporatists use disasters to push through political change. Read her work about the aftermath of Hurricane Katrina here.

“For more than three decades, [economist Milton] Friedman and his powerful followers had been perfecting this very strategy: waiting for a major crisis, then selling off pieces of the state to private players while citizens were still reeling from the shock, then quickly making the ‘reforms’ permanent. In one of his most influential essays, Friedman articulated contemporary capitalism’s core tactical nostrum, what I have come to understand as the shock doctrine. He observed that ‘only a crisis— actual or perceived—produces real change.’ ”

I think of her work every time someone mentions the Bush tax cuts. Back in 2001, the federal government had a budget surplus; and in the first few weeks of September, the Washington Post did a poll that found 57% of Americans wanted the Bush tax cuts reversed, in order to preserve that surplus. Then 9/11 happened. And a decade and a half later, we still haven’t gotten tax rates restored to Clinton-era levels… and the federal debt has increased by $12.4 trillion.  (And we’re being told we need to cut Social Security, rather than restore the tax rates that President Bush cut even further “while citizens were still reeling from the shock” of 9/11.)

The Paris attacks renewed the atmosphere of fear that I remember after 9/11… and we’ve already seen how some politicians want to use that fear to change government policies. The good news is: my Facebook feed is full of people pushing back against these proposals, questioning them and using historical analogies to say “This is not what America stands for.” The bad news is: Facebook feeds are determined by an algorithm that tends to reinforce what people already believe.

So… when the conversation turns to Paris, and ISIS, remember the advice above.  Arguing isn’t going to help. You need to find some way to help the people you’re talking with step away from their fear, and step into the reality that their fear allows them to be manipulated. Find something to say that you both agree on – most people agree that refugees should be vetted before being resettled – and work from there.

After Billions of $$$ to Stockholders, UnitedHealth Claims Poverty Due To Obamacare

By LaurMG, used by CreativeCommons license via Wikimedia Commons

By LaurMG, used by CreativeCommons license via Wikimedia Commons


Yesterday’s 24/7WallSt article about UnitedHealth said that an “earnings warning” issued by the corporation “could be a serious blow to at least part of ACA/Obamacare.”

UnitedHealth’s latest advice to investors is that the corporation now expects slightly lower 2015 profits.  (Can’t help noticing: that recalculation includes a write-off of “$275 million related to the advance recognition of 2016 losses.” Nevermind that we haven’t actually gotten to 2016 yet; UnitedHealth is already calculating losses.)

Apparently, that press release was worth the headline “UnitedHealth Warning Creates Huge Spillover, With Big Implications Ahead.”

Just a month ago, 27/7WallSt was writing happier news about UnitedHealth. Quarterly earnings per share were better than expected, and better than 2014. Premiums were up 9.87% over last year. The company was adding about 100,000 new subscribers a month (1.7 million new people a year). And for the first three quarters of 2015, things were so rosy that UnitedHealth spent $1.1 billion buying back its own stock.

Plus, UnitedHealth paid out another $1.3 billion to shareholders in dividends, just in the first three quarters of 2015.

So… $2.4 billion paid out to shareholders in the first nine months of this yearand now suddenly there’s supposed to be some sort of crisis?  Wow.

Back to 24/7WallSt: “What has been interesting to see here is that UnitedHealth actually has seen its shares soar under ACA/Obamacare.”  Yes, that’s what happened.  The Affordable Care Act passed in 2010.  Here’s what UnitedHealth’s stock price history looks like:UNH stock chart

Looks like UnitedHealth’s profits are up since Obamacare, too.  Here’s what their quarterly earnings-per-share history looks like:UNH EPS chartAm I the only one having a hard time seeing how this is a problem for UnitedHealth?

Back to 24/7WallSt. The headline from last month’s article: Are UnitedHealth Earnings Enough for Investors?

Hmmn.  Is investor greed the real crisis for Obamacare?

— — — —

insuranceYep, there’s more.

As of yesterday, the corporation’s new profit expectations “reflect a continuing deterioration in individual exchange-compliant product performance.”  Yep, they’re talking about policies sold to individuals through ACA exchanges, which apparently are not “performing” very well.  From the press release: “UnitedHealthcare has pulled back on its marketing efforts for individual exchange products in 2016. The Company is evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017.”

In other words: individual policies aren’t “performing” very well, from the corporation’s perspective.  So UnitedHealthcare may stop selling them.

UnitedHealth is currently the largest health insurance provider in America. Other large health insurance providers – Anthem and Cigna, Humana and Aetna – have plans to merge, which “could shrink the number of major companies in the health insurance industry from five to just three. And that could mean fewer options and higher rates for consumers and the employers that provide health insurance.”

And according to yesterday’s 24/7WallSt article, UnitedHealth’s (newest) earnings forecast “could be used by the companies to support those pending health insurance mergers.”  Apparently on the theory that the four other insurers are too small to compete in the individual policy “product segment.”  (Even though Centene Corp. and Kaiser Permanente seem to be doing just fine.)

Am I the only one wondering why UnitedHealth’s latest earnings warning would justify the mergers of its largest competitors?  Given the corporation’s “soaring” stock price.  Given the corporation’s growth in earnings-per-share.  Given the fact that the UnitedHealth paid out $2.4 billion to shareholders just in the first nine months of this year…?

Am I the only who remembers that Obamacare was intended to rein in profiteering by insurance companies?

Remember what it was like, back then?  “In the midst of a deep economic recession, America’s health insurance companies increased their profits by 56 percent in 2009, a year that saw 2.7 million people lose their private coverage.  The nation’s five largest for-profit insurers closed 2009 with a combined profit of $12.2 billion.”

So, yeah, I suppose someone could “blame” Obamacare for UnitedHealth’s current financial situation.  And the fact that UnitedHealth’s per-share profit (EPS) is 75% higher now than it was in 2009.

But if anybody’s going to start passing blame around, now that “the 2016 presidential election has brought the health care argument up more times than can easily be counted”…

I think we should also be talking about whether Obamacare managed to stop the corporate profiteering, like it was supposed to.

— — — —

Can’t help noticing…

Yesterday’s headlines were fueled by the sudden drop in UnitedHealth’s stock price, which followed its revised earnings statement.

But that was yesterday.  So far today, the stock price has recovered more than half of yesterday’s decline.

Which still leaves the stock trading at about four times its price in 2009.

— — — —

Read more NHLN coverage of stock buybacks here.

Big Banks: Paying Billions (of Borrowed Money) to Stockholders

NASDAQ Watch Photo by Kowloonese used under CreativeCommons license via Wikimedia Commons

Photo by Kowloonese; used by CreativeCommons license via Wikimedia Commons

The “new economy” in a nutshell:
full-time employees need government assistance because their wages are so low. Businesses are shrinking, not growing. And corporations are borrowing money to pay it out to stockholders… because, well, that’s what the system is designed to reward.

The more I look, the more I see it. The same pattern, almost everywhere. It’s not limited to just a few rogue companies. It’s not limited to just a few industries.

And it’s not getting any better.

Here’s the view, from the financial sector.

Remember that study showing that almost one-third of bank tellers receive food stamps, Medicaid or other public assistance? The authors calculated that taxpayers pick up the tab for almost $900 million in government aid – just to bank tellers – each year. That study didn’t break those costs out by particular employer, but…

— — — —

Bank Teller Counting Money for Customer --- Image by © Duncan Smith/Corbis via Flickr

© Duncan Smith/Corbis via Flickr. Used under CreativeCommons license.

According to Glassdoor, Bank of America tellers receive an average wage of $12 per hour – or, just about poverty-line wages for a hypothetical full-time employee supporting a family of four.

And the corporation just announced another set of layoffs, bringing the total to

  • about 14,300 jobs eliminated in the past year
  • about 69,000 jobs eliminated in the past five years.

But owners of the bank’s common stock are doing OK. So far this year, the corporation has distributed $3.1 billion to shareholders, through dividends and stock buybacks. And there will be even more money going to stockholders in December.

Can’t help noticing, though… Bank of America has issued a lot of bonds this year – more than $25 billion. Which means the corporation now has more than $270 billion in long-term debt that it has to pay off between now and 2047.

Yes, Bank of America is borrowing money at the same time it’s paying money out to stockholders.

(Which, yes, is sort of like running up your credit card to buy Christmas presents for people who already have everything.)

Wondering how stock prices are affected by the amount of money paid to shareholders?  Last year, Bank of America announced it would increase dividends and start buybacks – but then discovered an accounting mistake and had to withdraw those plans. And stock prices fell by 6.3%.

Want to know why corporate executives care so very much about short-term stock prices?  Look at the way Bank of America compensates its CEO. On the 13th of every month, Brian Moynihan receives the cash equivalent of 17,747 shares of common stock. In August, the per-share price was $17.62; for 17,747 shares, that works out to a payment of $312,702. In September, the per-share price was $16.04; that works out to $284,662. In October, the per-share price was only $15.52; that works out to $275,433. Don’t you think CEO Moynihan notices, when his monthly payment drops by ten or twenty thousand dollars?

But there’s good news for him: this month – after that latest set of layoffs was announced – the per-share price is back up above $17.  (Even though the Bank is $270 billion in debt and its credit ratings are, ahem, less-than-stellar… and it borrowed almost another $3 billion since CEO Moynihan’s October payment.)

— — — —

bankerAccording to Glassdoor, J.P. Morgan bank tellers also receive an average wage of $12 per hour… which is still, yes, about the poverty line for a hypothetical full-time employee trying to support a family of four.

And the corporation is, ahem, “cutting costs” by eliminating another 5,000 jobs. (Last year, they cut 7,900 jobs.)

But… stockholders are doing OK. The corporation just raised its dividend and is buying back $6.4 billion worth of its own stock. (That’s in addition to almost $18 billion in buybacks between 2010 and 2013.)

And CEO Jamie Dimon just got tagged as “the Best Big Bank CEO, Measured by Shareholder Returns.” Between buybacks and stock dividends, Dimon has “generated a total shareholder return of 119.5%” in the last decade.

Even though… can’t help noticing… J.P. Morgan had, at last report, $434.4 billion in long-term debt (which was an increase of $8.3 billion from the previous quarter). And it will be paying off debt through 2049.

I’m sure somebody at JP Morgan can explain why it makes sense to pay billions out to stockholders at the same time the corporation is borrowing billions. (And I’m sure somebody at the Federal Reserve Bank can explain why regulators approved this plan.)

And yes, folks high up the corporate ladder are doing OK, too. Their compensation includes mechanisms like restricted stock units and stock appreciation rights, which ensure they’re paying attention to share prices.  For instance, Managing Director Mary Erdoes just received stock appreciation rights equal to 200,000 shares of JP Morgan stock… on a day when the stock closed at $67.39 a share.   (Yep, some people get paid according to how high the stock price goes.)

Meanwhile… 5,000 JP Morgan employees will be looking for new jobs… and employees who still have their jobs get poverty wages and need government benefits to make ends meet.

— — — —

US states by poverty rate

States by 2013 poverty rate

And I’m betting that if I looked, most of the other Big Banks would show this same paying-low-wages-to-employees while cutting-rather-than-expanding-the-business while borrowing-against-future-revenues so they can pay-more-money-to-stockholders pattern.

It’s not just a few employers.

It’s not just a few industries.

Borrowing money in order to pay it to shareholders is the same basic thing Bain Capital was doing, back before journalists started writing about it, when Mitt Romney ran for President.

Only, this is on a bigger scale.

These are corporations that employ hundreds of thousands of people. And they’re borrowing against future revenue, in order to pay stockholders today.

While their executives rake in millions in compensation.

And their employees need government assistance just to get by.

— — — —

Read my last post, “McDonalds: Paying Billions (of Borrowed Money) to Stockholders” here.

Read my series about Verizon as a case study of what’s wrong with the economy, starting here.


McDonald’s: Paying Billions (of Borrowed Money) to Stockholders

Photo by Annette Bernhardt via Flickr

Photo by Annette Bernhardt via Flickr

Right there, in the USNWR story “Why McDonald’s stock is blowing the competition away,” was the clearest example yet of how our economy doesn’t work for anybody but the folks at the very, very top.

The company will cut $500 million [in costs] by 2018… it has a goal of having 4,000 stores refranchised in three years… it’s returning $30 billion to shareholders, an increase from $20 billion, through dividends and share buybacks and funded by taking on more debt.

And because of this strategy…

The famed restaurant chain has seen its stock jump by 17 percent since September.

Yes, McDonald’s. The corporation that costs taxpayers an estimated $1.2 billion a year in public assistance, because so many of its workers need government help to make ends meet. One of the employers who provoked the Fight for 15.

Yes, McDonald’s. The corporation whose per-share book value has dropped by 20% over the past decade … while its financial leverage (debt level) has more than doubled. The corporation that just saw its credit rating downgraded again, because Moody’s is concerned about “the company’s recent announcement that it intends to increase its returns to shareholders, the vast majority of which will be funded with additional debt.”

The corporation that has only $5.7 billion in net tangible assets (roughly $6.24 per share).

Yet the stock price hit $114 per share this week.

Because McDonald’s will be distributing an additional $10 billion to shareholders, “the vast majority of which will be funded with additional debt.”

(Even while its employees need $1.2 billion a year in food stamps and other assistance.)

— — — —

Image by Rose Lincoln, 1199SEIU

Image by Rose Lincoln, 1199SEIU

McDonald’s long-term debt will, as Moody’s noted, “limit its financial flexibility” for decades to come. Remember, the corporation eventually has to pay all that debt back, plus interest.  So basically, the corporation is using future revenues to pay stockholders now.

Moody’s expects the corporation to borrow even more as it increases its payments to stockholders.  At the same time, McDonald’s is selling off its assets, by “refranchising” 4,000 stores.

And Wall Street rewarded this strategy.  The stock price hit a record high this week… because McDonald’s will be distributing $30 billion, rather than only $20 billion, to shareholders.

And some McDonald’s executives took advantage of that record highChief Administrative Officer Peter Bensen reportedly exercised stock options to buy 15,870 shares – and then sold them the same day – making what I calculate to be a $1.2 million personal profit. Executive Vice President Richard Floersch exercised stock options to buy 23,910 shares, and then sold them – making a profit that I calculate at more than $1.3 million.  Executive Vice President Kevin Ozan also exercised stock options, buying 3,463 shares and then selling them at what I calculate to be almost $268,000 in profit.

And Executive Vice President David Fairhurst sold every share of McDonald’s stock he owned, that day of the record high.

Meanwhile… McDonald’s employees are receiving $1.2 billion in annual government assistance, because their wages are so low they can’t make ends meet.

And the financial press is trumpeting the fact that McDonald’s will be “cutting costs” – usually a euphemism for employee layoffs or wage reductions – by half a billion dollars.

— — — —

And no, I’m not the only one who thinks that our economy is being ruined by this fixation on short-term payouts to stockholders.

— — — —

Read “What Mitt Romney taught us about America’s Economy” here.

Read my series about Verizon as a case study of what’s wrong with the economy, starting here.

Politicians are Trying to Sell Off Veterans’ Health Care

Veterans_defend_the_promiseIt’s just… wrong.

It’s SO wrong, I’m having a hard time writing about it.

Politicians want to get rid of the VA healthcare system, and replace it with a system of vouchers that veterans would use “to purchase their own health insurance in the private marketplace.”

And they’re justifying this by pointing fingers at the VA system’s waiting lists. Nevermind that the system has a severe staff shortage, with 41,500 unfilled health care positions. Nevermind the amount of medical care that veterans need, since more than one-quarter of them are disabled. The politicians say it’s all the VA’s fault, and they’re using it as an excuse to privatize veterans’ health care.

So… who’s going to profit from this?

Probably all those special-interest campaign donors. (The health care industry spent more than $142 million on the 2014 congressional elections. Plus another $487 million lobbying, last year.)

And… how is this going to work?

Somebody – probably Congress – is going to decide how much each voucher will be worth. And then veterans will have to find their own health care. And if that health care costs more than the vouchers are worth… well, that’s not something that Congress will have to figure out.

Because by that point, the VA will be dismantled. Gone.

And it’ll just be a problem for each individual veteran… how to cover the gap between what Congress will pay, and what their health care will cost.

— — — —

Here’s what I think:

The idea of dismantling the VA healthcare system… it’s just wrong.

The thought of private healthcare corporations profiting off our veterans… it’s wrong, beyond words.

Want to know more about profits in the health industry? Start with this piece by whistleblower Wendell Potter.

Want to know more about the Koch-founded astroturf group “driving the VA scandal” for political purposes?  Start here.

— — — —

Veterans_deserve_quality_healthcareThis past week, two polling firms – one Republican, one Democrat – joined together to poll veterans about what they want, in their healthcare system.

The results shouldn’t be a surprise: Veterans want to keep their VA health care system – but they want it fixed, and properly staffed.

Veterans want health care providers who are specialists in veterans’ health care. They need doctors, nurses and support staff who already know about the health impacts of their military service. They don’t want to have to explain themselves – explain the circumstances and the consequences of their military service – every single time they need medical care. They want health care professionals who already know.

And veterans need 100% of their care covered. If the VA is replaced by a voucher system, that won’t happen.

You can read the full poll here. If you’ve talked with any veterans recently, none of it will be a surprise.

— — — —

This morning I am remembering particularly

  • two children of a veteran who committed suicide. Suicide is one of the least-discussed “health impacts” of military service. The Veterans Crisis Line is available here.
  • the veteran with PTSD who I spent time with, last weekend. Where to Get Help for Veterans with PTSD is available here.

To all of our veterans, thank you for your service.

Congress Votes Tomorrow On Everything That Will Happen For The Rest Of Obama’s Presidency

Congress West Front Late last night, House GOP leadership announced a compromise bill that will (temporarily) end all the Congress-created crises by setting the federal budget and suspending the debt limit through the end of the Obama presidency.

The House is expected to vote on the bill tomorrow (Wednesday). A draft of the bill is available here.

What it doesn’t do, from the perspective of the Right Wing:

  1. It doesn’t try to force through the Keystone XL Pipeline.
  2. It doesn’t try to de-fund Planned Parenthood.
  3. It doesn’t try to repeal the Affordable Care Act.
  4. It doesn’t try to voucherize Medicare.
  5. It doesn’t try to privatize Social Security.

What it doesn’t do, from the perspective of the Working Class:

  1. It doesn’t rein in corporate giveaways to stockholders, such as dividends and buybacks. (Trillions of dollars that corporations could have used to create jobs, pay fair wages and make long-term investments.)
  2. It doesn’t end the tax preference for unearned income. (Most investment income is still taxed at about half the rate of wage income.) Ending this tax preference could end the budget deficit.
  3. It doesn’t eliminate the Social Security wage cap (which would strengthen Social Security, long-term).
  4. It doesn’t raise the minimum wage.
  5. In its current form, it doesn’t do much to reverse previous cuts to Food Stamps, veterans benefits, and other safety-net programs. It doesn’t mention the 2.1 million American workers who are long-term unemployed… or the 1-in-five American children who are living in poverty.

What it does do:

  1. It loosens the Sequester budget restrictions, both for defense and non-defense spending – and it also increases an off-budget military spending account.
  2. It completely rewrites the procedures governing IRS audits of business partnerships. (Call me cynical, but I’m guessing that part of the bill was written by somebody’s lobbyist.)
  3. It diverts some Social Security tax revenue into the Social Security Disability Trust Fund, and *privacy alert* it also creates a new information clearinghouse (presumably, to be used to detect fraud).
  4. It reduces payments to some Medicare providers and regulates the increase in Medicare supplement policy premiums.
  5. It renames the small House rotunda… in honor of the House Freedom Caucus.

It does some other things. Please take the time to read through the bill yourself – and encourage your Congressional representatives to do the same. Contact information for those representatives is available here.


Having watched this impossibly deadlocked Congress — and its impossibly intransigent Right Wing

Personally, if this “grand compromise” happens, I don’t expect anything else to get through this Congress until President Obama leaves office.  (Remember, GOP extremists have been working to “submarine his presidency” since the very first day of his first term.)

Buying (and Selling) the Future on Wall Street

Verizon as a case study of why our economy doesn’t work, part six

The “ah-ha!” moment came during a conversation with a friend. What we realized: the way we usually talk about the stock market doesn’t match the reality of our modern economy. Things we assume about stock ownership often aren’t really true.


New York Stock Exchange, 1963 (Photo by US News and World Report via Library of Congress)

Start with the basics: what is a share of stock? Most of us think “Investors give a business money and get back shares of stock that give them a fractional ownership of the company.”

But try applying that concept to Verizon, and it doesn’t fit. Verizon stockholders buy and sell shares on the open market – and none of that money goes back to the corporation. The money that investors pay when they buy stock… goes to the investors who sold the stock.

So buying stock isn’t “an investment in the company”… it’s an investment in the stock itself. If you later sell that stock for more than you paid for it, that profit is what’s known as a “capital gain.” If you sell it for less than you paid for it, that’s a “capital loss.”

Stock ownership does give shareholders a “fractional ownership of the company.” But what does that mean? There are more than 4 billion shares of Verizon stock outstanding.  If you own one of those shares, you don’t have rights to any particular network router or mile of transmission line.  Instead, you own slightly less than one-four-billionth of the corporation’s “stockholder’s equity.”  That means if the corporation were to be liquidated tomorrow, you – along with all the other stockholders – would share whatever remained after the corporation’s assets were sold and its other debts were paid.

And that’s probably when, if you were a stockholder, you would start remembering the $49 billion in long-term debt that Verizon acquired in 2013.

And that’s probably when you’d realize that Verizon’s corporate balance sheet shows less than $12.3 billion in “total stockholder equity.” And there are more than 4 billion shares of stock outstanding.

Which means each share of stock represents less than $3 in stockholder equity.

VZ stock chart

Verizon Share Price

Verizon has been trading above $40 a share since… April Fool’s Day 2012. (Back when there were less than 3 billion shares outstanding and the balance sheet showed stockholder’s equity of about $11.76 per share.)

That’s a huge difference between the per-share value of stockholder equity and the per-share price stockholders have been paying… for years now.

So… what else are stockholders buying? (in addition to that minuscule percentage of a relatively small amount of stockholder equity)

Each share also confers the right to receive a dividend, when and if the corporation issues dividends.  And – no surprise – Verizon has been issuing steadily-increasing dividends for more than a decade.  At this point, it’s issuing dividends that total more than $2.20 a year.  With shares trading between $40 and $45, that means stock purchasers can expect to make back – in dividends – about 5% a year on their investment. Which is way more than the rest of us can get in bank interest right now, if we put money into a savings account.

But although those dividends represent a whopping big “return on investment” – there’s still the risk that you could lose money on the stock itself.  Think about it: if you bought a share of Verizon stock last October, you paid about $49 a share. Since then, you’ve received about $2.20 in dividends. But the price of each share of stock has dropped to about $44. So even though you’ve received 5% in dividends… if you sold the stock now, you would still have “lost” about $2.80 per share.

So corporate executives pay a whole lot of attention to share prices.

VZ_Exec_Comp_Program_from_ProxyFor two reasons. First, because executives’ compensation is largely “pay for performance.” For Verizon executives, 90% of compensation is “incentive-based pay.” And what’s the objective? “Align executives’ and shareholders’ interests.”

Second reason: because most corporate executives own a lot of stock in their company.

VERIZON SHARES OWNED by executivesAs of this past February, when stock incentives were awarded, Verizon’s top 10 executives reported owning a total of more than 645,000 shares of corporate stock – worth, at the time, $49.31 per share… or, more than $31.8 million.

But Verizon stock is now trading at about $44 per share. That means those same executives’ shares are now worth only about $28.4 million.

So is it really a surprise that corporations spend trillions of dollars buying back their own stock, to bump up share prices?  Is it really a surprise that corporations borrow money to pay dividends and fund buybacks?

I don’t see anything here that provides an incentive for corporate executives to grow a company long-term.  Nothing that provides an incentive to pay employees a fair wage.  Nothing that provides any incentive to “create jobs” (no matter how low the tax rate goes).

The only incentives are: to keep stock prices high and to pay dividends. (And an incentive for corporate executives to take as much money as they can, however they can, while it’s still available.)

And so for the rest of us, the economy doesn’t work.

— — — — —

retirement eggWondering why you should find time to care about this, with everything else that’s going on right now?

Because of that huge difference between the per-share value of shareholder’s equity and the actual price per share.

And what happens during recessions.

And the fact that almost everybody’s retirement money is – in one way or another – invested in the stock market.

Here in the Granite State, the NH Retirement System lost 25% of its value in the last recession.

In June 2007, before the Wall Street meltdown, the NHRS had $5.9 billion in investments, including
•  $29.7 million of stock in Citigroup, Inc.
•  $23.5 million of stock in American International Group, Inc. (AIG)
•  $14.0 million of bonds issued by Federal Home Loan Mortgage Corp. (Freddie Mac)
•  $13 million of bonds issued by Federal National Mortgage Association (Fannie Mae)

Two years later, when the recession was in full force,
•  Citigroup stock had plunged to only about 6% of its former value
•  AIG stock was worth only about a penny on the dollar and
•  Freddie Mac and Fannie Mae had both been placed into federal conservatorship

That’s what happens to stock values, during recessions.

Remember hearing about the Detroit bankruptcy? Which supposedly was triggered by unsustainable public employee pension costs? The Detroit pension systems were fully funded, as of June 2008. Then the recession hit.

All those defined-contribution 401(k)s? Across the country, families lost an estimated $2 trillion (with a T) of their retirement savings when stock values plummeted during the last recession.

Artificially-high stock prices hurt almost everybody, in the long run.

— — — — —

Yes, there’s more.

Smashed Piggy Bank RetirementVerizon’s balance sheet includes $24.6 billion of “goodwill” and $81 billion of “intangible assets.” And if you factor those out, Verizon has “net tangible assets” of minus $93.4 billion. That’s what most of us would think of as a negative net worth… of about minus $23.35 per share. While investors are paying about $44 per share to buy the stock.

The good news, from the investors’ perspective: they’re not personally liable for that $116 billion in long-term corporate debt. If – and this is purely hypothetical – if Verizon were to declare bankruptcy and default on that debt, stockholders would not be expected to pitch in $23.35 per share to satisfy the corporations’ creditors.

The bad news is, somebody out there would take that loss… and retirement systems across America invest in corporate bonds. (At last report, the NH Retirement System owned more than $433 million worth of corporate bonds.  Can’t tell, from here, whether any of those include Verizon.)

— — — — —

Photo by Stand Up to Verizon via Flickr

Photo by Stand Up to Verizon via Flickr

If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.

Stand Up to Verizon is on Facebook here.

Part one of this “Verizon as a case study” series is here.  It focuses on Verizon’s $5 billion stock buyback last February, and the short-term bump in stock prices which followed.

Part two of the series, showing how Verizon executives benefited from that $5 billion buyback, is here.

Part three, looking at the disconnect between Verizon’s reported profits and the dividends it pays its stockholders, is here.

Part four, about phantom stock and how Verizon executives are avoiding taxes by investing in imaginary assets, is here.

Part five, about how Verizon is borrowing money to pay stockholders and executives while demanding givebacks from unions, is here.

This is part six.  And yes, there will be more.

Verizon Borrows Money To Pay Stockholders And Executives While Demanding Givebacks From Unions

Verizon as a case study of what’s wrong with our economy, part 5

Photo by Stand Up to Verizon via Flickr

Photo by Stand Up to Verizon via Flickr

It’s a math problem, instantly recognizable by anybody who’s tried to balance a family budget lately.

But it’s also a morality problem.

Here’s the thing:

  1. Verizon reports annual income of $54,287 per employee. BUT
  2. This past February, Verizon indulged in a stock buyback equal to about $28,000 per employee. AND
  3. Verizon continues to pay out, in annual dividends to stockholders, more than $50,000 per employee.

Between buybacks and dividends, there’s a lot more money being “distributed to stockholders” than the company reports as income. That’s the math problem.

Which is depressingly reminiscent of the business practices of the private equity industry, documented back in 2012. “Bain, and some other private equity companies …had companies paying dividends using borrowed money, not profits.” (Read “What Mitt Romney Taught Us about America’s Economy” here.)

And Verizon has accumulated a substantial amount of debt, along the way. Right now, the corporation has long-term debt equal to about $655,000 per employee. And its Morningstar credit rating is only BBB (“moderate default risk”).

But the dividends it pays out to shareholders keep ratcheting higher… always higher. (And yes, Verizon CEO Lowell McAdam is a substantial shareholder, getting dividends worth more than a half-million dollars a year.)

Instead of cutting dividends to grow the business, Verizon has borrowed money – putting itself in debt at least through 2055.

Just this month, the corporation announced another increase in the dividend rate. While the corporation’s employees were working without a contract. Because Verizon wants givebacks from its employee unions.

Again: Verizon is increasing the amount of money paid to shareholders at the very same time it is insisting on employee givebacks.

Yes, there’s a morality problem here.


Anybody else see the Brookings study, earlier this week, “Would a significant increase in the top income tax rate substantially alter income inequality?”

As I see it, the researchers totally missed the point.

When you’re talking about the macroeconomic effects of tax rates, the big effect has nothing to do with the amount of revenue produced.

Instead, policymakers (and researchers) need to focus on how various tax rates influence decisions made on the micro level.

Anyone who lived through the Eisenhower era of 90% tax rates knows that CEOs make very different decisions when 90% of their income is going to the federal government. (For instance, they’re not anywhere near as likely to borrow money to pay themselves a stock dividend, if 90% of that dividend is going to the federal government.)


If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.

Stand Up to Verizon is on Facebook here.

Part one of this “Verizon as a case study” series is here.  It focuses on Verizon’s $5 billion stock buyback last February, and the short-term bump in stock prices which  followed.

Part two of the series, showing how Verizon executives benefited from the $5 billion buyback, is here.

Part three, looking at the disconnect between Verizon’s reported profits and the dividends it pays its stockholders, is here.

Part four, about phantom stock and how Verizon executives are avoiding taxes by investing in imaginary assets, is here.

This is part five.

Part six calculates that — because of all the dividends and long-term borrowing — each share of Verizon stock now represents less than $3 in stockholder equity (even while it’s trading at more than $40 a share); read it here.

And yes, there will be more in the series.  Please check back.

How Do CEOs Make Millions When The Company Goes Belly Up? Investing In Imaginary Assets

Verizon as a case study of what’s wrong with our economy, part 4

Enron play London

Photo by Tilemahos Efthimiadis via Wikimedia Commons

Remember Enron?

Remember when George Bush selected Enron executive Thomas White to be Secretary of the Army? Remember how, when he left Enron, White received a $13 million payment for “phantom stock”?

That was early in the biggest corporate meltdown in history (at the time).  And when analysts tried to reconstruct what went wrong, Enron’s “phantom stock” program was part of the explanation.  “According to documents provided by Enron to the IRS, in 2000, approximately 1,673 employees participated in the program.” “Enron’s SEC filings reveal that some payouts under the phantom stock plan were huge.”

Wondering what “phantom stock” is?

Well… it actually isn’t. Because it’s imaginary. It doesn’t exist.  In the terminology of Verizon’s “Executive Deferral Plan”… it’s just “hypothetical.”

Ah yes… as I was researching this series, I stumbled over traces of Verizon’s phantom stock.

For instance, according to SEC filings, Verizon Director Richard L. Carrion “owns” more than 98,500 shares of Verizon’s phantom stock. “Each share of phantom stock is the economic equivalent of one share of common stock and is settled in cash. The shares of phantom stock become payable following the reporting person’s termination of service as a director.” As of last week, Carrion’s phantom shares were “worth” more than $4.3 million. Which, under a 2004 tax law, apparently isn’t subject to taxation until the money is actually paid to Carrion. After “termination of [his] service as a director.”

And apparently, until the money’s paid out, Verizon’s phantom shares remain so hypothetical that not only are they not taxed

…but I couldn’t find any accounting for them, as a long-term corporate liability, in either Verizon’s 2014 Annual Report or its 2015 proxy statement.

Hopefully, I just missed it. Hopefully, the shareholders have some way of knowing exactly how much “economic equivalent” is out there as a standing liability for future payment.  Because when I added up all of the directors’ phantom stock I could find in the SEC filings, it totaled more than 400,000 shares — which would be worth more than $18 million at last week’s stock prices.

And Verizon doles out lots of phantom stock – not just to directors, but also to Verizon employees.

For instance, Verizon CEO Lowell McAdam. According to SEC filings, McAdam “owns” more than 278,900 phantom shares of Verizon stock. What’s that worth? I have no idea.  According to the filings, the phantom stock McAdam “owns” is the economic equivalent of only “a portion” of the corresponding shares of Verizon stock. How big a “portion”? I have no idea. I couldn’t find that anywhere, either.

VZ phantom stock - employee officersBased on what I could find, 10 Verizon employees who report their ownership to the SEC together “own” more than 1.5 million phantom shares. All reported as “deferred compensation” – payable in the future – but I couldn’t find any record of how much Verizon’s total long-term liability is, for all these “hypothetical” shares.

I couldn’t even find out how many people “own” phantom stock through Verizon’s “Executive Deferral Plan.” Although “a company’s officers and directors” are required to file ownership disclosures with the SEC, other top- and mid-level executives aren’t required to do so. (And remember, Enron reportedly had about 1,673 executives in its phantom stock program.)

And it gets worse.

That Executive Deferral Plan (EDP) also offers “a ‘Moody’s’ investment fund that provides a return that mirrors the yield on certain long-term, high-grade corporate bonds.” (page 8)   But again, this isn’t an actual investment in an actual investment fund.  No, remember, this Plan “is not funded and has no trust or assets to secure your benefits.” (page 17) Because, Verizon tells its executives, “If the EDP were funded by a trust, you would be subject to immediate income tax on your vested Plan benefits.” (also page 17)

Instead, this Plan seems to be just a bookkeeping mechanism. The Plan summary explicitly says: “the investments referred to in the Plan are hypothetical in nature… the Plan administrator will track the performance of the investments that correspond to the hypothetical investments in your EDP account, and the value [of] your EDP account will be adjusted to reflect the gains (and losses) of the investments corresponding to the hypothetical investments in your account.” (also page 17)

But I couldn’t find out how much money – total – is hypothetically “invested” in this hypothetical “Moody’s” fund. I couldn’t find out how many executives participate. So what’s the long-term liability to Verizon’s bottom line?

And it gets worse. There are apparently still other hypothetical investment options. From the Plan Summary: “[Y]ou can elect to have your EDP account treated as if it were invested in any of the hypothetical investment options that mirror the performance of the investment options that are available under the Verizon Savings Plan for Management Employees or the Verizon Business Savings Plan for Management Employees, whichever applies to you.”

But the bottom line liability? How much is owed to Verizon executives under this Plan? I couldn’t find it. Anywhere.  (If you can find it, please leave me a note in the comments!)

Remember that one Enron executive, Thomas White, received $13 million for his phantom stock… and there were 1,670 other enrollees in that company’s program.

Now… I’m not trying to draw an analogy between Enron and Verizon. But the “phantom stock” thing really caught my attention.

And it makes me uncomfortable that Verizon – which has about 178,000 working families depending on it for paychecks – is run by executives who are willing to put millions of dollars of their own money into “hypothetical” investments…

…just to delay taxation on I can’t tell how much executive compensation…

…at the same time Verizon is insisting on concessions from its employee unions.

And it’s not just Verizon. It’s corporations throughout our economy.

Big bucks to executives (who are using all kinds of imaginative ways to avoid taxation)… while working families are expected to give money back, to improve the corporate bottom line.

It’s why our economy isn’t working, for anybody but the folks at the very, very top.


If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.

Stand Up to Verizon is on Facebook here.

Part one of this “Verizon as a case study” series is here.  It focuses on Verizon’s $5 billion stock buyback last February, and the short-term bump in stock prices which  followed.

Part two of the series, showing how Verizon executives benefited from the $5 billion buyback, is here.

Part three of the series, looking at the disconnect between Verizon’s reported profits and the dividends it pays its stockholders, is here.

This part four.

Part five, about how Verizon is borrowing money to pay stockholders and executives while demanding givebacks from unions, is here.

Part six calculates that — because of all the dividends and long-term borrowing — each share of Verizon stock now represents less than $3 in stockholder equity (even while it’s trading at more than $40 a share); read it here.

And yes, there will be more in the series.  Please check back.

Read more about how US tax policy encourages profit-taking — even profit-taking that bankrupts corporations — in “What Mitt Romney Taught Us about America’s Economy” here.


“Dividend” is Just Another Word for Payout

Verizon as a case study of why the economy doesn’t work, part 3


Photo by Stand Up To Verizon via Flickr

Once upon a time, dividends were how corporations distributed excess profits to shareholders.  But with the 2003 Bush tax cuts, things changed. The tax code began giving preferential treatment to dividends.  And then dividends themselves changed. Now they are nothing more or less than “a sum of money paid regularly by a company to its shareholders.”

The connection between profits and dividends got lost. Now dividends can be paid out of cash reserves… or funded by long-term borrowing. Where the money comes from doesn’t seem to matter all that much. The only thing that seems to matter is: that the money goes to the stockholders who expect it.

I stumbled over this ugly truth – again – while looking at stock buybacks, particularly those done by Verizon. Why do corporations do stock buybacks? One of the reasons given is: to reduce the number of shares outstanding, in order to increase the value of the remaining shares. Fewer shares should mean each share is worth more, right? But when I looked closely at Verizon’s latest huge stock buyback, well… the post-buyback price bump disappeared in about a month. (And of course, all the trillions spent on buybacks before September 2008… didn’t keep the stock market from crashing then.)

So then there’s the other reason given, why to do stock buybacks. Reducing the number of shares through a buyback increases the “earnings per share” metric. (Same earnings divided by fewer shares makes the EPS bigger). And, the second part of that reasoning goes, companies that have higher “earnings per share” can afford to give out higher dividends, which keeps stockholders happy.


When I looked at Verizon’s EPS, and compared it to corporate dividends… I didn’t see any correlation whatsoever. Here’s what it looks like, for the past five years.

Verizon eps vs dividends 5 years.You’ll notice that Verizon’s $5 billion buyback – announced and then mostly completed this past February – didn’t change their 2015 Q1 dividend (which was declared on March 6) and it didn’t change their 2015 Q2 dividend.  Nope.  Despite that $5 billion buyback, the quarterly dividend remained exactly the same as it was on September 4, 2014.  Even massive losses in 2011 and 2012 didn’t change the dividend. (How does a corporation lose $1.48 per share and still pay a $0.515 dividend? And the CEO still keeps his job? And the stock price doesn’t dive?)

Click on the image to see the same comparison over the past decade.

Here’s what I saw: the earnings per share bounced around, but the dividends stayed roughly the same. Dividends grew – with surprising regularity – but there didn’t seem to be any correlation whatsoever between earnings and dividends. Just a nice steady upward line on dividend payments.

Again, this isn’t just Verizon. I’ve seen the same pattern of steadily growing dividends in lots of other large corporations. Walmart. Boeing. FedEx. McDonald’s.

Steady increase in dividends, no matter what. Pretty much ever since the 2003 change in our tax laws.

Even through the Great Recession, dividends kept increasing. Ratcheting upward, ever upward.

But no correlation whatsoever – that I could see – with stock buybacks.

Not even the $5 billion stock buyback Verizon did in February.

Here’s the thing that still irritates me, about that buyback. In February 2014, Verizon’s Chief Financial Officer ruled out any buybacks for at least a couple of years. Instead, Verizon was supposed to be paying back debt—including the $49 billion of debt it had added less than five months before. That was the “biggest company debt offering ever…more than double the previous issuance record of $17 billion (by Apple, Inc.).” A deal that was “about the size of all outstanding obligations of the Slovak Republic.” A deal that was really, really expensive because of its size and the corporation’s low credit rating.

Yes, in those circumstances, it would indeed seem financially prudent to focus on paying back debt.  But instead, Verizon raised its dividend again. And did a $5 billion buyback in February 2015. And then came after its employee unions, looking for wage, benefit and job security concessions.

Back when Verizon’s CFO was ruling out buybacks, the corporation had $114 billion of debt.

Now, after that $5 billion buyback, the corporation has $120 billion of debt (as of June 30, 2015).

And – after shoveling all that money out the door to stockholders – the corporation still insists on concessions from its unions.

I did a little math. Verizon has about 177,300 employees (most of them are not represented by a union). If the corporation had spent that $5 billion on its employees – rather than buying back its own stock – Verizon could have given each and every employee $28,200.

And then I did a little more math.  Despite the February buyback, Verizon still has more than 4 billion outstanding shares of stock.  That means each of the quarterly dividends it has issued this year has cost the corporation more than $2.2 billion. That’s more than $50,000 per employee that Verizon will transfer to stockholders through dividends, this year alone.

And the corporation is demanding givebacks from its employees’ unions.

Money going to the top of the economic pyramid, rather than to working families – that’s why our economy doesn’t work anymore.


If you want to support the 39,000 Verizon employees who have been working without a union contract since August 1st, you can sign the petition here.

Stand Up to Verizon is on Facebook here.

Part one of this “Verizon as a case study” series is here.

Part two of the series, showing how Verizon executives benefited from the $5 billion buyback, is here.

This is part three of the series.

Part four, about phantom stock and how Verizon executives are avoiding taxes by investing in imaginary assets, is here.

Part five, about how Verizon is borrowing money to pay stockholders and executives while demanding givebacks from unions, is here.

Part six calculates that — because of all the dividends and long-term borrowing — each share of Verizon stock now represents less than $3 in stockholder equity (even while it’s trading at more than $40 a share); read it here.

And yes, there will be more in the series.  Please check back.

Read more about how US tax policy encourages profit-taking — even profit-taking that bankrupts corporations — in “What Mitt Romney Taught Us about America’s Economy” here.

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