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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.

NYSE_09_26_1963_US_News_World_Report

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.

Public Pensions: Still Waiting to be ‘Made Whole’

IOU in a piggy bank by Images of Money via FlikrLooks like the Justice Department is settling cases with banks responsible for the 2008 financial meltdown. Citigroup is next up: and reported to be paying $7 billion to end Justice Department investigations.

But I don’t see any of that money headed back to public pension systems.

…like, say, New Hampshire? In June 2007, the New Hampshire Retirement System Trust Fund held $29.7 million in Citigroup stock. Within two years, that stock had lost 94% of its value. (That’s a lot of retirees’ COLAs, right there.)

…like, maybe, Detroit? In June 2007, the two retirement systems covering Detroit public employees had a total of $343 million invested in mortgages. But after the crash, the systems’ “unfunded pension liability” was one of the main justifications for declaring that Detroit was “bankrupt.” (Read “Detroit’s Pension Systems: not ‘unaffordable’, just battered by Wall Street” here.)

State and local pension funds lost a total of $1 Trillion (yes, with a “T”) in value between 2007 and 2008. NOT a coincidence: those state and local pension funds are now “underfunded” by $1 Trillion.

And now the Justice Department is wrapping up its investigations, with fines to the federal government and assistance to homeowners…

… and nothing, as far as I can tell, in the way of restitution to all those public employees whose retirement dreams were destroyed.

Meanwhile, Wall Street broke more records last week…

…and Governor Chris Christie has decided not to pay New Jersey’s pension system more than $2 billion in employer contributions.

New Hampshire public sector retirees haven’t received a cost-of-living adjustment since 2010.

Detroit’s retirees are voting on whether to accept benefit cuts.

And so far, only one banker has gone to jail (compared to 839 people who were convicted for crimes during the savings-and-loan scandals of the 1980s)…

…and as far as I can tell, nothing whatsoever in the way of restitution to public pension funds.

Does that $7 billion settlement sound like a lot to you? Here’s some context:

  • That’s just slightly higher than the $6.4 billion Citigroup had originally planned to spend next year to buy back corporate stock. (Why would a company buy its own stock? “To counteract the dilution of bank shares when executives are awarded stock as incentives.”)
  • It’s roughly equal to six-months’ profit for the corporation.
  • It’s less than 2% of what Citigroup received in the federal bailout.
  • It’s less than one percent of what public pension funds lost in the meltdown.

Mad, yet?

Read the Rolling Stone’s “Looting the Pension Funds” here.

Read “The Plot Against Pensions” here.

 

Wondering Where Your Retirement Has Gone?

 

If you’re wondering what happened to your retirement security, then you really need to read the NY Times excerpt from “The Wolf Hunters of Wall Street.”

The same system that once gave us subprime-mortgage collateralized debt obligations no investor could possibly truly understand now gave us stock-market trades involving fractions of a penny that occurred at unsafe speeds using order types that no investor could possibly truly understand…

“It was so insidious because you couldn’t see it,” Katsuyama says. “It happens on such a granular level that even if you tried to line it up and figure it out, you wouldn’t be able to do it. People are getting screwed because they can’t imagine a microsecond.”

…Even giant investors simply had to take it on faith that Goldman Sachs or Merrill Lynch acted in their interests, despite the obvious financial incentives not to do so.

“Giant investors” would include – yes, that’s right – public pension trust funds.

Like the NH Retirement System Trust Fund… which was 100% funded, as recently as 1999.

Or Detroit’s public pension systems, which were fully funded as recently as 2008 – but are now being used as the “reason” that the City “has” to go through bankruptcy.

Wonder where your retirement has gone?

Read about Wall Street’s “dark pools”… then get really, really mad.

Feel Like There’s A Target On Your Back? Multiple Lawsuits Target Unions

Image by ogimogi  CC Flikr

Image by ogimogi
CC Flikr

All these lawsuits asking the Courts to rule against unions?  They’re NOT about First Amendment rights.

And now, one of the groups behind the lawsuits is admitting that.  And they’re saying it’s about stopping public sector unions. 

And they’re even portraying it as a strategic assault. 

Read it for yourself in this week’s National Law Journal: “Courts Should Seize the Opportunity To Disempower Public-Worker Unions” (free registration required).

They’re looking at this as a one-two punch. First: Harris v. Quinn (Supreme Court ruling expected any day now). Then, the NLJ editorial suggests, Friedrichs v. California Teachers Association could deliver the final blow.

“Although there may not be five votes to end compulsory dues in the Harris case, Friedrichs v. CTA could provide the pivotal fifth vote for fundamentally re-ordering of public-employee union law.”

While you’re reading… don’t forget to translate!

  1. “Compulsory dues” translates to “union agency fees” (which cover the costs of negotiating and administering the contract, and nothing else.  Agency fees are NOT union “member dues”.).
  2. “Law that requires all public employees to join and support a union as a condition of employment” actually refers to California Government Code Chapter 10, which establishes a framework for teachers to collectively bargain – if they want to.  (Just like NH RSA 273-A provides a framework for collective bargaining; yet New Hampshire has lots of public workers who are not represented by any union.)

Don’t forget to look at the players!

  1. Plaintiffs in the Harris case are being represented by the National Right to Work Legal Defense Foundation… which is affiliated with the National Right to Work Committee… which those of us here in the Granite State know all-too-well, right?
  2. According to the NLJ editorial, plaintiffs in the Friedrichs case are being represented by the Center for Individual Rights.  Read the Sourcewatch article here.
  3. But according to the actual Court filings in the Friedrichs case… plaintiffs are being represented by the law firm Jones Day.

Yeah, Jones Day.  Seems they’ve been quite active lately. The City of Detroit bankruptcy. The Patriot Coal bankruptcy. The Hostess Brands bankruptcy.   Verizon’s “de-risking” of its pension obligation.

And, can’t forget the Court case over nominations to the National Labor Relations Board.  (Read “How They Won It: Jones Day Invalidates Obama’s NLRB Picks” here.)

Are you feeling targeted yet?

Remember: you’re not the only one being targeted these days, you’ve got lots of company.  Public employees everywhere.  Anyone with a union pension or health care benefits.  Workers, in general.  The middle class.

Education is the best way to fight disinformation campaigns. Please share this with your friends on Facebook, or Twitter, Google, LinkedIn, or other social media.  It’s really easy; just click the buttons on the left.

Is Detroit REALLY “broke”? Because The Math Does Not Add Up

Louis-Philippe Duc d' Orleans Saluting His Army on the BattlefieldCan’t help wondering about this scenario.

The City of Detroit owns one of the finest art museums in the world.  On Wednesday, Christie’s auction house released its appraisal of… just 5% of Detroit’s artwork.  According to Christie’s, that small fraction of the collection is worth somewhere between $452 and $866 million.  Earlier, outside experts had given a ballpark estimate of $2.5 billion – for just 38 of the museum’s 66,000 pieces.

But Detroit can’t afford to pay its retirees’ pensions?

Far more troubling is the fact that the city apparently didn’t seek federal grant money before seeking bankruptcy.

Imagine yourself in the shoes of Kevyn Orr, the “Emergency Manager” that Governor Rick Snyder appointed back in March.  If YOU were walking into a place that was in fiscal trouble, wouldn’t you look around for revenues?  (Anybody else remember “Mediscam”?)

Yeah, well, that’s apparently NOT what Kevyn Orr did.

Back in September, federal officials identified more than $300 million in grant monies that Detroit was eligible for… but somehow… hadn’t gotten.

Democratic  Sen. Carl Levin: “There are dozens and dozens of programs available – some they haven’t applied for… some have been granted and are simply sitting there waiting for the city to do what they need to be doing.”

Yep, that’s what he said: “simply sitting there, waiting for the city” (which is now headed by Emergency Manager Kevyn Orr) to do what needs to be done.

Think about all the press stories you’ve seen, about Detroit’s financial situation.  Then look at the money that was “simply sitting there” waiting for federal officials to point it out:

  • Public safety concerns? Turns out there was $28 million in federal money available to hire police and firefighters, purchase equipment and pay for programs.  Plus about another $2 million available from private foundations.
  • Public transportation issues?  There was more than $130 million in federal money to repair buses, install security cameras and expand service to areas outside the city.  Plus another $3.3 million in private foundation monies.
  • Neighborhood blight?  More than $85 million in federal money to rehab (or demolish) housing units, clean up brownfields and otherwise fight blight.  Plus another $13 million from private foundations.
  • Bleak future?  Federal officials identified another $32 million in private grant monies to help Detroit plan for its future, upgrade its technology, train its residents and bring retail and creative industries back to the city.

Now, think again about Mediscam.  In New Hampshire, public officials faced with fiscal problems got (ahem) “creative” in order to maximize federal funds.

But in Detroit, Emergency Manager Kevyn Orr left more than $300 million in grant monies… sitting there.

Now, let’s look one more level down.

All the press reports about Detroit focus on that “$18 billion” of total debt.  That includes not just pensions and retiree health care liabilities, but also all the usual long term bonds that large municipalities have (about $3.7 trillion total, nationwide).

In a bankruptcy proceeding, the question shouldn’t be “How much does Detroit owe?”  The question SHOULD be “Can Detroit afford to pay its bills?”

And – with different political leadership – the answer to that question could easily be “yes”.

At the end of each fiscal year, public entities prepare a “Combined Annual Financial Report” that provides useful information about their finances.  Detroit hasn’t released its 2013 CAFR yet (even though the fiscal year ended more than five months ago).  But here’s what Detroit’s auditors said, in their 2012 Comprehensive Annual Financial Report:  “The City has an accumulated unassigned deficit in the General Fund of $326.6 million as of June 30, 2012, which has resulted from operating deficits over the last several years.”

So… as I do the math… those operating deficits have been accumulating over several years… but just ONE year’s worth of those grants (which have been “just sitting there”)… could almost completely offset that accumulated deficit.

Whoa… without even touching that art collection?  (And without restoring state revenue-sharing that was cut under Governor Rick Snyder?)

Maybe it’s just me… but I can’t help suspecting there is something else going on here, OTHER than fixing Detroit’s finances.

 

 

Today, public employee retirements; Tomorrow, the rest of America

constitution
Yesterday was NOT a good day for public sector workers who think they can rely on long-promised pension benefits.

  • Detroit: Yesterday, a federal bankruptcy judge ruled that even the state constitution did not protect workers’ retirement benefits.
  • Illinois: Yesterday, the state Legislature passed a law reducing pension benefits and prohibiting collective bargaining on pensions.

Both of these violations of workers’ rights are being justified on the theory that the retirement systems are in such “dire” shape.  The rhetorical focus is on the “funding ratio”: comparing what the system has now, in assets, with the total benefits it will have to pay out in the future.

In household budget terms, this is like comparing your current bank balance with the total amount of the mortgage or rent payments you are expected to make over the next 20 years.  (Try doing that math, and you’ll understand how the “pension reform” disciples come up with their doomsday scenarios.  They’re doing it with Social Security, too; so what is happening to public employees now will probably happen to the rest of America very, very soon.)

Ok, so… maybe the retirement systems’ current funding ratio is “dire”.  Whose fault is that?

During the 2007-2008 Wall Street meltdown, public pension systems across America lost more than a trillion dollars in value.  (Yes, that’s “trillion” – with a “T”.)  Most public pension systems had already lost millions or billions in the 2001 recession.

But now that public pensions are a trillion dollars underfunded, they’re being attacked as “unaffordable” – and somehow, it’s all the fault of public workers.

  • Illinois:  In FY2000, back before the first Bush recession, the State Employees’ Retirement System was more than 80% funded, and the Teachers’ Retirement System was almost 70% funded.

But… instead of going after all those Wall Street folks who lost all that public pension fund money… our politicians are going after rank-and-file public employees.  (By the way: Wall Street bonuses are gong up by 5% to 15%, this year.)

Think this isn’t your fight? because it’s all the way out in Detroit?  or because it’s “just” public employee unions?

Think again.

The same folks who have been busy “reforming” public sector retirement benefits are also out to “reform” Social Security.

 

 

Judge’s ruling: giving more power to Congress, jeopardizing Detroit retirees

IOU in a piggy bank by Images of Money via FlikrSo, earlier today a federal judge ruled that Detroit’s “Emergency Manager” could go ahead with bankruptcy proceedings – and, as part of the bankruptcy, cut public pension benefits that would otherwise be protected by Michigan’s state Constitution.

Judge Rhodes ruled Tuesday that Michigan’s [constitutional] protections for public pensions “do not apply to the federal bankruptcy court,” adding that pensions are not entitled to “any extraordinary attention” compared with other debts.  (Read the New York Times article here.)

Think about that, carefully – because to me, that is the single most frightening part of this whole situation.  The judge held that federal bankruptcy law trumps a state constitution.

One more time: according to this morning’s ruling, a law passed by Congress can invalidate a provision of a state constitution.

Take a minute and look at all those rights guaranteed by the New Hampshire Constitution.  (Read it here.)

Now, think about what it means, if Congress has the power to take those freedoms away.

Article 7 of the New Hampshire Constitution:
The people of this state have the sole and exclusive right of governing themselves as a free, sovereign, and independent state; and do, and forever hereafter shall, exercise and enjoy every power, jurisdiction, and right, pertaining thereto, which is not, or may not hereafter be, by them expressly delegated to the United States of America in congress assembled.

How does that work, if state constitutions can be trumped by a federal law?

Read previous NH Labor News coverage of the Detroit situation here.

Read the statement from AFT President Randi Weingarten on this ruling here.

———-

Meanwhile, in Illinois, the state Legislature is meeting behind closed doors to discuss a legislative proposal to cut public pension benefits.  The bill was formally filed yesterday.  The vote is expected later today.

Read yesterday’s NH Labor News story about Illinois here.

 

Will the Illinois Legislature Steal Public Workers’ Retirement Security?

Smashed Piggy Bank RetirementAnd so the campaign to eliminate our retirement security continues.

As everyone was leaving for Thanksgiving weekend, Illinois legislators announced a “bipartisan” plan to “bail out” the state’s public pension funds.

That was Wednesday.  (LATE Wednesday.)

Details of the plan weren’t released until Friday.  (Increased retirement age.  Limits on COLAs.  Prohibits collective bargaining regarding pensions.  Prohibits use of pension funds for retiree health care. Etc.)

The actual bill was released today. (All 325 pages of it.)

The Legislature is expected to vote on the plan tomorrow (Tuesday).

And Chicago hedge fund honcho Ken Griffin spent Thanksgiving weekend beating his PR drums about the “the dire state of our pension situation.”  (Yeah, that WOULD be the very same Ken Griffin who, along with his wife: “were the top donors in the 2010 election cycle to Republicans running for Illinois legislative seats.”  That’s according to a Chicago Tribune analysis, which also tallied millions of dollars in other political contributions the Griffins have made to conservative political organizations.)

Can’t help but notice another context to the timing.  Today is the filing deadline for next year’s elections.  When legislators vote on the pension system revisions tomorrow, they will know what candidates they will be facing when they campaign for reelection.

Hey, I’ll agree with one thing Ken Griffin said in his weekend PR blitz: “We need political courage and a willingness to face painful truths.”

The “painful truth” here is: this is being pitched as a “bipartisan proposal” authored by the Democratic legislative leadership.

And it’s clearly the next step on the path toward eliminating retirement security… not just for public employees in Detroit, or Illinois… but also for Social Security participants throughout the country.  (Remember the “bipartisan proposal” from Simpson/Bowles?)

———-

Read “Going behind the rhetoric on public employee pensions” here.

Read “Detroit’s pension systems: not ‘unaffordable’, just battered by Wall Street” here.

New Book “ReMaking America” Is A Guide To Rebuilding American Manufacturing

Jobs! Jobs! Jobs!

During the last Presidential election, the biggest theme of the campaign was jobs.  Both President Obama and Governor Romney pushed the idea of supporting manufacturing jobs by promoting “Made In America”.  By the time election day finally arrived, more than one million ads had been created about “adding jobs to our struggling economy.”

What happened to that laser-like focus on “Jobs! Jobs! Jobs!”?  (Congress still hasn’t passed a jobs bill.)

For decades now, US “free-trade” policies and offshoring of jobs has reduced our manufacturing base.  According to Scott Paul, President of the Alliance for American Manufacturing, U.S. manufacturing has “fallen to 12% of our national economy.” Scott notes that this has turned the United States from a “creditor nation” to a “debtor nation”.

All you have to do is look at the city of Detroit.  Up until the 1980s, Detroit was a shining example of American manufacturing. Dave Johnson from the Campaign for America’s Future describes what has happened: Detroit, which ‘used to exemplify American prosperity, now is a wasteland of crumbling buildings, homes, and people.”

There are many reasons corporations ship their jobs overseas; most revolve around the public policies created in Washington.  Policies like NAFTA and the proposed Trans-Pacific Partnership are removing the advantages to manufacturing here at home.

Remaking America BookRebuilding our manufacturing base is the key to rebuilding our economy and putting millions of people back to work in good middle class jobs.  In an effort to bring awareness to the need for American manufacturing, the Alliance for American Manufacturing has published a new book called “ReMaking America”.  The book features an all-star cast of experts discussing America’s manufacturing potential and potential pitfalls.

“This new volume illustrates that American manufacturing is rising from the ashes,”  Paul said. “But it will take political insight and courage among our nation’s leaders to seize on this moment of great opportunity – before our global competitors out-innovate, out-invest, and out-build us. The cost of not acting will be great.” (AAM)

In a recent phone interview, Paul and Carl Pope (Former Director of the Sierra Club) explained some of the opportunities that we must seize if we have any chance of “Remaking America”.

Paul highlighted the promise made to America by President Obama to add one million new manufacturing jobs in the United States by 2017.   Paul said that so far we have added “24,000 new jobs.”  He said, “This is well below the number of monthly new jobs needed to meet this goal.”  (You can follow the one million jobs progress at AAMeter.) This does not mean we should abandon all hope, it means we need to change our policies and invest in new technologies like renewable energy.

Paul described the book as a “hopeful message for American manufacturing”. He contributed a chapter to the book, focusing on simple public policy changes that could revive our manufacturing base.  “There is a role for public policy in manufacturing and it is a key part of this discussion,” he said.

Pope, a well-known environmentalist, is another contributing author.  People have asked him, why is he involved with manufacturing as an environmentalist?  In the phone interview, he explained that “the energy sector is a prime example of how we could rebuild our manufacturing base.  By 2050, we are going to need to rebuild, renovate, and reconstruct pretty much everything we have built in the U.S. over the last 200 years.  This is something we cannot offshore to Shanghai.”

Pope goes into great detail in the book about how right now we have a significant economic advantage over the rest of the world in liquid natural gas prices.  He said, “The United States can buy LNG for around $4 per cubic foot, while Europe buys their LNG for around $10 from Russia.  China and Japan have to pay upwards of $18 per cubic foot for LNG.”  This is an enormous opportunity for America manufacturing.  Some states are already taking advantage of this by converting antiquated coal power plants to more efficient and economic LNG plants.  To reconstruct or convert these power plants is going to take large amounts of construction materials like manufactured steel.

Pope believes that the connection between manufacturing and renewable energy could revive our economy.  He believes in this so much that he teamed up with Leo Gerard, President of the United Steel Workers, to create the Blue-Green Alliance.  The Blue-Green Alliance is focused on rebuilding our infrastructure while creating new jobs and cleaning up our environment.

ReMaking America is a guide for simple common sense solutions to rebuilding our economy, making our environment cleaner, and putting millions of people back to work in good paying manufacturing jobs.  In their interview, Pope and Paul only scratched the surface of the issues covered in the book.  Other contributing authors include:

  • Richard McCormack, Editor of Manufacturing & Technology News.
  • Leo Hindery, Chair of the U.S. Economy / Smart Globalization Initiative at the New America Foundation and former CEO of AT&T Broadband.
  • Eric Garfinkel, Member of the Adjunct Faculty at the University of Colorado Law School and former Chief Council for China Trade in the Office of the U.S. Trade Representative.
  • Harry Moser, Founder of the Reshoring Initiative and Chairman Emeritus of Charmilles Technologies Corp.
  • Harold Meyerson, Executive Editor of the American Prospect and columnist for the Washington Post.
  • Irene Petrick, Director of the Enterprise Informatics and Integration Center at Pennsylvania State University.
  • Sridhar Kota, Professor of Mechanical Engineering at the University of Michigan and former Assistant Director for Advanced Manufacturing at the White House Office of Science and Technology Policy.
  • Stacey Jarrett Wagner, Manager of Workforce Systems Development at the National Institute of Standards and Technology’s Manufacturing Extension Partnership.

If you need a few more reasons why you must read this book, here are a couple of excerpts.

Richard McCormack: “We can’t have a strong robust economy without making things, creating wealth.” “Look at the talk about resourcing, there is not much evidence other than anecdotal stories. The economy is stagnant, the trade deficit is going up not down.”

Harold Meyerson: “A large growing number of American workers in well-paid manufacturing jobs are now hired on to low-paying jobs, partly due to lower-wage and anti-union states.” A study by Boston Consulting Group noted wage stagnation in the US and wage increases in China. “A leading example of higher pay and benefits is Germany. Their companies have preserved the highest level of manufacturing in home markets, have offshored less-skilled jobs. There is an increasing tendency for German companies to locate jobs here in the South for cheap labor. This is not realizing the promise of manufacturing.”

 

Click the links for more information on ReMaking America, Campaign for America’s Future, the Alliance for American Manufacturing, and the Blue-Green Alliance.

Court Overturn Decision To Allow Patriot Coal To Stop Paying Retiree Benefits

The fight over retiree benefits and Patriot Coal is only the precursor to what corporations and public entities are trying to do.  They want to take all the money you worked for and saved in your retirement.  They are trying to weasel their way out of their obligations by filing for bankruptcy.  The UMWA have been leading this fight over Patriot Coal and it turn are creating a precidence that will be usable in Detroit or any other case that comes down the road.

Appellate bankruptcy court overturns decision allowing Peabody Energy to stop paying for health care benefits for 3,100 retirees and dependents

[TRIANGLE, VA.] The United States Bankruptcy Appellate Panel for the Eighth Circuit today reversed a decision by federal Bankruptcy Judge Kathy Surratt-States that would have allowed Peabody Energy to stop paying health care benefits for some 3,100 retirees that it had assumed in the spinoff of Patriot Coal.

The strongly-worded decision by the three-Judge panel means that Peabody continues to hold responsibility for paying the health care benefits for this group of retirees, who are mostly in the Midwest.

“This is a bright ray of good news in what has been a long, dreary period for the retirees, their dependents and widows who have been desperately worried about what’s going to happen to their health care,” UMWA International President Cecil E. Roberts said.

“Peabody has spent years trying to get rid of its obligations to the thousands of retirees who made it the richest coal company in the world,” Roberts said. “This decision foils part of that plan. And it makes us even more determined to keep fighting to make sure the company lives up to its entire obligation to these miners.”

In preparation for the spinoff of Patriot, Peabody signed a 2007 agreement with Heritage Coal Co., which was at the time a Peabody subsidiary that Peabody included in the Patriot spinoff. That agreement allowed Peabody to reduce its contribution levels for retiree health care benefits to the same level as Heritage (Patriot) would pay if such levels were modified in the future.

Peabody argued that since Heritage (Patriot) was relieved of all its obligation to pay for retiree health care by Judge Surratt-States, that Peabody should be relieved of its obligation as well. Judge Surratt-States agreed, and issued a ruling in Peabody’s favor on May 29. Patriot and Heritage appealed, and their appeal was supported by the UMWA.

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