Quote of the Day: "Everyone knows"

"If you hear that 'everyone' supports a policy, whether it’s a war of choice or fiscal austerity, you should ask whether 'everyone' has been defined to exclude anyone expressing a different opinion."

- Paul Krugman, "Marches of folly", New York Times, 2013-03-17

Quote of the day: entitlements

"Indeed we do have an entitlement problem; some feel so entitled to power & wealth that they're willing to undermine our economy and our democracy."
- Annabel Park, founder of the Coffee Party

Click here for original.

Let's see!  Is the CEO of U.S. Bancorp entitled to $9,311,164 for 2012 compensation?  Or did he earn it?  Who decided this?  Did the shareholders or the self-selected board of U.S. Bancorp?  If Richard Davis earned it, did he do it with his own "hard work" or did thousands of employees contribute to the success of U.S. Bancorp and earned far less than one-hundredth of what he received.  If the latter, did they receive a bonus for their hard work?  Now these are the people who are entitled to better pay.

See "CEO pay watch: U.S. Bancorp's Richard Davis", Patrick Kennedy, Star Tribune, 2013-03-13

Less tax for little work

I've started doing our income taxes for the year and had a pleasant surprise.  If I calculate the tax in a straightforward way, we will owe a few hundred dollars.  If I calculate the tax with the worksheet for capital gains and dividends, we will get a refund of a few hundred dollars!

This is surprising because our income consists of Social Security, IRA withdrawals, two teensy-weensy pensions, and capital gains and dividends.  Capital gains and dividends are less than a quarter of our total income.  Social Security is about half, but it isn't all taxable.

An interesting thought: Social Security is considered an entitlement, but the capital gains and dividends are considered our due.

We worked for decades paying Social Security withholding; we buy and sell stocks with a click of the mouse.  The capital gains are a form of gambling and really don't contribute to the economy other than providing liquidity for the market and fees for the brokerages.  The dividends are based on the profits created by thousands and thousands of workers providing goods and services.  And again, we didn't provide the capital for these companies; we bought it from someone else.  For providing market liquidity, we supposedly are "makers".  As Social Security recipients we are "takers".

Quote of the Day - Entitlements

"Social Security and Medicare aren't entitlements. They're subsidies to companies that do not sufficiently cover the health care and retirement needs of their employees."
- Gary Peterson, Letter, Star Tribune, 2012-11-24

But companies often more than sufficiently cover the health care and retirement needs of their executives.  See "Let's Look at Entitlements".

Let's Look at Entitlements

Political reporting is full of stories about the need to rein in entitlements, mostly meaning Social Security and Medicare.  Remember these are insurance programs for which people pay premiums.

Consider auto insurance.  Suppose you buy a car and buy collision insurance for it.  The day after you pay your annual premium of, say $1,000, you are involved in a crash that totals your car.  Is the insurance reimbursement an entitlement?  Of course it is.  Is it an unjustified entitlement.  Well, if you've been paying car insurance payments for years and never had a claim, you might think so.  It's your premiums that are giving the owner who had made only one payment the reimbursement.

The question with Social Security and Medicare is if enough premiums are being paid in to cover the payouts, not whether those who paid in are entitled to the benefits or not.  One can question the level of payouts but not the fact that payouts are made.

In both the auto insurance and Social Security cases, the recipients are not determining the benefits.  It is either the insurance companies or the Federal Government.

However, there are other benefits that are being determined by the recipients, not some "disinterested" second party.

Consider CEO salaries.  It is not an independent group of shareholders that are determining the ever increasing CEO salaries.  It is a board often picked by the CEO!

Consider board member salaries and fees.  Who determines that board members will get $100,000 plus for five or six board meetings a year plus expenses?  The board members!  Who determines the stock benefits given to executives and board members to "align their interests with those of the shareholders"?  It's certainly not the shareholders.

Consider the "golden parachutes" given to fired executives.  Do you think a laid-off worker would receive a few million dollars and lifetime high-value health insurance?  If the worker receives any benefits at all, they are often considered entitlements, especially if part of a union contract.  Why don't more supporters of "capitalism" recognize the golden parachutes as undeserved "entitlements"?

Consider that corporations depend on employees  and customers to succeed.  Employees are often treated as costs rather than investments.  Customers are often treated as annoyances rather than supporters and free advertisers.  And too often, executive pay is inversely related to customer satisfaction.  See "Executive Pay and Customer Satisfaction".  That certainly smacks of entitlement on the part of the executives.

Consider that the owners of professional sport teams strong-arm cities and states to provide a larger portion of their increasingly expensive stadiums.  They argue that the newer, bigger stadium will be an investment in the local economy.  I wonder how many of these owners are willing to pay for all the schools, roads, sewers, and so on that modern communities need and provide.  Oh, the stadium will pay for those.  That sounds like a multi-million dollar entitlement to me.

My guess is that the "entitlement" of Social Security puts more money into a local economy than all the corporate entitlements.  My guess is that the "entitlement" of Medicare gives a lot of support to the local health care facilities than all the corporate entitlements, plus the employees of those facilities spend a lot of their wages in the local economy.

In short, an entitlement is something others receive, we only receive what is due us.

A "real" Republican stands up

David Stockman was director of the Office of Management and Budget during Ronald Reagan's first term.  He wrote a sharp criticism of current Republican thinking in "Paul Ryan's Fairy-Tale Budget Plan", New York Times, 2012-08-13.

Among other things Stockman points out that for all the budget cutting in "entitlements", Ryan wants to fund the "warfare state" with a budget twice what Eisenhower thought was sufficient to contain the Soviet threat, adjusted for inflation.  Stockman writes that we have no real credible threat from any "advanced industrial state" and that Iran is benighted but irrelevant.

You might not agree with everything Stockman wrote, but you'll find his thinking is more in tune with reality than what currently passes for conservatism, that is, conserve the entitlements of large corporations and their "right" to raid the Treasury and the pockets of savers.

Reading the fine print so we don't have to

Morningstar has started a new service called footnoted, which reports and analyzes the fine print of many companies' SEC filings.

The edition available today includes articles on

Jerry Yang leaving Yahoo "to pursue other interests, and not due to any disagreement with the Company",
The perks at a dental supply company that explain why your dental work costs so much,
The golden parachutes for executives who screw up, and
The whopping entitlements that directors at Google get.

I've added footnoted.com to my bookmarks. It will be interesting to delve into it now and then.