Author: Bonddad

Cross-Posted at My Left Wing

The cost of health insurance and related expenditures is destroying US national competitiveness.  As a result, US companies are less competitive versus their international rivals.  This hurts the US’ ability to create good-paying jobs and improving the standard of living of all Americans.
On April 15, 2005, Business Roundtable President Larry Burton gave a speech to the Alaska World Affairs Council.  During that speech, he made the following remark:

In a recent survey, three out of five of our CEOs cited health care costs as their number one cost pressure.

General Motors CEO Rick Wagoner reports that his company spent over $4,700 last year on each of its 1.1 million U.S. employees, retirees, and dependents. That equates to more than $1,500 per car that GM sells. Not one of GM’s overseas competitors has to bear such a direct and onerous health care cost burden.

Mr. Burton’s key observation is no other international competitor has the same expense.  As a result, American companies are at a distinct disadvantage when competing in the international marketplace.  American companies most factor in a large and increasing cost that other companies do not have.  

These costs to business have risen for the last 4 years.  According to the Bureau of Labor Statistics, health insurance as an employer cost rose and average of 8.15% in 2000, 8.6% in 2001, 10.82% in 2002, 10.17% in 2003, and 8% in 2004.  These increases are similar regardless of the type of plan the employer uses to cover his employees.  

And these increases are from an already large base.  According to the Kaiser foundation, the “Average Annual Employer Health Plan Premiums for Covered Workers, Single and Family Coverage, by Plan Type, 2004 were $3695 and $9950 respectively.  

As a result of these increases in business costs, employees are paying a larger percentage of health care premiums. Employee contributions to health insurance payments have increased at a 10.5% compounded annual rate since 2000.  The average monthly employee contribution is currently $222, which has nearly doubled since 2000’s figure of $135.  In other words, employees are paying a larger percentage of the costs.

So, to conclude, health expenses are a major concern of CEOs.  Their international competitors do not have to worry about health care, making US companies less competitive in the international market.  Health costs are very expensive to provide for employees, and the cost in increasing almost 4 times faster than inflation.  As a result employees are paying a larger percentage of the cost to the tune of $222/month on the national average.

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Cross-Posted at My Left Wing

It is well-established that unionized workers in the United States are covered by more extensive employee benefits than are comparable nonunion workers. Data from the March 2002 Current Population Survey (CPS), for example, show that unionized workers are 16.4 percentage points more likely than similar nonunion workers to be covered by an employer-provided health insurance plan, and 18.8 percentage points more likely to participate in an employer-sponsored retirement plan. What is less clear, however, is why this is so. In their seminal book What Do Unions Do?, Richard Freeman and James Medoff argue that greater benefits for unionized workers stem from two factors: 1) union bargaining power (what economists call the “monopoly face” or “monopoly effect” because they liken union bargaining power to that of a monopolist), and 2) union voice (or what is sometimes called the “collective voice” face).
Does this finding surprise anybody?  When employees exercise simple democratic principles by organizing their interests and electing representatives to negotiate for those interests, it is more than likely that the employees will get benefits.

However, Republicans argue that unions are bad and anti-competitive. What Republicans are really saying is democracy is great of Iraqis, but not for employees.

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Cross-Posted at My Left Wing

For the first time that I am aware of, a ratings agency has studied the relation of executive compensation packages to a company’s financial performance.  To end the suspense, the report concludes, “Companies that sweeten executive compensation with unusually large bonuses or options plans tend to have deeper and more frequent credit downgrades and higher bond-default rates than those that don’t offer such plum packages.”i>
First, executive pay is a pretty complicated arrangement, but it usually breaks down into two components: a base salary and incentives.  The base salary is, well, just that – a base salary.  However, incentive packages are usually tied to the company’s stock price.  The company will give the executive inexpensive stock options as part of the executive’s compensation.  A stock option allows a person to purchase a stock at a specific price, usually below the market price of the stock.  The person then sells the stock in the open market and profits the difference.  For example, suppose you have a stock option that allows you to purchase the stock at $10/share when the stock is trading at $30/share.  This is a no-branier – exercise the option and sell-the stock.  

Here’s the problem with the stock option packages.  An executive is in a position to influence the stock price by authorizing poor or questionable accounting practices that increase his net worth.  Accounting is not an exact science.  There are different ways to report certain financial items.  The executive has the option of using an accounting policy that makes the company’s numbers look good in the short run, which increases the stock price.  The executive exercises his options and sells the stock long before the financial press or independent auditors uncover the problems.  However, by then the damage is done.  The executive is very rich and stockholders are left holding the bag.

The study noted:

“Moody’s found that of the 43 companies rated “B3” or higher that defaulted between 1993 and 2003, 22 offered their CEOs much-larger-than-expected bonuses or stock-option grants or both at least once. Of the 214 that experienced large downgrades — that is, three or more ratings notches within 12 months — CEO compensation was higher than expected in 140 cases. Some 50 of those finished in the top 10% for plan generosity across their industries

Moody’s sees three possible correlations between excessive compensation and default risk: excessive compensation may be indicative of weak management oversight by the board of directors; large pay packages that are highly sensitive to stock price or operating performance may induce greater risk-taking by managers; and large-incentive pay packages may lead managers to focus on accounting results, which may divert management attention from the underlying business or, at worst, create an environment that ultimately leads to fraud.”

This is a very complicated issue.  On one hand, I am all for incentives to increase performance.  However, there is a question of “how much is enough?” At some point, an incentive package is so large that it would compromise the Pope’s morals.  While the specific level will vary with each person, it does exists with most people.  In other words, everybody essentially has a price.  

I also want to point out that there are numerous people in corporate America who try and do the right thing and who act morally in regard to their position.  Are there bad apples in the bunch?  Yes.  Does that mean that everybody in the bunch is bad?  No.

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33% of the working population has chronic medical condition such as diabetes or high-blood pressure.  A patient with a chronic condition requires continued and regular access to health care.  However, 20% of these families reported having problems paying their medical bills in 2003.  This is criminal.  Think about the stress this adds to a family.  A parent has diabetes, and yet must struggle to find money to pay for insulin.  This is not a heroin addict looking for a fix; it is an otherwise healthy adult who has a medical condition.  And his medical condition, rather than being a simple monthly expenditure, causes financial problems.
Cross Posted at My Left Wing

However, the story gets worse.  68% of adults with a chronic condition had private health insurance.  And private health insurance is no guarantee of financial security:

Uninsured people with chronic conditions are especially vulnerable to medical bill problems: almost half (45%, or 3 million people) are in families with such problems. However, even people covered by private insurance are not immune to these financial concerns: one in six privately insured people with chronic conditions (16%, or 6.4 million people) live in families with medical bill problems.

These problems with paying medical bills led to other financial problems:

Among working-age adults with chronic conditions whose families had problems paying medical bills in the past year, negative effects on other aspects of family finances are common: 68 percent of their families had problems paying for other necessities, such as food and shelter; 64 percent were contacted by a collection agency; 55 percent put off major purchases; and 50 percent had to borrow money. More than nine in 10 families with medical bill problems faced at least one of these negative effects on family finances, and almost a quarter experienced all four.

Let’s review.  People who have a chronic condition can’t change their condition; they must learn to live with it.  Chronic conditions are pretty common.  Yet having a chronic health condition creates a ton of other financial problems such as paying for food and shelter.

Am I the only one who thinks this system is really screwed up?

http://www.hschange.org/CONTENT/706/

United States Supreme Court Associate Justice Sandra Day O’Connor refuses to go gently into the night. Late last week, while her political friends were rallying around her heir apparent, she said something as important as anything she had said while sitting on the High Court for nearly a quarter of a century. She loudly and passionately called out the Republican leadership in Congress for its cynical, sinister, and relentless assault upon the independence of the federal judiciary.
In some of the frankest tones you will ever hear from a sitting Justice, O’Connor, the Reagan appointee, gray-haired grandmother, and symbol of middle-American courtliness, blasted the very people on Capitol Hill who are cheering the loudest these days for John G. Roberts, Jr., the man who will almost certainly take over her consistently conservative vote from the bench on the first Monday in October. Speaking in Spokane, Wash., to a group of lawyers and judges, O’Connor warned that “the present climate is such that I worry about the future of the federal judiciary … In our country today, we’re seeing efforts to prevent an independent judiciary.”

For those of you who forgot what all this is about:

Tom DeLay: Schiavo’s death was the result of an arrogant, out of control, unaccountable judiciary

John Cornyn wondered if the recent violence against judges was caused by”the perception in some quarters, on some occasions, where judges are making political decisions yet are unaccountable to the public.”

The judge in the Schiavo case was a conservative Republican.  He heard the case for 6 years and made numerous rulings which allowed Mike Schiavo to be decide when to disconnect life support.  This was a judge the right shold have loved.   However, because he ruled against the religious right’s interests and agenda, he was suddenly an activist judge.

What the right forgets is the courts are supposed to be independent.  That is why Federal judges are given lifetime appointments, barring bad behavior and Congress cannot cut their salaries.  The Federal Judiciary is supposed to have only the law as their guide, not party.  However, the Republicans clearly want the judiciary to be nothing more than a rubber stamp – so long as that stamp furthers the extreme Republican agenda.

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This is something I wrote about a month ago.  Given the currency split occurring in the AFL-CIO, it seems appropriate to repost it.  The central argument is simple: all of the “pro-democracy” Republicans are remarkably anti-democracy when it comes to the rights on employees.  However, employees have every right to organize and protect their interests.  Given the rise of outsourcing, crushing health costs and the lack of real growth in wages, it seems more important than ever for employees to exercise their right to use Democratic tools to achieve their legitimate goals.

Unions have gotten a bad rap for a variety of reasons.  The organized crime connection was clearly their fault and caused some very negative and well-justified backlash.  Unions also have some pretty antiquated and Byzantine work rules.  However, whenever a corporation whose employees have a union has problems with expenses, the right wing always blames the union for increasing costs.  Democracy is bad for employees but good for Iraqis.

A union is a group of people who use democratic principals to forward their economic interests.  They write by-laws that govern their behavior.  Unions elect leaders to represent its members.  If the leaders are unresponsive to the needs of the represented, then the represented can vote them out.  This looks an awful lot like the democracy Bush wants to create in Iraq.  Yet, for some reason it is bad when US employees organize along democratic principals and good when Iraqis do the same thing.  

Corporations have legal protections – they are enshrined in law.  Each of the 50 states has a corporate statute that creates and enshrines the corporate entity.  Like unions, corporations use democratic values such as voting to protect shareholder rights.  It is an understood and accepted legal fiction that insulates shareholders from liability.  It allows people to pool resources and develop new products and technologies.  Corporations have contributed numerous benefits to society.  DVDs, computers, telephones …. The list is endless.

Unions have also accomplished many good things.  Work rules about the number of hours people can legally work, safe work environments, collective health benefits – these are all fabulous benefits of unions.  

From the Republican perspective, when employees get together and use democratic principals to protect their interests, they are bad.  But, when corporate interests get together and use democratic principals to protect their interests, they are enshrined in law.

In other words, for Republicans employees are not allowed to use democracy to further their interests.

Cross-Posted at My Lwft Wing

Awhile ago, I had lunch with my Dad and a group of his friends.  All of the people there were the classic older Republican types.  I usually hold my tongue, but I just couldn’t resist when someone started talking about the government debt and I mentioned that Clinton was the only person to balance a budget in the last 30 years.  Boy were they pissed.  All I could think was “you guys want a balanced budget, but continue to vote for the party that doesn’t balance the budget, and instead creates the debt you complain about.” These are bright guys, but all I could think was what idiots.
Republicans have implemented supply-side economics for 17 of the last 25 years.  During the times when they have implemented their policies, Republicans have sunk this country into a mammoth amount of debt.  Their arguments used to justify this debt fail when compared to facts.  In addition, their claims that supply-side cuts increased tax revenue and GDP fail when compared to the facts.  In short, all their arguments fail.

 

Two Fundamental Flaw of Supply-Side Economics

Here’s the first problem with Supply-side economics.    It assumes the government will make a proportionate cut in spending — for every tax-dollar lost, the government will cut spending.  Good luck with this one.  Politicians – regardless of their party affiliation – will never proportionately cut spending.  In addition, Republicans love overspending on the military.  Every time a new Republican takes office, they give the pentagon a blank check.  Reagan and Bush II are classic examples of this.  How quickly they forget Eisenhower’s warning about the military industrial complex.

This is why Reagan’s great economic expansion increased the US debt from a little under 930 billion to 2.6 trillion.  Yes, he cut taxes.  He also increased defense spending from 134 billion in 1980 to 290.9 billion in 1988; a compound annual increase of 10% (from the CBO).  “But we won the cold war!”  Yes, we did.   When are we going to pay for it?  The debt Reagan created is still in circulation, accruing interest payments.  This leads nicely to the second problem with supply-side economics.

Tax cuts without a proportionate cut in spending creates a revenue shortfall.  To fund this shortfall, the government borrows money by selling Treasury bonds. According to supply side economics, the revenue shortfall will eventually be eliminated by the increased revenue from an expanding economy created by the upper class spending more of their money.  

The problem with this theory is US GDP has never grown fast enough to start paying-off Republican created debt.

Increasing National Debt Caused by Supply-Side Economics

As a result of fiscal irresponsibility, the Republicans have amassed a record of ever increasing debt.  According to the Treasury department:

Ronald Reagan started his term with total debt outstanding of 930 million and increased total debt outstanding to 2.7 trillion. This is a 13.71% compound annual increase.  He never balanced a budget.

Bush I started his term with outstanding debt of 2.7 trillion and increased total debt to 4 trillion. This is a 10.32% compounded annual increase.  He never balanced a budget.

Clinton started with total debt outstanding debt of 4 trillion and increased total debt outstanding to 5.6 trillion. This is a 4.2% compounded annual increase.  He balanced his last three budgets.

Bush II started with 5.6 total outstanding debt and increased total outstanding debt to 7.7 trillion. This is a 6.5% annual increase.  He has never balanced a budget.  

For 25 years the Republicans have held the presidency for 17 of the last 25 years. They have never balanced a budget and have increased total debt outstanding 11.69% in each year they have held the White House.

The Democrats have held the White House for 8 of the last 25 years. They have balanced the budget 3 times and increased total debt outstanding 4.2%.

Republican Arguments in Support of National Debt

Republicans have two primary arguments supporting this debt.  The first is that by using the capital markets, the US Treasury is either establishing US credit for future use or maintaining the US credit standard.  Essentially, the argument is that to have a credit rating, an entity must use its credit rating.  In literally every other case, this would be a correct argument.  However, the US national government is a unique economic entity. Let’s assume for a moment the US has no debt and the Treasury announces it wants to issue bonds.  How many people out there in finance think the US will get a credit rating other than AAA?  If you raised your hand, please do the financial markets a favor and find another job. There is no way the world’s largest economy and one if its most politically stable countries would have anything less than a AAA rating.  In other words, the US does not have to use it’s credit to obtain its credit.

The second argument used by Republican economists to justify this debt is to use the debt/percentage of GDP ratio.  They argue that a low debt/GDP ratio is good while a higher ratio is bad.  This argument is derived from a similar ratio in corporate credit analysis called the Total Debt/Total Assets ratio.  This ratio makes a great deal of sense in corporate analysis. If the company declares bankruptcy, the company’s entire asset based is put on the auction block and carved up according to rules in the bankruptcy code. However, on the macro economic level this ratio does not make sense because all of the US’ assets are not politically available to pay off the debt.  Assume for a moment the US government declares bankruptcy and Congress is forced to deal with the crisis.  Lobbyists from industry would start paying handsomely for exemption from whatever draconian legislation Congress passes to deal with the crisis.  Representatives would do everything in their power to exempt their favorite local cause and campaign contributors.  In short, the political will does not exist to actually place all US assets under the tax gun.

 

A better analysis is mostly derived from high-yield debt analysis called the EBITA ratio. It stands for earnings before interest, taxes and amortization of goodwill.  For those of you familiar with a standard income statement, this is roughly equivalent to operating income.  The purpose of this ratio is to determine the amount of money available to pay interest on the company’s debt.  At the national level, interest is non-discretionary national expense; if the government does not pay interest on its debt, it will go into default which would cause financial ruin for the country.  The Treasury will not let this happen.  As a result, the interest will get paid regardless of other spending programs.  According to the CBO, Interest is grouped with other non-discretionary expenditures, which in total comprise 53% of Federal Spending.  Regardless of its classification as discretionary or non-discretionary, interest payments total 17% of total 2004 revenues.  That’s a large amount of money from any standpoint.

Decreasing Tax Rates Increases Revenues

The theory of cutting taxes on the rich is this: by cutting taxes, people will feel wealthier.  This will make them spend more money and invest their new found wealth, increasing the total amount available for taxes.  As a result, taxes should actually increase.  Stirling Newberry performed a simple calculation to refute this contention.  He calculated Average Real increase in Payroll tax revenues per year, using GDP deflator, by term.  Here are these calculations: Reagan I 3.51%, Reagan II 4.94%, Bush Sr. 0.98%, Clinton I 3.75%, Clinton II 4.86% Bush I 1.68% (including his good year).  Clinton I increased taxes, yet his tax revenue increased almost as much as Reagan I.  Bush II cut taxes, and his tax revenue barely increased.  These numbers indicate that to increase tax revenue, the president should work to increase GDP, not increase the tax burden on the middle class.

Tax Cuts spur GDP growth

As mentioned above, the underlying theory of supply-side economics is tax cuts make people feel richer, spurring them to spend and invest their newfound wealth.  This spending, goes the theory, will increase GDP.  What supply siders fail to remember is an old Wall Street adage: never fight the fed:  When the Federal Reserve is lowering the discount rate, buy stocks because the economy will grow and when the Federal Reserve is increasing rates sell stocks because the economy will slow.  In other words, the cost of money directly affects the economy.   In addition, general economic reasoning states that an interest rate cut will start to affect the economy between 6-9 months after implementation.  

Here’s as example of the above ideas.  In 1980, the Federal Reserve dropped the discount rate from 12.94% in May to 10.17% in September.  The common economic wisdom states the earliest decreases would start to affect the economy 6-9 months after May, coming to fruition in November 1980- January 1981.  According to the Bureau of economic analysis, 4th quarter 1980 GDP growth was 7.6% and first quarter GDP growth in 1981 was 8.4%.  In other words, GDP growth grew when the economic wisdom dictated it would.

Reagan’s economy really took off in the first quarter of 1983, when first quarter GDP increased 5%.  Supply-siders will argue their tax cuts were responsible for this growth.  What they fail to mention is that starting in June 1981, the Federal Reserve started lowering the discount rate from 12% to 8.3% by year-end.  In other, once again the economy started growing about 6-9 months after the Federal Reserve started cutting interest rates.

The relationship between interest rates and economic growth is a solid direct relationship that existed before supply-side economics.  What the above data shows is at worst, interest rate cuts are just as logical an explanation for GDP growth.  At best, the interest rates are solely responsible for the growth.  Whatever the actual percentage, the old Wall Street adage still holds:interest rate policy is the prime determinant of GDP growth.

Conclusion

In short, every basic tenant of Republican economic thinking does not stand up to the facts.  In addition, alternate economic theories with a strong factual and theoretical basis provide answers just as viable as Republican theories.  Finally, these alternate theories have existed for far longer and proven themselves in fact far more often than the canard of Republican theories.

Republican economic thought is based on the oldest scam in the world: you can get something for nothing.  Republicans want all the advantages of citizenship – a judiciary to peacefully settle disputes, fire and police services, a transportation system to ship goods, an education system to provide an educated workforce and a military to defend the US – but they don’t want to pay their fair share.  These services which benefit us all cost money.  It is time to stop complaining and pay in a way that is fair to all.

Democrats do not want to tax people into oblivion.  But, we want those who have benefited from the services offered by the country as a whole to share the burden of paying for those services.

Discount Rate History

CBO Budget Data

Interest on National Debt

Stirling’s Calculations

GDP Table from BEA

Cross-Posted at My Left Wing

China announced it will remove the Yuan’s Peg.  This is a surprise move that caught everyone off-guard.  “Under the new exchange rate mechanism, one dollar is valued at 8.11 yuan compared to the old rate of 8.2765 yuan, effectively a 2 pct revaluation”. According to a Reuters story:
“The yuan will now be allowed to trade in a tight 0.3 percent band against a basket of foreign currencies, the government said. It didn’t say which currencies.”

The Chinese have pegged the yuan at 8.28/dollar for what seems like forever.  There are some who speculate this has undervalued the yuan by as much as 40%, making Chinese goods artificially cheap on the world currency markets.  

It appears> the Chinese are looking to make the devaluation as orderly as the forex markets will allow.  Their actual revaluation isn’t that large in the big picture, being a total of 2%.  However, it is a start.

Currency pegging 101:  When a country “pegs’ its currency to another currency (usually the US dollar) it creates a predetermined exchange rate.  If the home currency (here the yuan) is undervalued, the home country has several options.  The first – and by far the most popular — is to purchase other countries currencies.  This creates artificial demand for the their currencies, raising its price relative to the home companies.   This leaves the home country with a problem: it now has a large amount of another country’s currency.  Usually the home country will purchase Treasury notes in the other country’s currency to make money on the foreign currency holding.

Here’s an example.  Suppose China wants to peg the yuan to 8/dollar.  However, the forex markets think the actual exchange rate is 4 yuan to the dollar.  This means the forex markets thinks the yuan is more valuable relative to the dollar because forex traders think fewer yuan are needed for each dollar someone wants to exchange.  The Chinese government will now start to purchase dollars in the open market.  This makes the dollar more expensive relative to yuan.  However, now the Chinese government has more dollars than it knows what to do with.  Therefore, it starts to purchase US Treasury securities, which allows the Chinese government to get an interest payment on its dollar holdings.

This arrangement is one reason the Chinese currently own over 250 billion is US government securities.  And therein lies an interesting rub.  China is partly responsible for financing the US trade deficit.  One of the causes of this financing is the yuan peg. If China no longer pegs to the yuan, they will no longer need to help finance the US trade deficit.  That makes this very interesting from an international finance perspective.

In addition, a reavaluation is probably not the economic panacea many claim it will be.  In fact, it may create more problems.

The first problem is the US will simply import products from somewhere else, as Alan Greenspan noted on Friday. “So essentially what we will find is we are importing from a different area but we’ll be importing the same goods,” Greenspan said. (“from Reuter’s story   Fed: No trade perk from China revaluation).  This is a classic example of what product substitution, where purchasers will simply seek out the cheapest price for a good, regardless of the source.  There is little to argue against this statement.  All that is required is a single company to obtain a cost advantage from purchasing from another country, and all of that company’s competitors will have to follow suit in order to remain equally competitive.

The second problem will be an increase in import prices from China, which Greenspan also noted.  “The effect will be a rise in domestic prices in the United States and as a consequence of that, we will have other impacts which I could trace through but I’ve fortunately run out of time in this question.”  The reason is simple. Suppose a US company purchases a good that costs 8.2 Yuan for a dollar (which is the current exchange rate more or less).  If the Yuan increases in value relative to the dollar, each dollar will purchase fewer Yuan.  So, in our previous example, suppose the Yuan appreciates to 4.1 Yuan to the dollar.  Now the company must use 2 dollars for the same product.   The company will have to increase the prices it charges in the US to make-up for the higher exchange rate.  As a result, US import prices from China will increase.

The third problem could be an increase in US interest rates.  As the article “What do yuant from us?” from the Economist notes, “In order to maintain the peg, China is forced to buy loads of dollars, which are then dumped into US Treasury bonds, financing America’s hefty deficits. A sudden decline in Chinese demand for Treasuries would raise America’s borrowing costs, curbing Congress’s ability to dole out pork to constituents. Some economists fear that this would push interest rates up sharply enough to cause a sharp contraction in the debt markets (including the mortgages that are fuelling America’s housing boom) and the economy–though this is unlikely, since the Chinese government seems keen to ensure that any appreciation occurs gradually.” This is an extreme situation, and as the article points out, may not occur.

The final problem, notes the Economist is “China accounts for less than one-tenth of America’s trade, so even a 10% revaluation would only reduce the trade-weighted value of the dollar by 1%–not enough to produce any noticeable change in America’s current account.” The US has a trade imbalance with several countries, only one of which is China.  In other words, China is part of the problem, but not the entire problem.  However, because of the recent swelling of Chinese textile imports they are a convenient political target.

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I have written a great deal about the lack of pay growth for the last 5 years.  According to the Bureau of Labor Statistics, the average earnings increase from 2000-2004 was 3.86%, 3.22%, 3.12%, 1.71% and 2.39% respectively.  However wages have to be compared to inflation to determine the real rate of wage growth.  For the same years, annual inflation was 3.4%, 2.8%, 1.6%, 2.3% and 2.7% respectively.  When inflation is subtracted from wages, overall wage growth becomes .46%, .42%, 1.52%, -.59% and-.31% respectively for 2000-2004.
That trend is continuing, with workers barely making more than the rate of inflation.  “Results of a survey released Tuesday by Mercer Human Resource Consulting show the size of the average raise this year is little changed from 2004, when pay hikes averaged 3.5 percent. But the increases are generally helping workers stay ahead of inflation, which has risen at annual rate of 3.1 percent so far this year.”  

The average person is now making .4% more than the rate of inflation.  Wow.  Color me a happy man.  At the same time that workers are making .4% more than inflation, medical insurance premiums are increasing at an annual rate of 8.2%, prescription drug spending is increasing faster than inflation, and college tuition is going through the roof.

At the same time, corporations are doing well.  A reporter on Bloomberg news reported yesterday that of the S&P 500 companies that have reported earnings, 80% have met or exceeded expectations.  And corporation’s percentage of national income is at its highest level since the 1960s.  So, someone is making good money out there.

However, employers are more likely to use 1-time bonuses.  “Mercer said 86 percent of its survey respondents reported they used some kind of short-term incentive in 2005.”  We all like bonuses. The problem is they are sporadic in the current economy. While more people are using them, there is no guarantee they will continue to use them. Hence, it is difficult for the recipients to make any economic plans based on them.

http://www.chron.com/cs/CDA/ssistory.mpl/business/3273618

I wrote this about a month ago, but it seems equally important now.  The Republicans are clearly after Roe v. Wade, personal choice in birth control and a host of other issues the country has taken for granted for a long time.  All is not lost; the parameters of the battle have merely changed.
There are several rumors floating around that Rehnquist will announce his retirement soon.  Given that he has cancer, I find this a likely scenario.  Should he choose to stay on, he will still retire within Bush’s second term.  Either way, despite Bush’s claims that he has no litmus test, O’Connor’s announced retirement gives Bush the opportunity to appoint a justice who will overturn Roe.  Therefore, it is safe to conclude that Roe v. Wade will soon be overturned.  It is now important to make plans for a post Roe world.

I opened up my Constitutional Law textbook last night and reread the Roe case.  Here is the key to the decision: “This tight of privacy, whether it be founded in the 14 Amendment’s concept of personal and restrictions upon state action, as we fell it is, or as the District Court determined, in the 9th Amendment’s reservation of rights to the people, is broad enough to encompass a woman’s decision whether or not to terminate her pregnancy.”  In other words, the word “liberty” in the 14th Amendment includes the right to abortion.  This is what the rightwing will successfully attack when they challenge Roe.

So, what does this mean?  What is the result of a post-Roe world?  A women’s right to choose won’t be a federally protected individual right.

However, there is a way to use this to our advantage.  In the last election, the Republicans used gay marriage as a wedge issue that appealed to the rightwing extreme base.  The Democrats can do the same in 2006 by offering an amendment to state constitutions that the right of a woman to choose is a fundamental right.  Depending which poll you read, a clear majority of Americans support the right to choose, usually with some restrictions.  The Democrats can do this at the state level to great effect.

This will increase Democratic turnout and get some moderate Republicans on our side.  But, the time to start planning is now.  Let’s get to work.