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Obama – Bring the Money Home!

By Shlomo  Maital    

       money abroad

Two reports in today’s Bloomberg Business Week and  Global New York Times are closely connected.

 Floyd Norris reports that after six years of economic crisis and stagnation, the level of employment in the U.S.  has at least returned to its level in 2008. 

  And Bloomberg reports that American businesses, which recovered far far faster than us ordinary working people, have piled up nearly 2 trillion dollars (!) in retained profits abroad, which they choose not to repatriate and bring home to America, in order to avoid the 35 per cent corporate income tax. 

   General Electric alone has $110 b. locked up abroad; Microsoft, 76.4 b.; Pfizer, $69 billion; Merck $57 billion;    and Appel $54 billion.   Overall,  only 22 big companies hold half of the ‘locked earnings’ abroad, or $984 billion. 

   In the past, economic recoveries occur when businesses start investing again, in capital formation, using their retained earnings.  But this cannot happen in America when businesses are sitting on their money abroad. 

   It’s not as if America doesn’t need investment. It needs infrastructure, new airports, fast trains (Amtrak’s ‘fast’ Boston to Washington train is a disgrace, compared to Japan’s and France’s bullet trains), new roads, new bridges, new schools, new factories…in short, everything. 

   So President Obama —  why not declare an amnesty?  Tell the giant businesses, if you  bring your money home and use it – or even just bring it home, and make it available in capital markets for OTHERS to use it —  we’ll offer you an Irish rate of tax, about 12 per cent, rather than the American one, 35 per cent.   Do it because it makes good business sense, and besides, your country needs it – and it is your country that gave you the innovation and creativity that made you the profits in the first place. 

      It’s pretty likely the Republicans, who are pro-business, will support such an amnesty.  And President Obama —  after your dismal performance for six years, this may be your last chance to actually do something creative and productive.    Do something for America’s workers.  Renewed investment will create jobs more than anything.  Until America’s businesses stop sitting on their piles of money abroad and start using it at home, employment cannot recover strongly.

Unemployment – It’s How You Measure It!

By Shlomo  Maital

            unemployed  unemployed 2

       Writing in the Los Angeles Times, my friend Clyde Prestowitz, formerly senior trade policy advisor to President Reagan, explains the mystery of unemployment rates – if the U.S. job market is so bad, why is the unemployment rate so low? (6.7 per cent)? 

    Here is the answer, according to Clyde:

      “ Although the Federal Reserve Bank says we’re in the midst of a recovery, and the official unemployment rate has fallen below 7%, the economy is far from being out of the woods. That official rate – technically known as U-3 – doesn’t begin to tell the real story.  It is only one of six unemployment measures kept by the U.S. government and counts all those who say they are unemployed and looking for work.   

      But it does not include those discouraged unemployed workers who have given up looking for a job or those who would like to work full time but are only able to find part-time work. The rate that includes all those people – U-6 – is about 13%.    Granted, that is below the 17% of 2010, but it is still far above the 8% of 2007, as we navigate what is being called a recovery – albeit an abnormally slow one.”

         Americans who have a job, the fortunate ones, but fear they could lose it, and those who lack a job,  and are seeking one or who have given up [discouraged workers], should be defined as “unemployed or at risk of unemployment”.  THAT rate is over 50 per cent. And that is the relevant measure, and it is not included in U1 through U6. 

     U.S. President Barack Obama has just given his State of the Union address.  He mentioned the job problem, but gave no specifics.  This should become his top priority.  It’s a tough nut to crack.  Companies like Facebook, with a stock market cap of some $160 b., generate relatively little employment.  Companies like Apple create jobs in China.   Small businesses face impossible competition from shopping centers and chain stories like Wal-Mart.  So, President Obama, start with the SME’s, small and medium-size enterprises.  Help them a bit.  Nothing could help create jobs more.  And silence the big lobbyists, who drown out the weak voices of those SME’s.    

If You Thought Washington Is Dysfunctional – Wait ‘til You Read Gates!

By Shlomo   Maital   


 I prefer to write blogs about books I’ve read.  And it’s super-easy today to acquire any book – it takes 30 seconds to download an Amazon e-book.  But today I want to write about a book I haven’t yet read, but will soon – based on a review.  Because the content is so terribly disturbing.    America is still the leader of the Free World – and it is rudderless, incompetent, cynical, according to the consummate insider Robert Gates, former Defense Secretary.

    Gates’ book is called Duty: Memoirs of a Secretary at War.  Gates served for many years in the CIA, headed the CIA for two years, then was Defense Secretary under both Bush and Obama (December 18, 2006 – July 1, 2011).  In reviewing his book, national security expert Thomas E. Ricks calls it “probably one of the best Washington memoirs ever.”  Ricks doubts Gates can ever again hold a Federal govt. job, or even want to. 

     Here are a few juicy tidbits:  “VP Joe Biden is a ‘comical motormouth’…who “has been wrong on nearly every major foreign policy and national security issue over the past four decades”.  Former White House chief of staff Rahm Emanuel: “hell on wheels…a whirling dervish with attention-deficit disorder”.  Tom Donilon (Obama’s 2nd national security advisor): “suspicious and distrustful of the uniformed military leadership”;   Congress:  “truly ugly”…parochial, self-interested, rude and bullying. Harry Reid, Senate Majority Leader: “small-time hack who phones Gates to lobby for Defense Dept. funding for research on irritable bowel syndrome”.  (didn’t know whether to laugh or cry, Gates says).  Senator Nancy Pelosi, “said she wasn’t interested” when Gates tried to state the facts on the ground in Iraq.  Senator Patty Murray, Washington, “read from prepared notes…no one had bothered to remove the Boeing letterhead from her talking points”.  On Afghanistan and Obama: “the president doesn’t trust his commander, can’t stand (Afghan Pres.) Karzai, doesn’t believe in his own strategy and doesn’t consider the war to be his.”  The Obama White House:  “still stuck in campaign mode a year into the presidency”. 

   And this is just a start. 

    I guess most of us knew or suspected all this.  But it is still disturbing to read it.  No wonder “cold-blooded killers” (Gates’ description) like Russia’s Putin and Syria’s Assad are eating Obama for lunch daily. 


Is America Truly a Land of Opportunity? 

By Shlomo  Maital   


   Horatio Alger, Jr.  was a  19th-century American author who wrote many juvenile novels about boys who rose from poverty and humble backgrounds to middle-class security and comfort through hard work, determination, courage, and honesty.  He helped create the mythology of America as a land of unlimited rags-to-riches opportunity for everyone – a myth that was once partly true, but no longer is.  Today, Horatio Alger is science fiction. How do I know?

   As witness for the prosecution, I call on President Obama.  He claims he will make upward mobility, and lower inequality, “the defining challenge of our time”, as his main goal for the remainder of his presidency.  Here are some facts he cited, in an important speech:

* An American child born into the lowest 20 per cent income level has less than a 1-in-20 chance of making it to the top – while a child born into the top 20 per cent has a 2-in-3 chance of staying there.  So much for Horatio Alger.

* The top 10 per cent of income earners gets half of all national income, up from only a third in 1979, and matching the inequality in Jamaica and Argentina.

   Obama’s speech even won praise from New York Times columnist Paul Krugman, who loved Obama’s statement that fiscal deficits are a lesser threat compared with a “relentlessly growing deficit of opportunity”. 

    Nice speech, Obama.  But once again, you spin words without deeds. Because you forgot to mention the one thing that could truly revive the middle class – in-sourcing,  bringing home all the well-paying middle-class manufacturing jobs that America blithely sent abroad in outsourcing.   Only 9 per cent of America’s workforce is employed in manufacturing. Less than 12 per cent of GDP originates in manufacturing.  Not that long ago, it was fully 21 per cent (in 1980).   The U.S. share of world manufacturing production has declined from 31 percent in 1980 to 24 percent in 2008. 

    By outsourcing manufacturing jobs, America has given up two pillars of the middle class — $20/hr. wages (more than double what Wal-Mart pays),  and the productivity gains that accompany manufacturing technology, now being reaped mainly by China.  No country can truly prosper unless it makes things. 

    A few key changes in America’s tax laws could be a good start.  But forget that – Republicans will never support anything that damages the privileges of the wealthy.  What is hard to understand is why so many of the lowest 20% of the income distribution vote for them.

Blog entries written by Prof. Shlomo Maital

Shlomo Maital