Wednesday, February 28, 2018

286. Where does all that money go?

A typical day to consider in 2016.

It’s Friday, nice outside, and you’re looking forward to the weekend. You’re running a little late, so you get the kids off to school and head out the door.

Coffee sounds good to start the day, so you run through the McDonald’s drive-through. You pass on the breakfast sandwich and hurry off. You might not know, but the CEO of McDonald’s, Stephan Easterbrook, was compensated $15.35 million in 2016. From his yacht somewhere in the Pacific, he is thankful for your support.

On the way, you check your iPhone to make sure your kids made it to school without forgetting anything. You’re surprised to learn in a news alert that Tim Cook of Apple only made a modest $8.75 million. However, to run that phone, you’re on the Verizon network. Good choice — at least that’s what Lowell Mcadam was thinking when he was raking in $17.67 million.

You’re low on gas and better stop for a quick fill-up. Exxon Mobile can help with that. Rex Tillerson, the 2016 CEO, is happy to be of service at a cost of $27.39 million. You saved some money and packed your lunch, but run in to get a Diet Coke. Compared to Rex, J. Frank Harrison of Coca-Cola is a bargain at $11.36 million.

Finally, you head to your job at Parker Hannifin, where thankfully you are a full-time employee and not one of the contract employees they have been using increasingly. You are lucky to work for a Fortune 500 company. The CEO, who you’ve probably never met, made $10.78 million. He thanks you for your hard work and for voting down the union again. They’ve canceled the company picnic but were forthcoming in suggesting that you should vote Republican in the next election.

It’s a long day but it’s payday and that picks up your spirits. Your salary is directly deposited into Key Bank, where CEO Beth Mooney cashed in on $8.17 million of executive pay. Your mortgage is automatically withdrawn today too, saving a stamp. Wells Fargo, when its not making up fake accounts, is happy to service your loan and the CEO does so at $13.01 million.

After work, you run to the doctor to check your diabetes. The doctor says a prescription or two will keep it under control and so off you go to CVS to fill your prescription. CEO Larry Merlo is happy to fill that for you and his share is $18.36 million. The drug is made by Pfizer and you would think with a compensation of $17.32 million, CEO Ian Read would have cured cancer or something.

Dinner with the family is at Cheesecake Factory. It’s your one night out a week. The meal for a family of four is close to $200 with an appetizer and overpriced cheesecake for everyone. One person eating well is CEO David Overton. With compensation of almost $6 million, he can take his family anywhere he wants — anywhere in the world.

Wanting to get those hotel points, you wittingly use your American Express card, to the pleasure of Kenneth Chenault and his $17.46 million compensation package.

Exhausted, you sit down to watch a little television before bed. There is a reality show on CBS where people are stuck on an island. Les Moonves, CEO of CBS Corporation, can actually afford to buy that island with a compensation of $69.55 million. Of course, you watch the show on your cable provider, Charter Communications, where CEO Thomas Rutledge just missed the $100 million mark in 2016. Better luck next year, Tom!

We have just touched the surface of the impact corporations have on our lives. Besides live the American dream for another week, you made the wealthy even wealthier and made the powerful more powerful. You and the millions of us across the country do this on a daily basis, to the delight of the one percent.

It is not just executive pay that corporations spend their money on. They also spend billions upon billions on lobbyists and campaign contributions to protect their interests.

At the end of the day, we should ask two things of our economic system:

1. If corporations have this much profit to spend on executive pay, lobbying, and campaign contributions, why did Republicans give them an additional tax break?

2. If corporations have this much profit to spend on executive pay, lobbying, and campaign contributions, why can’t they pay their employees sustainable wages to not only help them in their lives but also raise the community they live in?

Note: 2016 CEO compensation provided by AFL-CIO CEO pay watch.

Thursday, February 22, 2018

285. Old friendships, divergent philosophies

Perhaps like many, my first venture into social media was Myspace.

After setting up my page, I didn’t do much with it and it sort of slowly disappeared from my attention. I really didn’t get it. So I wasn’t really interested in joining Facebook, in part because I was in law school at the onset of its popularity and because I thought it was just like Myspace.

Then one day my wife was on Facebook when I looked at her screen and noticed a close friend of mine from high school who I had been casually searching for. He was one of the few high school friends I kept in contact for a while after starting college, even writing letters back and forth. Somewhere along the way we lost touch, but I was excited now to find him.

I quickly joined Facebook and contacted him. I caught up with not only him but also other friends from high school and college. I couldn’t believe how quickly I was reacquainted with old friends. Some I remembered well; others I hardly knew. I enjoyed the perpetual class reunion, learning about the lives of classmates, such as their families, jobs, and where they were living.

I didn’t talk much about politics in high school. I didn’t run for class president, nor did I join the debate team. We might comment on a current event but we had no political philosophies and were largely oblivious to the ways of the world. I liked Ronald Reagan, everyone seemed to, though I really didn’t know why. I do remember trickle down economics and I thought it made sense at the time.

I was more interested in sports, my studies (math in particular), and of course girls. Our memories were filled with baseball games, swimming, movies, rooting for Cleveland sport teams and many late nights trying to figure out the opposite sex. I guess I just assumed that being such good friends growing up, and sharing those “teenage moments,” that we would grow up with similar belief and values. They were like family, after all.

But times change and people change and it turns out that many of my friends don’t share similar viewpoints. To be fair, I probably changed more than they did. Not many people from rural American grow up to be an agnostic liberal vegetarian with political views leaning democratic socialist.

When you’re a convicted idealist, and its tied to personal morality, it’s hard to grow a former relationship with someone perhaps as oppositely passionate. Too many issues like guns, animal compassion, Trump, and religion are deal-breakers to resume a close, in-depth friendship (as opposed to a friendship).

The memories of yesteryear are sometimes more valuable than the realities of today. It’s better that those memories stay there in that time of my life. We shared a meaningful time in our lives and had so many great memories — but that was then and this is now. We’re different people and there is not going to be any “The Hangover” type reunions. And it’s OK — some relationships grow into old age while others fizzle out. It doesn’t change the past and I wouldn’t want to. It’s emotional and a little sad, but we just see the world differently now.

On the flip side, I suppose, there are high school classmates that I really didn’t associate with much growing up but with whom now share a lot of common values. I often think it would be fun to get together and talk about our paths and how we arrived at a common worldview.

Perhaps form new relationships, thanks to Facebook.

Monday, February 12, 2018

284. Not just any jobs will do

Jobs, jobs, jobs. Despite 88 straight months of job growth, it’s still a major priority in our communities. It’s also the promise of almost every politician.
Obviously, if it were that easy to create jobs, it wouldn’t continue as a concern in communities across the country. And it is not just any job that counts — people need jobs that provide a sustainable wage and benefits like health insurance, retirement planning, sick days, and vacation time.
But creating jobs is actually a complex challenge, especially in areas that have lost major industries that used to support them. Driving through Lorain can almost bring one to tears with all the empty buildings and idle factories. It’s not unlike hundreds of other communities across the country, including most that rose to prominence built on industries like steel, coal, and automobiles. Towns that relied on manufacturing for taxes and jobs are suffering.
So, when it comes to reviving a community, what comes first: the businesses that improve them or the people who welcome them?
Companies need infrastructure so that employees and patrons can easily travel to their business. They need safety because they don’t want to have to worry about being robbed and customers need to feel safe to shop. They need customers who have disposable income to spend — a great product at a great price is useless if customers don’t have the money to buy it. They need an educated and skilled workforce. Cities are relentlessly competing for businesses, which are looking for economic advantages, whether it is tax breaks or other incentives. A successful retail district benefits other thriving businesses.
Communities and the governments that run them likewise need jobs. Jobs provide the income necessary to support local businesses. Jobs also provide taxes to government, which will be able to provide infrastructure needs and safety assurances that businesses need. An increase in income often means nice neighborhoods and increasing home values as houses are fixed up or new developments are built. Nicer homes and nice communities attract people with the skills necessary to build a reliable workforce.
In order to improve safety and infrastructure, cities need more money, often in the form of taxes. But if the communities can’t afford to pay more, you can’t tax them into poverty. At the same time, if the city becomes more run down because it cannot afford to improve infrastructure and safety, then it is going to have a hard time attracting the businesses that will provide jobs and generate tax revenue.
So if you can’t improve your community through taxes because people can’t afford them, then it’s difficult to attract business that might make paying more taxes affordable.
Going backward is rarely a realistic opportunity. While businesses often go back to their core values, it is difficult for government and communities. The world moves too fast. There is too much competition and too many alternatives. This problem, of course, is the availability of cheap labor throughout the world and a company’s willingness to move to acquire it.
The theory of economies of scale is built upon finding the cheapest labor, infrastructure, and natural resources to build a business, lowering the cost of production and improving the ability to compete against other businesses in a capitalistic society.
So, what happens when a community loses its competitive advantage in a market like steel? Some suggest tariffs, but tariffs raise prices. It might be good for American steel workers but it is not good for those who purchase steel. For free market purists, it is a loss in efficiency. It’s why people support capitalism so long as it works for them. Cheaper imported steel is the definition of a free market society and capitalism. For American steel companies to compete without tariffs often requires lowering wages (or going out of business). Profit becomes a race to the bottom.
Communities looking for economic recovery often need to reinvent themselves. They need to adopt a new identity, maximizing any economic advantages it might have, such as new technology, alternative industries, or using its natural resources. And like any business, government needs to invest in itself to attract those opportunities. It must balance the needs and economic situations of its citizens with the cost of improving the community to attract business. For this, it needs dedicated public officials willing to work tirelessly to attack this quandary from all angles.
It also needs committed citizens to take pride in their city, even in difficult times, to attract opportunities.