What’s
Wrong Today:

The
front page of today’s New York Times carries an article about the possibility
of a full
troop withdrawal from Afghanistan: 

The Zero Option
means that the US would not leave any troops in Afghanistan after 2014. That
has not been the plan. We have been negotiating with Afghan officials about
leaving a small “residual force” in-country. The exact numbers had not been
fixed, but what was most often floated was between 10,000 and 14,000 troops. Currently,
the 63,000 American troops in Afghanistan are scheduled to be reduced to 34,000
by February 2014. In the past, the White House has said the vast majority of
troops would be out of Afghanistan by the end of 2014.

The US
relationship with Mr. Karzai reached a new low after an effort by the US to
begin peace talks with the Taliban in Qatar. In June, the Wrongologist reported
that the US might begin talks with the Taliban:

Mr. Karzai promptly
repudiated the talks with the Taliban and ended negotiations with the United
States over the long-term security deal that we require in order to keep
American forces in Afghanistan after 2014. Mr. Karzai said the negotiations
would not resume until the Taliban met directly with the Afghan government,
essentially making the United States
responsible for persuading the Taliban to talk to the Afghan government.

Karzai’s
big issue in the long term security deal was his insistence that the US guarantee
Afghanistan’s security. These guarantees, if agreed, could compel the US to
attack Taliban havens in Pakistan after 2014, when the Obama administration has
said it hoped to dial back the CIA’s covert drone war there.

All of
this was bad enough, but what started Mr. Obama down the path of the Zero
Option was personal. From the NYT:

Mr.
Obama responded by pointing out the American lives that have been lost propping
up Mr. Karzai’s government.

But according
to the NYT, there’s more:

You
don’t have to be a fan of Mr. Karzai to know that there is some truth in his
comments. The ambassadors didn’t welcome it, because the truth hurts.

There
are similarities between our experience in Vietnam and in Afghanistan. In both
cases, our partner was a government riddled with corruption. Both were the
longest wars in American history, testing the patience of the American people
even if more domestic attention was paid to Vietnam.

In
each case, peace talks were pursued but the end result was a slow extrication
resulting in more deaths and without prospects for changing the outcome.

So,
should we be glad to leave early or sad to leave early?

The
Wrongologist watched back-to-back episodes of “Operation Afghanistan” on NatGeo
last night. It was two hours depicting US troops walking around and through
barren plains and poppy fields of Helmand Province, looking for Taliban to kill.


Our troops are undoubtedly brave, but their mission, as depicted, serves as a
metaphor about all that is wrong about our presence there: Little or no interaction with Afghan civilians, a heavy reliance on
air and armored power to flush out enemy fighters and, at the end of the day
(or days) nothing that anyone could describe as progress. The best result was
that no American was killed or wounded.


The overwhelming takeaway from the program was that no matter how many Taliban
were killed, we would not control the province, or the country as a whole. It
was hard not to conclude that our mission is futile.

It
is beyond time to leave Afghanistan to its own devices. That may sound cold, hard
and cruel. And it is for those Afghanis who may have benefited from greater
freedoms, women, children and peace-loving men.

But
there are limits to what a great power can do for some and against others.

Afghanistan
is an ancient culture. One in which Afghani fathers still sell their maiden
daughters to buy TV sets or cars. It has seen centuries of war. Afghanistan
needs more centuries to emerge from its traumas and its dominant Islamic ways
under the best of conditions.

And
at that point, what will it look like?

Let’s
load the planes tomorrow.  Start the airlift out. And yes, let’s end the
shipment of caskets from Afghanistan to Dover over another war that should
never have been fought in the first place. THAT is an accomplishment we can all
be proud of, well maybe, except for Sen. John McCain.  

On
our way out the door, we should meet with the Taliban. We should make the following
point: Should you support radical, disruptive Islam inside or outside your
borders, you will see more drones than you see in your worst dreams, and we
will focus on killing only your leaders.

What’s
Wrong Today:

We read
about outrage after outrage against the US worker, the middle class and the working poor. Recently,
Robert Reich tweeted:

There is
so much economic injustice these days; it’s hard to keep up. Yet sometimes
the news is so outrageous, you’ll swear out loud and scare the dog.

Consider the
story of the McDonald’s workers being forced to accept payment for their work by
debit cards instead of checks. A Shavertown PA McDonald’s franchise required employees to accept
payment on a JP Morgan Chase payroll card. But the card imposes fees on
virtually every transaction. Among the costs: $1.50 for an ATM withdrawal, $5
for over-the-counter cash withdrawals and $1 to check the balance, 75¢ per
online bill payment and $10 per month if the card is left inactive for more
than three months.

As a
result of all of these fees, this McDonald’s franchise pays its employees less than the minimum wage/hour.

A
McDonald’s ex-employee just sued over it: The case is Natalie
Gunshannon v. Albert/Carol Mueller T-A McDonald’s et al., case number
7010-2013 in the Court of Common Pleas of Luzerne County.

Gunshannon
worked less than a month at the Shavertown, PA McDonald’s location when she
learned that the franchise required employees to accept payment on the Chase payroll card. According to the lawsuit, employees had no option to
receive a traditional paycheck or get paid by direct deposit. The lawsuit
contends that the practice violates the Pennsylvania Wage Payment and
Collection Act.

According
to Lenore Uddyback-Fortson, a PA Department of Labor spokeswoman, the
department is aware of the McDonald’s case, but could not confirm or deny if
there is an active state investigation. She did say:

Using
prepaid cards isn’t new, but is a growing trend. It is estimated that $60 billion in wages
will be paid out via payroll cards by 2014. That’s quite a siphoning of
other people’s dough back to the banks via fees charged to use these cards.

Think
Progress reported that the rise of prepaid debit cards has been a boon for
banks in state-level unemployment insurance programs as well, as the National
Consumer Law Center (NCLC) reported
in January. While the NCLC found some improvements since the early days of
prepaid benefits cards, the numbers remain ugly. Even in California, the
group’s highest-rated state, banks charge users $1.8 million in fees each year.
The cards “effectively shifted the cost of distributing payments from governments
to individuals,” as the AP put it, as the country’s biggest banks “seized
on government payments as a business opportunity.“

And
remember this: The financial reform legislation in
2010 exempted prepaid cards from regulation. Thus it is no surprise they have
proliferated and are used by governments at all levels. While proposals have
been considered, it seems not much has changed either, as outlined in the
Federal Reserve prepaid regulations information.

It’s so
ridiculous that the FTC’s warning video on fees basically implies to just find
a way to pay lower fees. There is no mention of how checks and cash are not
normally fee-based since one can easily find a no fee bank account.

Isn’t this
the epitome of abuse and ripoff?

These cards are used primarily by the young and the poor. Think Finance , an alternative financial products company, released a survey of more than 1,000 people ages 18 to 34 that found while 92% currently use a bank, nearly half, or 45%, say they have also used outside services including prepaid cards, check cashing, pawn shops and payday loans. To make sure you don’t get taken advantage of, you may want to get some more information about payday loans before you sign a contract.

For millennials, many of whom find themselves cash-strapped, in debt from student loans and underemployed, they seem willing to be stuck with extra charges when it comes to quick access to cash and credit. They will still be eligable for getting a credit card with no credit but that doesn’t mean they will have total financial freedom.

Ken Rees, president
and CEO of Think Finance:

And he points out
that more than 80% of survey respondents said emergency credit options are at
least somewhat important to them.

It
is unclear if Ms. Gunshannon’s lawsuit is going anywhere, but it shows again
how the system is rigged against the working poor. The banks get prepaid cards
exempted from government oversight and we see the logical outcome: Fees pile on
top of fees, and pretty soon a minimum wage job is no longer minimum wage.

So,
paper (greenbacks or checks) or plastic?

Add
this to Congress’ to-do list: Get. Debit. Cards. Under control.

Otherwise,
let’s pay Congress via a JP Morgan Chase debit card.

What’s
Wrong Today:

From
Consumer
Reports:

Those are the types
of deals you could end up with if you get your electronics, furniture,
appliances, or other items from a rent-to-own store.

Money
Magazine reported in 2011 that according to the rent-to-own industry association,
the Association of Progressive Rental Organizations, (APRO), there are
approximately 8,600 rent-to-own stores in the US and Canada. Their customer
base has swelled to 4.8 million people, up 67% since 2007. According to the
APRO’s website, the industry currently has $8.5 billion in annual revenues.

It appears
that with the current low growth economy, growing numbers of Americans are
renting all kinds of products rather than buying them. Like payday lenders,
pawn shops and Buy
Here Pay Here used-car lots, the growth part of the industry has become
tires.

Yes, tires. Why don’t people just rent everything that they wouldn’t need to keep afterwords? Such as rent a computer instead of renting to own…

Tire
rental businesses provide ready credit to consumers who can’t get a loan
anywhere else. The LA
Times reported on Saturday that chains
such as Rent-a-Wheel and Rimco are seeing business boom. Consumers who rent to
own pay double or triple the cost of buying and face aggressive repossession
policies.

But that
access doesn’t come cheap.

The LA
Times:

With
payments as low as $14 a week, rent-to-own is proving irresistible for
consumers desperate for safe transportation.

It’s also
a booming business for specialized tire and wheel dealers that have become beneficiaries
of a struggling US economy. Fast-expanding chains with names like Rent-a-Wheel
and EZ Rims 4 Rent that got their start selling high-end rims to car
enthusiasts have discovered a lucrative market selling tires on time.

A host of
economic factors are pushing the growth of tire rentals.

Soaring
costs for natural rubber and petroleum used to manufacture tires have pushed up
prices. The average price of a passenger tire in 2012 in the US is 57% higher than in 2006. The prices on some popular sizes have more than doubled.

Consumers,
meanwhile, have an increasingly difficult time affording big-ticket purchases.

Since
2009, median household income has fallen more than 5%. And in the wake of the
recession, the number of households in the country with credit histories too
damaged to qualify for most credit cards has risen to 35% from 27% five years
ago. Individuals can get Credit Cards for No Credit and use them to build their credit score and that will certainly help with small to medium sized purchases but not large purchases like a home.

With more
people shut out of traditional financing, the rent-to-own industry has
flourished. Promising no credit checks, small down payments and the option to
return merchandise at any time with no questions asked, chains such as
Rent-a-Center are raking in huge profits. Tires account for just a small slice
of the $8.5-billion rent-to-own market, but they stand out from the industry’s
traditional fare because – unlike with a new TV – giving back tires means not
being able to drive to work.

The first
rent-to-own tire and wheel dealers appeared in the mid-1990s, targeting young
urban males looking to spiff up their rides. Chains enlisted rap personalities
such as Snoop Dogg and Busta Rhymes to hawk shiny customized rims and
low-profile tires. But after the economy crashed, dealers saw an influx of
customers asking for standard passenger tires. Many new patrons were older and
a surprising number were women, a group the industry had all but ignored.

The market
leader is Rent-a-Wheel. With $100 million in sales, the company last year
ranked as the nation’s seventh-largest independent tire dealer, according to
Modern Tire Dealer. The chain operates 89 stores branded as either Rent-a-Wheel
or Rent-a-Tire, including 13 in California.

Another
chain, Rimco, is also undergoing a transformation thanks to changing customer
demand.

Four years
ago, 70% of Rimco’s sales were aftermarket rims and the rest were tires; today
that ratio is reversed. The chain, a unit of Atlanta rent-to-own giant Aaron’s,
has 28 stores and plans to open seven more by year’s end.

RimTyme is
the tire rental franchise of Rent-a-Center. Eric Malone, who owns eight RimTyme
stores in North Carolina, Virginia and Georgia, was drawn to the business by
the high profit potential. RimTyme averages more than $1.4 million a year in
sales in each of its 25 locations, nearly
double the take at Rent-a-Center’s traditional furniture and electronics stores.

Malone’s employees
make about three repossessions a week. Malone said some new customers file for
bankruptcy protection soon after getting new tires, hoping to shed payments and
dodge the repo man. But they quickly learn that because they signed rental
contracts, not loans, the deals can’t
be modified or discharged in court.

From the
LA Times:

They paid
for the tires. The price was $982, almost triple what the Hankook radials would
have cost at Wal-Mart.

Florence
Cherry: “When you’re working paycheck to paycheck, your options are
limited…These tires were a lifesaver at any price.”

No tires
means no car and an immediate lost job in today’s at-will employment America.
So you get loan-sharked for $1200 for a $300 set of tires, or lose your job,
your home, your car, and have to face laws that all but criminalize being
unemployed.

These
businesses prey on the working poor. But state legislators have no problem with
the industry: 95% of the US populations living in 47 states are now subject to
state laws permitting rent-to-own transactions.

Are tire
repo guys the “small business owners” that the GOP is championing? This
is legalized loan sharking. More extracting of rents from the poorest among us.

Republican
policies are working as intended.

What ‘s
Wrong Today:

Sen.
John McCain (R-AZ) visited Syria over the Memorial Day weekend. According to
the The Daily
Beast, he made the
trip from Turkey into Syria alongside Gen. Salam Idris, who leads the Supreme Military
Council of the Free Syrian Army and accompanied McCain as they met with rebel
leaders from throughout the country.

Idris told
the Daily Beast:

McCain on Twitter:

Remember John McCain strolling through a Baghdad market in a
bulletproof vest accompanied by one hundred soldiers, three
Blackhawks, and two Apache Gunships? Well,
he’s now become a Syrian expert.

Meanwhile,
the Masters of War are building the global case that the Assad regime must
go as soon as possible. There was the sarin gas use, possibly against the
rebels, or possibly by the rebels.

France
worked to get the European Union to
lift its ban on sending weapons to the Syrian theater of the global war
on chaos. They succeeded last night.

In
response, yesterday’s news brought
this headline:

That means
sending S-300 Air Defense Missiles to Syria. The S-300 is a powerful weapon
with a range of up to 125 miles and the capability to track down and strike
multiple targets simultaneously. The weapon would be a quantum leap in Syria’s
air defense capability, particularly against Israel’s recent bombing runs, or
the McCain desire to establish a “no-fly” zone.

CBS reported that Deputy
Foreign Minister Sergei Ryabkov said that Moscow isn’t going to abandon the
deal despite strong Western and Israeli criticism. He states the air defense
weapons can’t be used in the civil war against the opposition, which doesn’t
have aircraft. Ryabkov said:

Further
complicating the conflict is Lebanese terrorist group Hezbollah’s decision to support
Assad militarily, which was formally announced Saturday. Hassan Nasrallah’s announcement
that it will use Hezbollah’s military power on the side of the Syrian
government brings a new dimension to the fight. It is likely that Hezbollah’s role is to control the supply
lines to and from Syria, not to fight rebels on the ground.

This is
turning into a bigger mess than anyone imagined it would be. Are we again
heading toward the inevitable?

The key
global actors (Russia, US) continue to circle each other regarding what to do
in Syria. There are a few assumptions that are seen as universal truths:

• The regime will be
  eventually be deposed of by freedom-loving Syrians

• International intervention
  in Syria is inevitable: Sooner or later the free world will be forced to take
  action to save the country’s civilian population

• “Assad must go” has
  been the US viewpoint until Kerry met with Russia earlier in the month, when we
  modified that position

Really? Is any of this true? McCain and
the other Masters of War have a learning disability. Think of all the data we
have on Islam, Muslim groups and the tribal cultures in the Middle East,
including data presented here,
here
and here
by the Wrongologist.

Dexter Filkins in
the New Yorker
underscored the complexity and potential pitfalls of arming a rebellion that is
fractured and potentially extreme in nature. In recent months, with urging from
the US and its allies, a large number of the estimated 70,000 rebel fighters
have been brought together under a joint military command, a coalition of 30
armed groups, which American officials imagine as a nascent national army.

Still, Filkins
reports that Mr. Obama has little
confidence in the rebels, arguing that they are ideologically
fractured, that the rebellion lacks a coherent structure, and that individual
groups would be impossible to control and would probably fight each other. Some
of the guns, he believes, will ultimately make their way to Islamist groups.

According
to The
NYT in April, the overwhelming majority of the rebels are fighting for an
Sharia-based Islamic republic.

Moreover,
citizens of most of Syria’s neighbors, especially Lebanon, Iraq and Jordan are
now fighting in Syria, acquiring skills that their home countries fear will be
turned against them when they return. And the problem isn’t confined to Arab
countries: Hundreds of European
Muslims are also fighting in Syria, where they are being further radicalized
and learning military skills that will make them serious terror risks when they
return.

So why is
Russia so solid in their support of Assad? There has been a parade of senior
diplomats to Moscow, seeking to find common ground in the Syria crisis. First,
US Secretary of State John Kerry, then British Prime Minister David Cameron,
next Israeli Prime Minister Benjamin Netanyahu and most recently, UN
Secretary-General Ban Ki-moon.

These
leaders see Russia as the key to resolving the Syria quandary.

But to get
Russia to cooperate on any stabilization plan, the United States and its allies
will have to understand Russia’s significant interests in the Mediterranean
region.

What are Russia’s strategic interests?

Syria buys Russian arms,
maintains the sole Russian naval base in the Mediterranean (in the Syrian port
city of Tartus), has energy development deals with Russia in both oil and
natural gas, and is closely allied with Iran, a major Russian arms customer.
Iran is also a big customer for Russian natural gas. From Reuters:

We
should have great respect for McCain’s Vietnam service and imprisonment.
However, McCain and his ilk believe America’s Exceptionalism will trump local
culture, beat back factionalism and create democratic societies through sheer
force of military will.

That isn’t America anymore, if it ever was America. We were wounded by the
neo-con wars started by Mr. Bush and continued by Mr. Obama. Fighting the wrong
wars at the wrong time in the Middle East has been our financial and military
undoing.

We
do not presently have the financial resources or military readiness to conduct
another long war in the Middle East. Our priorities should be elsewhere. We have
played the game wrong from the planning phase, we can’t control the situation,
we do not even truly understand it. 

We need to take a longer view on the global political environment and take the time to restore
our financial and military might.

Hang
up your spurs John.

What’s Wrong Today:

From
CNN:
Acting IRS Commissioner Steven Miller resigned Wednesday amid controversy over
Internal Revenue Service targeting of conservative groups that applied for
federal tax-exempt status.

The IRS appears to have acted in ways that are wholly inconsistent
with their mandate to perform unbiased investigations. In this case, the issue
is whether certain political groups, contending that they operate under a
“social welfare” part of the tax code, and should receive tax-exempt status. 
It is unclear how high up the chain of command these actions went, but WaPo’s report suggests it wasn’t simply a few rogue auditors in
Cincinnati. 

 

The Inspector
General’s Report on the IRS scandal seems to show two things:
First, how
unbelievably boring their writing is. Second, that this may be a non-scandal.

 

Why? Because the report
indicates that the IRS didn’t actually
deny tax-exempt status to a single Tea Party applicant. Not one.

 

What did they do? They
delayed responding to some applicants. They asked for inappropriate information
from some applicants. But they didn’t actually deny any nutball group’s
tax-exempt application.

When someone simultaneously tells you that they don’t intend to
engage primarily in political behavior and that their organization’s name
includes the word “party,” shouldn’t we do a little investigating?

That the IRS screwed up seems
undeniable. Instead of creating Be on
the Lookout (BOLO) criteria directed at the Tea Party, they should have
crafted ideologically-neutral language that had the effect of doing exactly
the same thing. It’s clear that the IRS violated
neutrality, investigating conservative groups by searching on “tea party” and
“patriot.” Of approximately 300 organizations sampled by the Inspector General,
about 100 had an affiliation with “Tea Party”, “Patriot”, “9/12” or other
common terms used by conservative organizations.

The
tax law in this area is an accident waiting to happen, and is one that may need some Tax Lien Help to help with in the interim period due to the concerns raised.  The problem isn’t the president.  It’s the Supreme Court’s Citizens United decision
and the subsequent tax law written by Congress that gives these groups tax exempt
status under rule 501(c)(4) as long as
most of their activities are focused primarily on educating the public about
policy issues, not direct campaigning.

Of
course, the ambiguities therein may be insurmountable.  Many of these
groups, especially the big ones, spend millions on campaign ads mildly
disguised as “issue ads,” and under current law they can do so limitlessly and
with impunity.

According
to the NYT:

Nowhere do the rules specify the meaning of “primarily
engaged”. At what point does an issue ad cross
the threshold into a campaign ad? What kind of “education” is provided and how
does it promote “social welfare?”

Consider
what CBS reported this week regarding Karl Rove’s ad about
Hillary Clinton and Benghazi:

And
the IRS hasn’t seemed particularly interested in going after the big fish, like
Rove’s American Crossroads on the right or Priorities USA on the left. 
Instead, they appear to have targeted small fry on the far right.  If so,
not only is that clearly biased and unacceptable, it’s also ridiculous given
the relative possibility of violations of tax exempt status by these small
groups relative to the larger ones.

Can the IRS fairly interpret and enforce these instructions? 
Of course. But we should really be asking ourselves what
societal purpose is being served by carving out special tax status for any of
these groups. The Wrongologist doesn’t believe there is a single Tea
Party group in the country that isn’t primarily concerned with politics.

If
anyone can show evidence that these groups are making our political system and
our country better off, please do so. If not, no one is saying shut them
down, they’ve got a constitutional right to speak their minds. 

But,
why on a tax exempt basis?

What’s
Wrong Today:

ADP’s
private payrolls jobs report shows a gain of 119,000
private sector jobs for April 2013. This is the weakest monthly ADP report of
private sector job growth since August 2012. ADP’s report does not
include government or public jobs.

If
Friday’s official unemployment report from the BLS matches ADP’s, it would indicate that
once again, job growth is not enough to
keep up with population growth, much less cut in to unemployment. When
the BLS report comes out, most expect to see that government job growth will be
negative, as the Sequester begins to take a toll.

Remember
that the US needs about 120,000 jobs per month, just to keep up with population growth, given current
low labor participation rates.

Speaking
of low labor participation rates, here is a great chart that looks at the
people who left the labor force in March 2013 by age group:

Source:
WSJ

The share of the
population either working or looking for work in March, 2013 hit its lowest
level since 1979.
This is called the participation rate, which now stands at 63.3%, down from 66%
when the recession began.

That
represents about 7 million workers who are now “missing” from
the labor force.

Although
the 16-24 age group make up a large slice of the working-age population, they
are becoming much less likely to work. The labor force participation among 16-
to 24-year-olds was 66% in 2000; it is now 54% (BLS).

This
is caused by declining rates of employment among high school grads. More young
people are going on for higher education in part to avoid the brutal job
market, particularly because employers
are passing on hiring teenagers for more experienced employees.

The
Great Recession and longer life expectancy have caused older Americans to
postpone retirement. The participation rate among people 55 and older is at a
50-year high. That has added about 1.2 million older workers to the labor
force, offsetting some of the decline among other age groups.

But
the focus on the labor force participation rate obscures what’s really missing
from the economy: Jobs.

Nearly four years
into the recovery, the US still employs close to three million fewer people
than when the recession began in December 2007. Nearly 12 million people remain
unemployed, 40% have been unemployed for more than six months.

The
surplus of prospective workers is so large that employers have the luxury of
waiting for the ideal candidate (meaning someone who already has the exact job)
to show up. The automated systems that score resumes also drive this by
rejecting anyone who is not a precise fit.


But technology is also having a more general impact: Many companies simply
decide to wait and leave positions unfilled, letting other workers carry the
load.

They can do this partly because technology is automating more jobs and tasks, allowing fewer workers to do more. Of course, this isn’t the only reason behind increased productivity. Multiple companies also try and make sure that their working environments are positive and supportive to make sure that employees are able to work happily. By using HIPOs management software, employers are able to ensure high potiential employees feel mentored and supported to reach their full working potential, increasing business productivity. Also, producitivity can be increased by efficient communication. Many businesses are now looking at SharePoint Alert Plus, which you can learn more here about, which automatically sends customized and conditional email notifications to keep everyone in the loop. Employee productivity grew 6.7% from 2008 to the start of 2012, while GDP was only 1.2% higher at the start of 2012 than it was in 2008. This means that employers needed 5.5% fewer employees.

Meanwhile,
our population continues to grow. It is growing by about 140,000 each month (4%
larger now than at the end of 2008).

This
is really the elephant in the room that no one talks about. Technology is
getting better and better, and things are likely to become even more difficult
for prospective workers.

The
bottom line is that in a slack labor market, employers have no incentive to
invest in training. They can wait for the perfect candidate or rely more on technology.
Too many people are being left behind.

A 2011 Accenture
survey found only 21% of US employees receiving any employer-provided formal
training in the past five years.

Peter
Cappelli, a professor at Wharton and former co-director of the
National Center on the Educational Quality of the Workforce during the Bush and
Clinton administrations has written a book, Why
Good People Can’t Get Jobs
(2012, Wharton Digital Press) that describes this phenomena.

Cappelli
points the finger at two interrelated factors: The process that companies are
using to identify potential hires, and their refusal to offer training or on-boarding
training for new employees.

Cappelli
explains that automated hiring software makes it easier for companies to weed
out applicants than ever before. All they need is a piece of code that can
parse application materials for the right keywords.

The result
is that firms either get the perfect hire, or none at all. A money quote from
Cappelli:

Today, in
many industries, on the job training has become a relic, with companies
increasingly fearful of investing time and money to train employees who can
then be poached by competitors. This causes a spiral where employees and
candidates increasingly have to use their own time and money to acquire the
skills that they think
employers might want.

That situation
isn’t ideal for anyone: Not just for the workers who end up going into their pockets
to get a shot at getting hired, but also for companies who can’t control the
training and ensure its quality or value to the firm.

Small
wonder, then, that Cappelli concludes his book with the observation that:

Amen.

We
hear corporations say they “give back” to their communities through media-friendly
charitable contributions.

If
companies truly cared about their communities or this country, they would put
these efforts (and their money) where
it would give back to all, through sustained job creation and on the
job training.

What’s
Wrong Today:

The
Obama administration is seemingly hell bent on cutting social security benefits
through chained
CPI, but they do nothing to deal with the loss of tax revenues from big
business and individuals who use pass through tax business entities to avoid
taxes. 

Here is Nathaniel Popper in the NYT:

Popper is speaking
about the real estate investment trust, (REIT). The REIT became law in 1960 during
the Eisenhower administration. When they were created, they were meant to be
passive investment vehicles, like mutual funds, that buy up a broad portfolio
of real estate, whether shopping malls, warehouses, hospitals or even
timberland and derive almost all of their income from those holdings. One of
the bedrock principles (and the reason for the tax exemption) was that the
trusts do not do any business other
than owning real estate.

Now, changing from a standard
corporation to an REIT has become a corporate trend. The poster boy of
domestic government outsourcing, the Corrections
Corporation of America, which owns and operates 44 prisons and detention
centers across the nation, has received permission from the IRS to convert to
REIT status and as a result, will save many millions on taxes. They expect to
save $70 million in 2013.

Today, there are more
than 1,000 real estate investment trusts, about 10% of them are publicly traded.
Investors like them because, by law, they must distribute at least 90% of their
taxable income to their shareholders, an alluring prospect today, given the low
interest rates paid by other basic investments.

So,
What’s Wrong?

This
is just another tax avoidance scheme enabled through the 72,000 page IRS tax
code that contains thousands of tax preference items like the REIT and carried
interest provisions. Corporations and their tax lawyers are clipping coupons from a IRS tax code written by the rich, for the rich and enabled by
corporate campaign funding.

The
graph below from the OMB shows how low corporate tax revenues are as a
percentage of the total taxes that the government collects. It is the lowest level
in 25 years:

Corporate
profits, on the other hand, are at a 60 year high.

The GAO
issued a new
report which shows that corporate tax breaks cost the US government $181.4 billion in 2011 alone. The GAO calls these breaks “tax
expenditures”. The Center for Tax and Budget Accountability defines
tax expenditures as: (emphasis by the Wrongologist)

In 2011,
the Treasury Department estimated 80 tax expenditures resulted in the
government forgoing corporate tax revenue totaling more than $181 billion. 56
of the 80 tax expenditures used by corporations in 2011 were also used by
individual taxpayers, which include businesses not organized as corporations:

In the
chart below from the GAO, parking corporate money offshore is the #2 cause of
lost tax revenues.  The table includes the top seven reasons corporate tax
collections were $181.4 billion short for 2011:

With so
many loopholes in the corporate tax code, multinationals never pay the official
35% corporate tax rate.  Many instead get money from us in the form of tax
credits and rebates. These same
corporations are the ones lobbying for austerity, to cut social safety nets like
Medicaid, Medicare and social security, while they demand Congress lower
further the corporate tax rate and add even more loopholes.

And
the beat goes on: The Huffington Post reported that America’s ten most
profitable corporations paid an average income tax rate of just 9% last year.
The top two corporations not paying their fair share in taxes are ExxonMobil (the
most profitable corporation in the history of the world) paying a mere 2%
income tax rate and Chevron paying 4%.

A
report earlier this year by The New York Times
found that state and local governments are providing $80 billion a year in tax
breaks and other subsidies in a race to attract companies. The Citizens for Tax
Justice (CTJ) found that 30 major corporations made billions of dollars in
profits while paying no federal income tax between 2008 and 2010. The CTJ
updated that report to add their 2011 tax bill to the total, and 26 of them have still managed to pay
absolutely nothing over that four year period.

This
loss in corporate tax revenue will be made up by slashing education, transportation
and social services.

This is prima facie
evidence of corporate interests hijacking the tax code. These are the greedy sociopaths
who are slowly drowning the New Deal (and later) programs in a Randian bathtub.
 

We
should call it the IRS tax evasion code since it is becoming a complete mockery
of fairness and decency.

We
no longer live in a republican democracy of, by and for the people, but a corporatocracy
run by the plutocracy. We have a Congress, of, by and for corporations and the special interests
of the 1%, who every four years anoint a President, while the
rest of the 99% of us continue to pay the taxes to support them, just as in the
time of King George III in the 1700s.

No
one has what it takes to say “no more” and then do the right thing.  

Where and when will we say: Enough is enough?

Martin
Luther King was murdered in Memphis on April 4, 1968. We neither celebrate the day of his birth or death, so its difficult to remember the exact date of his death.

On that day 45 years
ago, the Wrongologist was tasked by our government with leading a nuclear
missile base in Germany. Our company’s racial composition was about 45%
African-American, 45% White and 10% all others principally, Hispanic. Since a missile base is a fairly
technical shop, most of the people were quite intelligent, had some college and
most were not draftees; most had been in the military for at least 5 years. It
was the Vietnam era and we were in a rural part of Germany.

When the
news of his death broke, the military brass thought that remote bases like ours
were likely to see violence, but we had none. It was grim and sullen, but not at
all violent, only painful for most of us.

This all
came to mind while watching “MLK: The Assassination Tapes”, a Smithsonian
Channel presentation. A little known fact is that all of the events of that day
were caught on film, tape and audio. They were compiled into this film produced
by Tom Jennings, who repeats the goals and methods of his earlier “The
Lost JFK Tapes: The Assassination” which ran in 2009 on the National
Geographic Channel.

While this
ground has been covered in other documentaries, there is an immediacy here. It
feels like you are part of the event, you experience those days as they
happened, probably for the first time. The film lasts only about 47 minutes; so
much had to be left out, such as the fate of the convicted killer James Earl
Ray. That doesn’t come across as a failing, however, but as focus. There are
plenty of places to go to learn more.

The film
is definitely worth watching. You don’t need to subscribe to the Smithsonian
Channel, it can be viewed here.
See it.

Most have
seen the iconic photo of Jesse Jackson and others standing on the balcony of
the Lorraine Motel, pointing in the direction of the gunfire. The motel is now
a museum dedicated to the civil rights movement. Dr. King had gone to Memphis to
support a strike by sanitation workers to achieve pay equity with white workers
and to improve working conditions. The strike started in February and had gotten
progressively violent over the period of 8 weeks.

One of
MLK’s most remarkable speeches, the “I’ve seen the promised land” speech, was
given in Memphis on April 3d, about 22 hours before he was killed. It is
reprised here with chilling effect, as you realize Dr. King clearly had a premonition of his death.

In “At Canaan’s Edge,” the last volume of
his “America in the King Years” trilogy, Pulitzer Prize-winning author Taylor
Branch wrote that King’s last words that day were to a musician who was to play
at a meeting on the night of April 4th in Memphis: “Make sure you
play ‘Precious Lord, Take My Hand,’” King requested. “Play it real pretty.”

It was Dr.
King’s favorite song, and he often invited gospel singer Mahalia Jackson to
sing it at civil rights rallies to inspire the crowds. Here is the first verse:

Precious
Lord, take my hand
Lead me on,
Let me stand.
I’m tired, I am weak I am worn.
Through the storm, through the night
Lead me on to the light.
Take my hand precious Lord, lead me home.

Interestingly, it was also sung at LBJ’s funeral by Leontyne Price in 1973.

MLK’s assassination
sparked a paroxysm of violence as riots broke out across the nation in the
aftermath of his murder. Just two months after Dr. King was killed, Bobby
Kennedy was assassinated in Los Angeles. Lyndon Johnson, the incumbent
president was forced from the race, despite being elected by a landslide in
1964. College campuses were seething with demonstrations. There were violent
confrontations between police and protesters at the 1968 Democratic National
Convention, a significant third-party presidential run by George Wallace and
ultimately, the election of Richard Nixon, which effectively ended the New Deal
coalition that had dominated domestic politics for 35 years.

A year to
the day before he was murdered, Dr. King spoke out against the Vietnam War at
Riverside Church in New York City. Though some liberals had warned him that
protesting the war could dilute the civil rights movement, Dr. King saw the
link between a struggle for freedom at home and our long, costly war overseas.

He called
the US government “the greatest purveyor of violence in the world today.” He urged
citizens to “move past indecision to action” and warned his fellow Americans:

45 years after
his death, the words of Dr. Martin Luther King Jr. remain valid.

Once again
we need to act.

The
challenges are different, but the message still resonates.

 

Turkey
is a constitutional republic with a diverse cultural heritage. Turkey’s
population is 75 million, and 96% of the people are Muslims. The country spans
Europe and Asia, with its main city, Istanbul, separated by the Bosporus and
Dardanelles straits, which link the Mediterranean Sea with the Black Sea to its
north.

The
Wrongologist has been staying in Istanbul, home to 15 million people. It has
the look and feel of a European city, showing evident wealth, sophistication
and some cultural diversity. The city is growing rapidly: it was home to 8
million in 1990, 12 million in 2000 and 15 million today. All of Turkey is
becoming urbanized: Today, 75% of its population lives in towns or cities.

Istanbul
has the feel of a secular place. There are few headscarves and fewer bhurkas
evident on the streets, while most women are in western dress, many talking on
mobile phones as the walk. Most cars are relatively new, but there is evident
use of public transportation, buses, metro and ferries to the Asian side of the
city. There is much construction underway, including a tunnel under the Straits,
more bridges between the the old city and the new city, and metro line
extensions.

We
saw gentrification much like you would see in an American city: A city block of
old apartments that had been occupied by Kurds is now being converted to
upscale apartments with water views. What happened to the Kurds? They were “relocated”
to another part of the city. The renovated buildings will be offered at market
rates to the new middle class of Istanbul.

Nothing
demonstrates the secular nature of the Turkish Republic better than the Sophia,
a Roman church that became an Eastern Orthodox Church, which became a mosque,
that finally became a museum in 1935.

It
was built by the Romans in 360. The dome visible in the photo was added in 537.
Constantine made it the home of the Roman church (and the city,
Constantinople). It was an Eastern Orthodox Church for a short period, and from
1453 to 1931, it was a mosque. Sophia shows the additions and subtractions as
its religion changed throughout the millennia. This photo below was taken
yesterday:

The
medallion on the right represents Allah while the medallion on the left is for
Mohammad. Behind the medallions is the nave of the original church, with the middle
window pointing to Jerusalem. The lighted arch in the nave was added when the
building became a mosque, and it points toward Mecca.

Our
hotel was the site of the Young Presidents Organization world congress. Since
the age limit to be a Young President is 45, the Wrongologist is disqualified
on the basis of ageism. Holding this meeting in Istanbul demonstrates the
growing economic clout of Turkey and its commitment to tourism. Last
year, 10 million people visited the country.

Turkey
is not without human rights and women’s rights issues, however. Over the past
few days, Turkey’s ruling party, the AKP, unveiled a campaign to replace local
women’s rights groups which provide consultation in 11 centers for the
prevention of violence against women with party-sponsored consultants. All of
the former personnel were dismissed it is alleged, in order to bring the
shelters and consultation under the control of the ruling party.

Most
women’s groups in the country see this as the government’s way to set and control
the agenda of women’s rights in Turkey.

By
the way, the famed Turkish bath houses are open to men only.

Onward to Dubai today…         

What’s
Wrong Today:

The deficit
hawks have taken flight once again.

We see
that the serious newspapers can’t stop giving space to the deficit hawks. Two
very serious examples are from two very serious people, Tom Friedman in the NYT
and the editorial board of the Washington
Post.

First,
Mr. Friedman:

The siren song of the uncertainty meme
was just too strong for Tom Friedman on Sunday, as he ruminated
on Mr. Obama’s SOTU speech. Last Sunday, in another Fried-tastic column, he said: (emphasis by the Wrongologist)

Have a claim you’re too
lazy to substantiate? Just preface it with “I’ll bet anything that
…” and presto, you too can be Tom Friedman!

Data
might help Mr. Friedman see that current investment in equipment and software
is actually reasonably healthy. Measured as a share of GDP it is almost back to
its pre-recession level. Furthermore, apart from the tech bubble days of the
late 90s, it has never been much higher than it is today. Here’s the picture
from the BEA:

In short,
there is no reason to expect investment to be much higher than it is. The peak in the graph was during Y2K. It
doesn’t appear that uncertainty is very important to investment.

What
about corporate investing?

Let’s
consider Apple Inc. (NASDAQ: AAPL): Like other big companies, Apple leaves a
lot of its cash overseas. If it brought it home to the US, it would have to pay
US corporate taxes on the money.

The cash that Apple
has overseas is a stunning $82.6 billion.


Apple paid an income tax rate of only 1.9% on its earnings outside the US in
its latest fiscal year, according to a regulatory filing by the company. They had
$713 million in tax on foreign earnings of $36.8 billion in the fiscal year ended
Sept. 29.

Rather
than repatriating more of its foreign earnings, Apple is lobbying to change US
law so that it can erase its liabilities through a tax holiday that will allow
it to bring home cash at a lower tax burden than it would currently pay.


Get this: Where does AAPL invest all of this foreign cash? The vast majority is
invested in US government securities, and
the earnings on those investments are tax-free in the US.

It
is clear that uncertainty hasn’t stopped Apple from purchasing US government securities.

Next,
WaPo:

The WaPo
had another in its series of editorials warning against
any complacency in our efforts to stabilize the debt:

We need to
differentiate between “stabilizing” our deficit and “eliminating” our deficit. This
is the crux of the difference between the parties on the Sequester and the
deficit.

• Democrats
  want to stabilize the deficit and let a slowly growing economy gradually unwind
  our debt position over a couple of decades

• Republicans
  want to eliminate the deficit within a decade and unwind our debt position more
  rapidly

WaPo’s
view that deficit reduction is more urgent than Mr. Obama thinks is both dangerous and naive: Today’s
Congress simply can’t be trusted to achieve deficit savings in a way that’s
compatible with either growth or smart governance.

Many in
Congress are driven by deep ideological opposition to government. They remain in
deficit-freak-out mode in order to slash and burn the social safety net. They
are pushing balanced budget amendments that could rob the federal government of
counter-cyclical policy tools or force massive sequesters.

They argue
for spending caps that have no reference to the nation’s needs going forward.
 

Arguments
like WaPo’s simply throw fuel on the  Hawk’s fire.

Consider
an analogy:
There is a dam outside your city that is owned and operated by the city. The
dam is essential for flood prevention, electricity generation and providing the
city with its water supply. But it is in bad repair and crumbling, and every
year the city’s dam maintenance expenditures have been going up.

Ultimately,
the city will either have to spend a lot of money in a short period of time to
repair the dam for good, or else accept mounting annual maintenance costs that
over the long run will cost much more than the one-time repair.

A city
councilman says, “We have to do something about this dam problem! We must
reduce our dam maintenance budget!” It would be obvious to everyone that
simply reducing the maintenance budget will not solve the
problem.

Deciding not to spend money to address a
growing problem is not the same thing as fixing that problem.

Citizens know
that the dam problem isn’t fixed simply by selling the dam to a private utility
company. The utility will charge the people of the city higher water and
electric rates, so the citizens pay either way. Shifting the cost from the
public’s tax bills, payable to the city, to the citizens’ water bills payable
to a private company does nothing for the taxpayer.

It’s dishonest
to say about any problem, “We have to
reduce the public commitment, because the government will never be able to
afford this”, while saying with the same breath that the whole society can
afford it.

The debate
about public provision vs. private provision, regardless of whether we are
talking about the Postal Service or a local dam, is a debate about delivery mechanisms,
not about affordability.

A little
strategic thinking could go a long way right now. Some advice to the WaPo and
the NYT: Consider our economy today–

• Is
  there a lack of demand? Yes

• Are
  people saving? No

• Is
  private investment high? Reasonably so

Isn’t it also
true that only an ideologue would
say you can make progress on the deficit without a strong economy?

Note to
Mr. Friedman:

• If
  we aren’t saving but we are investing, then weak demand must be a function of weak personal
  income

• Why
  is personal income weak? Not enough people are working, so our entire focus
  should be on getting people back to work

Message
to WaPo and the New York Times: Write a column listing ten ways to eliminate
unemployment.