US Corporations – Page 2 – The Wrongologist

Republican Purity: Who’s Good Enough For Them?

The Daily Escape:

Walker River, NV – February 2023 photo by TheOsideBish

According to the GOP, your organization has to toe the line or else you could be banished or investigated. CNBC is reporting that House Speaker Kevin McCarthy (R-CA) and House Majority Leader Steve Scalise (R-LA) are set to banish the US Chamber of Commerce from Capitol Hill for endorsing Democrats in some 2020 and 2022 House races.

CNBC quotes Mark Bednar, a spokesman for McCarthy:

“The priorities of the US Chamber of Commerce have not aligned with the priorities of House Republicans or the interests of their own members, and they should not expect a meeting with Speaker McCarthy as long as that’s the case…”

CNBC says Scalise also won’t meet with them either, quoting his spokeswoman Lauren Fine: (brackets by Wrongo)

“[the Chamber headquarters in] Washington has radically shifted away from the pro-business philosophy of most local Chambers across America….unless the Chamber gets back to their traditional pro-business roots, they should not expect to have any engagement with Majority Leader Scalise’s office.”

This all started in 2020, when the Chamber endorsed 23 House Democrats in swing districts, a sharp break from the past practice of endorsing a nearly exclusive slate of Republicans, with one or two Democrats thrown on the list for a patina of bipartisan perception. And Republicans failed to regain the majority. The Chamber then reportedly endorsed 23 House Republican candidates and just four Democrats during the 2022 election. But that hasn’t made them “pure” enough for Kevin McCarthy, despite the Chamber providing $3 million to Mehmet Oz in his losing effort for a Senate seat in Pennsylvania.

Wrongo met often with the US Chamber of Commerce during his days at the big bank. They are far from being anti-GOP. On Monday, Tim Doyle, a spokesman for the Chamber, told CNBC:

“The Chamber’s priorities include lower taxes, reduced spending, fighting over regulation and numerous other issues, and we are aligned with House Republicans on many of the issues that are important to American businesses of all sizes,”

That sounds to Wrongo like it’s aligned with the Republicans. Doyle did go on to say:

“We do disagree with those who believe the Chamber should become a single-party partisan organization….”

The Intercept is reporting that the new House Republican majority wants to investigate the Chamber over its commitment to ESG regulations. ESG stands for environmental, social, and governance, key criteria that can impact company market valuations and its behavior. But ESG has become a red line for Conservatives, who argue that companies that follow it are failing to live up to their fiduciary duty to maximize profits for investors.

Apparently, Republicans in the House are also questioning the Chamber’s own conduct, including reportedly allowing former Chamber CEO Thomas Donohue to use the organization’s corporate jet for personal trips.

Look, the Chamber can be pretty terrible. They’re planning to sue the Securities and Exchange Commission if it goes forward with a climate change-related disclosure rule. But forcing them to only give money to Republicans is a new low, even for these nihilists.

Separately, Florida’s Governor DeSantis is set to take over Disney’s special Reedy Creek tax district in order to force the company to cough up $1 billion. Wrongo reported on DeSantis’ fight with Disney in April 2022 here and here. Targeting Disney became a thing after the company spoke out about Florida’s “don’t say gay” law.

Back in April, DeSantis pushed lawmakers to dissolve the Reedy Creek Improvement District, which for 55 years effectively gave Disney control of the land around its Florida properties. Republicans complied, and the district was scheduled to sunset on June 1, 2023.

But on Monday, Republican lawmakers unveiled a bill to turn over control of Disney’s special taxing district to a five-member board to be chosen by DeSantis. The proposal also comes with a rebrand; Reedy Creek would become the “Central Florida Tourism Oversight District.”

This gives DeSantis a new form of control over Disney, the state’s largest employer. And the opportunity for extorting collecting an additional $1 billion from a company that is on the DeSantis enemies list (which will ultimately be paid by the park’s patrons) is totally on brand for DeSantis.

Anyone else getting really tired of Republicans telling us we can’t say certain words, we can’t read certain books, we can’t teach certain things, we can’t talk about certain history, or we can’t donate to a few Democrats?

What’s Conservative about any of that?

Workin’ On The Railroad

The Daily Escape:

Pikes Peak with Garden of the Gods in foreground, Colorado Springs, CO. View is from the reflection pool at Garden of the Gods Club and Resort – November 2022 photo by John Susan Hoffman

On Monday, Biden called on Congress to prevent a rail workers’ strike. Railroad workers are threatening a nationwide strike on December 9, which could deliver a crippling blow to the American economy. According to the Association of American Railroads, a nationwide rail shutdown could cost more than $2 billion per day. Passenger rail transportation would also stop, disrupting hundreds of thousands of commuters.

The unions have rejected a tentative agreement that had secured a pay increase of 24% over 5 years for rail workers, but wages don’t appear to be the primary sticking point. The outstanding issue is paid sick leave. The railroad companies have adamantly refused to include any more short-term paid leave. That means rail workers must report to work, even when they are sick, or forfeit their pay.

The essence of the unions’ position is that rail workers must use accrued paid time off (PTO) for their sick time. Actually, they use PTO for ANY days off. They get about 21 days of PTO annually. The rest of their time, including their weekends, is tightly controlled.

The context is that rail workers do not get weekends or holidays off unless they use their PTO. They’re on call 24/7, and if they refuse a shift after a designated (12 hour) rest period, they are docked points. Since the rail carriers have laid off more than a third of their workforce in the past decade, every shift is understaffed, and on most shifts, everyone who is eligible is likely to be called in.

Rail workers have jobs that often require them to be on the road for weeks at a time. From Heather Cox Richardson: (brackets by Wrongo)

“…[the unions]…oppose a new staffing system implemented after 2018, which created record profits for the country’s main rail carriers but cost the industry 40,000 jobs, mainly among the people who actually operate the trains, leading to brutal schedules and dangerous working conditions.”

The Precision Schedule Railroading (PSR) system made trains more efficient by keeping workers on very tight schedules. Any disruption in those schedules, like a family emergency, brought disciplinary action and possible job loss for the worker.

In the US, the 40-hour work week provides on average, 104 weekend days off per year, plus federal holidays. How many American workers would accept the total of 21 days off that most rail workers will accrue in PTO under the now-rejected Tentative Agreement?

The Railway Labor Acts of 1926, 1934 and 1966 control not only railroad labor disputes but also airline labor disputes. There is a series of steps that must be taken by both sides, and the final steps are where a union may strike, and Congress can step in and enact a law codifying an agreement between the companies and the unions.

The US Chamber of Congress and some 400 business groups, representing a wide range of industries, have sent a letter calling on Congress to intervene before the strike deadline if a deal is not reached to “ensure continued rail service.”

You would think that puts Democrats in a bind. They’re pro-union, but in this case, they’re jumping to the tune of big business. And why did Biden make his announcement a week in advance of the possible strike? A good negotiator would create some uncertainty in the minds of both the companies and the unions. There should be at least the appearance of a strike being possible.

Shouldn’t the “most pro-labor president” in a generation (in 1992, he was one of only six Senators to vote against legislation that ended another strike by rail workers), demonstrate that he’s proud to be on the workers’ side, at least until he isn’t?

Congress also has the option to dictate a cooling-off period, allowing parties to continue negotiating until they reach an agreement, or force both sides to enter arbitration, where a third-party mediator gets involved.

The unions knew that Congress would likely intervene. So workers would rather have a bad deal forced on them than to vote for it.

Four paid sick days is nothing. The fact that the rail companies are unwilling even to give four sick days says everything you need to know about American corporations in 2022.

Corporate Money Is Flowing To Senate Republicans

The Daily Escape:

Sunset, Housatonic River, New Milford CT – 2022 photo by Tony Vengrove

There are just 55 days left until the 2022 midterm elections, and Wrongo’s crystal ball remains cloudy. For example, take the US Senate race in Pennsylvania. Democrat John Fetterman leads Republican Mehmet Oz by 48.5% to 40.4% in the 535 average of polls as of September 8. Sounds like a big lead, no?

But the US Chamber of Commerce told Axios on Sept. 11 that it was donating $3 million to support Oz’s campaign. Who is the US Chamber? They are an industry group that represents virtually every major American corporation. From Judd Legum:

“Corporations — whether individually or through a trade organization like the Chamber — are prohibited from donating $3 million directly to Oz’s campaign. (Corporate PAC donations are capped at $5,000 per election.) So instead, the Chamber is routing the money through the Senate Leadership Fund, a Super PAC set up by Republican Leader Mitch McConnell….The Senate Leadership Fund can raise unlimited funds from any source and spend them to boost Oz and other Republican candidates.”

In a statement, Chamber EVP Neil Bradley described Oz as “a pro-business champion” and said Fetterman “subscribes to a far-left, government-knows-best approach.”

So, America’s big corporations are against Fetterman. Sounds like a reason to be for him.

Legum takes a deep dive into where the US Chamber gets the millions it is donating to promote Oz’s candidacy: It comes from dues paid by member corporations. And which corporations are members? The Chamber keeps its membership list secret. More from Legum:

“We know, however, that virtually every major American corporation is a member of the Chamber. The Chamber’s board of directors includes representatives from FedEx, Bristol Myers Squibb, Facebook, AT&T, United Airlines, Abbott, 3M, Microsoft, Deloitte, Fidelity, Chevron, Intuit, Xerox, Pfizer, Dow, AllState, Delta, and many others.”

And most member companies don’t have a board seat. Their donations are secret as well, but CVS disclosed that it paid $500,000 to the Chamber in 2021 and $325,000 to a related organization, the US Chamber Institute for Legal Reform. And CVS isn’t a board member! Imagine how much the really big guns paid.

A few major corporations aren’t members. Apple, for example, resigned its membership in 2009 in protest of the Chamber’s policy on climate change.

Sadly, corporations are not accountable (or even visible) in their support of the extreme policies of the GOP when they donate through vehicles like the US Chamber. We have to hope that as the Republican message gets ever more extreme, corporations will have a harder time continuing their support for this type of Citizens United chicanery.

This shows just how scummy our politics have become with the help of the Roberts Court and the Federalist Society. If it’s illegal to donate a certain amount directly to this person or organization, we simply create a PAC or a Super-PAC, and then donate huge sums directly to them.

If creating a PAC achieves this result, how is the individual limitation protecting democracy?

There’s an old joke about how if you know a little about politics, your issues are guns, abortion and taxes. If you know a lot about politics, your issue is campaign finance reform.

Pennsylvania is one of a handful of states that could determine which Party holds the majority in the Senate. While Fetterman has a lead, Pennsylvania is still a competitive state, with money pouring into its governor’s race as well. This $3 million from the Chamber could have a real impact on the outcome.

It’s important to understand that more than 40% of the Pennsylvania electorate seems to want what Oz is offering. That’s scary, and it speaks to something that many in the media don’t want to address. They’re actually scared to address what the Republican Party has become. It isn’t surprising because the media are both a large part of the problem and not a part of the solution.

And when Biden accurately calls out what the Republican Party has become, when he says that Republican behavior and beliefs are inimical to what America is supposed to be, the media says he’s being divisive.

Oz is an example of what happens when one Party creates an existential situation out of whole cloth. When it’s backed by their 30 years of increasing extremism, the existential threat to democracy is now real.

No, America’s corporations aren’t going to save you. Giving money and time to Democratic Senate candidates like Fetterman, or Georgia’s Warnock (up by 2%), or Arizona’s Kelly (up by 2%), or New Hampshire’s Hassan (up by 4%), or Ohio’s Ryan (up by 1%), or North Carolina’s Beasley (up by 1%) MIGHT save you.

Do what you can.

Monday Wake Up Call – September 12, 2022

The Daily Escape:

Harvest Moon, Cape Cod National Seashore, MA – September photo by Tom Baratz

With all of the media’s coverage of the comings and goings of the British monarchy, Wrongo’s certain that you missed the reviews of a new book, “Slouching Towards Utopia” by Brad DeLong, an economist from UC Berkeley. Dylan Matthews in Vox quotes DeLong from the book:

“The 140 years from 1870 to 2010 of the long twentieth century were, I strongly believe, the most consequential years of all humanity’s centuries.”

Matthews thinks it’s a bold claim. After all, homo sapiens has been around for at least 300,000 years; DeLong’s “long twentieth century” represents 0.05% of that history.

But DeLong says an incredible thing happened during that sliver of time that had eluded our species for the other 99.95% of our history: Before 1870, technological progress was glacial, but after 1870 it accelerated dramatically. More from Vox:

“DeLong reports that in 1870, an average unskilled male worker living in London could afford 5,000 calories for himself and his family on his daily wages. That was more than the 3,000 calories he could’ve afforded in 1600, a 66% increase….But by 2010, the same worker could afford 2.4 million calories a day, a nearly five hundred fold increase.”

DeLong is speaking of the nations of the rich north, not about all nations. He’s saying that food surplus was the key driver of progress. What’s implied is that the greatest difference between the wealthy and everyone else was that the poor were living on the verge of starvation. Those basic economic facts shifted once having enough to eat ceased being society’s most critical status distinction.

Another interesting statistic from the book:

“…the average number of years of a woman’s life spent either pregnant or breastfeeding…has gone down dramatically, from 20 years of a typical woman’s life in 1870 to four years today.”

Most historians present modern history as a long 19th century (from the French revolution in 1789) to the crisis of 1914. Which is then followed by a shorter 20^th century ending with the fall of communism. DeLong, by contrast, argues that the period from 1870 to 2010 is best seen as a coherent whole: the first era, he argues, in which historical developments were overwhelmingly driven by economics.

From the Economist:

“…despite the Industrial Revolution…for millennia, technological improvements never yielded enough new production to outrun population growth. Incomes had stuck close to subsistence levels. Yet from around 1870, growth found a new gear, and incomes in leading economies rose to unprecedented levels, then kept climbing.”

DeLong says that economic policy in this period was a duel between the ideas of Friedrich von Hayek, who extolled the power of the free market, and Karl Polanyi, who warned that the market should serve man, not man serving the market.

Before WWI, markets generated rapid growth along with soaring inequality. People pushed back, demanding greater political rights, which they used to pursue regulation of the economy and improved social insurance.

After WWII, a mix of a market economy and a generous safety-net made for a happy marriage of Hayek and Polanyi, improved by Keynes, who said that governments should act to prevent economic recessions. This led to a three-decade post-war period of growth unmatched before or since. DeLong calls them the Thirty Glorious Years; from 1945 to 1975, as the US and Europe recovered from World War II.

But when growth sagged and inflation rose in the 1970s, voters supported politicians promising market-friendly, or “neoliberal”, economic growth reforms, like lower taxes and reduced regulation. But those reforms didn’t keep economic growth high. And they also led to even worse inequality. Still, the US and other rich countries pressed on with them, right up to the 2008 global financial crisis, which marks the end of DeLong’s 20th century.

According to a paper by Carter C. Price and Kathryn Edwards of the RAND Corporation, had the more equitable income distribution that America experienced in those thirty glorious years stayed constant, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in just the year 2018. That’s an amount equal to nearly 12% of GDP.

Price and Edwards say that the cumulative inequality cost for our 40-year experiment in government-supported income inequality added up to $47 trillion from 1975 through 2018. And probably equaled $50 trillion by 2020.

That’s $50 trillion that would have made the vast majority of Americans far more healthy, resilient, and financially secure.

So, the big unanswered question is: Can we again return to a period where we see both economic growth and equitable growth? It’s highly doubtful. As DeLong says in Time:

“Our current situation: in the rich countries there is enough by any reasonable standard, and yet we are all unhappy, all earnestly seeking to discover who the enemies are who have somehow stolen our rich birthright and fed us unappetizing lentil stew instead.”

The problem here is that our entire culture, economy and even our civilization is predicated around growth and people haven’t known anything else. Hope you’ve enjoyed the ride.

Time to wake up America! We need to reimagine capitalism, our taxation policies and our welfare scheme if we are to survive. Expect a rough adjustment. To help you wake up, listen, and watch Bruce Springsteen perform “Darlington County” live in London in 2013:

Monday Wake Up Call, Recession Edition – August 1, 2022

The Daily Escape:

Monopoly, Revere Beach, MA – From the 2022 Revere Beach International Sand Sculpting Festival. July 24, 2022 photo by Jack Daryl Photography.

From Paul Krugman:

“The US economy is not currently in a recession. No, two quarters of negative growth aren’t, whatever you may have heard, the “official” or “technical” definition of a recession; that determination is made by a committee that has always relied on several indicators, especially job growth.”

Nonetheless, Wrongo predicts that over the next few months, the Big Brain News Pundits will spend mucho time arguing among themselves while we watch, about the meaning of the word “recession“. They will ensure that the word “recession” is said at least once every 30 seconds.

Wrongo brought this up a few weeks ago. Recessions are determined not by pundits but by a committee of economists at the National Bureau of Economics (NBER). The two measures that have had the most weight are real personal income and non-farm payroll employment. So, despite what you’re hearing, it boils down to income and employment. If income and employment turn south, there’s a good chance economic output will be lower. From Robert J. Shapiro:

“Start with employment, which normally contracts in the first two quarters of recessions. Over the first six months of the 1990–91 recession, employment fell by 690,000, or 0.6%. Similarly, over the first two quarters of the recessions of 2001 and 2007–09, employment fell respectively by 761,000 and 426,000 positions, or 0.6% and 0.3%.”

But in the first two quarters of 2022, employment actually grew, increasing by 2,740,000, or 1.8%.

The main factor behind the lower GDP in the second quarter was business inventories. Businesses generally finance increases in their inventories. So as interest rates rose in the second quarter, inventory purchases fell sharply, subtracting 2% from GDP. GDP growth in the second quarter was -0.9%, so inventories accounted for all of the loss of GDP.

Inventories grew. but at a slower pace, bringing about the negative GDP performance. But this change in the rate of growth in inventories is not tied to either employment or to income, so we’re not in a recession, even though GDP fell.

But our bigger economic problem is inflation. Back to Krugman:

“Obviously gasoline prices are down — almost 80 cents a gallon from their mid-June peak. (Remember those scare stories about $6 a gallon by August?)”

We all know that the Big Brain Pundits only really care about how much it costs to fill their gas tanks compared to what it may have cost when some other guy was president. Expect that they will ignore our record low unemployment, and the growth in median wages.

Despite growing slower than inflation, wages are growing at about 5.4% annually. That’s good, although it could be better. Yet, the Big Brains want us all to be worried about the possibility of recession and inflation occurring at the same time. They’re worrying about that old 1970’s bugaboo, stagflation, which is highly unlikely to occur, despite how much Republicans are rooting for it to happen.

If America really wants to stop inflation in its tracks, we know how to nudge prices in the right direction: Implement a windfall profits tax on oil and food companies, whose profits are off the charts, along with their prices. Also, we could pass the corporate minimum income tax that is a part of the proposed Inflation Reduction Act.

How well the Federal Reserve addresses inflation will decide how soon the current economic expansion ends, and a recession begins. Although the economy’s fundamentals are sound, there’s a danger that the Fed’s interest rate hikes may dampen demand and employment too much. That’s a 50/50 call right now.

Time to wake up America! We’re not in a recession, although we may see one in 2023. We don’t have inflation under control yet, although that’s likely to happen within the next year.

To help you wake up, watch and listen to Sir Elton John from his “Farewell Yellow Brick Road” tour. Wrongo and Ms. Right got to see him in Foxborough, MA last Wednesday, courtesy of daughter Kelly and her partner Bob.

It was Wrongo’s second time seeing Sir Elton, the first was at the Budokan in Tokyo in 1974.

Last Wednesday was a great night with an adoring audience for what seems to be near the end of his touring career. Here’s his final encore from last week’s performance, “Goodbye Yellow Brick Road” performed on the night we were there:

J&J’s Texas Two-Step

The Daily Escape:

Wallowa Lake near Joseph, OR – May 2022 photo by Danny J Goff

From Judd Legum:

“Nearly 40,000 lawsuits have been filed against Johnson & Johnson (J&J), alleging that the company’s baby powder causes cancer. The lawsuits claim that customers became sick with mesothelioma or ovarian cancer after being exposed to asbestos contained in talcum powder.”

In July 2018, a Missouri jury awarded $4.7 billion in damages to 22 women who said they contracted ovarian cancer from J&J baby powder. According to judge Rex Burlison, J&J:

“…knew of the presence of asbestos in products that they knowingly targeted for sale to mothers and babies, knew of the damage their products caused, and misrepresented the safety of these products for decades.”

Obviously J&J appealed, and an appeals court reduced the verdict to $2 billion. J&J wasn’t satisfied and further appealed the verdict, ultimately to the US Supreme Court. In June 2021, however, the Supremes refused to hear the case, letting the $2 billion award stand.

J&J had no interest in bankruptcy, but came up with another strategy to protect most of its assets from the current and any future judgements. In July 2021, the company launched “Project Pluto,” in which J&J would create a new subsidiary, LTL Management, which would “own” the liability for the baby powder litigation. It also would receive about $2 billion in cash. LTL would then declare bankruptcy.

Boeing Documentary Shows Corporate Malfeasance

The Daily Escape:

Mount Liberty, White Mountains, NH – February 2022 photo by AG Evans Photography

Over the weekend, Wrongo and Ms. Right watched the Netflix Boeing documentary: “Downfall: The Case Against Boeing”. You can watch the trailer here. It exposes how Boeing’s management, Wall Street’s influence and the cratering of Boeing’s culture of quality control, resulted in two plane crashes of the 737 MAX, just months after being placed in service.

That two new planes would go down within five months of each other was beyond a chance event in 21^st Century airplane manufacturing. Boeing initially blamed the pilots based in Indonesia and Ethiopia for being poorly trained. But it turns out that Boeing knew all along that the 737 MAX had a critical software problem that caused the plane to go into an irreversible nosedive.

The film makes it clear that pilots had just 10 seconds to reverse those faulty software commands before it was too late. It shows that Boeing told the FAA and the airlines that purchased the MAX that no new pilot training was required to fly the new plane, even though pilots knew nothing about the software or the glitch.

Boeing was lying about training to keep the costs of the new aircraft competitive with Airbus. It was a lie that Boeing took months to correct. It also took months for Boeing to admit that they were flying an unsafe plane.

Why did this (and even worse things) occur while Boeing was attempting to bamboozle the Feds, the airlines, crash victims and their families? Money. The film features Michael Stumo, father of Ethiopian Airlines crash victim 24-year-old Samya Stumo. While not mentioned in the film, Ralph Nader is Samya’s uncle. At the time, he published an open letter to Dennis A. Muilenburg, then-CEO of Boeing. Here’s a part of his letter: (brackets by Wrongo)

“Your narrow-body passenger aircraft – namely, the long series of 737’s that began in the nineteen sixties was past its prime. How long could Boeing avoid making the investment needed to produce a “clean-sheet” [new design] aircraft and, instead, in the words of Bloomberg Businessweek “push an aging design beyond its limits?” Answer: As long as Boeing could get away with it and keep necessary pilot training and other costs low…as a sales incentive.”

Nader draws a connection between Boeing’s decision to “push an aging design” and their financial engineering:

“Did you use the $30 billion surplus from 2009 to 2017 to reinvest in R&D, in new narrow-body passenger aircraft? Or did you, instead, essentially burn this surplus with self-serving stock buybacks of $30 billion in that period?”

Nader notes that Boeing was one of the companies that MarketWatch labelled as “Five companies that spent lavishly on stock buybacks while pension funding lagged.” More:

“Incredibly, your buybacks of $9.24 billion in 2017 comprised 109% of annual earnings….in 2018, buybacks of $9 billion constituted 86% of annual earnings….in December 2018, you arranged for your rubberstamp Board of Directors to approve $20 billion more in buybacks.”

Nader shows that Boeing had the capital to invest in developing a new plane. They also had problems with the launch of the 787:

“In the summer of 2011, the 787 Dreamliner wasn’t yet done after billions invested and years of delays. More than 800 airplanes later…each 787 costs less to build than sell, but it’s still running a $23 billion production cost deficit.

The 737 MAX was the answer to Boeing’s prayer. It allowed them to continue their share buybacks while paying for the 787 cost overruns. Abandoning the 737 for a completely new plane would’ve meant walking away from a financial golden goose.

Rep. Peter DeFazio (D-OR) who chaired the House Committee on transportation and infrastructure that investigated Boeing, said:

“My committee’s investigation revealed numerous opportunities for Boeing to correct course during the development of the 737 Max but each time the company failed to do so, instead choosing to take a gamble with the safety of the flying public in hopes it wouldn’t catch up with them in the end…”

Wrongo remains baffled by how Boeing management was given a pass after this gross negligence. They paid the US government $2.5 billion to settle criminal charges that the company defrauded the FAA when it first won approval for the 737 MAX. The deal deferred any criminal charges by the DOJ to January 2024 and will dismiss the case then if there are no more misdeeds by the company.

Perhaps this is another example of a corporate mistake that’s simply too big to be punishable in the US. That means US corporations and their CEOs are immune to accountability. This should have put people into prison, but the CEO got off, and ultimately got a $62.2 million severance for his misdeeds, despite a lot of people dying on his watch.

To curry favor on Wall Street, Boeing reduced salaries. They cut costs deeply in quality assurance and safety programs to give the shareholders more money.

See the movie. Be outraged. Elect more people like Peter DeFazio.

The Great Resignation

The Daily Escape

Sunrise, Alpine AZ – November 2021 photo by Ed Kendall. Alpine is at 8,200’ elevation.

From Krugman:

“You’re probably aware that the US is experiencing what many call the Great Resignation — a significant fall in the number of people willing to accept jobs, at least at pre-Covid wages. Four million fewer Americans are employed than were on the eve of the pandemic, yet the rate at which workers are quitting their jobs — usually a good indicator of labor market tightness — has hit a record, and the scramble of employers to find workers has led to rapid wage increases.”

People see the “now hiring” signs everywhere. They assumed that generous unemployment benefits were discouraging workers from accepting jobs. But the enhanced benefits went away with no visible change in the US labor force participation. So, what’s going on?

Back to Krugman: (brackets by Wrongo)

“…[the] Great Resignation, it turns out, is largely an American phenomenon. European nations have been much more successful than we have at getting people back to work. In France, in particular, employment and labor force participation are now well above prepandemic levels.”

Barry Ritholtz says that there’s a massive transformation underway in America’s labor markets. When we look at the total Quits Rate for all Nonfarm payroll workers since the Great Financial Crisis (GFC) ended in 2009, the trend in the “quits rate” has steadily moved higher for all workers and really accelerated this year:

The red trend line shows that the rate that people are quitting has now returned to its level in 2016, and except during the pandemic, it has continued to rise.

If you look at only the Quits Rate for Professional & Business Services, those white-collar workers who did okay during the pandemic, their trend isn’t the same as the overall quits:

There’s been virtually no difference in the rate of professional quits since 2008. That’s telling us that the Great Resignation is taking place in the lower half of the employment wage scale, entry-level jobs, and the tiers just above them.

This has deep ramifications for the American economy.

Companies who rely on cheap labor are having hiring problems. Those companies that pay the minimum wage (or slightly higher) are having a hard time finding workers. Part of this is the failure of the Federal government to raise the minimum wage, which has been the same since 2009. That hasn’t kept up with inflation, or the growth in corporate profits.

Instead of gradually raising the minimum wage over time nationally, putting it on a path towards $15 or higher, we’ve allowed wage pressure to build for years. Then, during the pandemic, we experienced an 18 month period when low-wage workers reconsidered their careers. The dam broke, and we’re seeing both a sudden spike in wages and a shortage of workers.

Along the way, some labor has upskilled, gotten certified, degreed, and found new fields to work in. Now we have millions of people launching small businesses, striving to make it to the middle class, and towards self-determination. From the WSJ:

“The pandemic has unleashed a historic burst in entrepreneurship and self-employment. Hundreds of thousands of Americans are striking out on their own as consultants, retailers and small-business owners.”

The number of unincorporated self-employed workers has risen by 500,000 since the start of the pandemic, to 9.44 million. Except for a few months this summer, that’s the highest total since 2008. It amounts to an increase of 6% in the self-employed, while overall US employment total remains nearly 3% lower than before the pandemic.

So far this year, these entrepreneurs applied for federal tax-identification numbers to register 4.54 million new businesses, up 56% from the same period of 2019. That is the largest number on record since 2004. And two-thirds are for businesses that aren’t expected to hire employees.

Our Curious Job Market

The Daily Escape:

Cranberry harvest, Carver, MA – October 2021 photo by Sarah Stiles Cabe

Robert Reich commented to Newsweek about the unexpectedly low US employment figures, that American workers are engaged in, “the equivalent of a general strike.”

He was referencing Bureau of Labor Statistics (BLS) numbers that showed US employment increased 194,000 in September, nearly 300,000 jobs shy of estimates. Despite a record level of job openings and 7.7 million out of work, many employers report difficulty filling positions. From Reich:

“In reality, there’s a living wage shortage, a hazard pay shortage, a childcare shortage, a paid sick leave shortage, and a health care shortage – and American workers are demanding an end to all these shortages. Or they won’t return to work.”

So, the question is: are Americans saying “take your shit job and shove it” to corporate America?

Reich may have a point, but the current employment situation is both good and bad, and it’s a lot less political than he thinks it is. The numbers make clear that ending unemployment benefits wasn’t as effective in generating new employment as conservative politicians said it would be.

The inability to find childcare, or concerns about the safety of the available jobs, and the possibility that people saved some amount of their former emergency benefits and it’s providing them with a cushion, are all possibly contributing to the current jobs situation.

There are other factors at work. The data also show a record number of people voluntarily quitting their jobs (meaning they are not eligible for unemployment benefits). The number of quits (to work for another company offering higher wages and benefits, change careers, or stay home and take care of the kids) spiked by 242,000 people to a record of 4.27 million in August, up 19% from August 2019.

A historically high number of quits suggests a tight and competitive labor market that’s encouraging workers to switch jobs. The highest quit rate was in leisure and hospitality (6.4%), a sector that includes accommodation and food services (6.8%), retail (4.7%), and professional and business services (3.4%):

In total, 892,000 workers in accommodation and food services quit in August, equal to 6.8% of all workers in that sector. Quits are usually high in this sector. In August 2019, during that pre-Covid tight labor market, 5.1% quit.

The Labor Department also reported that there were 10.4 million job openings in August, up by 46% from August 2019. A high number of job openings pushes employers to offer higher wages, better benefits, signing bonuses, and similar enticements to help bring qualified people on board.

Despite what Robert Reich says, workers now seem to have some pricing power. When they leave a job for better wages and working conditions at another company, they create a headache for their old employer who now has to find a new employee by also offering a better deal.

But it all doesn’t quite add up. On the one hand, there are tons of jobs going begging. On the other hand, the labor force participation rate is well below pre-pandemic levels. In September, the civilian non-institutional population in the US was 261.8 million. That includes all people 16 and older who did not live in an institution, such as a prison, nursing home or long-term care facility.

Of that civilian non-institutional population, 161.3 million were participating in the labor force, meaning they either had a job or were actively seeking one during the last month. This resulted in a labor force participation rate of 61.6% in September, down slightly from the 61.7% in the prior two months, but 0.2 points higher than the 61.4% when Biden took office.

The number of Americans counted as not in the labor force, meaning they didn’t have a job and were not looking for one, rose in September to 100.4 million, up 338,000 from August.

If the job market is so good, why are so many people staying on the sidelines? That’s not consistent with a tight labor market, so there has to be something missing from the data. We do know that a big chunk of employees have taken early retirement. The number of retirees shot up by around 3.6 million during the pandemic, according to the Federal Reserve Bank of Kansas City. At the usual pace, that figure would have been around 1.5 million.

Are people just working off the books more now? Is it people who can’t get/afford childcare? Or is it simply a mismatch of skills and jobs? We don’t need as many people staffing tourist jobs, but we need more people working at the docks and driving trucks?

Whatever is going on, there are millions of people doing it.

More Shortages Are Coming

The Daily Escape:

Fall, Longfalls Dam road, Carrabassett, ME – October photo by Laura Casey

The NYT reported on how the German economy is being slowed by product shortages:

“More than 40% of German companies said they had lost sales because of supply problems in an August survey….Europewide, exports would have been 7% higher in the first six months of the year if not for supply bottlenecks, according to the European Central Bank.”

And it isn’t just Germany. Since the onset of Covid, US consumers have been experiencing disruptions in the supply chain. Wrongo has once again noticed empty shelves are back in our local chain supermarkets.

The bad news is that many think it’s going to get worse.

It’s no longer a matter of fixing one problem. A cascade of sourcing failures in raw materials, production, shipping, staffing, labor, along with weather disasters, may mean these shortages are around for several years. From Shelley Fagan:

“The US has 20 container ports located along the East and West coasts as well the Gulf of Mexico. Ports are where 70% of all US-international trade enters, accounting for 26% of…GDP.”

Even if the goods get to America, we’re at the mercy of our system of rails, barges, and trucks that transport goods to factories, distribution centers, stores, and consumers. Trucking moves 71% of all this freight in America, and there’s a shortage of drivers.

But our transportation infrastructure is also vulnerable, and our politicians have yet to lift a finger to help. Maybe next month.

Moving cargo by sea is historically cheap and efficient, so most of our imports from Asia arrive via cargo vessels. But now there’s a shortage of shipping containers. This has caused an immense spike in the cost of shipping. From Scott Galloway:

“Until 2020, the cost of shipping a 40-foot container along the world’s major trade routes never exceeded $2,000. Then Covid hit, and shipping firms reduced their fleets in expectation of low consumer demand. Instead, demand went up. This has upended the global supply chain. Shipping costs are now up 5 times to a record high: $10,000.”

The largest ships can carry more than 10,000 of these and when things run smoothly, about 25 million containers are in use on some 6,000 ships sailing around the globe.

The supply chain disruptions are causing backlogs in transporting all this cargo. About 40% of all US container traffic flows through the ports of Los Angeles and Long Beach. Currently, there are 65 ships waiting to unload thousands of containers. Again, that’s complicated by too few drivers in the trucking industry.

Flying into San Francisco last week, Wrongo saw about 30-35 ships also stacked up there. And China’s current forced reduction in energy consumption has hurt many high-tech producers. Wolfstreet reports that:

“…suspensions or reductions of industrial electricity supply that manufacturers in numerous industries are hit with, including key facilities that produce components for Apple, Tesla, Intel, NVIDIA, Qualcomm, NXP, Infineon, and ASE Tech….They’re now under orders to temporarily halt production…”

And supply chain issues go beyond tech products. Currently, 119 million Americans use prescription drugs, of which 25% are imported. These drugs start out as APIs (active pharmaceutical ingredients) — chemicals like hydrochloric acid and caustic soda. And China accounts for 80% of total raw materials for making medicine.

India is the largest producer of generic pharmaceuticals. They fulfill 40% of the demand in the US generic market. And shortages linked to this vulnerability aren’t a new problem. From Pharmaceutical Outsourcing:

“The average drug shortage in the US lasts for 14 months and some last for years when based on a high-risk supply chain. Before COVID-19, the FDA had already placed 145 pharmaceutical products on its drug shortages list.”

Since disruptions of the supply chain cause big price increases for goods that are difficult to get, it’s a threat to America’s economic health. And for medical and pharmaceuticals, it’s also a threat to public health.

Government knows about the problem but can’t fix it. After the PPE shortages at the onset of the Covid pandemic, you’d think we would develop a detailed plan to address the areas of greatest disruption. But all that happened was a 100-day review, making recommendations to shore up vulnerabilities sometime in the future. The proposals are sound, but they won’t help end our current shortages. Consumers can expect the current supply chain issues to persist well into 2022, and possibly beyond.

The geniuses in the multinational corporations who sold us globalization and just-in-time supply chains as the way to our best future are now telling us we just have to get used to shortages.

Economies can’t always just fix themselves. That’s a fantasy of capitalist utopianism.

The Wrongologist

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More Shortages Are Coming