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Gerald McEntee: Let’s Get Women Out of the Red

by Gerald McEntee on April 17, 2012

Huffington Post…

Workers are under attack and women are bearing the brunt of it when it comes to pay . Who’s to blame? Corporate-backed politicians typified by Wisconsin Governor Scott Walker. Last week, in the dead of night, Walker signed a piece of legislation that rolls back progress on pay equity in his state, where women make only 75 cents for every dollar a man earns doing the same job. (Wisconsin’s rate was already worse than the disheartening national average of 77 cents on the dollar.) Walker’s legislation repeals a 2009 law that made it easier for victims of wage discrimination to have their day in court. His action adds another to the growing list of reasons Wisconsin voters want to recall him this June . Republican presidential hopeful Mitt Romney has yet to denounce Walker’s anti-worker, anti-women action. Recently, Romney’s campaign officials were stumped by a reporter’s question on the topic. The reporter asked if Romney supports the Lilly Ledbetter Fair Pay Act , the first law President Barack Obama signed, making it easier for women to sue in wage discrimination cases. Campaign officials were silent, then said only, “We’ll get back to you on that.” No public official should have to stop and think about pay equity. It’s the right thing to do. And it’s the smart thing to do. When women do not get paid fairly, we all suffer. Yet in places like Wisconsin, the systematic attacks on women’s pay and voices continue. Walker’s so-called “budget repair” bill passed last year broke the livelihoods of many women in the state, where the resulting layoffs and pay cuts disproportionally hit working women. Leah Lipska, a member of AFSCME Local 1 in Wisconsin, told her story in a letter to the Washington Post . She wrote, “Aside from my full-time job with the state, I have been forced to take a part-time job at a local pizza place. Even that’s not enough to make up for my decrease in pay since Governor Walker’s law. I got so far behind on my car payments, I had to ask my parents for help. I’ve even had to go to the local food pantry. [Walker] is no hero; he’s stolen our American Dream.” Nationwide, the reality of pay inequity for women of color is even bleaker. African-American women make about 72 cents for every dollar earned by a white man. Latina women, only 62 cents. In the 1970s, pay equity emerged as one of the most significant issues confronting women. AFSCME members in San Jose, Calif., staged the first pay equity strike , and AFSCME members in Washington state reaped the benefits of the largest pay equity court settlement to date. We have made some strides as a nation, through pay equity agreements at the bargaining table and in state and local legislatures. But progress has been far too slow and much too scarce. Today, pay equity remains so troubling an issue that President Barack Obama talked about it in this year’s State of the Union address. “An economy built to last is one where we encourage the talent and ingenuity of every person in this country,” Obama said. “That means women should earn equal pay for equal work.” Wisconsin gubernatorial recall candidate Kathleen Falk echoed these words recently. “As a woman, as a mother who worked full-time while raising my son, I know first-hand how important pay equity and health care are to women across Wisconsin.” Today, AFSCME members across the country are wearing red . We are wearing red because we, like Falk, know how important pay equity is. We are wearing red to stand in solidarity with the women we work with every day, the women who make America happen. We are wearing red to get women out of the red. “Another day, another 77 cents on the dollar,” doesn’t have a nice ring to it. We must finish what we started in the 1970s. We must stop the corporate-backed politicians who are trying to rewind history. We must make sure women earn equal pay for equal work.

Original post:
Gerald McEntee: Let’s Get Women Out of the Red

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Chip Conley: The 7 Practices of PEAK Leadership

by Chip Conley on April 17, 2012

Huffington Post…

Why don’t we “practice” business? I’ve come to realize that — unlike medicine and law — we don’t think of our profession as business leaders as a “practice.” A few years ago, in the last downturn, I developed the principles of PEAK as an alternative operating model for my business based upon Abraham Maslow’s iconic Hierarchy of Needs pyramid. Reinterpreting this well-known theory of human motivation helped me to see that all stakeholders associated with a company have their own Hierarchy of Needs. My company Joie de Vivre tripled in size during this difficult period and I came to find out that a variety of other transformational companies like Harley-Davidson have used Maslow’s theory as a foundation for their business model. Business principles are only as good as the practices that back them up. Recently, with the assistance of some good friends, I’ve developed a set of PEAK Leadership practices that can assist any leader or leadership team to move from survival to success and on to being a transformative role model in their industry. When a company embeds these principles and practices in how they grow their leaders, the end result is PEAK performance: a phenomenon of sustained growth — both for the organization as well as for those within the organization. Practice 1: Embody an inherently positive view of human nature. The principles of PEAK have their roots in humanistic psychology and a basic belief that man is meant to “be all that he can be.” So, it’s not surprising that the fundamental first practice is assuring that a PEAK leader believes that humans — at their very core — gravitate to goodness when the right conditions exist for them to flourish. Creating what Maslow called “psycho-hygiene” in a company means focusing on people’s best qualities and believing in what’s been known for a half-century in business as a “Theory Y” perspective on management versus “Theory X.” With Theory X, management assumes employees are inherently lazy and will avoid work if they can. As a result of this, management believes that workers need to be closely supervised and a comprehensive system of controls developed. With Theory Y, management assumes employees may be ambitious and self-motivated. They believe the satisfaction of doing a good job is a strong motivation and seek to create the conditions for the employee to develop their own strengths to be successful. While this latter theory may feel intuitively right to many of us, is your organization still structured in a Theory X style of business? Practice 2: Create the conditions for people to live their callings. Great leaders understand there are only three relationships you can have with your work: a job, a career, or a calling. A job tends to deplete you and a calling energizes you. Most employees live in the bartering world of work. The company gives them a compensation package and recognition and, in return, the employee gives their time and energy. Yet, those that are living their calling have moved from external to internal motivation. And, these employees are not exclusively focused on the specific collection of tasks they perform and are more focused on the impact or purpose of what they do. The best hospitals have more nurses living their calling. The best airlines have the happiest flight attendants (Southwest). What are you doing to help your people find their sense of calling in what they do? Practice 3: Promote and measure the value of intangibles. In business, we are taught that leadership is all about managing what you can measure, but what’s most easily measurable is the tangible in life. Yet, is it the tangible or the intangible in business and life that creates value? In business, the metrics that track the tangible are well known: your profitability, assets & liabilities, cost structure, market share. Yet, in reality, these tangible metrics are the result of a series of intangibles that drive excellence: brand loyalty and reputation, employee engagement, customer evangelism, the ability to innovate. Great leaders nurture, value, and evolve corporate culture — one of the most valuable intangibles — as a key differentiator for their company. These intangibles are the inputs that drive the tangible output that most companies use to evaluate their performance. In the 21st century, great leaders are learning how to measure and benchmark these intangibles so that they’re not out of sight, out of mind. Which intangibles are most valuable to your business and how are you measuring them? Practice 4: Ability to move fluidly between being a “transactional” and a “transformational leader.” Author James McGregor Burns once wrote that, “Transformational leaders look for the personal motives in followers, seek to satisfy higher needs, and engage the full person of the follower.” Yet, most management decisions require only transactional thinking because the goal is purely to optimize existing resources. A great leader is able to move fluidly between addressing the foundational needs that people have, but also helping them see beyond the short-term so that they can be motivated by a compelling vision that helps them transcend their momentary challenges. How much of your time is stuck in the trenches as a transactional leader versus focusing on how to create transformation? Practice 5: Calibrate the balance between “Conscious” and “Capitalism.” Business has quite often been seen as a “zero-sum” game. One person’s win is another person’s loss. Taken to the global level, some believe that capitalism’s short-term gains are often to the long-term detriment of the environment and to certain communities. And, at this crossroads, in an increasingly transparent world, this is why great leaders have to think more broadly about the impact of their decisions, not just on the bottom line, but on their broader stakeholders. In many ways, Walmart took this step when they saw their stock price flat line even with sizable revenue and net income growth. Yet, for those socially conscious business leaders, cash flow is the blood that keeps your organization alive. Make sure the basic survival needs of your company are met. How do you balance the priorities of the broader community versus the financial needs of your company? Practice 6: Focus on your customers’ highest needs. Henry Ford once suggested, “If I asked my customers what they wanted, they would have said a faster horse.” PEAK leaders and companies understand what the customer wants even before the customer has articulated it and they realize that customer innovation requires a certain amount of mind reading and cultural anthropology. By doing this well (with Apple being the best example in the world), you create a movement and evangelists and reduce your need to spend money on traditional marketing. Are your customer satisfaction surveys just asking the obvious questions that will track their expectations and desires, but not their unrecognized needs? How can you “mind read” your customers? Practice 7: Lead to PEAK. Just as a Sherpa does in the Himalayas, great leaders meet their people where they are on the pyramid and help them to see the natural path to the peak. They recognize the value of loyalty and mentoring as a means of sustainable success in business. PEAK leaders champion personal development in tandem with corporate development knowing that there’s a synergistic effect of having a self-actualized individual in the workplace as evidenced at companies like Google. And, most importantly, they embody authentic leadership by being, not just by doing. How are you incubating a collection of great leaders? Conscious people pay attention. It’s true of spiritual leaders. It’s true of business leaders. PEAK leaders pay attention to the higher needs while not neglecting the base needs that provide a foundation for their organization. Leadership is all about making conscious choices and knowing that the higher you are in a company, the more magnified your decisions and behavior will be throughout the organization.

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Chip Conley: The 7 Practices of PEAK Leadership

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David Yarnold: Big Oil’s Arctic Bet: A Fool’s Risk

April 17, 2012

“Fool me once, shame on you; fool me twice, shame on me.” We’ve all heard it — and lived it — as individuals and collectively as Americans. We’ve all had to confront someone who has fooled or even misled us. But when Big Oil repeatedly tells us a monumental lie, we’re struck with collective amnesia. Marking the second anniversary of the BP oil disaster in the Gulf of Mexico, which occurred April 20, 2010, we can’t help but remember the rage and heartbreak we all felt when 11 men died and we saw images of oiled Brown Pelicans flattened to the wet sand. Scientists are just now reporting ominous disruptions in the Gulf’s underwater food chain and we still don’t fully understand the long-term impact on birds and other wildlife. It was a case of “shame on you” in 1989, when the Exxon Valdez ran aground in Alaska, spilling tens of millions of gallons of crude oil into the pristine and achingly beautiful southern Alaska landscape. But there was plenty of shame to go around two years ago as the BP oil disaster unfolded in the Gulf, spewing more than 200 million gallons into what, from a bird and human standpoint, is one of America’s most precious ecosystems. William K. Reilly, a lifelong conservationist and moderate Republican, co-chaired the commission investigating the BP disaster. Reilly was EPA administrator at the time of the Valdez, and he was flabbergasted to find that nothing much had changed since 1989. Reilly concluded that the BP spill “evidenced a failure of management, and good management could have avoided the catastrophe … We are not dealing here with a sick or failing or unsuccessful industry but with a complacent one.” Reilly reminds us that we in fact dodged a bullet two years ago: “…there was a point in the management of this crisis when industry experts feared the entire 120-million-barrel reservoir might seep through the ocean floor and wreak total havoc… What would we be talking about today if the well couldn’t be canned?… We’d be having an existential conversation about whether offshore drilling should ever be permitted in US coastal waters again.” Bill Reilly is no bomb-thrower. At the time he co-chaired the BP spill commission he was serving on the boards of ConocoPhilips and DuPont. As we mark this anniversary, two immediate challenges leap to mind: First, we must restore the Gulf Coast. The BP spill was a major blow to a region already under stress from urban sprawl, wetlands loss and pollution. Congress is now weighing a measure — called the RESTORE Act — that would divert most or all of BP’s penalties to gulf cleanup. Bipartisan versions of this measure have passed both the Senate and the House; it’s time for Congress to finish the job and send a final bill to the president. Second, even as you read this, a drilling fleet under contract to Shell Oil is making its way to a patch of seabed less than 15 miles from Alaska’s Arctic National Wildlife Refuge. Incredibly, Shell has secured nearly all the government permissions it needs to begin drilling operations in a body of water that is ice-covered much of the year, in a place where the sun does not shine for months on end, and where extreme weather is commonplace. The U.S. Government’s own non-partisan watchdog, the Government Accountability Office (GAO) thinks this is a terrible idea . We agree. Cleaning up a major spill in the Arctic would make the BP disaster look like child’s play. Last month the GAO issued a report raising fundamental concerns about whether a major spill could ever be managed in icy conditions. If there is a spot on Earth as sacred or as critical to the future of our wild birds as the Gulf of Mexico, it is probably the unspoiled Arctic. Here, hundreds of bird species arrive every spring from all four North American flyways — the superhighways in the sky that birds use to travel up and down the Americas. Here, they mate, lay eggs and raise their young. Here also, many of America’s remaining polar bears make their winter dens along the coasts. The potential harm from a BP-scale spill is almost beyond comprehension. And, there is growing evidence that we simply do not need to take risks like this to meet our nation’s energy needs. Oil imports are down. Oil production from domestic wells is up thanks to new technology. We’re driving farther on a gallon of gas and using less. Energy independence is becoming a real possibility. Since those who cannot remember history are doomed to repeat it, the price of social amnesia has become unacceptably high. A workable balance between powering the nation and protecting our natural bounty is within reach, but only if we remember, learn, and not be fooled again.

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Sarah Damaske: Equal Pay Day: In the Wake of the So-Called "Mommy Wars" Renewal and Partisan Attacks on Equal Pay Bills

April 17, 2012

Equal Pay Day comes this year in the midst of the renewal of the so-called “mommy wars” on the one hand, and a blatant attack on equal pay rights bills on the other. Last week, Hilary Rosen set off a media maelstrom when she said that Mitt Romney’s wife, Ann, “has never actually worked a day in her life.” Just a week before (and to much less fanfare), Wisconsin Gov. Scott Walker repealed Wisconsin’s Equal Pay law and one of the state senate Republicans, Glenn Grothman, was quoted as saying, “You could argue that money is more important for men, anyways.” Both have serious implications for the equal pay cause. The National Committee on Pay Equity started Equal Pay Day in 1996 to bring more public attention to the gender wage gap, the difference between what an average full-time, year-round, male worker earned and what the average full-time, year-round, female worker earned. In 1996, the difference was 73.8 cents to the dollar and, today, the difference is about 77.4 cents. Not a terribly huge improvement over the last 16 years. Researchers have long noted that a number of factors can partially explain the gender wage gap. Notably, women and men tend to work in different industry sectors and different occupations within industry, which can explain a sizable portion of the gap. But differences in pay for various occupations may be due to whether jobs are associated with women or men. In other words, while occupational differences may explain some of the gender wage gap, the pay scale for different occupations is connected to whether or not the occupations are made up of mostly men or mostly women. And as sociologist Paula England and economist Nancy Folbre found in their research , women are more likely to work in caring fields, which offer relatively poor pay given the skill and education necessary for much of this work. Devaluing the hard work of acting as a primary caregiver of children not only dismisses the unpaid labor done in the home, it also contributes to the struggle of the millions of paid female laborers who work in caring fields and find that their work is neither recognized nor justly rewarded. Calling this past week’s maelstrom a renewal of the “mommy wars” dodges the real issue: Caregiving, whether done unpaid in the home or for pay outside of it, is not particularly valued in this country and women (whether in the labor market or not) suffer the brunt of this. Differences in pay are likely also connected to bias. Having children often increases men’s wages, according to research from sociologist Rebecca Glauber , but it often decreases women’s wages and women working in low-wage jobs face the toughest wage penalties for motherhood, as sociologists Michelle Budig and Melissa Hodges found . When Grothman argued, “Money is more important for men,” he may have been tapping a generally unspoken belief — that a woman’s salary is less necessary to her family than is her spouse’s. But, these beliefs are a remnant of times gone by in which men were primary breadwinners and women were primary homemakers (although as historian Stephanie Coontz has noted, even during the 1950s, this gender divide was never as big a phenomenon as we remember it to be). Today, only 20 percent of children are raised in families with a traditional breadwinning father and stay-at-home mother. Most children, then, live in families that depend on the wages of women, and one-third of children live in single-mother households and are most at risk of living in poverty. The National Women’s Law Center reports that bridging the gender wage gap would give the average full-time working woman’s family the money to pay for an additional 4 months’ supply of groceries, 5 months’ of childcare, 3 months’ rent and utilities, 5 months’ health insurance premiums, 4 months’ student loan payments, and 5 tanks of gas. Addressing the wage gap would go a long way in increasing women’s economic security, as well as the financial security of their families. In 2010, all Senate Republicans voted against considering the Paycheck Fairness Act. As both President Obama and presidential hopeful Governor Romney continue to vie for women’s votes, it would be nice to see some serious proposals from the candidates about how to bridge the wage gap.

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Andrea Sittig-Rolf: The Audacity of Nope: Why Hearing "No" Can Help Salespeople Get to "Yes"

April 16, 2012

You may often think, “How can I increase my number of face-to-face appointments when so many companies aren’t buying right now?” The problem lies in the question itself. If you’re scheduling an appointment just to sell something, you may have a tough time getting the appointment. If the perception of your prospect is that the very reason you’re calling is to either sell them something over the phone, or schedule a meeting to sell them something, you’ll likely hear things like “It’s not in our budget,” “We’re not making any purchases now,” “We don’t have any money,” “We’re not in the market,” and “Our budget has been frozen.” In other words, you may be setting yourself up to hear “no.” If, however, you position your introduction over the phone as an opportunity to meet in person so you can learn more about your prospect and their potential future needs, you may have better luck. After all, if your goal is simply to learn about the prospect, you may not have an opportunity to sell them anything at all, so there’s less resistance to setting up a meeting. If you still encounter “no” when asking for that first meeting to start the discovery, and potentially selling process, here are some tips to get the meeting anyway. First, if you have a good sense of humor, use it, and you’ll be half way there. Making someone laugh breaks down the barrier between two otherwise strangers. If the response to your question in asking for a meeting is, for example, “We don’t have any money,” say “Neither do I, that’s why I’m calling YOU!” Now of course, part of the humor in this is your delivery, so you may want to practice a few times before trying it live. Another response to the all too common, “It’s not in our budget” objection is “In that case, now is the perfect time to meet! We’ve found it very beneficial to discuss future needs and our solution early so that if you decide to proceed, we can be of help during your decision-making process.” Notice I said, “If you decide to proceed” which implies that you’re not going to shove the sale down their throat, but that the prospect will be making the decision to proceed or not. It’s also a good idea to present yourself as a resource to the prospect, regardless of whether they’re in the market at the moment or not. Then, actually BE a resource for them, even if it means meeting several times, providing valuable information that will help them and offering advice in your area of expertise even if it’s outside of the potential solution you may have to sell them. Another good rule of thumb is to give something of value to your prospect three times before asking for anything in return, like an order. Providing something of value might mean something as simple as sending an email with an article relevant to a recent discussion the two of you had about their needs, or introducing your prospect to another member of your team or resource within your company who can provide expertise, such as an engineer or project manager. If you’re genuinely interested in helping them with their plight, regardless of having the entire solution to sell yourself, your sincerity will become obvious to the prospect and it will only make sense they buy from you when they’re ready to make a purchase. Also, the rule of reciprocity is at play here. It’s human nature to give back to those who have helped us. By helping the prospect first, you set up the dynamic of the rule of reciprocity and they will be likely to reciprocate the favor you’ve done for them, by placing their order with you. Once you’re ready to close the sale, if budget is still an issue, you can discuss payment plans, leasing options, no money down, 90-day payment and other terms that may make your solution more appealing to your prospect. Your willingness to work with them and their budget will increase your chances of ultimately closing the sale. You can also reflect back with the prospect to your earlier discussions about what was important to them which will help build the value of your solution, framing the money issue more as an investment than as a cost. Finally, sometimes the answer is “no,” but you know what? That’s okay too. Part of learning to love hearing “no” is knowing that it’s only a matter of time before you hear the word “yes.” The more “nos” you get, the closer you get to “yes.”

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Terry Connelly: We Have Seen This Stock Market ‘Horror’ Movie Before

April 16, 2012

Here we go again. It’s the second quarter of the year, and once again — as in 2010 and 2011 — the hedge fund investors that missed the rally in the U.S. stock market have rebooted their “sky is falling” pitch to scare the rest of us out of our shareholdings. They do this so they can buy back into the market on the cheap and enjoy the rally that will occur in the second half of the year — just like the previous years. Two months ago, “a few” members of the Federal Reserve Board were favoring a QE. Now, they say it’s just “a couple.” So, one day it’s a strained reading of month-old Federal Reserve Board meeting minutes that concludes that the Board has taken additional monetary stimulus “off the table” because just “a couple” as opposed to “a few” have agreed that action may be necessary. (What if the “couple” happened to be Chairman Bernanke and Janet Yellen, his deputy?). In the end, a couple and a few are the same thing, but the market has overread “a couple.” Curiously, CNBC, the main market news outlet on cable, started promoting this thesis right away (presumably as part of its virulent anti-Obama campaign to talk down the market lest the President’s re-election campaign get any bounce from better stock prices and fatter 401(k)s and sure enough the market went down by triple digits. Then came the monthly jobs report showing only 120,000 net jobs created in March. Clearly a disappointing number compared with the more than 200,000 in February and January, except for the fact that these monthly estimates (which are based on a projection model for a set of interviews with employers, not an actual numerical “headcount”) are always wrong and corrected in subsequent months. On a corrected basis, the QUARTERLY jobs report — a more reliable indicator — shows a step up in hiring for each of the past THREE quarters, rising from 300,000 plus in Q3 2011 to 400,000 plus in Q4 2011 to more than 600,000 plus in Q1 2012. Of course, this data never made it onto CNBC. Then came the hedge fund hit to Spanish and Italian sovereign debt interest rates when the European markets opened Tuesday after the Easter holiday. Here’s how that happens: the hedgies don’t have to actually sell Spanish and Italian government bonds and take losses. All they have to do is bid up the price of credit-protection (the famous credit default swaps (CDS) that helped bring on the U.S. financial panic in 2008) on Spanish and Italian debt. The CDS contracts pay out only if the debt defaults, so a higher price implies a higher risk of default on the underlying debt. When that happens, investors tend to dump the underlying debt, sending the interest rates up. The hedge funds and other big investors know from the past two years of experience that such movements in the CDS markets move the European sovereign debt markets down and in turn, spook the U.S. stock markets into their now famous “chicken little posture.” Translation: you can manipulate the U.S. stock market down by 500 points or more over two or three days just by bidding up a few Euro debt CDS contracts on Italian and Spanish debt! But you won’t hear that on the supposedly informative CNBC. You just hear about the Spanish and Italian interest rate spikes, just like last year and the year before. You also hear about other European sovereign debt at just about this time of the year — after a run up in the U.S. market that some of the “big boys” missed out on. And so, on Tuesday after Easter, we went down 200 more points on the Dow. As CNBC cheers on the incipient “market correction” and puts on a series of chartists warning of free-fall. Just to top it off, the CNBC mavens chat incessantly about the coming downturn in corporate earnings on the first day of Q1 reporting season, quoting of course unnamed experts that earnings will actually fall for the quarter. Never mind that 3/4th of the early reporters — a small but at least “actual” sample — have already reported earnings that EXCEEDED estimate. Never mind that Alcoa, which was panned all day long by the cable Cassandras, actually reported earning revenues and earnings after Tuesday’s closing bell that also significantly exceeded estimates! Are we seeing a pattern here? It’s déjà vu all over again, as Yogi Berra would say. Fool me once, your fault; fool me twice, my fault; fool me three times, well, that’s the lot of U.S. equity traders, as they again fall for the hedge funds’ head-fake apocalyptic scenario in the second quarter, and take the rest of us down with them. What the hedgies and their shills at CNBC count on is the fact that average investors aren’t used to short selling, so they don’t understand that folks who come on TV and talk the market down might actually be “talking their book” just like the typical stock “promoters” they are justly suspicious of. Wise up, stock investors — you are being had, again — by some real pros that count on you having a short memory from the games they played the last two years, at just this time of the year. They, not you, made the money in the second half of the past two years. Wise up!

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Ben Hecht: Mainstreaming Social Innovation With the Public Sector

April 16, 2012

Social innovation has been a hot topic for a number of years now, but never more so than today. Conferences, awards, magazines, even a White House-led Social Innovation Fund, are dedicated to it. And for good reason. People have lost confidence in the institutions that they historically relied upon to solve our most pressing problems. Leaders have realized that if they want to change the status quo in their lifetimes, they need to stop waiting and start building their own solutions. More often than not, however, when we refer to social innovation, what we really mean is innovation sponsored by the social sector (“social sector innovation”). We’re talking about nonprofits created to fill gaps in a terribly broken system, such as connecting patients and their families with the basic resources they need to be healthy ( HealthLeads ) or providing urban young adults with the skills, experience and support that they need to reach their potential through professional careers and higher education ( YearUp ). Organizations like Echoing Green , Ashoka and New Profit , have accelerated the creation of a social sector innovation field by supporting the emerging leaders of these organizations with grants, business planning and connecting them to a network of similar ‘social entrepreneurs.’ As I stood atop the trading floor of the New York Stock Exchange (NYSE) last Wednesday however, I realized how incredibly self-defeating this narrow definition of social innovation is if large scale change is our goal. I was literally witnessing one of the most effective and lasting social innovations in the U.S. and it had been done by the public sector. The more I thought about it, the more I realized that public sector-led social innovation (“public sector innovation”) differs from social sector innovation in one absolutely fundamental way: it actually has a much better chance of having permanent, lasting impact from the outset. Many social sector innovations, like ones I’ve helped lead over the past 20 years, toil for years to build a successful model and then struggle for years thereafter to both get the attention of government and the adoption of the model by the public sector. In contrast, public sector innovation is undertaken with the assumption that if it is successful, it will go straight, “intravenously” into effect. No annual fundraising or advocacy necessary. The innovation and related funding will quickly displace the old way that government did business. For instance, what Linda I. Gibbs, New York City’s Deputy Mayor for Health and Human Services, has done in New York is one example of the extraordinary power of public sector innovation strategies. After her appointment, Gibbs created the Center for Economic Opportunity (CEO) to design and implement evidence-based initiatives to reduce poverty. On the policy side, the Center developed an updated poverty measure that it not only adopted but has also been adopted by the Obama Administration. On the program side, for example, CEO created Financial Empowerment Centers to help citizens take control of debt, improve credit ratings, deal with debt collection and learn to create budgets. After serving over 13,800 residents, helping them to reduce over $6.9 million in debt, build more than $900,000 in savings and achieve financial stability, the innovation went straight into the mainstream — it’s now the way the city does business. Not a pilot. Nice but that’s not all especially given how cities compete with their peers. In 2008, Mayor Michael Bloomberg of New York City and then-Mayor Gavin Newsom of San Francisco, two mayors committed to this issue, created the Cities for Financial Empowerment (CFE) Coalition . Since then, a dozen cities have come together to share promising approaches, build a unified policy program and adopt innovations into their mainstream operations. I was standing atop the NYSE because I was celebrating, with CFE co-chairs Jonathan Mintz, NYC Department of Consumer Affairs Commissioner, and José Cisneros, City of San Francisco Treasurer, the announcement of The Cities for Financial Empowerment Fund (CFE Fund) at Living Cities as part of NYSE’s Financial Literacy Week. The Fund will institutionalize this loose-knit collaboration of cities interested in financial empowerment. In essence, it will help cities to skip a generation of innovation and go right to intravenous adoption of what works. We need to do more to celebrate and replicate these types of successes. We need to honor the vision of public sector innovation trailblazers like Linda Gibbs, Jonathan Mintz and Jose Cisneros as much as we honor the extraordinary efforts of social sector innovation leaders like Wendy Kopp and Geoffrey Canada. The more the better.

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Javier Garcia-Martinez: Science Deficit

April 16, 2012

The current worldwide economic situation is bringing scrutiny to how developed countries balance their national budgets, and for the scientific community this provides a timely and interesting opportunity to observe how public investment in scientific research and development (R&D) is being either increased or significantly reduced by different countries. Some countries believe that investment in R&D is one to help get out of the crisis; heavily investing in R&D can diversify their economies and increase their competitiveness. For example, France has announced a €35,000-million ($4.6-billion) investment in research. Germany has implemented a 5-percent increase in the budget of its main research institutions until 2015. But other countries are trying to reduce public expending at all costs. Recently, Spain announced a whopping 25.6-percent cut in its budget for R&D. It is interesting to note that Spain is, along with the countries that have been bailed out (Portugal, Italy, Greece, and Ireland), among the countries that spend the least amount in R&D. Conversely, countries that invest more in R&D have very low-risk premiums. It seems that public investment in R&D is the effective recipe against the contagious economic illness that many developed economies are suffering. One could think that at least the markets will react positively to short-term radical measures to reduce national deficits. Unfortunately, for those countries that are dramatically cutting in R&D, although markets will be benevolent to dynamic and competitive economies, they will be merciless to economies with high unemployment rates, lack of opportunities, and brain drain, trends that underinvestment in R&D will only aggravate. A good example was seen when Spain was significantly punished by the markets in the days after announcing these austere but unselective measures on March 30. Just few days later a national call for promoting scientific culture was announced by Fecyt, a government organization devoted to promoting science and technology. A crucial issue is how to convince now-young Spaniards that there is a future in science when there is no money there, and when the leaders of the country have decided that is not a priority. Furthermore, what does this mean for those who already decided to go for a career in science? In the past, companies have been incentivized via tax deductions to invest in innovation, but now many of those incentives are gone. How can we convince others to place a bet on R&D when the leaders of the country have decided that this is something superfluous, something that has to go in difficult times? However, the unprecedented reduction in government investment in R&D is only one of the recent measures announced that exacerbates our “science deficit” and that will impact our ability to create a more competitive and diverse economy in Spain. Since the end of last year, by law, no public institution can hire any new scientist, teacher, or professor, no matter how good, how capable of attracting funding, or how able to create new companies he or she is. This is especially dramatic for the researches under the Ramón y Cajal program, which include some of the most brilliant scholars of Spain, typically between 35 and 45 years old. Sadly, it seems that bright futures for these individuals exist only abroad. Suddenly closing programs that took years to build doesn’t make any economic sense, as the losses and opportunity costs will be far greater than the money saved. Similarly, pushing the best and the brightest away at their best time of their careers after investing so much in their education and training is possibly the worse decision a government can make to recover from an economic crisis. A similar cut has been announced in education (22-percent reduction), which is significantly higher than the average reduction in the national budget (16.9-percent). This is despite the fact that three out of 10 students in Spain are unable to finish the Obligatory Secondary Education (ESO) and Spain is 12 points below the average of the OCDE countries (18 points below in science) in the PISA study. As in the case of public investment in R&D, those countries at the top positions of the PISA ranking are also the ones with lower-risk premiums; more sustainable, competitive, and diversified economies; and better-paid jobs. Research and education seems to act as vaccine against the worst consequences of the crisis, which in the case of the Spain is unemployment, which reaches almost 50 percent for young people. In the U.S., the Obama administration has identified education as one of the key strategies for the future of the country, specifically focusing on the teachers, announcing a nation-wide program to train 100,000 teachers of STEM in the next 10 years. Balancing public budgets is not only necessary but urgent in many developed countries, because their economies are not able to grow at the level that will allow maintaining many public services. However, dramatic reductions in strategic programs and education, and closing the doors to the most talented, will have only limited, short-term budget impacts, and they come at the expense of making it impossible to create conditions that foster growth, competitiveness, and a dynamic economy.

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Bill Moyers: The Rich Are Different From You and Me — They Pay Lower Taxes

April 16, 2012

Benjamin Franklin, who used his many talents to become a wealthy man, famously said that the only things certain in life are death and taxes. But if you’re a corporate CEO in America today, even they can be put on the backburner — death held at bay by the best medical care money can buy and the latest in surgical and life extension techniques, taxes conveniently shunted aside courtesy of loopholes, overseas investment and governments that conveniently look the other way. In a story headlined, ” For Big Companies, Life Is Good ,” the Wall Street Journal reports that big American companies have emerged from the deepest recession since World War II more profitable than ever: flush with cash, less burdened by debt, and with a greater share of the country’s income. But, the paper notes, “Many of the 1.1 million jobs the big companies added since 2007 were outside the U.S. So, too, was much of the $1.2 trillion added to corporate treasuries.” To add to this embarrassment of riches, the consumer group Citizens for Tax Justice reports that more than two dozen major corporations — including GE, Boeing, Mattel and Verizon — paid no federal taxes between 2008 and 2011. They got a corporate tax break that was broadly supported by Republicans and Democrats alike. Corporate taxes today are at a 40-year-low — even as the executive suites at big corporations have become throne rooms where the crown jewels wind up in the personal vault of the CEO. Then look at this report in the New York Times : Last year, among the 100 best-paid CEOs, the median income was more than $14 million, compared with the average annual American salary of $45,230. Combined, this happy hundred executives pulled down more than two billion dollars. What’s more, according to the Times “… these CEOs might seem like pikers. Top hedge fund managers collectively earned $14.4 billion last year.” No wonder some of them are fighting to kill a provision in the recent Dodd-Frank reform law that would require disclosing the ratio of CEO pay to the median pay of their employees. One never wishes to upset the help, you know. It can lead to unrest. That’s Wall Street — the metaphorical bestiary of the financial universe. But there’s nothing metaphorical about the earnings of hedge fund tigers, private equity lions, and the top dogs at those big banks that were bailed out by tax dollars after they helped chase our economy off a cliff. So what do these big moneyed nabobs have to complain about? Why are they whining about reform? And why are they funneling cash to super PACs aimed at bringing down Barack Obama, who many of them supported four years ago? Because, writes Alec MacGillis in The New Republic — the president wants to raise their taxes. That’s right — while ordinary Americans are taxed at a top rate of 35 percent on their income, Congress allows hedge fund and private equity tycoons to pay only pay 15 percent of their compensation. The president wants them to pay more; still at a rate below what you might pay, and for that he’s being accused of – hold onto your combat helmets — “class warfare.” One Wall Street Midas, once an Obama fan, now his foe, told MacGillis that by making the rich a primary target, Obama is “[expletive deleted] on people who are successful.” And can you believe this? Two years ago, when President Obama first tried to close that gaping loophole in our tax code, Stephen Schwarzman, who runs the Blackstone Group, the world’s largest private equity fund, compared the president’s action to Hitler’s invasion of Poland. That’s the same Stephen Schwarzman whose agents in 2006 launched a predatory raid on a travel company in Colorado. His fund bought it, laid off 841 employees, and recouped its entire investment in just seven months — one of the quickest returns on capital ever for such a deal. To celebrate his 60th birthday Mr. Schwarzman rented the Park Avenue Armory here in New York at a cost of $3 million, including a gospel choir led by Patti LaBelle that serenaded him with “He’s Got the Whole World in His Hands.” Does he ever — his net worth is estimated at nearly $5 billion. Last year alone Schwarzman took home over $213 million in pay and dividends, a third more than 2010. Now he’s fundraising for Mitt Romney, who, like him, made his bundle on leveraged buyouts that left many American workers up the creek. To add insult to injury, average taxpayers even help subsidize the private jet travel of the rich. On the Times ‘ DealBook blog , mergers and acquisitions expert Steven Davidoff writes, “If an outside security consultant determines that executives need a private jet and other services for their safety, the Internal Revenue Service cuts corporate chieftains a break. In such cases, the chief executive will pay a reduced tax bill or sometimes no tax at all.” Are the CEOs really in danger? No, says Davidoff, “It’s a common corporate tax trick.” Talk about your friendly skies. No wonder the people with money and influence don’t feel connected to the rest of the population. It’s as if they live in a foreign country at the top of the world, like their own private Switzerland, at heights so rarefied they can’t imagine life down below. Moyers & Company airs weekly on public television ( check local listings ). See more features — including our all-new TAKE ACTION page — at BillMoyers.com

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Deborah J. Vagins: We Can’t Wait for Fair Pay

April 16, 2012

Would you know if the person sitting next to you at work was being paid significantly more than you to do the same job? If you suspected that might be the case, would you know what to do about it? You might start by simply asking the question. Unfortunately, there’s a chance that you could be fired for doing just that. Nearly half of American workers are either forbidden or strongly discouraged from discussing their pay with colleagues. Not just inquiring, but merely discussing — that means that in plenty of workplaces, you can be fired for just volunteering information about your own salary. That’s right: your conversation at the water cooler could cost you your job. This brand of punitive pay secrecy has dire implications for women, who even today — almost 50 years after the passage of the Equal Pay Act of 1963, still make just 77 cents for every dollar earned by men. For women of color, the facts are even worse : in 2010, African-American women earned only 62 cents and Latinas only 54 cents for each dollar earned by a white man. It’s these dismal statistics that force us to reluctantly mark Equal Pay Day this year on April 17, 2012 — the point into 2012 that a woman must work, on average, to make she same amount a man did in 2011 alone. The serious wage gap, combined with pay secrecy policies, means that many women are not only being paid less than their male co-workers, but they have no way of knowing it. And if they don’t know it, they can’t fight it. Thankfully, this Equal Pay Day, we can do something to change that. President Obama has the opportunity to take a huge step towards ensuring pay equality right now by signing an executive order that would protect people who work for federal contractors against retaliation for disclosing or asking about their wages. Federal contractors include any company that receives federal taxpayer dollars to do work for the government. About 26 million people in America work for such contractors — that’s over 20 percent of the entire U.S. workforce. For over 70 years , president after president, of both parties, have used the power of executive orders to protect employees who work in companies that contract with the federal government. These steps have often led the way later for expanded protections for all workers. Allowing all of these workers to discuss their salaries without fear of losing their jobs will give women an important tool for finding out whether or not they are being treated equally. And that’s the first step to fighting back against pay discrimination. This month, the president has put the issue of women’s economic security center stage. Speaking at a forum on women and the economy, he announced the release of a new report by the White House Council on Women & Girls, which details progress the administration has made in initiatives that support women throughout their careers. He also acknowledged the continued pay gap, noting , “Overall, a woman with a college degree doing the same work as a man will earn hundreds of thousands of dollars less over the course of her career.” And in an op-ed last week, he emphasized the importance of fixing that, writing “Closing this pay gap – ending this pay discrimination – is about far more than simple fairness, it’s about strengthening families, communities and our entire economy.” We couldn’t agree more. With 40 percent of women acting as the primary breadwinners in their homes, far too many families are taking home far less than they deserve. Women can’t wait any longer. That’s why it is so crucial that President Obama brings immediate relief to the millions of women employed by federal contractors by issuing an executive order that will protect them from retaliation for discussing their wages. Of course, federal legislation is still needed to protect all workers against discrimination. The Paycheck Fairness Act, a bill currently pending in both the House and Senate , would help close some of the loopholes in the Equal Pay Act of 1963, which have made that law less effective over time. Among a range of other provisions, it would prohibit retaliation against employees who inquires about or discloses wage information–much like the proposed executive order — but would extend coverage to all workers (with some limited exceptions), not just those who are employed by federal contractors. There’s no question that the Paycheck Fairness Act is necessary — but while Congress remains gridlocked, millions of women are still waiting for fair treatment. You can help to end that wait for millions of women. Take action today by urging President Obama to issue an executive order banning retaliation against federal contract employees for discussing their pay.

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David Burwell: Of Oil Prices and Elephants

April 16, 2012

Six wise men of Industan, of learning much inclined, went to see an elephant, though all of them were blind, that each by observation might satisfy his mind. The debate over gas prices, what causes them to soar and crash, and who is to blame, is a parlor game played out in Washington at the start of the driving season every spring, and even more so in presidential election years. It is a redundant, blind-leading-the-blind discussion. So, let’s see if we can parse the arguments made by the proponents of the various “truths” about gasoline prices to find the culprit. By analogy, we will track the arguments to the classic J. G. Saxe poem, “The Blind Men and the Elephant,” with oil being the “elephant” in the room. The first approached the elephant and happening to fall against his broad and sturdy side at once began to bawl, “This mystery of an elephant is very like a wall.” The wall of worry — that some natural (like a hurricane) or man-made (such as a terrorist act, a war, or an embargo ) disaster will cut off our access to oil and drive gasoline prices higher. This is a fear that oil exporters of any stripe diligently encourage. And it is partly true–Hurricane Katrina cut off both access to oil and caused refineries to shut down, causing a gasoline price spike. But the United States, like all net oil importing nations, have set up strategic petroleum reserves to safeguard access to oil in times of such interruptions. The U.S. strategic reserves already have more than 200 days of U.S. oil imports safely stored in salt domes in Texas. Absent an OPEC-like coordinated embargo, which would do more damage to OPEC than to oil importers (see below), these interruptions will be short term and the price hike mild. So risk of supply interruption can’t fully explain the problem. The second, feeling of the tusk, cried “Lo what have we here, so very round and smooth and sharp? To me ’tis mighty clear, this wonder of an elephant is very like a spear.” The spear of the gas tax — a tax that pierces the heart of every American driver. But the 18.4-cent federal gas tax is less than 5 percent of the price of a gallon of gasoline. It is also getting smaller as a percentage every day as gasoline prices rise. Add state and local gas taxes and the average is still only 12 percent of the total price per gallon — one of the lowest in the world. It also has not risen since 1993 — even though fully 60 percent of Americans think the gas tax rises every year. While this tax is supposed to keep our transportation infrastructure in good shape and performing efficiently, it is so inadequate to meet present needs that the quality of U.S. infrastructure has fallen, according to the World Economic Forum, from fifth in 2001 to twenty-third place globally. So gas taxes — while a minor contributor — can’t be the culprit either. The third approached the elephant, and happening to take the squirming trunk within his hands, thus boldly up and spake, “I see,” quoth he, the elephant, is very like a snake.” The snake of speculation — this argument appears to have some merit, especially if one compares global daily consumption of oil (89 million barrels) to actual oil traded on public commodity markets every day (over three billion barrels ). Clearly most oil traded is done by those who have no intention of ever taking possession of it. This argument is bolstered by commentators who note the existence of ” dark pools ” of oil traded privately between oil companies, banks, and investment companies as a kind of reserve currency. These private trades are estimated to be many multiples higher than publicly-traded oil stocks and can lock up inventories, thus causing prices to soar even in times of low demand and high supply. A recent study by the St. Louis Federal Reserve estimates that speculation accounts for about 15 percent of the oil price rise over the last ten years. But it also says that “fundamentals (supply and demand) continue to account for the long-term trend in oil prices.” This snake, if it has a bite, is not poisonous. The fourth reached out with eager hand, and felt above the knee, “what this most wondrous beast is like is very plain” said he, “tis clear enough the elephant is very like a tree.” The ever-growing tree of demand expansion — true, global demand for oil has risen over the last decade, from 76 million barrels per day in 2000 to 87 million in 2010 , but supply has kept pace. Moreover, OECD oil consumption has peaked and is now in decline , and new, unconventional oils have expanded potential supply to meet all needs far beyond the time their carbon emissions will push global temperatures to catastrophic levels. The simple fact is that the OPEC nations, with 77 percent of global proven oil reserves and 42 percent of production, have models that calibrate the exact amount of that oil to put on the market to secure maximum financial return. The United States, representing about 10 percent of global production but 20 percent of global consumption, cannot substantially affect the oil price — nor can more drilling. In fact, America already has more than 50 percent of all the in-use wells in the world. Canada, which produces 50 percent more oil than it consumes , has higher gasoline prices than the United States. The fifth, who chanced to touch the ear said, “E’en the blindest man, can tell what this resembles most — deny the fact who can; This marvel of an elephant is very like a fan.” The fan of inflation — the theory goes that as the U.S. continues printing money to cover its trillion-dollar deficits, inflation will rise and, with it, the price of oil, since it’s priced in dollars. Nice idea. But inflation remains tame while the price of oil has doubled since the depth of the Great Recession in early 2009. Inflation may be a future culprit, but it certainly is not pushing oil and gas prices up anytime soon. The sixth no sooner had begun about the beast to grope, than seizing on the swinging tail that fell within his scope; “I see,” said he, “the elephant, is very like a rope.” The rope of the resource curse — this is a little-understood contributor to the world oil price that may eventually hang the oil-exporting economies. These economies, primarily the OPEC countries, Norway, and Russia, are heavily dependent on export sales of their natural resources — especially oil — to fund their national budgets. Over 50 percent of the federal budget of the Russian Federation is from taxes on sales of exported oil, and this percentage is much higher in some Middle Eastern countries. These revenues are then disbursed to subsidize their social contracts with their citizens — cheap energy and low-cost housing, without which social unrest would accelerate. This requires ever-rising oil prices. Ten years ago, Russia could fund its social contract at a world barrel price of oil of $20. But by this year, Moscow’s budget needs an average price of $115 a barrel to break even. The Middle Eastern states are feeling the pinch as well: Barclay’s Capital recently estimated that the cost of the Arab Spring alone pushed the break-even point for Saudi Arabia’s budget from $78 a barrel to $91 a barrel — to fund the extra spending needed to prevent social unrest from threatening the regime. So, if gas prices are the elephant, did the six wise men find their answer? So six blind men of Industan disputed loud and long, each in his own opinion exceeding stiff and strong; though each was partly in the right, they all were in the wrong! As it is with elephants, so it is with oil prices — plenty of “wise men” talking about what drives oil prices and all are partly in the right — but mostly in the wrong. For the real answer on what is driving gas prices higher, let’s look into the mirror. We all hate high gasoline prices but we love the lifestyle that gasoline supports: the freedom of the open road — flat, straight, fast, and free (with no tolls). We buy up cheap land where you can “drive until you qualify” for a home mortgage (with interest deductible). We then expect the government to build and maintain the infrastructure that supports our 50-mile commute to work, even though we oppose the gas taxes that fund all the infrastructure that provides these very same lifestyle benefits. Until we grasp the reality that the price of oil is directly related to how we waste it, we will continue to dedicate countless hours and endless column inches looking for a different culprit. The elephant in the room is not the price of gasoline — it is us. David Burwell is the director of the energy and climate program at the Carnegie Endowment for International Peace .

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D. Sidney Potter: Stories From the Frontline: Why Is Mortgage Aid, Hater-Aid?

April 16, 2012

As a continuing topic from the post entitled, “Stories From the Frontline: Robo Signers vs. the Silent Enemy,” the following is a continued look into the operational innards of mortgage operations centers. Why is the banking industry — for the most part, since I personally detest over generalizations, resistant to essentially doing the right thing and/or at least doing it in a timely matter? It is almost fascinating that acclimatization is loathed, rather than embraced. It is not often one gets to be a white knight in the face of such Armageddon-like financial tragedy, but these banking guys in the C-suite found a way to do it without really trying. Sociologists would call that cognitive dissonance. For example, I was engaged a few years back as a mortgage operations consultant for one “Too Big to Fail” bank that shall remain nameless (let’s just say it’s logo is a stage coach), whose loss litigation team had to consist of less than 30 full time members! Albeit, this was back in 2009, and banks were gonna through a deer in the headlights stage in adjusting their operational capacity to meet the massive avalanche of foreclosures coming upon them, but this mind you was a very apparent understaffing at this particular banks’ headquarter location. Out of curiosity and in passing, I asked the vice president in charge of this ‘start-up’ department, where were all the loan modifiers. Her reply, and slightly stunned response, was that they were working on it! Hello, did you not get the memo that the economy just got pierced wide open with a set of vice grips for open heart surgery and that it may have forgotten to administer itself with anesthesia. (Maybe the email went to her junk mail). The silent enemy — who are a form of malfeasant employees, are not necessarily a conniving bunch; and like the poisonous affect a few drops of python venom has on a healthy 200-pound man, so to can a few bad men within an industry that is entrusted in safe keeping our money. In the end, those individuals who work in loss mitigation centers for the banks are to a point, contributorily responsible for the prolonged economic recession. Like the 1977 movie Network , one wants to open a window and yell out “I’m mad as hell and I’m not going to take it anymore.” Mortgage mess, be over already, will you. But ultimately, these loan modifiers who are known as LMs (aka Lone Morons) are good Germans. And good Germans do what good Germans do best, and that is they do what their told. But consequently, they benefit financially by their individual group conformity — and as luck would have it, results in some of them not losing their own home to foreclosure. How ironic. Poetic justice almost sings again. The loss mitigation business, is not the only industry to do well when a mega-disaster hits. I’m not an expert on the histrionics of vaccinations, but somebody had to have made a killing with the onset of the black bubonic plague or even the polio epidemic at the turn of the last century. During and after every disaster there’s clean up to be done. What about German uniform manufacturers (for soldiers and prisoners), in the 1930s and ’40s? And lest we forget about German oven makers in the 1940s. Business most have been brisk. Couldn’t keep up with the demand. And in present day America, watch how many insurance claim adjusters come off unemployment whenever there’s a massive tornado. They call it tornado season for a reason. As a banking professional, you start to fill like you’re in the ‘body bag’ business of the mortgage industry. It doesn’t make what you do anymore digestible knowing that it’s God’s work, depending upon your mindset in which you try to convince yourself that you’re at least helping people. Metaphorically, it’s like being on a parole board and realizing that even though it’s usually a 3 to 5 board vote, your one vote could be the difference in properly adjudicating for the inmate/prospective parolee their future. Hence, some of the mortgage operations consultants — such as myself, take the contrarian point of view that a loan modification applicant ought to be helped, not hurt. For many bankers, the word help is a four letter word. And hence, that is the narrow bandwidth in which you live in — in which you can justify your professional credentials, and your professional wherewith all, and still look another mortgage ops professional in the eye without drawing scrutiny, scorn and contempt from others. And once again, you’d like to think that you’re doing God’s work, vs. the atypical maladjusted mortgage ops professional in the next cube over, whose’ pulling down $2k-plus a week while simultaneously casting judgment over others. For this reason, you come across some (although not nearly enough — since everyone has their best interest in hand), mortgage ops professionals who become the moral equivalent of Supreme Court Justice Anthony Kennedy. You become the swing vote. You become the unseen voice of reason. You become the final arbitrator, who may be able to justify the investigation or non-investigation of a mortgage applicant for suspected fraud. Realizing that another person fate is dependent upon you checking a box off on an intake sheet, or that the approval or denial of a loan modification may affect the uprooting of an entire family, or that because of professional peer pressure you deny a financially healthy loan applicant a cash-out “refi” that he is otherwise entitled to. This can sometimes be a heady undertaking. Without equivocation, you become the final denominator. Quite often, mortgage ops consultants are responsible for Monday morning quarter backing. You act as a referee of what’s just occurred. And sometimes you don’t always get instant replay and/or a commercial break to thoughtfully analyze the situation. In effect, you step atop a pedestal and decide (more or less), to fully adjudicate in your subjective opinion who wins or losses. Almost like Caesar summoning his court and deciding which of two remaining Gladiators to feed to the lions — or maybe both of them, for pure entertainment purposes. Even Caesar loved ratings. Some mortgage ops consultants where unfortunately ex-mortgage brokers who had no compunction, reluctance or guilt in seeing some hard working customers lose their home as a result of a loan modification specialist being short sighted. And in Caesar fashion, raising their clenched fist and pointing their thumb down. Next Huffington Post segment. Stories From the Frontline: Please Tell Me I’m in Kansas.

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Rory O’Connor: Facebook Is Not Your Friend

April 15, 2012

“Imagine… that you knew which sites — or what news stories — people you trust found useful and which they disliked,” David Kirkpatrick wrote in the June 11, 2007 issue of Fortune magazine. “This isn’t fantasy. Facebook might make it possible, and soon. Yes, the social-networking site college kids spend so much time on — the one you thought was just about hooking up — could turn out to be more important than any of us thought.” Kirkpatrick, who was then Fortune ‘s Senior Editor for Internet and Technology, went on to write the best-selling The Facebook Effect: The Inside Story of the Company That is Connecting the World , the definitive book on the company. He was prescient. In a startlingly short period of time, Facebook did make it possible for you to find those trusted and useful news sites and stories — along with much, much more. Now, with Facebook facing growing scrutiny in advance of its IPO next month, which is expected to value the Internet giant at $100 billion, the question of trust looms even larger. True, the social networking giant has made it easier than ever before to find trusted friends and followers, who can now create, curate, aggregate and distribute news and information with an unprecedented ease, as I detail in my new book Friends, Followers and The Future : How Social Media are Changing Politics, Threatening Big Brands and Killing Traditional Media . But is Facebook itself, the billion dollar baby whose rapid growth has yet to be slowed by continuing controversy over the privacy of its more than 800 million users, itself worthy of our trust? Can we rely on its wunderkind CEO Mark Zuckerberg, who has repeatedly pronounced privacy to be outmoded and argued that we are living in a new era beyond it, to safeguard our interests? Despite our differing — some would say competing — concerns, should we regard Facebook and Zuckerberg as our friends? After all, the online social network, which offers its tools, technologies, and services at no cost, makes profit primarily by using heretofore private information it has collected about you to target advertising. And Zuckerberg has repeatedly made sudden, sometimes ill conceived and often poorly communicated policy changes that resulted in once-private personal information becoming instantly and publicly accessible. As a result, once-latent concerns over privacy, power and profit have bubbled up and led both domestic and international regulatory agencies to scrutinize the company more closely. In one case, consumer protection groups, including the Electronic Privacy Information Center (EPIC) and fourteen others, filed a 2009 unfair-trade complaint with the Federal Trade Commission (FTC) accusing Facebook of unfair and deceptive trade practices that “violate user expectations, diminish user privacy, and contradict Facebook’s own representations.” It said that Facebook’s decisions to disclose previously restricted “personal information to the public” had violated users’ expectations, diminished their privacy, and contradicted its own representations. It asked the FTC to order the company to “restore privacy settings that were previously available… and give users meaningful control over personal information,” to investigate Facebook’s trade practices, require the company to restore privacy settings that were previously available and force it to “give users meaningful control over personal information.” Facebook settled in November 2011 by agreeing to refrain from making any further deceptive privacy claims, to obtain consumers’ approval before changing the way it shares their data, and to undergo independent third-party auditing for 20 years. Shortly after the uproar subsided, however, renewed concerns over privacy and trust began to shake the brand again. This privacy blunder centered on Facebook’s belated admission that it was still tracking the web pages its members visited, even after they have logged out of the Facebook site. As Daniel Bates reported for the Daily Mail , The social networking giant says the huge privacy breach was simply a mistake — that software automatically downloaded to users’ computers when they logged in to Facebook ‘inadvertently’ sent information to the company, whether or not they were logged in at the time. Most would assume that Facebook stops monitoring them after they leave its site, but technology bloggers discovered this was not the case. Instead, the tracking information — worth billions of dollars to advertisers — was being sent back to the Facebook servers. Even after you were logged out, Facebook still tracked every page you visited. As Bates noted, “The admission is the latest in a series of privacy blunders from Facebook, which has a record of only correcting such matters when they are brought to light by other people.” As its executives struggled to explain the “inadvertent” privacy row over its “creepy” web-tracking practices, that trust was shaken once again “by criticism and speculation regarding how it uses browser cookies to get data about users,” as Josh Constine posted on Insidefacebook.com . A lack of thorough documentation explaining what each of its cookies does has led some observers to assume that the company is tracking offsite browsing behavior in order to target ads. Facebook needs to provide explanations for both the average user and privacy researchers about how exactly its cookies work in order to prevent these press flare-ups from giving users a negative impression and bringing on regulatory scrutiny from governments. The company’s growing stature and importance only magnifies such concerns. As Facebook profile pages morph more and more into overall online identities, the inherent tension between our individual desire to protect personal information and the company’s need for that information comes into ever-sharper focus. Last week, for example, Facebook sought once again to address the persistent criticism of its privacy practices by instituting a new policy providing greater transparency on the types of data it stores about you. Yet critics like Max Schrems, a German law student who filed a complaint leading to the agreement, still criticize the company’s response. “We welcome that Facebook users are now getting more access to their data, but Facebook is still not in line with the European Data Protection Law,” Schrems told Kevin J. O’Brien of the New York Times . “With the changes, Facebook will only offer access to 39 data categories, while it is holding at least 84 such data categories about every user.” In 2011, when Schrems requested his own data from Facebook, he learned that the company was keeping information he had previously deleted from the website, and was storing information on his location. None of that sounds too friendly to me, so I really can’t recommend that you trust Zuckerberg, or Facebook, or indeed any corporation that makes its money by selling you — down the river or anywhere else. And as Nielsen’s Latest Global Trust in Advertising Survey proves, we trust “word-of-mouth recommendation from friends and family” above all other forms of communication. (At least that’s what 92 percent of respondents in 56 different countries said .) At the same time, our trust in paid traditional media (including television, magazine and newspaper ads) has steadily declined since 2009. (Trust in television is down 24 percent; magazines, down 20 percent; and newspapers down 25 percent, according to the survey.) “Consumers around the world continue to see recommendations from friends… as by far the most credible,” said Randall Beard, global head, Advertiser Solutions at Nielsen. Trust is essential for the success of any brand. Mark Zuckerberg may think that Facebook’s recurrent privacy flaps haven’t much affected the sometimes anti-social social network, but they represent a huge potential threat to what he has built. The high-handed manner in which members’ personal information has been treated, the lack of consultation or even communication with them beforehand, Facebook’s growing domination of the entire social networking sphere, Zuckerberg’s constant and very public declarations of the death of privacy and his seeming imposition of new social norms all feed growing fears that he and Facebook itself simply can not be trusted. As Zuckerberg’s fellow CEOs from the legacy media should have already learned, losing the trust of your audience is the first step in losing your audience itself — and eventually the power of your brand.

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Martha Burk: Equal Pay — Will We Ever Get There? An Interview With Lilly Ledbetter

April 15, 2012

April is the month every year when the paychecks of women working full-time, year-round catch up with what men earned by the previous December 31. This year it’s April 17. There are a number of causes for the pay gap, including job segregation (so-called “men’s jobs” pay more than “women’s jobs”) and the fact that working moms are often seen as less serious or less reliable, despite solid evidence to the contrary. But plain old sex discrimination plays a big part. Lilly Ledbetter found out the hard way after 19 years at Goodyear, when she learned she had been underpaid all along compared to men doing the same job. She sued — and won in lower courts. But the Supreme Court overturned 40 years of precedent when it ruled against her in the now-infamous Ledbetter v. Goodyear case, saying she should have complained earlier — even though she didn’t know about the discrimination. The Lilly Ledbetter Fair Pay Act restoring the previous standard (a victim has 180 days to complain beginning when she learns about the discrimination) was the first law President Obama signed. Ledbetter’s new book Grace and Grit chronicles her struggle and the aftermath. I interviewed her this month for my radio show Equal Time With Martha Burk . MB: When did you go to work for Goodyear? LL: I was hired in 1979. There were 5 of us in the group, 2 female. MB : How did you find out after 19 years that you were making less than the men doing the same job and in some cases with less seniority? LL: An anonymous note — a little piece of paper with my salary and 3 male co-workers. I knew it was correct, because my numbers were there to the penny. The first thing that hit me was devastation, humiliation. Then I thought about how many hours of overtime I had worked and not been compensated for what I was legally entitled to, and how hard it had been on my family struggling to pay the mortgage, education, doctor bills. We had done without quite a bit. And this was not right. I didn’t know how I could through my 12 hour shift. MB : Did you leave the plant and go home? LL: No, I finally got my composure. Halfway through my night shift it hit me. My retirement, my 401(k), and someday my Social Security all were dependent on what I was making — and that’s another tremendous loss. MB : Did you go to the company and complain? LL: I had already been to the company recently, because there were rumors, and I wanted to know where I stood. They told me “you’re just listening to too much B.S.. Your salary is fine.” Later my lawyer found out that for many years I had been paid below the minimum for the job I was doing. MB : It had to be a hard decision to file a suit, and risk retaliation or even getting fired. LL: Yes, I thought about it. But I decided I could not let a major corporation do me this way, and not stand up for myself. I went straight to the Equal Employment Opportunity Commission closest to my home. MB: You’ve said that one of the most important pieces of advice you can give to women in this situation is “don’t hold back, tell the investigators as much detail as you can, and document as much as you can.” LL: That’s absolutely correct. It’s very hard — you feel like you’re being a complainer and a whiner, and that’s actually the reputation you get when you do file a charge. But you should open up and tell everything. I was shunned by co-workers. MB: You were transferred to another job where you had to lift heavy tires all day. You were over 60 years old. Wasn’t that retaliation for filing the charge, which is against the law? LL: Yes, but I lost that part and also an age discrimination complaint. MB: The State of New Mexico has a rule that any company applying for a state contract has to file a gender pay equity report showing pay statistics for men and women in each job category. Would that have helped you? LL: Absolutely. I thought because Goodyear was a federal contractor they would be following the law. But that turned out not to be the case, and I couldn’t find out. MB: What would your advice be to women who might be considering filing a complaint? LL: Do your research on salaries in your area. Do not take anything for granted, and document everything. Discrimination is alive and well today. You cannot afford to work any length of time accepting less money, because you can never catch up. Listen to the full Lilly Ledbetter interview here:

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Mohamed A. El-Erian: What the Return of Market Volatility Tells Us

April 15, 2012

Four of last week’s five daily trading sessions saw the Dow move by more than a hundred points. The wide fluctuations of the index reminded investors of the unsettling market volatility of last year. In the process, and after a wonderfully strong first quarter, questions multiplied as to whether stocks would again be subject to a mid-year correction. By looking at the factors behind the recent volatility, including how it played out in different segments of the global markets, you will see that a big part of the answer depends on policymaking here and in Europe — a particularly uncomfortable situation for those who rightly believe that valuations and correlations should reflect underlying fundamentals. The renewed volatility in stocks was due to conflicting signs of additional central bank liquidity support, both in Europe and the US. By providing time (and hope) for economic and financial fundamentals to heal properly, such support is seen as critical to sustain the recent rally in risk assets. Yet, in listening to different voices here and across the Atlantic, equity investors come to different conclusions as to whether additional liquidity will indeed be forthcoming. Some officials seem committed to renewed unusual central bank activism. Others feel that this would only postpone the inevitable adjustments required on the part of governments, companies and individuals. And there seems to be no way, as yet, to get both groups on the same wavelength quickly. Market volatility has also been accentuated by competing narratives about the economic outlook. Last week, several companies’ quarterly earnings reports, led by Alcoa, were supportive. The problem is that they conflicted with the more worrisome macro data, including a Chinese growth slowdown (though 8.1 percent would be deemed great anywhere else in the world), the undershooting of a much-followed US sentiment indicator, and mounting signs of recession in Europe . These two narratives are, once more, finely balanced; and the tug of war will continue until one side asserts itself — either through a policy breakthrough or through a policy breakdown. No wonder so many analysts are warning that stock market volatility may be with us for a while. In understanding the implications, it is good to reflect on what other market segments are telling us — particularly global bonds where last week’s differentiation was both noteworthy and insightful. Compared to stocks, US Treasury bonds experienced less volatility (both in absolute and relative terms). This was partly due to a measurement issue: As only the bond market was open when the disappointing March employment number was released, yields reacted on that Friday while stocks had to wait for the following Monday. But even when adjusting for this by extending the comparison to two weeks, the contrast is still there. Investors in the Treasury segment appears less conflicted. This market segment signals a muted growth outlook, and one that may even trigger additional Federal Reserve intervention in the form of a new QE. Signals of a challenging outlook are much, much louder in European bond markets — and rightly so. Last week, yields on peripheral government securities went from flashing orange to again flashing red, with Spanish risk spreads near or at record levels (as measured by credit default swaps). All this speaks to the unsettling situation of markets that remain highly dependent on policymakers who, themselves, are stuck in the muddled middle: unable to deliver sustainable outcomes or to exit from their market interventions. This is the unfortunate reality of an “unusually uncertain” outlook, blunt policy tools, and a rather dysfunctional political context. Mohamed El-Erian is the co-CEO of Pimco, which oversees nearly $1.8 trillion in assets and runs the Pimco Total Return Fund, the largest bond fund in the world. Cross-posted from CNBC.com

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Mark Axelrod: A Roadmap for America’s Future: Highway 21 Not To Be Confused With Highway 61 Revisited

April 13, 2012

Sometimes it’s not a good idea to use certain symbols to represent things, especially when the subtext involved, well, makes you look stupid. Take Paul Ryan’s Roadmap for America’s Future. On the website there’s a picture of a cherubic Paul Ryan wearing a greenish sport coat (too long at the sleeves), a blue button down shirt and what appears to be a burgundy and white diagonally stripped tie. To borrow a line that Kevin Garnett once said to Craig Sager, “Go home and burn that outfit.” Perhaps, the fact it shows really bad taste in clothes, is Ryan’s point. That is, nothing seems very coordinated and by virtue of that “bad taste” it’s supposed to indicate that clothing is not what’s important to Paul. That may be, but if clothes make the man then you can finish the cliché. But what’s more egregious than Ryan’s outfit is what’s opposite Ryan; namely, a supposed information sign one might see on the highway with the words A ROADMAP FOR AMERICA’S FUTURE (with the word “ROADMAP” in decidedly larger font than the rest) next to an Interstate “21″ sign. Now one shouldn’t confuse Interstate 21 with U.S. Route 21 which is a north-south United States highway running from Hunting Island State Park, South Carolina to Wytheville, Virginia. Interstate 21 doesn’t exist, but that’s not what the sign is supposed to mean. The Interstate 21 sign is (Ready?) supposed to represent the 21st Century! (Wink, wink, nod, nod.) How clever these political people are. How subtle. But why, might you ask, is it so egregious to use highway signs to indicate America’s future? Well, because the interstate highway system in this country is falling apart — so if the metaphor is meant to mean that following Ryan’s budget will take America to its future, then, well, the future doesn’t look very healthy. The Interstate Highway System was authorized by the Federal Aid Highway Act of 1956 which, ironically, was better known as the National Interstate and Defense Highways Act of 1956 since it was originally thought of as a key component for defense. Eisenhower was impressed with the German autobahn as a major part of a national defense system that would be vital in deploying military supplies and troops in case of foreign invasion. So, it’s all the more ironic that Ryan would use these transportational signs as a way to convey to the American public that the road to a better future is to follow his roads. To refresh Mr. Ryan’s mind (if not his metaphor) , in a 2007 article written by John W. Schoen: 33 percent of the nation’s major roads are in “poor or mediocre condition.” 36 percent of major urban highways are congested. 26 percent of bridges are “structurally deficient or functionally obsolete.” That was in 2007. According to the 2009 Report Card for America’s Infrastructure : Americans spend 4.2 billion hours a year stuck in traffic at a cost of $78.2 billion a year — $710 per motorist. Roadway conditions are a significant factor in about one-third of traffic fatalities. Poor road conditions cost U.S. motorists $67 billion a year in repairs and operating costs — $333 per motorist; 33% of America’s major roads are in poor or mediocre condition and 36% of the nation’s major urban highways are congested. Current spending level of $70.3 billion for highway capital improvements is well below the estimated $186 billion needed annually to substantially improve the nation’s highways. Final grade for America’s Roads: D-. That’s just slightly higher than an F+ and if your son or daughter came home with that final grade, then I’m not sure you’d be pleased about it. So, where does Congress stand on trying to raise the highway grade from a D- to something one might consider a passing grade? As Bloomberg reported on March 29, 2012 : Road projects in every U.S. state would have been affected if Congress failed to act by March 31. The U.S. would have been forced to stop collecting all but 4.3 cents of the 18.4 cents-per-gallon federal tax on gasoline, putting further strain on the Highway Trust Fund, which pays for highway and transit projects. Most Democrats said a vote on a two-year, $109 billion highway plan, passed by the Senate March 14 and blocked in the House, would give states and localities more certainty. “This extension kicks the can down the road,” said Representative Nick Rahall of West Virginia, the top Democrat on the House transportation committee. “It fails to rebuild America just as the construction season begins.” Blocked by the House? You mean to say the Republicans in Congress tried to block the same plan to help rebuild the US highway system that Paul Ryan is advocating to be the “road to the future?” The word “hypocrite” is a great word. It comes from the Greek hypokritēs which means, “actor” and, by extension, “mask” since that’s what an actor wears. In this case, the word fits Ryan perfectly since regardless of the clothes he wears, the mask remains the same.

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Soraya Chemaly: Ann Or Hilary: Either Way, Motherhood Is a Dismal Financial Decision for American Women

April 13, 2012

BREAKING NEWS GUYS: It is ” arguable ” that one of the single worst financial decisions a woman can make in this country is to become a mother. Regardless of whether she gets paid for work that she does. And one of the most disastrous economic growth policies governments can pursue is to impede women’s ability to plan their families and be paid fairly for their participation in the labor force. And yet this is exactly what the Republican party is dedicated to doing. The result of “secondary” in importance “social issues” is to ensure that stay-at-home or not, women pay and pay and pay for their reproductive choices or lack thereof. Today’s cynical Hilary Rosen/Ann Romney “Gasp!” is nothing more than this week’s politically flavored sexist-media-loves-a-”cat”-fight . What is “working woman” versus “stay-at-home” code for? For the most part it is code for “what is a woman’s relationship to a man and what is his earning potential?” It’s a paternalistic, sexist framework that subordinates women either way. That’s why this is not about a mommy war. It’s about keeping women dependent, especially by DEvaluing the work of women who are mothers and caretakers (in and out of the home) — their time, their labor, their productivity — by making balancing work and family as hard as possible. It’s the way we penalize women for taking on the bulk of our society’s reproduction responsibilities while simultaneously telling them “it’s the most important job in the world.” You want to create jobs, stimulate and grow the economy? Stop harassing and penalizing women seeking independence and financial security. Allow people to plan their families and create systematized, institutional and cultural approaches to work/life balance for both men and women. What I am not hearing anyone say loudly and clearly in this Rosen/Romney snafu is that women’s ability — not desire or choice — to take part in the economy, to be productive in the economy, to help stimulate the economy is based on her freedom to make reproductive decisions or lack thereof and on the more active, unpunished by culture, participation of men in child care. Motherhood in America , taking place as it does in a vacuum of cultural, corporate and governmental support, and idealized as part of a paternalistic, heterosexual and gender-hierarchical social structure, is why women — most of whom have to earn a living either as supplemental or primary — have to stop working, work part-time, and cycle in and out of the work force. It’s why we have a debilitating gender pay gap — really a maternal pay gap when you examine it closely — and why women make up the majority of the poor. Consider these facts: Women make up more than 50 percent of the American workforce . 40 percent of wives earn more than their husbands . Women are more and more often heads of households, now 22 percent . The highest earning window for women, practically the only time they are not subject to the wage gap, is when they are single and childless, usually in their twenties. They have to live in cities and have gone to college. More than 50 percent of children born to women under 30 are born to single mothers . 60 percent of women with children under the age of three and 77 percent of mothers with school-age children remain in the workforce . When a woman has a baby, her chances of being hired go down , compared to a single woman, by 44 percent. When a woman has a child her pay drops by 11 percent . According to the Bureau of Labor Statistics , mothers works fewer hours, have to work part time more and cannot take on overtime. Fully 55 percent of stay at home moms would like to work , for pay, out of the home. Working mothers are penalized in terms of long-term success by having to work in an interrupted fashion that perpetually erodes their career tenures or experiences. The distribution of retirement income is gendered and unbalanced. If a woman “chooses” to be a stay at home mom, because entrenched pay discrepancy, cultural habits and a gender segregated workforce make that “choice” the most logical and financially rational, she is not compensated, either through pay or benefits, for her investment of time and effort and risks her long term financial security. This is why money is not ” more important to men ” and why bickering about mommy wars is a red herring. Ignoring demographic trends because they erode your privileges (which is different from being oppressive) does not make them go away. Mitt Romney and Republican legislators would like us to focus on what really matters to women. Ann Romney, because apparently women are either a different species or speak a form of English that Mitt et al. cannot understand in their particular female-deaf form of manliness, has assured them that, based on what she is hearing, it’s “the economy.” So — let’s talk about women, work and the economy. First , women’s work is often invisible and unpaid . Let’s pretend that Ann Romney is, like the 143 million other women in the country, not the wife of a multimillionaire Mormon Bishop and talk about her unpaid work as a stay-at-home mom. According to the Wall Street Journal , an average housewife would make $138,095 if she were paid for her labor (that is what she would have to pay someone else). Ann Romney is not your average housewife, but, let’s go with it. Ann Romney’s lost wages for 30 years of providing 24 hour unpaid childcare for her husband, running a household, nursing sick children, being a chauffeur, food shopping, cooking, being executive assistant to six boys and men and other assorted duties is $4,142,850. She also did this, graciously, while struggling with major illness. Ann Romney, like all “non-working” mothers, is not financially compensated for her labor. (She is however, also like other married women who work, taxed for her efforts.) Many women in this position are thought of as parasites and a net drag by abusive husbands . In addition, Romney gave up any hope of related benefits for social security, for example, and put her trust in Mitt Romney’s long-term good graces. For women involved in the 50 percent of marriages that will end in divorce , however, this is a terrible economic scenario. For unmarried women or those depending on dual incomes to survive, this is also not an option. For women not married to a multi-millionaire Mormon bishop — that would be well over 99 percent of the 142 million of the rest of us — the real costs of being an unpaid, full-time, hard-working stay-at-home mom is too high. I don’t begrudge Ann Romney her choice. She has not only put her financial well being but also her salvation into Mitt Romney’s hands. But that is not either available or desirable to the overwhelming majority of women. Second , family planning is the key to financial survival and security. Around 50 percent of pregnancies currently in the U.S. are unplanned (it’s a side effect of not teaching people how they get pregnant). Why do women seek abortions? Studies have shown that it’s because they have families and are more often than not financially strapped, tired, responsible for children and/or other family members, trying to improve their lot in life. It is because pregnancy and motherhood affects a woman’s health and healthcare costs, child and child-care related expenses, her pursuit of higher education, her ability to work productively and for financial gain, her ability to parent other children, her chances of relying on the state help for support and her risk of long-term poverty. You know what the real entitlement program I worry about is? The fact that the reproductive control experiences of the people advocating anti-family friendly policies is primarily limited to the changing of the temperature of their tighty-whiteys . You know what the opposite of PLANNED parenthood is, UNPLANNED parenthood. And you know what that costs to women, families, the government, and “the important economy” will be when they increase as they will if the Republican Party leadership has its way with women? • More unplanned pregnancies than virtually anywhere else in the industrialized world • An increase in abortions (whether safe and legal or not) • Decreased maternal health • Decreased relationship stability • Lower educational aspirations and accomplishments for women and their children, impaired female workforce participation • Increased health care costs related to poor prenatal and neonatal care • Increases in welfare program participation • Higher maternal death rates. It is safe to assume that unplanned pregnancies and reduced maternal health have the effect of reducing women’s workforce participation and reducing the social and economic status of women and children with all kinds of impacts on market stimulation, economic growth and government spending. By the way, poor, sick, tired and dead women cannot contribute to what is “really important” — that would be “the economy.” Third , gender equality, which requires reproductive freedom, justice and autonomy for women, means INCREASED ECONOMIC ACTIVITY. Women’s ability to plan and manage their pregnancies — with or without men — spurs economic growth. This is true all over the world. Countries with high gender equity indices usually have stronger economies because they understand the value of the human capital that women represent. As noted here , “In mature economies, attitudes toward gender equality and the actual possibilities for combining parenthood with gainful employment are decisive. Countries governed by traditional male-dominant attitudes run the risk of long-term economic stagnation.” If you do not support a woman’s right to choose when to become a mother, and you actively seek to deny her reproductive health options and reduce her ability to be paid fairly for her work, then you actively work against economic growth and prosperity, for individuals, families and the country. If you insist on modeling economic policy on an outdated, sluggish, pater-familia model then you will get an outdated, sluggish mater-familia bashing economy. The “less important social issue” policies — “getting rid” of Planned Parenthood, eliminating abortion, reducing access to contraception and affordable healthcare, abstinence-only miseducation, and more — through which Mitt Romney and the Republican party are eliminating women’s options (and therefore their families options) are an ECONOMIC DISASTER. In these ways Mitt Romney and the Republican party are committed to infringing on all women’s ability to live freely and healthily and to making sure that women continue to be penalized for their maternity to the detriment of families and THE ECONOMY.

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Joanne Lang: Breaking Free From Fear of Failure

April 13, 2012

As a start-up founder, I’ve come to expect new and interesting experiences on a regular basis. It’s part of what makes being an entrepreneur so exciting. Not long ago, James Logan, Program Director for the Chester County Chamber of Business & Industry , asked me to be the keynote speaker at their Annual Small Business Dinner. I’d never given a keynote before, and like many people, I find public speaking a bit unsettling. However, another wonderful aspect of being an entrepreneur is the amazing support I regularly receive from those around me. After a lovely lunch with Nancy Keefer, the Chamber President, and James, I was so buoyed by their enthusiasm and encouragement that I accepted their invitation to speak. I decided to use this opportunity to reflect on my entrepreneurial experiences over the past year. I wanted to identify lessons learned that would be useful in both the corporate and start-up worlds and I realized that the most important and valuable lesson I had to share was breaking free from fear of failure and embracing the opportunity to learn from failure. Because I think these lessons are worth sharing with others, I’ve included excerpts from my keynote below. Several years ago, I had a big idea that originated from my direct experiences as a mom of 4 children: While I used LinkedIn to organize my career and Facebook to organize my social life, there was no single, private and secure application to help me quickly and easily organize my family and home life. At the time, I was a member of SAP’s original cloud technology team, and I was convinced that Software as a Service was the answer. However, in order to turn this idea into a reality, I had to take the plunge from a safe, senior position at SAP to the unknown waters of a bootstrapped start-up. Because I was the primary income earner in my home, this was a difficult and risky move to make. So what stopped me from pursuing my idea at that time? Fear of failure. Sharing my idea with naysayers just furthered this fear. I’ve heard Arianna Huffington refer to the obnoxious roommate in her head, and this was exactly how I felt. Everyone who discounted my idea fueled the obnoxious roommate in my head that made me doubt myself and fear failure — especially in regard to competing with large, well-established companies like Google. And of course, there was the state of the economy to consider. Then my son had a life-threatening medical emergency and I could not give the paramedic the information he needed. I thought my son was going to die and I felt like a failure as a parent. My son is fine now, but that experience taught me new way of thinking — a positive way of thinking. Instead of worrying about failure, I began to think, “What if this will work?” I put the perceived risks into a perspective that made sense to me: “What is the worst thing that can happen — will it hurt my children?” Once I kicked out that obnoxious roommate in my head, I achieved things that I would never have imagined. My idea, AboutOne, now has partnerships with Microsoft and Suze Orman. We’ve closed a Series A for $1.8M led by an amazing investment group called Golden Seeds , and I’m part of the 6% of women in tech who have received venture capital funding. I was featured in a documentary film about start-up life called CTRL+ALT+COMPETE . In order to find the repeatable models necessary for my start-up to grow quickly, I had to learn that if you are not failing you are not trying enough new things; I had to learn to encourage my team to celebrate and openly share failures so we could learn from those lessons. When I look back at my previous corporate job, I realize that I never failed and I now wonder if that was really a good thing. I wonder if CEOs of large companies should allow their teams to fail, and to celebrate those failures as opportunities to learn and improve. Entrepreneurial opportunities in the US are fabulous. Because of this, AboutOne has been able to help millions of people quickly and easily organize their family and home lives, even when they feel that they are too busy or don’t know how to get started. I’ve also been able to show my children that if they work hard and have faith in themselves, they really can live their dreams. As a mother, I feel these lessons about breaking free from fear of failure and embracing the opportunity to learn from failure are as important for my boys as they are for my company and myself. Originally posted on Joanne’s blog, Notes from the CEO

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Brad Reid: Electronically Transmitted Source Code Not Stolen Goods Under the National Stolen Property Act

April 13, 2012

In an opinion that indicates the need to revise U.S. federal intellectual property theft statutes, the Second Circuit reversed a jury’s theft convictions under the National Stolen Property Act and the Economic Espionage Act ( U.S. v. Aleynikov ). Proprietary computer source code was taken by a computer programmer employed by Goldman Sachs in violation of confidentiality policies. He left his employment and began working at another firm. The source code was electronically transmitted to a server in Germany. The Second Circuit on Feb. 17 issued a short order reversing the convictions, and on April 11, produced a fully reasoned opinion. Criminal statutes are narrowly interpreted. Consequently, while the National Stolen Property Act makes it an offense to transport interstate commerce items that are known to be stolen, the statute does not define the terms “goods, wares, or merchandise.” The Second Circuit concluded that electronically transmitted source code was not included in the ordinary meaning of these words and that prior decisions favored this interpretation. The Second Circuit in 1966 determined that transmitting photocopies of manufacturing procedures did violate the statute. Some tangible property must be taken to constitute the “good” that is stolen. A 1985 U.S. Supreme Court decision supports this reasoning ( Dowling v. United States ) as well as decisions of other federal courts. The Second Circuit further determined that a 1988 statutory amendment adding the words “transmit” only applied to electronic transfers of money. In telling language, the Second Circuit wrote : “We decline to stretch or update statutory words of plain and ordinary meaning in order to better accommodate the digital age.” Regarding the Economic Espionage Act conviction, the Second Circuit determined that its statutory language limited offenses to products “produced for or placed in” interstate commerce. In this case Goldman Sachs did not produce the source code for sale in commerce. Assuming a broader meaning would only create an ambiguity that is resolved in favor of leniency in criminal law. The Second Circuit opinion concluded that while the conduct in question “was in breach of his confidentiality obligations to Goldman, and was dishonest in ways that would subject him to sanctions…” it did not violate criminal law. It is clear that Congress must act to address the electronic transmission of stolen property if the intellectual property theft statutes are to be meaningful in our digital environment.

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Matthew Kavanagh: Transformative Development: How Jim Yong Kim Might Change the World Bank

April 13, 2012

Since President Obama nominated Dr. Jim Yong Kim as President of the World Bank commentators have weighed in on his past writings, his nationality, his part in upholding an unjust U.S. domination of the Bank, and his qualifications. But at the heart of this presidential decision is a fundamental question of focus and mission for the World Bank. Jim Kim represents a break from the past — as both his supporters and detractors agree — and would surely steer the Bank in new directions. Interestingly, so too might Dr. Jose Antonio Ocampo, the Columbian economist and former UN official, leaving for the first time two heterodox candidates to head one of the World’s most fraught institutions. What seems to be unsaid in discussions of Dr. Kim, however, is that the new direction is likely toward a focus the stated mission of the bank: the elimination of poverty. A Focus on Delivering Development Dr. Kim’s career gives us a fairly clear understanding of what he would prioritize as World Bank president. He would be, without question, more expert and experienced in development than any World Bank president since its inception. He led the World Health Organization’s 3×5 initiative that, as the journal The Lancet notes , “helped change forever the way we thought about AIDS.” Most recently he’s run the Ivy League Dartmouth College. But it is in founding Partners in Health and more recently in pioneering the field of “delivery science” in global health that we see where Kim would take the bank and the fight against global poverty. At Partners In Health, he and the other pioneering physicians worked to break the mold on medical care in impoverished settings — bringing world-class medicine to people when the general wisdom said it was neither feasible nor “cost effective.” Again and again, Dr. Kim and PIH proved the dominant voices in the development community wrong — showing, for example, that anti-retroviral treatment of AIDS in Africa and the Caribbean could succeed when leading economic and development experts said it was not practical or did not meet the economic conditions ” test for action .” Now some of these same economists are campaigning against Dr. Kim. But to imply, as some have, that Kim’s experience is somehow limited to charity shows a willful misunderstanding of what is unique about Partners in Health. The group’s outlook is medical, but where Dr. Kim has worked in Rwanda, Haiti, Peru, and the former Soviet Union they have managed to transform communities: building and staffing schools, training and (against the development grain) paying community health workers through effective employment strategies, and building community-based research for development. Later Kim brought experts in business, economics, and health together to create the Global Health Delivery Project and the Dartmouth Center for Health Care Delivery Science to bring rigorous study to the actual delivery of health care to impoverished communities. It is in this work that we see what Dr. Kim is likely to do quite differently than other candidates as World Bank President: focus on community-level development in education, health care, infrastructure, and employment and take transformative practices to scale to change nations. And in doing so, he and others have shown that when people demand drugs or doctors or classrooms, well-done health and development can transform the relationship between people and government. To some observers this may seem obvious — isn’t this the raison d’etre of the World Bank today? And yet it is at the heart of a question about the Bank’s future. Challenging Bank Orthodoxy The stated mission of the World Bank is poverty reduction and achieving the millennium development goals on health, education, food, and sustainability. But at the heart of the fight over the future of the Bank has been the word “growth,” which appears nowhere in that mission or in its public description of itself. Long time Bank insiders and orthodox publications like the Economist have taken to challenging Kim’s credentials. Kim, they say, isn’t sufficiently focused on pure economic growth. They cite his suggestion that increases in Gross Domestic Product and corporate profits have often failed to trickle down to poor communities. But in 2012 is this really a question? Who but the most committed neoliberal economists believes that growth alone will end poverty? And to be fair, Dr. Kim has responded to his critics agreeing that, “Economic growth is vital to generate resources for investment in health, education and public goods.” But he clearly has a vision beyond GDP. Here we see the real decision in the 2012 World Bank Presidency race: a vision of the World Bank focused on community-level development results vs. a Bank focused primarily on GDP growth. Only for those who believe in the latter are folks like Larry Summers or PepsiCo’s CEO Indra Nooyi ” better qualified ” for the job than Dr. Jim Kim. For the GDP-purists, Dr. Ngozi Okonjo-Iweala is a better pick as a U.S.-trained free market, growth-oriented economist who spent over twenty years working at the World Bank. And yet during this time the Bank too often failed in exactly the areas the bank is supposed to be focused on: poverty reduction, health, and the Millennium Development Goals. For example: The most recent ten-year evaluation showed that three quarters of World Bank health programs in Africa failed by their own unambitious measures and a recent report suggest the Bank is remains focused on short-term domestic-only financing for health that undermines efforts to halt infectious disease. In the Bank’s education efforts “fewer than half of projects have succeeded in achieving education quality, labor force, management, learning, or efficiency objectives.” At the International Finance Corporation, the arm of the World Bank dedicated to the dubious mission of fighting poverty through financing “companies and other private sector partners” only 13% of IFC policies even had any objectives related to people in poverty. The majority (60 percent) of their advisory programs actually delivered no identifiable benefits to society, let alone to the poor. Why? Because despite rhetoric to the contrary, the Bank’s focus has often drifted from achieving development for people living in poverty. The World Bank’s failures have not been lack of focus on economic growth, but a lack of focus on delivering results to communities it claims to serve. What the Bank needs is someone willing to have audacious goals, to use the bully-pulpit of the World Bank to push for pro-poor policies, and to work to transform a massive institution into an effective institution for impoverished communities. The next Bank president will need to transform the agency’s ideology and practice and move the thousands of staff and consultants along with them. We need an expert in delivering development and cutting through policies that have failed in the past. Dr. Jim Yong Kim’s track record shows he can pull off exactly that. Regardless of the outcome this presidential decision will portend change at the Bank: a serious candidacy by Ocampo and Okonjo-Iweala challenging U.S. dominance is only positive. And hopefully a merit-based selection process will emerge in which the World Bank’s board actually debates the who and the how of delivering for communities. For many of us, though, the key question is who will actually challenge the ways of doing things at the Bank.

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Steve Clemons: New Economic Thinking vs German Ordnungspolitik

April 13, 2012

photo credit: Reuters German Minister of Finance Wolfgang Schäuble in his welcome note to an Institute of New Economic Thinking convening of some of the world’s leading economic theorists and practitioners in Berlin this week wrote: I would also like to point out that it is not just new thinking that we need.  Rather, it is often equally important to recall older ideas and approaches that may have fallen out of the limelight in the meantime.  For example, we in Germany have sharpened our focus on the necessity of pursuing economic and fiscal policies that are consistent with the principles of markets and competition — what we call Ordnungspolitik .  This approach can make crucial contributions to the concrete design of policies and especially institutions.  In my view, Germany’s “debt brake” is an institution that lays the groundwork for reliable long-term policymaking and that by itself can counteract undesriable fiscal and economic developments. Ordnungspolitik seems to roughly translate into a government debt-averse, laissez-faire approach to economic policy that runs along similar lines to what Republican House Budget Committee Paul Ryan is promoting. What is frightening many in Europe today is that Schäuble’s views are mainstream in Germany, a current account surplus national oasis in a world plagued by debt desertification. In other words, Germany is not only unwilling to extend a real lifeline to other sinking economies in Europe, it’s using this moment in history to promote an ideological austerity that it wants to compel other nations — when their economies are reeling — to do the same as the price for German support. George Soros , anchor speaker among many luminaries at this INET conference , has offered contrarian views to those of Schäuble and published this oped in yesterday’s Financial Times , ” Europe’s Future Not up to Bundesbank .”  However, in the side chatter here, most believe that the gap between Germany’s economic prescriptions and floundering European siblings won’t be bridged. There is sort of a feeling among many here that the European titanic is sinking and that Germany has control of all the life boats and won’t let them out. In a way, developing ‘new economic thinking’ is similar to researching and promoting use of renewable energy sources — vital but it takes a long time and major investment to retrofit a world organized around traditional energy.  Soros and some others at this conference have been arguing that the very foundation of equilibrium-driven economics is wrong, that markets are instead prone to bubbles and collapse and require constant regulatory involvement.  But just as the gap between Germany on one side and Spain, Italy, Greece, Portugal, and others on the other is growing — so too is the gap between market fundamentalists like German Finance Minister Schäuble and ‘new economic thinking’ market skeptics. While millions of other-than-German Europeans may sink given Germany’s tenaciousness about a debt brake for all and a conservative Ordnungspolitik, also hit hard could be President Obama’s reelection aspirations.  Stay tuned. — Steve Clemons is Washington Editor at Large at The Atlantic , where this post first appeared. Clemons can be followed on Twitter at @SCClemons

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Daniel Burrus: Stop the Presses: The Future of Newspapers

April 12, 2012

According to the  Newspaper Association of America ,  2011 was not a good year for newspaper advertising , with total revenue down 7.3% — almost $2 billion, and a percentage point more than the previous year’s loss. To be blunt, that’s not surprising. In fact, what is surprising is that it was only down that much. Let’s face it, newspaper publishers still haven’t quite understood how to maximize and leverage the digital world, and thus increase their advertising revenue. The newspaper business is, unfortunately, focused on the second word, “paper,” instead of the first word, “news.” As a result, they are still making their online news static rather than dynamic, meaning that it is still one-dimensional. The online versions of most newspapers are nothing more than a piece of paper online. A better approach is for newspaper publishers to give us an online version that’s a two-dimensional experience. They could give us interactive maps, videos, audio interviews, and the ability to actually go to the news site and take a look with a live cam. For example, recently where I live in Southern California there were  several big boats that caught fire in a marina.  All I saw in the newspaper’s online reporting was a written article about the fire and a picture. What could they have done? They could have given me video footage. They could have set up a live feed and let me take a look at the fire in real time. They could have given me an audio feed to the reporter covering the fire so I could get off-the-cuff comments that were not a part of the written story. They could have given me some additional interviews. These are just a few suggestions for how newspapers can make their information truly dynamic so we can start thinking digital and stop thinking paper. Also, why isn’t the newspaper getting more social? Local newspapers are about local news. Yet I don’t see that social component appearing in most outlets. In the newspaper world, that could be very innovative, since so few of them are doing it currently. Am I saying that newspapers should stop doing a print version and focus solely on online? Of course not. You need both. The paper version is a way to hook people. People see it, pick it up, look it over, and get hooked. The online version is usually the option for long-term fans. So we still need both, but they don’t need to be identical copies of each other. So let’s finally get rid of that paper-based newspaper idea. It’s time to make the online newspaper more dynamic, more interactive, and more social. It’s time for newspaper publishers to shift into the communication age so they gain more readers and advertising dollars. Article first published as  Stop the Presses: The Future of Newspapers  on Technorati.

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Zaid Jilani: As Donors Flee, Corporate Front Group ALEC Whines That Critics Are Trying to "Eliminate Discourse"

April 12, 2012

At least six major corporations and foundations — Coca-Cola, Pepsi, McDonald’s, Kraft, Intuit, and the Bill and Melinda Gates Foundation — have now left or have pledged to leave the American Legislative Exchange Council (ALEC), a secretive corporate front group that works to pass legislation in all 50 states. The corporations are leaving largely thanks to protests by activists and consumers outraged that ALEC has been pushing voter suppression and “Stand Your Ground” laws that harm American communities. Yesterday morning, ALEC sent out a panicked press statement complaining of an “intimidation” campaign that is trying to “eliminate discourse”: ALEC is an organization that supports pro-growth, pro-jobs policies and the vigorous exchange of ideas between the public and private sector to develop state based solutions. Today, we find ourselves the focus of a well-funded, expertly coordinated intimidation campaign. Our members join ALEC because we connect state legislators with other state legislators and with job-creators in their states. They join because we support pro-business policies that promote innovation and spur local and national competitiveness. They’re ALEC members because they’re more interested in solutions than rhetoric.  At a time when job creation, real solutions and improved dialogue among political leaders is needed most, ALEC’s mission has never been more important. This is why we are redoubling our commitment to these essential priorities. We are not and will not be defined by ideological special interests who would like to eliminate discourse that leads to economic vitality, jobs and fiscal stability for the states. A much more accurate re-write of one of those statements would read like this: Our members join ALEC because we connect state legislators with other state legislators and with the biggest campaign donors in their states. They join because we support pro-Big Business policies that promote the bottom lines of special interests and spur local and national donations by Big Business to our organization. They’re ALEC members because they’re more interested in profit than principles. ALEC loves to claim that it is simply advocating for small-government, conservative ideas. But its agenda isn’t that of the free market but rather one of its Big Business donors. It has in the past gotten state legislatures to pass laws stopping local governments from enacting their own municipal broadband systems and banning them from deciding to use their tax dollars to pay living wages to contractors. These laws are not designed to promote the free market or small government. They have only one goal — padding the profits of ALEC’s corporate members, even if small government principles are discarded in the process. ALEC claims that its critics are trying to “eliminate discourse.” That’s nonsense. We here at Republic Report love the discourse about ALEC that is occurring in town squares, Internet forums, social media, and corporate boardrooms all over America. We and our partners have sought to engage in this discussion with corporations sitting on ALEC’s Private Enterprise Board. Everywhere, Americans are asking why corporations are pouring so much money into this secretive organization that has such a harmful impact on their lives. And when groups like Color of Change call on corporate donors to leave ALEC, they are not utilizing Big Government but rather their own right to free speech — and the right to use their own money as they see fit in a free market — to change America. The campaign to hold ALEC responsible represents the best combination of free speech and the free market. ALEC hates that, but that’s because ALEC doesn’t stand for the free market or free speech at all. It stands for an America where Big Business can secretly write our laws. And increasingly, even Big Business is learning that a relationship with ALEC may be unprofitable. This story is adapted from a post originally appearing on Republic Report .

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Brian Tolle: Sales or Marketing?

April 12, 2012

The longer I’m in the business world, the more comical the term sales and marketing seems to me. These two disciplines couldn’t be more different. And since I’ve had to wear both hats as a business owner, what each role demands of me is mind-boggling. When I’m the marketer, I’ve got to get and keep the brand right and blast it as far and wide as possible. When I’m the salesperson, I’ve got to get in the trenches and go face-to-face with the real buyer in the flesh. It’s the difference between zone defense and man-to-man. So in the real world, it’s sales or marketing. At any one moment you’re either one or the other, not both. The same goes for when you are leading others; you’re either a marketer or a salesperson. Why is this important? The very nature of marketing requires some sort of medium… television, magazines, Internet, mail. This means the marketer is one (significant) step removed from the end user, the buyer. The two can only connect when the medium is present. If the medium isn’t available, the marketer will check their Blackberries. And the chief weapon they wield is scale. Millions of TV watchers can see one commercial, read one ad in a publication. No surprise, then, that their techniques take on a certain carpet bombing feel with the marketer as the pilot, high above the fray of the buying moment of truth. Regrettably, a leader with this mindset has a hard time connecting with the troops and spends more time in front of groups instead of individuals. Think of those leaders in your experience who epitomize the marketing mindset. How many of them can you imagine gaining commitment from a reluctant front-line employee through a face-to-face discussion? Not many. Without the bullhorn, the marketer has no voice. The very nature of sales requires personal contact… face to face, asking questions, listening for pain, being up front about each step in the process and bold enough to hold a prospect or customer to their mutual agreement, however small in the grand scheme of things. Salespeople hear “no” whereas marketers hear silence. Salespeople come to know the hard truth about the product or service but still work to make it work, it’s the only way they make a buck. Great salespeople have guts; they go back into the line of fire every day. Think of those leaders in your experience who epitomize the sales mindset. They’re never far removed from you in the trenches. They find you to make sure you’re ready to take on the fight. They look you in the eye. It’s sale or marketing. Your choice. Which one will you be? If I had my druthers, I’d take the sales guy.

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Jerry Chautin: Don’t Abolish SBA; Mills Says Her Agency Is Faster, Quicker, Better

April 11, 2012

Once upon a time, the U.S. Small Business Administration made direct loans to socially and economically disadvantaged small-business people. The SBA’s direct lending programs also targeted disabled veterans and others that politicians said deserved preferential treatment. What’s more, the agency required applicants to get turned down by two banks as a prerequisite to applying for its loans. The paperwork was voluminous, and it took many, gut-wrenching months to get a deal done. That was during the 1960s and ’70s, and yet the myths persist. With the exception of disaster lending , SBA has morphed into a loan grantor to mitigate some of the risk for its banks. The lenders underwrite the loans and make the credit decisions without the government imposing underwriting leniency for disadvantaged applicants. The timeline from application to closing is not much longer than for a conventional business loans. “The paperwork is actually not very much,” Karen Mills, the SBA’s administrator said, during an in the interview for a March 27 article in the New York Times . “Our turnaround time for loans is 10 days.” When delays do occur, it is often because the borrower is having difficulty assembling financial statements and other documentation requested by the lender. “Banks are working with mostly their own documents” for SBA loans, Mills added. “Our role is to provide access and opportunity.” As a hypothetical example, she cited, “The bank says the last two years have been a little tough, you don’t quite meet my standards.” But rather than turning down an existing or prospective client, “that’s when they use the SBA guarantee,” Mills explained. The SBA was there to give banks the comfort they needed to begin lending again when they were recovering from the Great Recession, according to a Feb. 3 column in Forbes Magazine . The agency was front and center as an important part of the Obama administration’s $1 trillion Recovery Act. The legislation temporarily increased the loan guarantee on SBA 7(a) loans to 90 percent from its typical 75 percent. As a result, lenders made more loans, and in some cases, accepted borrowers with lower credit scores, less cash invested and softer collateral than they would have approved otherwise. Newtek Small Business Finance , a non-bank, SBA lender, contributed the column to Forbes . “We believe that there are approximately $60 billion in outstanding balance of 7(a) loans,” the column said. “The funds are invaluable to small businesses that receive long term (7-25 year amortizing loans) with fair interest rates.” The SBA’s 7(a) program, for example, provides up to $5 million in working capital, equipment financing, acquisition funds to buy a business and real estate financing for owner-occupied buildings. That includes hotels and motels, daycare centers, manufacturing businesses, service businesses and most types of businesses. And yet, some legislative ideologues and conservative groups would rather abolish the agency than spend taxpayers’ money to boost its small business loan-guarantee programs. The programs put the full faith and credit of the federal government in loans that would otherwise not have been made. In many cases the non-chain, neighborhood restaurant, dry-cleaner, and even the McDonald Fast-food franchise that we have all come accustom to patronizing, would not exist. Furthermore, these businesses create jobs and stimulate the lackluster economy. One more myth needs to be laid to rest. The SBA does not give grants to small-business owners . An exception is for technical research and development . The SBA’s Small Business Innovation Research and Small Business Technology Transfer Research Programs offer grants directly to qualifying small businesses. SBA also gives grants and low interests loans to its licensed microlenders . In turn, the microlenders, such as Asheville, North Carolina-based Mountain BizWorks , makes small-business loans from $5,000 to $50,000. “The amount of money microlenders have to lend went from around $120 million in 2008 to $340 million now,” Mills says. “They provide an enormous amount of technical assistance,” in addition to making loans. In my opinion, some of SBA’s programs should be reformed or eventually phased out. But its lending programs are an essential part of our economy. Because without SBA, small-business ownership would founder. Jerry Chautin is a volunteer SCORE business mentor, business and real estate columnist, blogger and SBA’s 2006 national ” Journalist of the Year ” award winner. He is a former entrepreneur, commercial mortgage banker, commercial real estate dealmaker and business lender. You can follow him at www.Twitter.com/JerryChautin Copyright © 2012 Jerry Chautin — All rights reserved Huffington Post readers are permitted to distribute with attribution to the author

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Sandy Abrams: Mompreneurs: Should You Consider a Franchise?

April 11, 2012

This may be the year of the entrepreneur, but does that include franchising? Brenda Dronkers says: Yes! There are so many reasons that right now is a good time to buy into a franchise. For women in particular, there are so many low cost as well as home-based franchise brands. In the past, it seemed that franchising was geared more for the brick and mortar, high investment, high strung entrepreneurs. However, these days, with options like tutoring services, food trucks, home services and so many other industries adding a low cost franchise opportunity with flexible work schedules, it is primetime for women in franchising. Brenda Dronkers knows about franchising. She’s the founder and former president of Pump It Up, the Inflatable Party Zone. Founded in 2000, she grew it to what is now the largest children’s recreational franchise system in the country. She sold majority ownership in 2007 after sales hit $70 million. Brenda’s kids were 4,9, & 11 years old in 1999 when she attended a church carnival. There were two big inflatables in the church warehouse that were by far the most fun attraction at the carnival. Kids would wait in line to jump up and down for a few minutes then swing around to get right back in line again. Brenda found herself awestruck in two ways. The first was that both her youngest and oldest kids were both completely enthralled with the inflatables. Usually her kids weren’t entertained with the same activity since they were seven years apart. Secondly, she realized that because these were inside, there was no weather issue allowing for year-round fun and parties. Without a college education or biz experience, ten weeks after this aha moment, Brenda opened her first Pump It Up. If you are considering buying a franchise, Brenda recommends that you ask yourself these questions: Can I follow training and directions easily? Can I follow someone else’s system requirements? Am I a multi-tasker? Can I fund the franchise until it is up and running successfully? Last but certainly not least… Do I have my family’s support? If you answered yes to all of those questions, then franchising may be for you. If in fact it is, Brenda suggests these questions be asked of a potential franchise: How long has the franchisor been in business? What kind of ongoing support will the franchise offer? Does the franchise have a solid growth plan? How do the rest of the franchisees like working with the brand? How much freedom does the franchise give you? Brenda describes how she managed to balance mom & biz when she first launched: When I began PIU, my children were 4, 10 and 12. When hubby was at the firehouse, I took them with me to the PIU when I had parties booked. I had an office, and I taught them all to make goodie bags (free child labor, except for all the ‘goodies’ they grabbed). I brought a TV, books, toys and made a play area/homework room for them. This lasted for about six months, and then I was able to hire a manager to work the parties. I did the rest of the business from home. Many moms, if given the chance, would choose to work from home once they have their baby like I did. As moms, we have this amazing way of being able to balance our home and business life. It will take some practice, but it can be done. For many moms franchising can be an effective, flexible, rewarding and supportive business option. There are lots of franchise systems set up by franchisors that are focused on targeting women who want to work from home. Out of the approximate 3,500 franchise opportunities, Brenda says that about 1,000 are home-based options. She recommends the following franchises for mompreneurs who prefer to be home based: Games On the Go: This is a mobile RV that travels to birthday parties and events. The RV is full of retro games, such as Pac Man, Donkey Kong and more It has a very low start-up cost and is designed to be run from a home office. Stroller Moms: This is a franchise that trains you to host stroller fitness classes in your neighborhood. This is not only a great source of revenue, but the mompreneur actually makes friends and can take her baby to work! Bark Busters: This franchise will teach its franchisee to train dogs. So, if you love dogs, what a great way to get out of the house, and run your own business as well. Home Helpers: If you love senior citizens, you may love Home Helpers. The franchisee of this franchise work’s from home, making appointments to visit and assist senior citizens…o n your own schedule! Brenda talks about the benefits of going with a franchise as opposed to starting your own similar type of biz: When you invest in a franchise, you are investing in a proven business model. I was very blessed that PIU was a hit. According to About.com, studies show that franchises have a success rate of approximately 90 percent as compared to only about 15 percent for businesses that are started from the ground up. The increased probability of success usually far outweighs any initial franchise fee and nominal royalties that are paid monthly. Also, many franchises participate in women’s funding opportunities, or have pre-registered with the SBA to avoid lending issues. Franchising is amazing. But not all franchises are created equal. If you decide to explore franchises, be sure to use your talents as a woman…practice discernment and use your intuition as you speak to these franchise brands. Any doubt, find another brand. There’s such a variety of options available and if you spend enough time researching, Brenda is confident that you will find the right business match. You too can then jump for joy!

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Vitaliy N. Katsenelson: Not Buying Best Buy

April 11, 2012

Best Buy’s CEO Brian Dunn did a courageous and proper thing for shareholders by resigning. He was not the right person to lead Best Buy into battle against online-only competitors that use Best Buy’s spacious and beautiful stores as the showroom for their products. To make things even worse, smartphones make comparison shopping so much easier nowadays, and structurally, Best Buy cannot have lower prices than its online competitors. Its stores also lack the breadth of selection of Amazon and they are at a permanent, competitive cost disadvantage. The new strategy Dunn announced a few weeks ago of closing big stores and opening a lot of smaller stores for mobile sales makes little sense. It is basically morphing Best Buy into a Radio Shack. It would be great if this strategy had worked for Radio Shack, but it didn’t. Radio Shack’s margins are collapsing, and that is why its stock is scratching as-far-as-my-chart-goes-back lows. I don’t know what the solution is for Best Buy. It must involve a much tighter collaboration of physical stores and its Internet presence — the stores need to be turned from a liability into an asset. Or maybe a logistical miracle that would allow Best Buy to deliver a much, much greater range of products (like, hundreds of thousands) to its customers on the day they order them. One thing is for certain: The new strategy will require thinking that cannot be delivered by somebody who spent 28 years in the Best Buy box. It requires a Netflix or Amazon-like strategy, where management was willing to bring forward (and flawlessly execute) a disruptive strategy that undermines its current cash cowing business. Amazon did this by bringing electronic readers to the masses, which undermined its core book business. Netflix did it with streaming. I am sure I’ll get plenty of dissenting emails about Netflix: “We don’t know if its model will be successful down the road,” etc. I’ll admit, I don’t know what Netflix’s streaming business is worth. But one thing is for certain, if it did not bring out streaming, it would have been dead in three to five years. Now it has a fighting chance to survive and maybe even create value for shareholders. I am a value investor, and so when I see a stock dangling at six times earnings I’d be lying if I told you that I did not have an inkling to seriously consider it for our portfolios. But Best Buy is not a retailer that missed a fad (stacked the shelves with wrong-color shirts, etc.) — those sorts of situations often present great buying opportunities, as the problems are easily fixed. Best Buy is a retailer that so far has missed a structural change that may make its business obsolete. It is only cheap if the “E” projected for next year will be there. So far the market is betting that it won’t, and I have no insight that encourages me to disagree with the market. Reminder: The VALUEx Vail conference is June 20-22 in Vail. This is not your typical conference — think of it as the TED of value investing. Though this is a not-for-profit event, I hope what you’ll learn from attending will generate profits for you. You can find out more about VALUEx Vail here . Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates in Denver, Colo. He is the author of The Little Book of Sideways Markets (Wiley, December 2010). To receive Vitaliy’s future articles by email, click here or read his articles here . Investment Management Associates Inc. is a value investing firm based in Denver, Colorado. Its main focus is on growing and preserving wealth for private investors and institutions while adhering to a disciplined value investment process, as detailed in Vitaliy Katsenelson’s Active Value Investing (Wiley, 2007) book.

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Jason Alderman: Put Your Tax Refund to Work

April 11, 2012

If you’re among the millions of Americans expecting an income tax refund this year, you’ve probably already filed your 2011 return and are eagerly awaiting the money. But if you haven’t already mentally spent your refund on a guilty pleasure, here are several great ways you might better put that money to work for you: Pay down debt. Beefing up credit card and loan payments can significantly lower your long-term interest payments. Suppose you currently pay $120 a month toward a $3,000 credit card balance at 18 percent interest. At that pace it’ll take 32 months and $788 in interest to pay off, assuming no new purchases. By doubling your payment to $240 you’ll shave off 18 months and $441 in interest. Use this calculator to try different repayment scenarios. If you carry balances on multiple cards, always make at least the minimum payments to avoid penalties. Paying down the highest-rate card first will save the most money overall, but some people find that paying off smaller-balanced accounts first is a better motivator. Start an emergency fund . To protect your family against the impact of a layoff or other unexpected financial crisis (e.g., medical emergency, major car repair, theft), set aside enough cash to cover at least six months of living expenses — nine months is even better. Seed the account with part of your refund and then set up monthly automatic deductions from your paycheck or checking account. Boost retirement savings. Another great use for your refund is to beef up your 2012 IRA or 401(k) contribution, especially if your employer offers matching contributions; a 50 percent match corresponds to a 50 percent guaranteed rate of return — something you aren’t likely to find in any investment. Spend now to save later. Reap long-term savings on things you’ll eventually pay for anyway: Replace older appliances with energy-efficient models that will pay for themselves through lower utility bills. For example, replacing a 1980s refrigerator with an ENERGY STAR model will save over $100 a year. The government’s ENERGY STAR website can help you find ENERGY STAR products and estimate savings. Sell your older appliances or donate them to a charitable organization for the tax write-off to help offset the cost of new models. Switching from traditional light bulbs to energy-efficient alternatives like CFLs and LEDs, while initially more expensive, can save about $6 per bulb in annual energy costs. Just make sure they are ENERGY STAR-qualified models, which exceed minimum standards. Click HERE to learn more. Schedule routine car maintenance. According to AAA , simply changing your car’s air filter once a year can save over $270, while replacing older spark plugs can save $540 in wasted fuel. Ask whether your utility company offers free or subsidized home energy audits. An audit will tell you which investments — such as increasing home insulation and replacing drafty windows and doors — will lower both winter and summer energy bills. Overcome bad habits . If all that stands between you and quitting an unhealthy (and expensive) habit is the treatment cost, now’s your chance to make a down payment on your health. Also ask whether your health insurance will help cover weight loss and smoke-ender programs or at least lower your premiums afterwards. Finance education. Strengthen your career prospects and earnings potential by adding new skills through college courses or vocational training. Ask if your employer will help pay for job-related education. You can also set money aside for your children’s or grandchildren’s education by contributing to a 529 Qualified State Tuition Plan or Coverdell Education Savings Account. Bonus: Your contributions will grow tax-free until withdrawn. Visit the U.S. Securities and Exchange Commission’s Introduction to 529 Plans and the IRS’s Tax Topic 310 — Coverdell Education Savings Accounts for details. Vacation fund. Start budgeting and saving now for your summer vacation so you’re not caught off guard when the bills start rolling in. See my previous blog, Trim Your Vacation Costs , for travel budgeting tips. Charitable contributions . Many people wait until year’s end to make charitable donations, but nonprofits need help year-round. Prepay bills . If you expect major expenses later this year (e.g., insurance premiums, orthodontia, college tuition), start setting money aside now so you won’t rack up interest charges. Also, use this calculator to see how paying slightly more each month toward your mortgage principal can save you thousands of dollars in interest over the life of the loan. And finally, if you regularly receive large tax refunds, you’re probably having too much tax withheld from your paycheck — you’re essentially giving the government an interest-free loan. Ask your employer for a new W-4 form and recalculate your withholding allowance using the IRS’ Withholding Calculator . This is also a good idea whenever your pay or family situation changes significantly (e.g., pay increase, marriage, divorce, new child, etc.) This article is intended to provide general information and should not be considered legal, tax or financial advice. It’s always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation. To participate in a free, online Financial Literacy and Education Summit on April 23, 2012, go to Practical Money Skills .

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Richard Komaiko: The Ultimate Irony of Groupon

April 11, 2012

Just yesterday, a Pennsylvania class action lawyer, Howard G. Smith, filed a class action lawsuit against Groupon on behalf of all shareholders who bought in during the infamous IPO. The complaint alleges that Groupon misrepresented or failed to disclose information that they had an obligation, under Securities Laws, to share with prospective investors. According to MarketWatch , “no class has been certified” at this time. Here’s what that means in plain language. When large numbers of people have been harmed in the same way by the same defendant, each of them could file a lawsuit on their own, which is very expensive. Alternatively, they can merge all of their lawsuits into one, which totally changes the economics of litigation. All of a sudden it becomes very cost effective to sue, because the overhead of the legal fees is defrayed over large numbers of plaintiffs. Needless to say, it’s in the interest of the plaintiffs to do this, but courts are cautious about when they should and should not permit it. When the court decides to permit it, that’s called certifying the class. The principal factor that courts look to when deciding whether or not to certify a class is the number of people who come forward to announce that they believe they have been wronged. And often times, these types of law suits can sink or swim depending on whether or not the class gets certified. In other words, the fate of Groupon literally depends on whether this class action lawsuit “tips.” The irony is just too delicious… This post originally appeared on AttorneyFee

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Jodie Levin-Epstein: Is Marriage a Poverty-Buster?

April 11, 2012

” The Myth of the Disappearing Middle Class ” (Washington Post, March 29, 2012) by Brookings Institution Senior Fellow Ron Haskins asserts that the lack of opportunity in 21st century America is largely driven by the failure of individuals to behave responsibly, particularly the failure of parents to marry. “The Myth” demonstrates the mathematical attributes of marriage (it also raises a host of other issues reverberating in the blogosphere). The arithmetic seems hard to beat: two incomes must be better than one. Haskins, who steered welfare reform for House Republicans, cares about results ; here he is typically careful with his data and provides a lot of it: Brookings Institution calculations of census data for 2009, a deep recession year, show that adults who graduated from at least high school, had a job, and were both at least age 21 and married before having children had about a 2 percent chance of living in poverty and a better than 70 percent chance of making the middle class — defined as $65,000 or more in household income. People who did not meet any of these factors had a 77 percent chance of living in poverty and a 4 percent chance of making the middle class (or higher). Unless young Americans begin making better decisions, the nation’s problems with poverty and inequality will continue to grow. Marriage (before children), high school graduation, and working are all great goals shared by many across the political spectrum. The sequence makes sense. Policies and programs to achieve the goals are valuable. But Haskins’ view scrambles together the data on good outcomes with the idea that gumption can move anyone into a higher-income cohort. The numbers simply celebrate how those who have a foot on the ladder can move up it. Haskins’ analysis considers the importance of missing rings but is essentially silent on the role of missing rungs. The question really ought to be what do we do when individual responsibility is no match for the economic forces that can envelop people as they move toward the desired goals? To note a few: Graduation from high school is particularly challenging for students enrolled in the nation’s dysfunctional “drop out factories,” which, by definition, graduate fewer than 60 percent of their students; while the good news is that the number of such schools declined 23 percent between 2002-2010, about 2 million students are still trapped in these failed institutions. Graduation from high school, while far better than dropping out, too often fails to adequately help job seekers. In March 2012, adults age 25 and over who had high school degrees faced an unemployment rate of 8 percent. Employment for youth is generally precarious, but within communities of color unemployment is a crisis : among those looking for work, youth unemployment (ages 16-24) stood at 16.5 percent in February 2012, essentially double the overall rate of 8.3 percent; black youth employment is more than triple the overall rate at 26 percent (large differences by race appear even among college graduates ; unemployment for white college grads in 2010 was 4.2 percent, while for African Americans it was 7.3 percent). Providing a child quality early care is out of reach for too many families: only one in six children federally-eligible for child care assistance receives any help. In 22 states, families seeking child care assistance face waiting lists or frozen intake. But is marriage invariably a poverty-buster? It turns out that one plus one does not always add up to two stable incomes. Particularly for those with precarious incomes the decision to get hitched includes a special calculation that adds in an assessment of economic instability and liability. As Stephanie Coontz , an expert on marriage observes, a woman “will certainly end up better off financially if she marries a man who is able to keep a job and is willing to share his resources. But she also has to weigh the very real possibility that he will become an economic liability if he loses his job or misuses the couple’s resources.” Income instability comes in many forms, not just a worry about job loss. Research that tracked young men ages 18 to 32 has shown that “changing jobs and having a large number of jobs end up lowering wage rates and reducing marriage rates .” Marriage may be more readily achieved by those who can woo with promises of economic stability. As reported in ” Marriage is for the Rich “, the rates of marriage are dramatically higher at higher incomes (even while rates are declining at all incomes). For low-wage workers, the math of marriage in which one plus one adds up and becomes two incomes may be true only infrequently over time. That creates instability. And while all workers may risk a job or earnings loss, there may be a low-income tipping point where instability feels boundless, not just some blip from which to bounce back. For some low-income couples, a future that anticipates economic liability makes it tough to tie the knot. It seems the poor and the rich share a crush on stability. So, when Haskins concludes “Yes, the nation needs its safety net, but improvements in personal responsibility would have a greater and more lasting impact on poverty and opportunity,” his assertion begets a question for all of us. Do you think factors such as limited educational opportunity and jobs that are inherently precarious (e.g. hours that are unpredictable) make it more difficult to succeed even for those who are trying to reach each benchmark, including marriage? I do.

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Brad Reid: The Supreme Court Applies Immunity to Prevent Suits

April 10, 2012

A significant preliminary issue in any suit against governmental bodies is the application of sovereign immunity. Sovereign immunity, historically phrased as the king can do no wrong, early became a part of the U.S. legal system. Governments may only allow suits to proceed against themselves by some affirmative action (waiver) of sovereign immunity. The U.S. Supreme Court recently has once again addressed immunity in two decisions with Justice Alito writing the opinions. In one recent case, a licensed pilot sued the Federal Aviation Administration, the U.S. Department of Transportation, and the Social Security Administration for mental and emotional distress for revealing his confidential medical information (FAA v. Cooper). The federal Privacy Act allows suits for “actual damages” if the government intentionally or willfully violates it. In discussing giving up sovereign immunity (waiver) the Supreme Court majority noted that the Government is entitled to the most favorable interpretation of protection. Since “actual damages” in the Privacy Act is somewhat unclear, the Court understood the phrase to mean a “proven precuniary loss,” not mental or emotional distress. Justices Sotomayor, Ginsburg, and Breyer dissented finding a broader meaning of the phrase “actual damages,” and stated that the narrow meaning was contrary to the purpose of the Privacy Act. These three Justices also dissented in a 2004 Privacy Act decision. The majority opinion in 2004 interpreted “entitlement for recovery” to require damages beyond a willful or intentional violation being proven (Doe v. Chao). A second recent unanimous Supreme Court decision granted absolute immunity from suit to a federal grand jury witness (Rehberg v. Paulk). The plaintiff alleged that an investigator for a district attorney’s office had presented false testimony in violation of a federal civil rights statute (42 U.S.C. Sec. 1983). The Court explained that this immunity from suit was the same protection already granted trial witnesses. Furthermore judicial precedents, the need for witnesses not to fear retaliatory litigation, available perjury remedies, and secrecy considerations for grand jury witnesses favored this result. Related but distinct from sovereign immunity is the “government contractor defense.” This defense broadly prevents military equipment manufacturers from being sued when equipment is constructed to government specifications. It was famously applied in 1988 by the Supreme Court in litigation involving a Marine helicopter crash to end a suit brought against the manufacturer (Boyle v. United Technologies). There were four dissenting justices. In January, 2012, a three judge panel of the Federal Court of Appeals for the Fifth Circuit decided that the legal remedies for the heirs of civilian convoy drivers who were killed in Iraq were those remedies granted by the Defense Base Act and Longshore and Harbor Workers’ Compensation Act (Fisher v. Halliburton). These statutes grant workers’ compensation type awards. Federal law preempted state law tort claims of negligence and fraud against the Army contractors that the heirs had sued. Consequently, the public policy question to consider is how broadly to extend immunity from suits? The general arguments in favor of immunity are that retaliatory or frivolous lawsuits will be time consuming and detract from official duties, individuals will be deterred from seeking careers in public service or exercising their best judgment for fear of litigation, and burdensome and lengthy suits will waste public resources. The general arguments against immunity are that injustices will not be remedied, immunity discourages due care, and individuals or entities are exempted by immunity from the standards that apply to the rest of society. There are numerous additional forms of immunity from suit not discussed in this brief comment that are further subdivided into absolute and qualified.The general legal trend presently seems to expand immunity from suit based upon strict statutory interpretation of waiver provisions. Under this view statutory language is very precisely, and critics would say too narrowly, defined to prevent suits.

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Ian Yolles: Contributing to the Greater Good by Being Selfish

April 10, 2012

“Doing well by doing good.” The phrase has been overused, but fortunately it is no longer a novel concept in business. Employees, shareholders, and customers are increasingly expecting companies to focus on their social and environmental performance hand-in-hand with their financial performance. In fact, recent studies by companies such as Edelman Financial Group and WPP indicate that when choosing between brands of equal quality and price, social purpose ranks as the number-one deciding factor for global consumers’ purchases, above design, innovation, and brand loyalty considerations, and 75 percent of U.S. consumers want to buy from green brands. Failure to listen, given the means in the digital age to stand in judgment of brands, will result in business being withdrawn. The reverse is also true. Consumers will reward brands for their behavior with passionate advocacy enabled by the same social media tools. At its core, the phrase “doing well by doing good” means that growth, revenue, and profit should be the byproduct of making a positive difference for multiple stakeholders, not the ultimate goal. This approach becomes more interesting when applied to the most microcosmic “business unit” possible: the individual consumer. If we could imbue this philosophy into our culture — at an individual level — collectively we would catalyze a broad positive impact previously thought unattainable. Businesses that embrace this philosophy focus on the connections between creating societal and economic value and are motivated by generating benefit for multiple and diverse stakeholders — for their employees, supply chain partners, customers, investors, and the health of their brand. Many individual consumers are similarly motivated. Our choices are heavily influenced by self-interest; we want to have enough resources to support ourselves and be able to provide for and protect our families, while at the same time wanting to leave a positive mark on our communities and even the world. The ROI of “doing good” for businesses is pretty easy to understand: improvements to the bottom line, increased customer satisfaction, and often a more visible, measurable environmental impact due to the larger scale. The return on making sustainable lifestyle changes at the individual level, however, isn’t always as clear or pronounced. Given the magnitude of our environmental issues, we cannot always “see” the impact of our behavior. To get a critical mass of consumers to change their behavior, you have to make the return relatable and valuable on a personal level. So which are the most effective motivators of behavior change? I believe there are three key pillars: Show me the money: If certain behavior changes can influence one’s personal financial position and that of one’s community, it forges a personal connection and increases the chance that the behavior is maintained over time. The consumer becomes invested, if you will. The opportunity to save or even make money taps into every person’s desire to better provide for themselves and their family. Get social: We now live in a world of hyper transparency and constant connectivity; people don’t hesitate to head online to seek out information around sustainability efforts, share their own thoughts, and promote the positive steps they are taking to live more sustainably. This public sharing contributes to our definition of our sense of self and provides social status and recognition, which adds an additional motivational factor. Incorporating elements of competition and personal reaffirmation into our efforts to inspire a mass shift towards more sustainable choices and behaviors is an effective way to use social currency as a catalyst for positive change. Make it measurable: The global environmental issues that confront us are so large, complex, and interconnected that they seem impersonal and impossible to do anything about at the individual level. By making the actions you are requesting people to take measurable and trackable, you can show individuals the tangible impact that their actions have in the context of the collective action of others. If you can show them how their actions are contributing positively to their own community as well as the natural environment, then you can catalyze social activism and commitment. If we’re going to navigate our way toward a sustainable future, we’re going to have to think and behave differently. It’s not about doing good for the sake of doing good. It’s really about self-interest. By engraining this into both business and consumer behavior, we can more effectively move society toward a sustainable future, and, in the process, help people understand the connection between the environment, economics, and the well-being of our communities.

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Richard Barrington: Are Money Market Rates Poised for a Comeback?

April 10, 2012

Is your money market account stuck in a rut? If so, you’re not alone. Money market rates have been locked into a long and steady descent for a few years now, resulting in average money market rates of just 0.14 percent as of the end of March. Finally, though, there are signs that this could change in the months ahead. Treasury bond yields trended upward in March, in reaction to a streak of positive economic news. This could ultimately start to affect money market rates, but there are still some obstacles to overcome. Higher Treasury Bond Yields After spending most of January and February below 2 percent , 10-year Treasury bond yields broke through on the upside in March, reaching a much-higher 2.3 percent before falling back a little. As this is written, they are still holding onto ground in a range around 2.2 percent. If they don’t slip back again, this would represent the first sustained upward progress for bond yields since late 2010. This is largely in reaction to positive economic news on the domestic front — in particular, a string of encouraging employment reports. Adding jobs has the potential to generate continuing economic momentum, which would eventually create an environment that could support higher interest rates. The Impact of Inflation Unfortunately, the rise in bond yields may not be entirely due to positive economic developments. The most recent Consumer Price Index report showed a 0.4 percent increase in February, which, if continued, would project to an inflation rate of nearly 5 percent a year. So far, this is a one-time uptick in inflation, and the rate for the last 12 months remains a moderate 2.9 percent. However, the high inflation reading for February is troubling in the context of rising oil prices , which have a way of spreading inflation to other segments of the economy. Higher inflation could push interest rates higher without really helping money market accounts. The Fed, and Other Obstacles to Higher Rates Besides inflation, there are a few other obstacles for money market accounts. Specifically, here are three things that could derail money market accounts on the way to higher interest rates: 1. Federal Reserve policy. The Federal Reserve has somewhat painted itself into a corner with a multi-year commitment to low interest rates. Money market rates can rise without the Fed, but it will be more difficult. 2. A European recession. For some countries in Europe, the question isn’t whether they will go into recession, but how deep it will be. The resulting reduction in global demand will hold interest rates back. 3. Slower growth in China. When it comes to China , the issue isn’t one of recession, but simply of a more moderate rate of growth. However, the effect is the same as with the prospect of recession in Europe — an incremental drop in world demand growth. When balanced against signs of job growth in the U.S., it is difficult to tell from day-to-day which of these factors might be gaining the upper hand. However, bond market yields provide a continuous assessment of economic developments, and based on recent moves, those yields seem ready to break out of their low-rate rut. The next question is, how soon will money market accounts follow? The original article can be found at Money-Rates.com : ” Are money market rates poised for a comeback? ”

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Russell C. Smith: Reinventing Capitalism: Strange Currencies in the Marketplace

April 10, 2012

As a species, human beings have excelled at hedonistic adaptation. It’s one of the main reasons we’ve become the dominant species on the planet, and have survived over the past 12,000 years, when many other animals that roamed the Earth far longer didn’t accomplish anything resembling modern civilization. Dinosaurs had millions of years to evolve, but they never got around to developing a Gap Outlet, much less online shopping. Adaptation, altering behavior on a reward/punishment basis, and always staying ahead of the competition — enabled humanity to create civilization and all the institutions, organizations, and social structures that evolved along with us. When coins and paper currency overtook the barter system, societal structures adapted and those with the gold wanted to hold onto the gold. Modern capitalism and economic theories have only been around for a brief time in the history of humanity. And when it comes to economics, most of what’s been written, argued about, and speculated upon was done so before the Internet Age. As the Internet continues to expand and morph into its next iteration, helping to reinvent and demolish one industry after another, one can easily imagine the Internet soon altering huge segments of how capitalism works in the digital age. It’s safe to say there’s been no other time in the history of the world when so much information on peoples’ purchasing habits has been gathered, stored, catalogued, and most importantly… used. Impulse buying is done quickly, with a swipe of a credit or debit card, without much thought as to how a person’s overall buying timeline connects back to every other purchase ever made. Buying everything on credit or debit is now the norm in our society, and people who still use cash on a daily basis will soon become an anachronism, similar to those odd individuals who don’t always carry a mobile communication device. If the constant tracking of one’s buying habits already has a decades-long history, and everyone in society is now expected to be on-call and constantly tethered to a mobile phone, how does this consumer surveillance and over-connectedness play out in the long run? One of the easiest ways a mega-corporation can change your behavior is to offer reward points to you for every purchase you make. And with smart phone and microchips becoming more prevalent in our daily lives, don’t be surprised if you’ll soon be able to accumulate points automatically, even in your sleep. You already receive points for special deals, so why not for regular daily purchases — having your morning Starbucks Latte, drinking a Coke at lunch, or filling up at the same Shell station every afternoon. You’ll get more and more points for buying, choosing, picking anything, anytime, anywhere. You’ll become a walking preferred card for hundreds of global brand that will embed themselves into your behavior. And eventually, you may receive real rewards for your loyalty, not just rewards the corporation chooses for you. Eventually a person could accumulate far too many points to spend in a lifetime, similar to the way some frequent flyers have racked up so many miles they just don’t have enough time to use them all. Internet sites specializing in point trading could easily become the next big online business. Individuals could sign up and trade reward points with others, which would go toward buying tangible items on eBay or Swap.com. In the near future, it’s easy to imagine companies like Facebook or Google creating their own brand of currency. A far fetched idea? Not really. Just ask anybody who’s spent money on Second Life currency so they could buy virtual products or experiences. In a few years you might be buying Starbucks coffee with Star Bucks. It’s often be said by politicians that small businesses are the driving force of a healthy economy, and right now further growth of small businesses are what will create a more sustainable economy. Small businesses have struggled through these hard times, and adapted to the harsh economic realities. The complete failure of trickle-down economics has been apparent for some time, and new methods of achieving successes are tried daily, in every city in the country, online, and in every possible way. One proven method has been for small communities to invent their own currency exchange. In Traverse City, Michigan, the community developed a local currency known as Bay Bucks in 2006, and it’s billed as a the “homegrown local currency.” And Ithaca, New York has been using Ithaca Hours as a form of local small business currency since 1991. In the pioneering, can-do spirit, their website proclaims Ithaca Hours “promotes local economic strength and community self-reliance.” More than one economic seismic shift could happen over the next several decades. Finding inventive ways to get off shaky ground and move toward a more a sustainable economic climate is certainly on everyone’s mind. If capitalism has proven anything, it’s that it serves our hedonistic sensibilities well — providing citizens with everything they desire, all the time, if only they can pay for it. When a majority of the population agrees it’s finally time to reinvent capitalism so that it works for the majority and not just the ultra-wealthy, the super rich may decide to openly condemn the same system they’ve championed for so long. Witness the voices of mega-rich capitalists who realized it was time to promote a better future and change the world. Bill Gates aimed higher, began a charitable foundation, and decided to use a portion of his sizable wealth to rid the world of Malaria, and Warren Buffett has suggested to other billionaires they should set an example by giving more, or at the very least be taxed appropriately to their wealth, while also using their riches to transform the state of the world. After all, the one formidable task huge amounts of capital can be used for is to improve lives on a global scale.

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Susan Harrow: How Do I Smell? Use Twitter to Survey Customer Wants

April 10, 2012

When she decided to develop a perfume, Kim Kardashian didn’t guess what her almost eight-million Twitter followers wanted; she asked them. Her first scent, named after the “star” herself, was created after Kardashian asked her devoted Twitter followers what they wanted from a fragrance. The response? Hints of honeysuckle and sensual tonka beans. Tonka beans? Who knew? They are purported to be so intoxicating that they may be declared illegal. While I agree that to poll your Twitter followers before you create a new product is a great strategy, I also know that I don’t want to smell like dessert when I go out for the evening. But I may be alone on this. “I wanted something rich and creamy and sexy, but still youthful,” Kardashian said . Good enough to eat perhaps… Sister Kourtney Kardashian called Twitter “the best decision-maker,” disclosing that she Tweets everything from potential perfume bottle designs for the sisters’ signature fragrance, to outfit decisions, and even, absurd as this sounds, asking fans what she should have for dinner. Hey, ya’ll, what should I have for dinner? Weigh in on Twitter , will you? I may create a product from your suggestions. Susan Harrow is the author of “Sell Yourself Without Selling Your Soul.” She runs a Media Consultancy where she helps everyone from Fortune 500 CEOs to celebrity chefs, entrepreneurs to authors grow their business through media coaching and the power of PR. For more information please contact Susan .

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Edward Wytkind: Richard Branson Is Quite Busy Not Owning Virgin America

April 10, 2012

In 2005, British billionaire Richard Branson came to America to launch a new airline for Americans, owned by Americans and controlled by Americans. At least that was the story he was selling. First, you have to understand that under current U.S. law, foreign interests cannot own more than 25 percent of the voting stock or 49 percent of the equity in a U.S. carrier. To further ensure this is crystal clear, the law requires the “actual control” of the airline to be in the hands of U.S. citizens. This is no small matter not only for national security purposes, but also because of its impact on U.S. airlines, safety, jobs and the collective bargaining process. But Sir Richard doesn’t get involved in many things he can’t control, so you can imagine our skepticism at the outset. You think he would have let someone else control the introduction of his self-proclaimed ‘ sexiest spaceship ever ‘–Virgin Galactic? So I have a question: If Virgin America is independent of U.K.-based Virgin Group, why is the group’s founder talking to Virgin America’s flight attendants about the evils of unionizing? Hold that thought, I’ll get back to the video-taped evidence in a moment. Since the end of 2005 when Virgin America first filed an application with the U.S. Department of Transportation to operate as a U.S airline, the Transportation Trades Department, AFL-CIO and others argued that Virgin America is controlled by foreign interests, which is counter to U.S. law. But time and time again founder and Chairman of the Virgin Group Richard Branson, who is no stranger to arguing against U.S. ownership laws and regulations, was able to convince U.S. authorities that he was not controlling the airline and was, therefore, compliant with our laws. Eventually our regulators agreed. Therefore, we find ourselves in a place where — more than four years since it actually began flying in the fall of 2007 — Virgin America is vying for highly sought-after slots at Washington Reagan National Airport. And while it battles it out for these slots with its competitors, its compliance with foreign ownership and control laws must again be scrutinized. This time, it is not about speculation that at some point in the future Mr. Branson might play a role in controlling the operations of the airline. This time, there is a video produced by the Virgin Group and shown to Virgin America employees of the great founder taking the time out of his busy schedule (what, no space launch that day?) to speak to them about what is supposed to be their unfettered right to vote on unionization without employer interference. In the video, he tells flight attendants of the consequences to the company of joining a union after the Transport Workers Union filed to represent these employees. Branson asks the employees of Virgin America, a carrier in which he has sworn no control in, to think about what is at stake for the company if the TWU is elected. He then urges them to protect their “independent spirit” by rejecting the TWU because the union will take their “uniqueness away.” Actually, what is unique about these employees is that they have to sit at the table, on their own, and negotiate with a billionaire over wages and benefits without a union voice. That’s a “uniqueness” I wouldn’t cling to. In telling Virgin America employees to “say no to the old way of flying and say no to the TWU,” Sir Richard couldn’t have been clearer — he is at the helm making sure that his (sorry, I meant Virgin America’s) employees remain non-union. Branson is taking Virgin America down this path, an airline he allegedly doesn’t control. Odd. And now Branson’s airline has applied for two nonstop flights to San Francisco International from Reagan National. These slots are coveted by actual American-owned and controlled airlines because there are a limited number to go around from this popular stop near the nation’s Capital. It would appear that Mr. Branson is fond of making videos these days. In a Kobe Bryant ad for Nike, which features Branson and his business success, the video ends with this message: “Attack Fast. Attack Strong. Learn the System.” It looks as though Mr. Branson and Virgin America, fully in compliance with our foreign control laws I’m sure, have learned our system well, and how to beat it. Regulators take notice: Sir Richard is quite busy not controlling Virgin America.

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Jared Bernstein: What Is This Thing Called… Escape Velocity?

April 10, 2012

A number of economists, myself included, have been talking for awhile about the underlying strength of the recovery in terms of “escape velocity.” The idea we’re trying to convey — or at least the one I’m contemplating — is a virtuous cycle of growth begetting jobs, which in turn generates incomes, which supports more growth, etc. Others talk about it in terms of “taking the training wheels off” of the economy, which I also kind of like in the sense that an economy that’s growing too slow is like a wobbly bike ride, where there’s not enough speed to ensure stability. The training wheels analogy also implies that the bike has enough momentum to take off fiscal and monetary stimulus… we’re already taking off fiscal stimulus, by the way — and too soon. Well, someone asked me a good question the other day: how would we know if we’ve achieved escape velocity? The best answer is, of course, multiple quarters of real GDP growth above trend, which right now is generally thought to be in the 2-2.5% range (perhaps a bit lower given slower labor force growth, but that could accelerate as the improving job market pulls more folks back in from the sidelines), followed by consistent quarters of robust job growth. We started kinda, sorta, maybe, seeing something like that in recent months, with GDP averaging north of 2% and employment above 200K. But both of these trends are still too shaky for many economists’ comfort (last Friday’s jobs report didn’t help), and while forecasts disagree, some predict slower growth ahead, jobs settling in around 150-200K, and unemployment staying about where it is, in the low 8′s. That’s about what I expect in the near term. It’s not bad — it’s progress, moving steadily in the right direction –, but neither is it fast enough to ensure the bike doesn’t wobble, especially if it hits a bump. But there’s another, related version of self-sustaining growth that also warrants a close look.* I don’t have time to do it justice right now (Monday night basketball beckons!), but I can get things started, and I encourage others to join in. In this version, you assume that absent a flock of albatrosses around its neck, the economy can pretty much be expected to grow at trend. I admit, there are many important nuances of great import that this theory brushes over (is not the underlying trend insufficient from the perspective of truly full employment; what about the structure of jobs? Too much finance? Too little job growth among startups? Accelerated labor-saving technology? A structural gap between pay and productivity?) I worry intensely about all of those questions — but it’s also true that absent the weights around its neck, the economy is a lot more likely to be on track toward self-sustaining growth. Trend growth may not be sufficient for solving our structural problems. But it’s surely necessary. So, how do you gauge our economic progress in this regard? One good way is to think about the corrections that need to take place and see how far along they are. Once they’re complete, we’re more likely to hit escape velocity. Like I said, I’ll get the party started and will add more in days to come. The first and one of most important corrections is housing. True, it was a home price bubble that got us into this uniquely deep mess, but it’s also the case that housing, goosed by low interest rates, is a traditional escape route from recession. Here, two slides suggest the correction is largely, but not wholly over. First, the Case-Shiller price index doesn’t appear to have bottomed and similarly, the residential investment contribution to GDP has yet to show any life. Sources: 1, S&P’s Case-Shiller Index, 2, NIPA Next, the TED spread. This is a measure of riskiness in credit markets, and back in the heart of the GR, we talked about targeting the TED , recognizing that if it remained high, there was little hope of credit markets coming back on line. Think of the TED spread as a measure of blood pressure in the veins of credit. It’s picked up a bit lately, but clearly credit default risk is way down from its heights. It’s fair to say that this correction is and no longer weighing on the economy. Source: FRED, 3mos LIBOR minus 3mos T-bill (that’s right, I got the TED from FRED, like I SAID) What else? There’s household indebtedness — very important, and well-analyzed here , related to housing, of course, and not yet fully corrected. But that’s where I’ll start when I can get back to this. *I thank the great econometrician Jim Stock for helping me to crystallize these thoughts, but any mistakes in logic or measurement are mine, not his. This post originally appeared at Jared Bernstein’s On The Economy blog.

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Robert Pozen: An Intermediate Approach to the Auditor Rotation Issue

April 10, 2012

In March the Public Company Accounting Oversight Board (PCAOB) held hearings about whether to require public companies to change (or “rotate”) their external auditor periodically. Similarly, the European Union has proposed mandatory auditor rotation every six or 12 years. Mandatory auditor rotation is designed to address a potential conflict of interest between a public company and its auditor. Because an auditor is hired and paid by the public company it audits, the auditor’s desire to maintain a good relationship with its client could conflict with its duty to rigorously question the client’s financial statements. Advocates of mandatory rotation generally object to the historic coziness between auditors and the management of public companies: the auditors of almost 36 percent of all companies in the Russell 1000 have held that position for 21 years or more. These advocates cite two specific benefits of replacing the auditor every five or 10 years: a term limit for an auditor’s engagement with a company would decrease the auditor’s incentive to ingratiate itself with management, and furthermore, mandatory rotation would keep the current auditor on its toes, since it would fear that a new auditor would expose any previous errors or omissions. On the other hand, public companies have vigorously argued that the benefits of mandatory rotation are outweighed by its costs. Because multinational corporations are very complex, an auditor must develop company specific knowledge to fully understand the company’s finances. Mandatory rotation would quickly erode this institutional knowledge, reducing audit quality and increasing costs. In addition, critics point out that mandatory rotation undermines the role of the audit committee in overseeing the audit process, as expanded by the Sarbanes Oxley Act. That Act made the auditor report to the independent audit committee, which now has the power to appoint and terminate the auditor. Given these competing arguments, I favor a compromise proposal requiring the independent audit committee to periodically issue a request for proposal (RFP) for the audit engagement, but allowing the existing auditor to bid on the RFP. This proposal would reap most of the benefits of auditor rotation without imposing many of the costs. Even if the existing auditor usually wins the RFP, the bidding process raises the probability that the audit committee would appoint a new auditor. This would encourage the existing auditor to maintain its professional skepticism more vigilantly. The existing auditor would be worried that any deficiencies in its audits would be discovered if a new auditor were subsequently engaged. Yet an RFP requirement would not impose large costs on a public company from switching its auditor every five or 10 years. The existing auditor would be replaced only if the audit committee decided that this change met a cost/benefit test in the context of that particular company. Most importantly, an RFP process would reinforce the critical role of the independent audit committee in the eyes of the external auditor, especially one with a longstanding relationship to the same company. The RFP process would make it clear that the independent directors on the audit committee, not company management, were in charge of choosing the auditor and supervising its work. Nevertheless, commentators are likely to raise three practical questions about this RFP proposal. 1. How often should the audit committee be required to issue a RFP? In my view, the answer is every 15 years. This period would allow an audit firm enough time to gain the expertise it needed to understand the complexities of a global company. This period would also be long enough to warrant a serious effort by other large audit firms in responding to these RFPs. Audit fees for 15 years might even persuade one or two middle-size audit firms to develop the capability of auditing multinational companies. 2. Will there be enough firms bidding on the RFP other than the existing auditor? Even if only one firm other than the existing auditor responds to the RFP, that should be sufficient to obtain most of the benefits of a competitive bidding process, as shown by the bidding for many large defense contracts . Of course, audit firms cannot perform both audit and non-audit services for the same public company. But the regulators could allow any qualified firm to respond to a RFP as long as the firm stopped the non-audit services if it won the RFP for the audit. 3. Will the RFP process make audit firms more likely to fold on tough accounting issues? With a periodic RFP process, the auditor would make great efforts to serve the needs of the audit committee, not company management. Thus, the RFP process would make the existing auditor to be more responsive to the audit committee — exactly what we want. With the RFP process in mind, the auditor would be more likely to alert the audit committee to close questions on financial reporting and possible areas of debate with company management. In short, mandatory audit rotation as a blanket rule is probably not cost effective. Instead, the PCAOB should require the audit committee to issue a RFP for the auditor engagement every 15 years, but allow the existing auditor to participate in the bidding process. This process would enhance the auditor’s willingness to make tough calls and reinforce its primary allegiance to the audit committee.

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Harlan Green: The Terrible Cost of Bush II’s Deficit

April 9, 2012

It is now becoming evident just how much damage the GW Bush budget deficit has done to the U.S. In part from the tax cuts of 2001 and 2003, which sharply reduced taxes on income, capital gains, and corporations, two wars and the Great Recession that began halfway through Bush’s second term, the deficit now threatens not only our fiscal soundness, but our status as the world’s economic powerhouse. It was VP Cheney who maintained that Reagan had said deficits don’t matter, but President Reagan raised taxes some 11 times during his tenure to save the budget, and the economy, as his Budget Director David Stockman described so well in The Triumph of Politics . In other words, President Reagan didn’t dare go as far as Dubya and VP Cheney in creating a deficit that siphoned off revenues to the wealthiest 1 percent and raised corporate profits to the highest in history as a percentage of GDP, while almost causing the disappearance of our middle class while endangering Medicare and social security. So it shouldn’t be a surprise that Republican Paul Ryan’s 2013 budget proposal passed by the Republican House follows in GW Bush’s footsteps. President Obama assailed it as “… a Trojan horse, disguised as deficit-reduction plans,” said the president at an Associated Press luncheon in Washington on April 3. “It is thinly veiled Social Darwinism.” Obama was referring to the fact that Ryan’s plan doesn’t really reduce deficits. Because it calls for trillions of dollars in spending cuts without raising revenues, 62 percent of which would come from low-income programs, just as the Bush II budgets did. And both revenue increases and spending reductions are necessary to pay down the budget deficit. In fact, the new tax cuts at the top would dwarf those for middle-and lower-income families, says The Center for Budget and Policy Priorities, a non-partisan think tank. After-tax incomes would rise by 12.5 percent among millionaires, but just 1.9 percent for middle-income households. It’s Bushonomics all over again. What was most unconscionable about the Bush tax cuts was that they occurred during his first recession — from March to November 2001, caused mostly by the dot-com bubble bust. In fact, he was starving the government of revenues at the same time that he was planning two wars, as has been revealed in several books by Ron Susskind , including The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neil . Now we have a yawning federal deficit that continues to grow past $15 Trillion. Bush Treasury Secretary Paul O’Neill, who was fired by VP Cheney for advocating that the four Clinton years of budget surpluses be used to put social security and Medicare on a more secure footing, described the result of the debate that led to such a disastrous decision in The Price of Loyalty . It was to return government to its 1900 size, the era of William McKinley and the Robber Barons, by reducing government spending enough “to shrink it down to the size where we can drown it in the bathtub”, Grover Norquist , architect of the no tax increase pledge signed by more than 200 Republican legislators, once famously said. So we now know what makes up the current $15 trillion federal debt. Most of the deficit was created by the Bush tax cuts , war spending, and the second Great Recession that occurred under the Bush presidency — from June 2006 to December 2007 — says the CBPP . It resulted in the most anemic recovery since WWII, with just 5 million jobs created, not even recovering from the 8 million jobs lost since 2000, and the median household income decline from $56,000 in 2000 to $52,000 in 2011 dollars, where it was in 1997, according to the New York Times and Moody’s Analytics . Graph: CBPP/org That cost of the Bush II deficit is just now becoming evident, because of its growing size and the fact that budget matters are so arcane and hard to understand by the public and politicos alike. But all of the Bush tax cuts contributed to the deficit, because they weren’t paid for. GW Bush wouldn’t cut back spending to match the loss in revenues because he wanted to pay for his wars, so he borrowed the monies. Whereas during the Clinton era, legislators had agreed to pay-as-you-go rules, where spending cuts had to match tax cuts. And the Great Recession has continued to grow the deficit. In fact, if just the Bush tax cuts were extended it would increase that deficit by $4.6 trillion over the next 10 years, says Andrew Fieldhouse and Ethan Pollock of the Economic Policy Institute , a labor think tank. That means we are now facing its terrible cost. Republicans have proven their ideology of starving the beast of government ends up starving the economy of growth, except for the 1 percent who are their supporters.

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Jed Kolko: Home Prices Are Up. Haven’t You Heard?

April 9, 2012

Find Out Where Asking Prices and Rents Are Heading, Almost In Real-Time, With the New Trulia Price Monitor and Trulia Rent Monitor I rely on the major sales-price indexes — Case-Shiller , Federal Housing Finance Agency (FHFA) and CoreLogic — as much as the next guy (or the next housing economist, anyway). They’re essential for understanding where home prices have been going. But they come out between five and eight weeks after each month ends, and the sales prices they report are rooted in asking prices set two or three months earlier. Doing these sales-price indexes right takes time , but buyers, sellers, investors and policymakers need to know what’s happening in the housing market now . Starting today, we’re closing this gap. The Trulia Price Monitor and the Trulia Rent Monitor show every month what’s happening to asking prices and rents almost in real-time. By focusing on asking prices and releasing each month’s Monitors just days after each month ends, we can detect price movements at least three months before the major sales-price indexes do. What are the Trulia Price Monitor and Trulia Rent Monitor? To create the Trulia Price Monitor and Trulia Rent Monitor, we take all the for-sale homes and rentals ever listed on Trulia.com and calculate how asking prices and rents changed month by month. Rather than simply tracking the average or median, we adjust for the changing composition of homes that are listed each month. Therefore, these Monitors reflect the price and rent trends for similar homes in similar neighborhoods over time. For the Trulia Price Monitor, we also account for the regular seasonal fluctuations in asking prices in order to reveal the underlying trend in prices. The Trulia Price Monitor differs from the major sales-price indexes in important ways. First, we focus on asking prices. Final asking prices lead sales prices by about two or three months, reflecting the time that homes are typically on the market. In 2011, the Trulia Price Monitor’s national month-on-month changes track the seasonally-adjusted month-on-month changes in Case-Shiller and FHFA two months later.  Asking prices, however, are not a perfect predictor of sales prices: the final sales price for a home can be above or below asking, and some listed homes might not sell. Asking prices and sales prices each have their advantages for understanding the housing market: asking prices have the advantage of showing current market conditions and trends, but sales prices are the best guide to historical and long-term trends in the housing market. Second, the Trulia Price Monitor uses a different statistical approach: a “hedonic” rather than “repeat-sales” method. The explanation gets technical pretty quickly, but we’ve provided all the details in our FAQs . Here’s what to expect from us: in the first few days of each month, we will publish price and rent trends for the previous month, for the nation as a whole and for the largest metro areas (for prices, the 100 largest; for rents, most of the 100 largest). We report monthly, quarterly and yearly changes nationally, plus quarterly and yearly changes at the metro-level. Our approach lets us dig deep: in the future, we’ll look at price trends for single-family homes versus condos; homes with one, two and three or more bedrooms; downtown versus suburban trends; and more. Have some other comparison that you’d like us to make? Email us and let us know. Madness! Asking Home Prices Moved Up in March Let’s get to the facts. Nationally, asking prices on for-sale homes were 1.4 percent higher in March than one quarter ago. Prices increased month over month by 0.9 percent in March and 0.6 percent in February. What we found through the Monitor is that asking prices had been declining prior to February and reached a low in January 2012. Throughout 2011, asking prices rose slightly in several months of the year, but never more than 0.2 percent in a month. Asking prices in March were 0.7 percent below their level one year earlier. One thing to keep in mind — because the Trulia Price Monitor is seasonally adjusted, these monthly and quarterly increases are on top of typical springtime price jumps . Without adjusting for seasonality, asking prices rose 2.4 percent quarter over quarter. Asking Home Prices Are Looking Up for the Sunshine State But all housing is local. On the up side, the Trulia Price Monitor revealed that asking prices rose year over year in all large Florida metros, and fastest in Cape Coral-Fort Myers and Miami. Asking prices also rose in Phoenix, Pittsburgh and the Detroit area. Meanwhile, local housing markets in much of the West continue to struggle. Prices fell most in Tacoma and Seattle, followed by Sacramento and Las Vegas. All large California metros saw year-over-year price declines. Just check out this metro-level map and see for yourself. Florida and Michigan are looking mighty green (which means rising prices) whereas California is in the red (which means falling prices). Why do we see price increases in some places and price declines in others? As a general rule, prices are now rising faster in places where prices fell more during the bust and where vacancy rates are higher . In other words, many of the local price increases are bounce-backs: Cape Coral-Fort Myers, Miami and Phoenix all saw huge price drops after the bubble burst and big increases in asking prices this past year. But there are exceptions: Las Vegas prices continue to fall, even after years of steep price declines. Top 10 Metros With Largest Price Increases # U.S. Metro Y-O-Y % Change in Asking Price 1 Cape Coral – Fort Myers , FL 14.8% 2 Miami, FL 14.1% 3 Phoenix, AZ 13.2% 4 Pittsburgh, PA 9.2% 5 Little Rock, AR 6.7% 6 Orlando, FL 6.3% 7 North Port – Bradenton – Sarasota , FL 6.2% 8 Palm Bay – Melbourne – Titusville , FL 6.1% 9 West Palm Beach , FL 5.8% 10 Warren – Troy – Farmington Hills , MI 5.6% Top 10 Metros with Largest Price Decreases # U.S. Metro Y-O-Y % Change in Asking Price 1 Tacoma, WA -11.9% 2 Seattle, WA -9.1% 3 Sacramento, CA -8.3% 4 Las Vegas, NV -7.7% 5 Wilmington , DE-MD-NJ -7.7% 6 Columbia, SC -7.3% 7 Cleveland, OH -6.9% 8 Fresno, CA -6.8% 9 Milwaukee, WI -6.7% 10 Allentown , PA-NJ -6.7% Note: Rankings based on the year-over-year changes in asking price among the 100 largest U.S. metropolitan areas. Want to see the full list of price and rent changes for all 100 metros? You can download it here . No Wonder Your Landlord is Smiling What about rentals? Nationally, rents rose by 5.0 percent year on year: unlike prices, rents have been moving steadily upward. During the recession, some owners lost their homes and became renters instead; also, many younger adults deferred the leap from renting to owning. Strong rental demand, combined with little new rental construction, pushed rents higher. Asking rents rose over the past year in almost all large metro areas included in the Trulia Rent Monitor — regardless of whether asking home prices were going up or down. For example, rents rose strongly in Miami (12.1 percent) and Denver (9.9 percent), where for-sale prices also increased. Meanwhile, rental affordability declined in places where rents rose while prices fell, most notably in San Francisco (rents up 11.1 percent), Seattle (9.7 percent), San Jose (9.4 percent) and Boston (9.2 percent). As for the very largest metros, rents rose 6.2 percent in New York and 6.1 percent in Chicago , but only 0.6 percent in Los Angeles . So what drives rent trends? Employment growth matters most. San Francisco, Denver, Seattle, San Jose and Austin all had high year-on-year employment growth (through February 2012, according to the Bureau of Labor Statistics) and big rent increases. Is This Bounce-back Here To Stay? Will these price and rent increases continue? Continued job growth plus declining inventories equal more buyers chasing fewer homes – and therefore higher prices. The big wildcard for prices is the next wave of foreclosures. The robo-signing settlement will accelerate foreclosures, which will ultimately depress prices in neighborhoods where foreclosures are concentrated. Rents this year depend on both job growth and new construction: last year builders broke ground on many multi-family buildings, which should come to market later this year and dampen rent increases. Want to be the first to know how foreclosures , construction and jobs are affecting prices and rents in April? Come back in early May, when we’ll release the April 2012 Trulia Price Monitor and Trulia Rent Monitor.

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Raymond J. Learsy: The New York Times Sheds a Tear for Wall Street Paydays

April 8, 2012

Andrew Ross Sorkin, The New York Times ‘ and CNBC’s subtle apologist for Wall Street, Goldman Sachs et al slinks again –this time in a featured babble on the growing difficulties being encountered by the Wall Street folk to strike it big time. Mr. Sorkin presents us with a laundry list of why the cascade of wealth that has been showered on Wall Street players is coming to an en end. That henceforward times are going to be tough with its implication that we should all be more charitable and understanding in our judgments of the errant behavior that has done so much to bring our economy close to its knees. He plaintively intones, “It is harder than ever to become one of the world’s wealthiest individuals by working on Wall Street.” He then goes on to draw a distinction between the Wall Street Poobahs such as JP Morgan’s Jamie Dimon, Goldman’s Lloyd Blankfein being the poorer cousins of the hedge fund crowd, a bit like saying they all belly-up to the same bar, but one set is drinking scotch, the other ordering gin. Then, brimming with a subtext of the unfairness of it all, that the Wall Street types haven’t reached the herculean heights of wealth such as the likes of a Bill Gates. Without any qualifier, thereby implying Bill Gates’ billions were achieved by the same razzle-dazzle as the Wall Street players and their speculative excesses. No mention that Bill Gates earned his billions by his exemplar of American meritocracy, thanks to his entrepreneurial vision and courage through which we have all realized richer lives — this, in stark contrast to the largely self-enriching crony capitalism of Wall Street laid bare by the events of 2008 and thereafter. In the meanwhile, working in the trenches, getting their hands dirty on farms, on assembly lines, tending the sick in emergency rooms, driving the trucks or buses, getting splattered with oil working on a rig, or whatever day to day undertaking in which they were engaged, clearly those below were too busy to take heed of Mr. Sorkin’s concerns. Last year alone these hard working souls pulled in the following paydays from their one year’s sweat and labor: Ray Dalio, Bridgewater Associates,$3.9 Billion Carl Icahn, Icahn Capital Management,$2.5 Billion James H. Simmons, Renaissance Technologies Corp,$2.1 Billion Kenneth C. Griffin, Citadel,$700 million Steven A. Cohen, SAC Capital Partners,$585 million If timing is everything, than the timing of Mr. Sorkin’s article becomes ever so curious coming just one week after the publication of these humungous sums. There he was, as so often before, trying to steer our focus from the excesses of Wall Street’s “Big Money” parade.

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Job Creators Alliance: What the Federal Government Can Learn From Florida

April 8, 2012

The headline numbers of 121,000 in March and 240,000 in February were well below the consensus expectations, which ran about 205,000. Private payrolls increased by 121,000, with the bulk coming from private services at 90,000. Gains were strongest in business services (31,000), education and health (37,000), and leisure and hospitality (39,000), but gains in these sectors were below what had been observed in recent months. On the goods-producing side of the ledger, construction payrolls fell by 7,000. Manufacturing payrolls, however, grew by 31,000 and, along with gains in leisure and hospitality, suggest that some underlying labor market strength in cyclical sectors remains in place. The public sector shed 1,000 jobs, and recent trends there suggest that the persistent declines in public sector payrolls have subsided. The three-month average change in public sector payrolls is now 1,000, versus the -22,000 average monthly change recorded in 2011. Finally, net revisions to previous months added 4,000 jobs, continuing the pattern of upward revisions to the data, but at a slower rate. EARNINGS GROWTH STAGNANT Average hourly earnings rose 0.2 percent, compared with an upwardly revised 0.3 percent in the previous month (initial estimate: 0.1 percent), and the y/y change now stands at 2.1 percent. The average workweek was unchanged at 34.5 hours, in line with expectations, while the February data were revised higher to 34.6 from 34.5. Aggregate hours worked increased at a 3.7 percent 3m/3m (saar) pace in March, compared with 4.1 percent in February and 3.4 percent in January. The payroll proxy for labor income (aggregate hours worked times average hourly earnings) rose at a 5.6 percent 3m/3m (saar) pace after rising 5.8 percent last month and 5.0 percent in January. The household survey also took on a weak tone, with employment falling by 31,000. This is well below the three-month average of 415,000 and breaks eight consecutive months of household employment gains. THE CLAIMS DROP BECAUSE CLAIMANTS DROP OFF The unemployment rate fell to 8.2 percent (8.192 percent unrounded), reflecting a drop in the participation rate of one-tenth, to 63.8 percent. Overall, the report had an undeniably weak tone and will raise doubts about the strength of the labor market. Given that the report reflects only one month of data and some of the underlying cyclical sectors registered payroll gains, I do not view it as conclusively signaling a shift to a lower trend rate of employment growth. THE BOTTOM LINE OF THE BOTTOM LINE Although the unemployment rate went down to 8.2 percent, the number of jobs created was only 121,000. This is basically in line with population growth. The only reason the number of unemployment claims went down is because the overall labor force participation went down — those hundreds of thousands who are no longer eligible for unemployment. This is what happens when you give people less incentive. The president says we have tried ‘on-your-own economics’ but now we can see how ‘government-run, high-tax, heavily-regulated, bureaucrats-pick-the-winners-and-losers economics’ destroys job growth. The 121,000 new jobs are in line with what you would expect with GDP growth and income growth. As I have always said the prior job growth was not in line with the low GDP and income growth we were seeing. Our low GDP and income growth during this period should have given us job growth of 120,000-150,000 a month, rather than the anemic growth we had in February and March. What this says to me is the growth in jobs is a just bounce from too many layoffs during the recession beyond what the GDP at that point was indicating. The effect of the administration’s policies are finally showing. One month is not a trend, but we finally have a correlation between the GDP and Income growth. And on the bright side, we have job growth in the service industry that serves alcohol. THE FLORIDA EXCEPTION One state that stood apart from national trends was Florida. What they saw there was amazing, and it was the result of a government approach to economics that was 180 degrees from what the White House wants. With the release of March’s data, Florida has now had 11 consecutive months of job growth. Their unemployment is at a three-year low . These job growth trends are a result of Florida’s reducing regulation, easing the tax burden on small businesses and delivering two consecutive balanced state budgets without tax increases. This is the example we need in every state, and most especially in Washington, D.C. The parties must come together to create a positive business environment, with established and common sense rules, a reduction in bureaucratic induced burdens, and the removal of uncertainty and ambiguity that comes from arbitrary and radical policies. By David Park, Chairman, Job Creators Alliance David Park is Managing Partner at Austin Capital, LLC, a merchant bank that assists small companies with financial consulting, and is also Chairman of the Job Creators Alliance , a nonprofit comprised of current and former major business leaders who are committed to the defense and preservation of the free enterprise system.

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James Kwak: Fiscal Affairs: Someone Is Wrong in The Times*

April 7, 2012

James Stewart has doubled down on his infatuation with Paul Ryan. Ryan’s budget, he says, is a viable centrist starting point for budget negotiations, and attacks from “left and right” are mere “partisan rhetoric.” This is several different kinds of crazy. First, Stewart repeats his belief that Ryan’s plan would increase taxes on investment income. But that belief has no basis other than Stewart’s own belief that it would be a good idea. As I pointed out before, Ryan’s own budget argues against raising taxes on capital gains and dividends. The only thing Stewart can find is Ryan’s apple-pie platitudes about the need for tax reform. But Ryan’s own vision of tax reform, as evidenced by his budget’s own words, doesn’t include higher capital gains taxes. (In addition, as a signatory to the Taxpayer Protection Pledge, Ryan is sworn to “oppose any and all efforts to increase the marginal income tax rate for individuals and business.” That sounds to me like it includes the capital gains tax rate, which is a marginal income rate.) This is further evidence of columnists’ ability to project their own fantasies onto Paul Ryan’s handsome face. More generally, Stewart pins high hopes on Ryan’s embrace of tax reform. But all Ryan’s budget actually says about tax reform can be summed up in two points: tax reform is good; and tax rates should be lower (25 percent for the top individual rate and for the top corporate rate, both down from 35 percent today). This of course allows credulous people to see themselves in Paul’s blue eyes (see above). But if you want a serious starting point for tax reform, you should look at Simpson-Bowles or Domenici-Rivlin , both of which spelled out actual tax expenditures they would close (or Feldstein, Feenberg, and MacGuineas , or White House Burning , or any one of many other policy proposals that do the same). Ryan’s “tax reform” is nothing more than a few talking points designed to score political points (why else would you specify the lower tax rates but not the closed loopholes), not a starting point for anything. Stewart also plays the “centrist” card with unprecedented aggressiveness. He cites attacks by the Club for Growth as proof of Ryan’s reasonableness. But when it comes to military spending, the Club for Growth isn’t attacking Ryan from the right; it’s attacking him from the left . Democrats want to reduce military spending as a share of GDP; so does every bipartisan deficit reduction panel; so does the Club for Growth (which thinks that the automatic spending cuts in the Budget Control Act should be respected). Ryan, by undoing the automatic spending cuts to preserve defense spending, is to the right of the budget debate, not in the center. In other words, everyone knows that if you want to reduce the deficit you have to cut defense spending–except Paul Ryan and James Stewart. Then there’s Medicare, one of the few areas where Ryan is willing to spell out his cost-cutting proposals. For Stewart, this shows that Ryan is a brave warrior against entitlement spending. But simply tackling entitlement spending doesn’t make you reasonable, centrist, or worth listening to; everyone who talks about the deficit talks about tackling entitlement spending. (Even Simon and I do, although our entitlement cuts are smaller than most other people’s.) It’s the actual proposal that matters. And Ryan’s proposal is only one step from the far-right fringe–that’s the step he walked back since last year. Last year he was going to convert Medicare into a voucher program where you could use your voucher toward insurance from a private company, but the value of the voucher was artificially capped so it would buy less and less health care over time. This year the only difference is that now you can buy insurance from a private company or from traditional Medicare. But in either case, the important points are: (a) the vouchers are designed to grow more slowly than the cost of health care, meaning a huge transfer of cost and risk from the government to individuals; and (b) reliance on the private market to reduce costs and improve outcomes (something it’s failed at dismally for the last forty years). Having a Medicare plan shouldn’t win you any points; it’s what’s in the plan that matters. At least for most of us. This inattention to actual policy is how Stewart can think that “within the Ryan budget proposal is the outline of a grand compromise not all that different from the one President Obama and the House majority leader, John Boehner, reportedly came close to reaching last summer: long-term deficit reduction through tax reform, higher tax revenue and spending cuts.” Well, yes, if you’re going to stick to the level of abstract generalities, I guess the Ryan budget is similar to the Obama-Boehner deal in that both included tax reform and spending cuts. In practice, though, the Obama-Boehner deal was nothing like the Ryan budget. We know the tax reform was completely different because Boehner was offering higher tax revenues that were not entirely due to supply-side fantasies. Ryan only achieves higher tax revenues by dictating that his plan will bring in 19 percent of GDP in tax revenue; nowhere does he say how we would actually achieve this while slashing tax rates. We also know the spending cuts were completely different, because Obama-Boehner did not convert Medicare to a voucher system (they did include spending cuts, but they kept the same benefit structure), while Ryan does. Finally, here’s one more way to think about the Ryan budget: This picture shows all government spending except for Medicare, Medicaid, CHIP, Social Security, and net interest. (The data are from Tables 1.1, 1.2, 3.1, and 8.5 of the OMB’s 2012 budget, historical tables.) It’s a close approximation for discretionary spending, and it’s what the CBO uses in its long-term projections . The Ryan Budget would reduce spending on everything except Social Security and health care to the lowest levels since before the Great Depression. Furthermore, those numbers include defense spending. Since Ryan’s budget proposes to protect military spending from the automatic cuts in the Budget Control Act, I think it’s fair to assume that he won’t want to cut defense spending to historical lows. Since World War II, defense spending has never fallen below 3.0 percent of GDP. Assuming that defense spending never falls below that level, you get this picture: This is a blatant assault on the entire federal government except for health care, Social Security, and defense. This is not a courageous, centrist starting point for a real deficit solution. * See XKCD . James Kwak is the co-author of White House Burning: The Founding Fathers, Our National Debt, and Why It Matters To You , available from April 3rd. This post is cross-posted from The Baseline Scenario . Read more from the Fiscal Affairs series here .

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Matt Bieber: To Bet or Not to Bet? Why Gambling on Elections Is Wrong

April 6, 2012

Many mornings this spring, my roommate, Teddy, and I have speculated about how the Republican candidates are likely to fare in states we’ve never visited. Our third roommate, Ben, stays quiet and seeks out the most reliable polling information he knows. “InTrade has Romney up by 4,” Ben will say. When he does so, my stomach churns a bit — and not because of Romney. InTrade — which bills itself as the “World’s Leading Prediction Market” — is a website that allows users to create betting ‘markets’ and buy or sell ‘shares’ in any yes-or-no prediction they can dream up. Shares range from $0 to $10, and their prices reflect the market’s overall confidence that the event in question will happen. Right now, for example, it costs a user $9.74 to buy a share in the market that Ruth Bader Ginsburg will be the next Supreme Court justice to retire or resign . In other words, the market thinks there’s a 97.4% chance that this event will take place. (InTrade’s election-specific predictions are quite accurate — and much more so than many polls.) You can also bet on election outcomes. Will Rick Santorum win the Pennsylvania primary ? Will Pat Toomey be the Republican VP nominee ? Will Barack Obama be re-elected? But as much fun as it can be to speculate about these questions, I can’t bring myself to feel good about the idea of gambling on election outcomes. It’s not because I oppose gambling in general; I think betting on how much money The Hunger Games makes on its opening weekend is just fine. (A little silly maybe, but fine.) Instead, my objection has to do with a feeling that our elections are profound, even sacred opportunities to express our highest ideals, and that gambling profanes them. Now, that’s not to say that our elections actually are particularly high-minded affairs. They usually aren’t. But they could be, if only we’d take ourselves and our democracy seriously enough to insist on it. Gambling on elections cuts the other way. It’s as if the InTraders are saying, “None of the stuff that’s at stake in these elections matters to us. We just care about getting ours.” (You can imagine the more cynical version: We’re screwed either way, so we might as well make a few bucks betting on when the ship will go down.) Maybe I’m being unfair. After all, some of these folks could be dedicated activists who also enjoy expressing their commitment to a particular candidate by putting money behind the campaign — gambling as a gesture of hope or faith. My roommate Ben has an even more sanguine take. Not only is betting on elections morally acceptable, he thinks, it’s actually valuable. After all, prediction markets provide a kind of information that you can’t get anywhere else. This information comes in the form of prices, which Ben takes to be an important signal of people’s real feelings about a matter. People might lie to pollsters, his thinking goes, but they’re less likely to lie to themselves when they’re deciding how to bet on Santorum stock . When Ben first explained this line of thinking, I felt a familiar kind of ethical tension. While I’m not comfortable gambling on elections, that fact that other people do so creates something I value. (After all, I want to know which candidate the markets think is going to win — and above all, I want my candidate to know so that his or her campaign can develop the most effective strategy.) But that doesn’t answer the basic question: how should we regard gambling on elections in the first place? Perhaps an analogy will help. Right now on InTrade, you can place bets on whether the U.S. or Israel will launch an air strike on Iran this year . (In fact, you can place different bets based on when you think a strike might occur.) When I told a friend about this, he responded, “Why would you create an incentive to rejoice at war?” He’s right. When we bet on trivial things — basketball games, American Idol — we don’t put our moral selves at stake. Regardless of how things turn out, the world won’t be meaningfully better or worse. But when we gamble on things like war (or elections), we create incentives for ourselves to want things that may run counter to our best moral instincts. No, I don’t want to see Tehran burn, but it would be nice to have that $50. These incentives encourage us to balance things that cannot be balanced. They may even affect our political behavior — distorting our priorities and inviting us to be a little more (or less) vocal than we might otherwise be. If that example seems extreme, take something closer to home. Would you bet on how long a friend’s marriage might last? How about the month in which a family member might die? If you said no, my guess is that you did so because you understand what another friend recently suggested to me: that part of being moral involves responding appropriately to things with moral weight. The world is a complicated and uncertain place. But that doesn’t mean that everything in it should be treated like a March Madness pool. Some things matter more. Some things are sacred, even. Gambling sullies them and sullies us. Note: this article originally appeared at The Wheat and Chaff .

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Jennifer Hamady: Reevaluating Ownership

April 6, 2012

I was on a train this morning, where I saw an advertisement — in Spanish — for attorneys offering to secure compensation for the victims of accidents and malpractice. The number to call was: 1-888-MARGARITA™ Setting aside the word choice someone thought appropriate for promoting legal services to New York’s Spanish-speaking community, I’d like to take up the pervasive use of the trademark in our culture today. My interest in the subject has been growing for a while, given that everywhere I look — on the internet, in magazines, on television, and in newspapers — the ™ and ® symbols (trademark pending and registered, respectively) abound. They’re becoming as common as commas, yet with a far greater impact than often overused punctuation. For those of you unfamiliar with what those little symbols mean, they mean that you can no longer freely use whatever comes before them. Those words, common as they may be, are now effectively the business property of someone who has chosen to link up their professional ambitions, services or products with them. This issue came to a head for me on a recent walk in midtown. I gazed up to see a mural of Sean “Puffy” Combs promoting his new Vodka. Under the name were the words: Perfectly Smooth. With a big fat ® after them. Are you kidding me? If I’m a baker, I can’t write on my website that my cake’s texture is perfectly smooth? I can’t — if I’m an auto-detailer, a plastic surgeon or a floor sander — describe my work this way. Can I? In my own field of voice, the trend to lock in language has also blossomed. There are thousands of trademark applications and successful registrations each year for companies, websites and services that include the words voice, vocal, tone, breath, breathing, body, note, notes, support, sing and singing, to name only a few. Mix them up, throw a ™ after them, and everyone else is left unable to say much of anything. I’m not saying companies shouldn’t be able to protect the unique titles and content that distinguish their brand. Service and trademark laws were created for this reason and thus, why Nike, lululemon, and Wikipedia — deservedly so — have been granted trademarks. These companies have earned the right to utilize the laws created to protect imagination, hard work and commitment to a corporate and cultural identity. Yet this law, appropriate as it is, also serves to protect — and in the process, prevent others from using — monikers and phrases that are in no way original or imaginative. Even those who are neither in, nor yet successfully in, business may — with little more than a simple website and a dated pamphlet — take national and even worldwide professional ownership of words and phrases that have for centuries been used in the common vernacular. It is interesting that the legal lockdown of conversational language is progressing while copyright law and rights are being so thoroughly challenged. While “perfectly smooth” and “margarita” are now effectively off the professional English-speaking market worldwide (as well as, in translation, in many others) entire albums, books and movies are being publicly shared without acknowledgement of or compensation for those who created them. For some — particularly those from younger generations — this doesn’t seem like such a big deal. It’s not only appropriate, but fair, to get songs, movies and books for free. These boys and girls weren’t around when copyright laws were put in place to protect the creations — and livelihoods — of men and women who spent entire lifetimes generating high quality literary, cinematic, theatrical and musical works for the rest of us to enjoy and benefit from. To these kids, while their laptops, iPhones and clothes are decidedly theirs , so too are the blood, sweat and tears of every composer, author, director and screenwriter that has ever lived. Before you argue the theoretical or legal specifics of creative ownership, hear me out. I’m not saying that the rules should never change. Certainly they do and certainly we must embrace them, lest we are to be left in the proverbial and technological dust. But we also have the right to question — beyond our comfort and our convenience — why the rules are changing. Is the expansion of free access to musical, literary and artistic creations in order to inspire and educate people of all ages, nations and means? Or to serve the greed that may be so easily fulfilled by technology that happily, if not legally, makes everything freely accessible? Similarly, is the expanded use of trademark law in order to serve and protect inspired business owners and their unique ideas and brands, or to provide an economic boon for that branch of government, as well as for the lawyers that profitably interface with it in the filing and fighting of claims? Penalties for using trademarked words and phrases — even in personal blogs — are already on the books, including words and phrases you used long before someone chose to submit a check for $375 to the patent and trademark office in Washington, D.C. Some would argue that the path we’re on is inevitable, thanks to our historical and current cultural notions of “ownership.” Land, people, animals and now language… is there nothing — or no one — that we are unable to intellectually convince ourselves that we have a right to own ? Our inability to see ourselves as an interdependent and collective whole leaves us with a view of the world as scarce and therefore, we are determined to grab rabidly — desperately — for what we want. It’s like the sandbox all over again, only now instead of screaming “Mine!” at each object we want, we type up on-line applications, hire lawyers and file and cease-and-desist orders. Certainly there needs to be protections for creators to ensure that their brands — and content — may be fairly delivered to and received by the public. But with respect to common words and phrases, we’ve gone too far. Unless, that is, you don’t mind your local bar advertising that their “popular tequila-based drink” is “flawlessly even.”

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Blair Bowie: Disempowered Bankers Start Super PAC, Reveal Plans for World Domination

April 6, 2012

The American Banker Association recently announced that after years of being ignored in the halls of power, it will at last be creating its own super PAC to serve as its proverbial “big stick.” For too long, the banking industry has been stuck at 13 on the list of industries giving the most to members of Congress , drowned out by such vehemently anti-banking interests as “Misc. Finance” (12), “Lobbyists” (7), “Real Estate” (5), and “Securities and Investment” (3). American Banker editor-at-large Barbara Rehm writes, “Frustrated by a lack of political power and fed up with blindly donating to politicians who consistently vote against the industry’s interests, a handful of leaders are determined to shake things up.” While I am highly skeptical of the sentiment that “Congress is not afraid of bankers”, given that banking lobbyists outnumber banking reform advocates 25-1 and that the Chairman of the Senate Financial Services Committee seems to believe that “the banks own the place,” the most ridiculous thing about this announcement may just be ABA’s willingness to reveal its strategy for skirting the non-coordination rules. The Supreme Court and FEC explicitly prohibit Super PACs from coordinating with candidates and their campaigns. I generally interpret this to mean that having a direct conversation with a candidate is a violation of the rules. Yet Matt Packard, the Super PAC’s chairman, is apparently quite excited about using his new stick in that context, “If someone says I am going to give your opponent $5,000 or $10,000, you might say, ‘Yea, okay’. But if you say the bankers are going to put in $10,000 or $500,000 or $1 million into your opponent’s campaign, that starts to draw some attention.” When is Packard imagining himself having this conversation and what will he be asking for to call off the hounds? This statement speaks volumes about how the industry thinks about its involvement in politics. Note too that Packard says they may be directing money “into your opponent’s campaign.” He means that in the same way that one might give to Restore Our Future to support Romney right? Nope. While the coordination rules are twisted enough when it comes to candidate specific super PACs, Friends of Traditional Banking plans to go even further. The independen expenditure-only committee, according to Rehm’s description, will exist not to “touch the money,” but to direct it to the candidate’s actual campaigns. This is starting to feel like the scene where the Bond villain reveals his whole plan for world domination. Even with a feckless FEC on the beat, Friends of Traditional Banking seems to be inviting federal investigation. Rehm reports that the first thing prospective donors have been asking Utah Bankers Association president Howard Headlee is, “Is this legal?” Luckily, Headlee seems to have a Trevor Potter button for that.

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Robert Reich: The Fable of the Century

April 5, 2012

Imagine a country in which the very richest people get all the economic gains. They eventually accumulate so much of the nation’s total income and wealth that the middle class no longer has the purchasing power to keep the economy going full speed. Most of the middle class’s wages keep falling and their major asset — their home — keeps shrinking in value. Imagine that the richest people in this country use some of their vast wealth to routinely bribe politicians. They get the politicians to cut their taxes so low there’s no money to finance important public investments that the middle class depends on — such as schools and roads, or safety nets such as health care for the elderly and poor. Imagine further that among the richest of these rich are financiers. These financiers have so much power over the rest of the economy they get average taxpayers to bail them out when their bets in the casino called the stock market go bad. They have so much power they even shred regulations intended to limit their power. These financiers have so much power they force businesses to lay off millions of workers and to reduce the wages and benefits of millions of others, in order to maximize profits and raise share prices — all of which make the financiers even richer, because they own so many of shares of stock and run the casino. Now, imagine that among the richest of these financiers are people called private-equity managers who buy up companies in order to squeeze even more money out of them by loading them up with debt and firing even more of their employees, and then selling the companies for a fat profit. Although these private-equity managers don’t even risk their own money — they round up investors to buy the target companies — they nonetheless pocket 20 percent of those fat profits. And because of a loophole in the tax laws, which they created with their political bribes, these private equity managers are allowed to treat their whopping earnings as capital gains, taxed at only 15 percent — even though they themselves made no investment and didn’t risk a dime. Finally, imagine there is a presidential election. One party, called the Republican Party, nominates as its candidate a private-equity manager who has raked in more than $20 million a year and paid only 13.9 percent in taxes — a lower tax rate than many in the middle class. Yes, I know it sounds far-fetched. But bear with me because the fable gets even wilder. Imagine this candidate and his party come up with a plan to cut the taxes of the rich even more — so millionaires save another $150,000 a year. And their plan cuts everything else the middle class and the poor depend on — Medicare, Medicaid, education, job-training, food stamps, Pell grants, child nutrition, even law enforcement. What happens next? There are two endings to this fable. You have to decide which it’s to be. In one ending the private-equity manager candidate gets all his friends and everyone in the Wall Street casino and everyone in every executive suite of big corporations to contribute the largest wad of campaign money ever assembled — beyond your imagination. The candidate uses the money to run continuous advertisements telling the same big lies over and over, such as “don’t tax the wealthy because they create the jobs” and “don’t tax corporations or they’ll go abroad” and “government is your enemy” and “the other party wants to turn America into a socialist state.” And because big lies told repeatedly start sounding like the truth, the citizens of the country begin to believe them, and they elect the private equity manager president. Then he and his friends turn the country into a plutocracy (which it was starting to become anyway). But there’s another ending. In this one, the candidacy of the private equity manager (and all the money he and his friends use to try to sell their lies) has the opposite effect. It awakens the citizens of the country to what is happening to their economy and their democracy. It ignites a movement among the citizens to take it all back. The citizens repudiate the private equity manager and everything he stands for, and the party that nominated him. And they begin to recreate an economy that works for everyone and a democracy that’s responsive to everyone. Just a fable, of course. But the ending is up to you. Robert Reich is the author of Aftershock: The Next Economy and America’s Future , now in bookstores. This post originally appeared at RobertReich.org .

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Neda Talebian Funk: Fitness: The New ‘It’ Bag

April 5, 2012

Remember when dinner conversation between friends was once all about kids, fashion, and where you were traveling next? Today, the topic in vogue is fitness. It may start with, “Who is your favorite spin instructor and what class are you taking tomorrow?” and an hour later, the group is likely still talking about where and how they get their sweat on. Fitness is the new fashion, and — not surprisingly — it is quickly taking a greater portion of wallet share. At over $20 billion, the U.S. fitness market continues to grow at a solid clip. Further, the introduction of “a la carte” group fitness classes has created a growing market of fitness-goers who spend north of $300 per month on their group fitness classes alone. The boom in boutique studios and fitness apparel is proof. Fitness is not only what people are talking about, but it’s what they are doing. As Technogym’s Nerio Alessandri so perfectly once said, “Fashion is looking good outside; wellness is feeling good inside. It’s the new frontier of luxury.” What makes getting your heart rate up with a sweaty workout the new luxury? The Rise of the Boutiques. Let’s face it: The gym has not changed very much over the years. The big box format offers everything — its cardio machines, group fitness classes and locker rooms — all under one roof, and has remained pretty standard. Thanks, Jack LaLanne. Yet, in recent years, there has been a proliferation of “boutique” fitness studios offering a specialized workout. These workouts embody the “3 E’s,” as coined by fitness consultant, Jonathan Fields: efficiency, effectiveness, and engagement. Boutique studios also tend to be upscale: think $30+ per class in major cities. In fact, over the last three years despite the economic downtown, the NYC market has seen an incredible rise in the boutique studio — up over 30 percent, according to FITiST internal research. Chanel, Oscar de la Renta… and Lululemon. Walk down the street in NYC, LA, or any other metropolitan city and you will see more women in yoga pants than jeans. It’s a fact and a lifestyle. Fashion fitness brands such as Lululemon have revolutionized the fitness apparel industry. Remember working out in baggy soccer shorts and big t-shirts? Not anymore. Flattering, formfitting and highly technical sportswear is being worn not only in the gym, but to lunch, on weekends and even in the office. Want proof? Lululemon has posted over 30 percent year over year sales gains for the past nine quarters, and now boasts a market value of $10.4 billion… Yes, that’s billion. In the last quarter, the company’s sales per square foot were over three times that of luxury retailer, Neiman Marcus. And fashion designers themselves are mixing sportier styles into their lines and even doing collaborations with sportswear labels. Stella McCartney’s collaboration with Adidas has been among the more prominent designer athletic lines to date. The Celeb Factor. Simple truth: Thanks to the likes of Us Weekly , our culture is obsessed with celebrities’ every move, including how they sweat. Why do we all know Tracy Anderson? She trained Madonna and now Gwyneth. And who doesn’t want to look like Gwyneth Paltrow? People are more likely to fork over $35 for a class at a studio when they know it’s where Kelly Ripa gets her sweat on, Lady Gaga spends her birthday, or Matthew McConaughey blows off steam. In conclusion, fitness is simply the new “IT” bag, the season’s most talked about story — “seen in” is now “seen at.” For more by Neda Talebian Funk, click here . For more on fitness and exercise, click here .

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Blythe McGarvie: Wealth, Prosperity and Longevity (Part II)

April 5, 2012

In last month’s newsletter, I provided a Values Framework and stated that in subsequent letters I would dig deeper into the implications of the five dimensions of cultural values. Today, I will explain the first three dimensions. In Part 2 of this two-part series, I will discuss risk-taking and how people from different cultures deal with time. Today’s fast-paced technology is changing the levels of risk-taking in certain cultures. Individual vs. Collective Dimension When I worked in France, I advised my multicultural team to remember that French management holds in great esteem those individuals who make a name for themselves through their investments or accomplishments in great respect. Napoleon Bonaparte is still revered because he dared to be different and succeeded. Many western cultures, like those in the U.S. and the UK, tend to celebrate the strength of the individual and individual achievement. In such cultures, family ties tend to be secondary to individual goals and self-sufficiency is an honored trait. Nations like Japan or Kenya, however, embrace a collective or group-oriented value orientation, in which people tend to identify or define themselves as members of a group rather than as individuals. For example, an American company operating in Japan with Japanese employees must be sensitive to the notion that those workers think less about individual achievement than about how their efforts reflect on the group’s achievement as a whole. Also, unlike the American ideal of self-sufficiency, Japanese workers highly value the interdependence that comes from working within a group. For leaders, that means creating incentives and recognizing achievements for groups rather than individuals. In such a culture, a business should adopt a “high context,” defined as keeping the volatility and variability of a group to a minimum. In many Asian cultures, awareness of the concept of “saving face” should restructure a westerner’s behavior. How another person is perceived within his or her group is important. Accordingly, do not criticize an Asian individual in his own culture in public. Even praise should be done in a manner that does not isolate the individual from his group. Equality vs. Hierarchy Dimension Surprisingly, although Liberté, égalité, and fraternité is the national motto of France, the idea of equality is much different than to which Americans have grown accustomed. Hierarchy is quite important in France and modeling behaviors after King Louis XIV will serve you well when you meet the CEO or key political leaders. Whereas cultures like those found in the U.S., Canada or Sweden tend to share a value that people with different levels of power, prestige, and status, can interact with each other as equals, the cultures of nations like France as well as Asian countries expect recognition of social hierarchies based on a person’s social status. This acceptance of hierarchy leads to higher status differences, formal social relations and greater power concentrations among fewer people. It also means people who reside in lower rungs of the social order may have fewer perceived choices and rarely question authority. As a global leader coming from an egalitarian culture that might reward individuals that speak out or question authority figures, you will need to adjust your leadership approach if you want to create trust. It is crucial for you to define your rank and status at the onset of any relationship so that other individuals will know how to interact with you. You will also be expected to make the decisions affecting your organization with less input from subordinate. Tough vs. Tender Dimension I’ve done business and observed negotiations in Russia and learned that it is a tough culture. A “tough” culture has a preference for high material rewards to a winner and nothing to the loser. Tough societies also tend to enforce gender and racial stereotypes accepting male domination and aggressive behavior and discounting of minority races and cultures. When I was walking in downtown Moscow with our company controller who was of Indian descent, he was stopped by police who demanded to see his passport and questioned him. We found out later that this harassment was common and sent a message that certain foreigners are not welcomed. A book entitled Dilemmas of Diversity After the Cold War: Analyses of “Cultural Difference” by U.S. and Russia-based Scholars by Michele R. Rivkin-Fish and Elena Trubina expands on this theme describing social differences which often lead to symbolic violence and struggles between groups. It’s more difficult to assert which countries have a tender culture because the more aggressive participants stand out in business. When working within a tender culture, leaders need to be sensitive to gender issues. Men may also assume more domestic roles and take an active role in raising the family. Tender cultures also reject the “winner take all” approach championed in tougher cultures. Leaders need to adjust how they conduct their outreach to members of each kind of culture. While individuals from tough cultures will respond to personal challenges, members of tender cultures will respond more positively to efforts that result in “win-win” scenarios for everyone involved. Prepare differently Generalizations are dangerous yet they can give a clue to deep-rooted attitudes. With different nationalities in today’s workplace, just thinking in advance about how someone might think and behave will create better alignment in an organization and make your day more effective. Read Part I of this series here .

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Mohamed A. El-Erian: Markets Wake Up to Central Banks’ Complicated Tradeoffs

April 5, 2012

This week’s market action serves as a vivid reminder of how dependent valuations are on central bank policies, and especially the aggressive provision of liquidity by the Federal Reserve and the European Central Bank. The question for markets thus boils down to whether central banks will do more; and the issues these institutions face are extremely and increasingly complex. The global sell-off started on Tuesday with the release of the minutes of the most recent FOMC meeting. They were read by many as signaling less eagerness on the part of the Fed to embark on yet another round of liquidity injections (“QE3″). Virtually every asset class promptly slumped, including bonds, commodities and equities — a reflection of how liquidity, rather than fundamentals, partly underpins recent market strength. The sell-off in risk assets accelerated on Wednesday as the European Central Bank also cautioned about expectations of yet more unusual policy activism on that side of the Atlantic. The disappointing Spanish government bond auction was also a problem, coming at a time of mounting market concern about the country’s outlook. This time around, however, German and U.S. government bonds decoupled reflecting the “flight to quality” trade — out of risk assets and into what are regarded as safe heavens. Against this background, it is natural that investor conversations center on whether central banks will renew their liquidity injection programs if markets continue to sell off. Some believe that the institutions have no choice but to do so. Others are less sure. This uncertainty is not surprising. The analysis conducted here at PIMCO, including research for next week’s presentation of the Homer Jones Memorial Lecture at the St. Louis Federal Reserve, confirms that central banks face extremely complicated policy challenges: They are dealing with what Chairman Bernanke correctly called an “unusually uncertain outlook.” They are forced to use blunt tools. They receive very little support from other government agencies. And their repeated interventions inevitably distort price signals, alter market functioning, and disrupt liquidity. In sum, the critical trade-off in policymaking — between benefits, costs and risks — is becoming less attractive for central banks. Thus, recent signals of their hesitancy to do more, especially in light of improving economic data. When push comes to shove, however, we suspect that central banks may ultimately resort yet again to their printing presses, especially if meaningful economic and financial weaknesses reappear. Remember, this is not about what central banks SHOULD do; rather, it concerns what they are LIKELY to do. And in being forced to inject liquidity into the global system, central banks would be driven not by positive motivations but, rather, negative ones. In their hearts, central banks know that their policies cannot by themselves deliver the desired economic outcomes; and they are increasingly aware of the collateral damage associated with their unusual policy activism, as well as the unintended consequences. But they also feel that, for many reasons, they cannot be seen to stand on the sideline while politicians bicker, other agencies dither, and the economy stumbles. The markets’ obsession with central bank policies will not go away any time soon. Moreover, it will evolve over time to also include the question that holds the key to sustaining over time the bull market: whether central banks will be able to hand off the policy challenge — either to a robust economy or to other institutions that have better tools yet, for a host of reasons, have preferred to remain on the sidelines until now? Dr. Mohamed El-Erian is CEO and Co-CIO of PIMCO, the global investment manager. This post originally appeared at CNBC.com . © 2012 CNBC.com

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