How to fix the long-term economy?

Yes, exactly, I recalled your post when I was writing mine, and I concur, I think that the USA needs to start looking at rewarding US companies for hiring or staying within the USA.

DD

 

Those were the same problems since the Gilded Age 140 years ago. They were never solved.

There is no solution as long as the capitalism is functioning in the country.

 

Regulate the pay ratio between the highest and lowest paid employees.

Currently, the CEO-Worker pay ratio is 325:1

 

I think that includes stock options and bonus plans, right?

General salaries for CEOs are not 350 times greater than the other employees, but if the company performs well under their leadership then they get really rewarded.

I agree it is too much but the shareholders can force action on that.....

I am not for regulating profit, but maybe you tax the crap out of those CEOs personally after they earn those big bonuses.....

DD

 

Time for a humorous interlude?

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Capitalism is why with 3% of the worlds population, we control almost 25% of global gdp.

That is why even our poorest citizens have cars, televisions, designer brands and no one starves to death in our country.

Have some respect for the system that allows you to chat on the computer from your home, probably wirelessly and is the greatest producer of innovation in the history of the world.

 

Regulating it will never work as industries vary. What is crucial is that the CEO's income is related to long-term success of the business.

If a CEO is a superstar and his and his teams decisionmaking are so dynamic that they deserve it why the hell not?

Lets say Apple's average salary fell to $40,000 with local production and more retail, would Steve Jobs be worth $16,000,000? (400x) He grew the company from one worth less than $10 billion to a company worth almost $400 billion and adding thousands and thousands of jobs to our economy while creating products that revolutionize the way we communicate.

I'd pay hime double that much as he was WORTH it.

 

But has a system where 26 cents out of every dollar collected in taxes goes to paying off the INTEREST on the debt.....

It is like people that are upside down on credit cards and can only pay the interest, never touching the principal.

Maybe the USA should declare bankruptcy, balance the budget and start over?

I think the problem with that though is that the majority of the debt is owed to US citizens.

DD

 

This thread is pointless. We know how to fix the economy. Our broken politics prevent us from doing it.

 

So the suggestion is creating laws that limit executive compensation?

 

Major

i think your plan on incentives to hire americans is a great idea. just my take

 

To quickly name a few...

Short term: jobs bill (preferably with a large public works component... I like having libraries and riverwalks and parks and they are ultimately good for the community economy), aid to states to stop the job losses there, prudent regulation of the finance sector (Glass-Steagall anyone?), reach some agreement on what to do with the crashed housing bubble, even if it means everyone has to officially recognize the losses that are there, set up a program to help homeowners and deal with the flood of repossessed homes. (It kind of sucks that I was one of the most conservative of homeowners and probably would not benefit from such a program, but I've come to the conclusion that the housing market will be a drag forever unless we're able to reset to values that are more realistic while becoming more conservative with mortgages and providing means for people to recover while breaking the power of the big mortgage companies/banks.)

Long term: Much more and better stimulus to invest in people (education, law enforcement, etc.) infrastructure like roads, bridges, trains, schools, energy grids, data, research and development, etc. Public option to free people from the shackles of corporate provided health care and let them pursue their own entreprenuerial visions, reformation of university systems that provide better value to the student and country and discourages the steering of the best and brightest into stupid pursuits like finance, recreate a fairer tax system that starts to rebuild the middle class (I grew up in one of the few middle class-dominant economies in history and I'd like that for my kids as well). Bootkick the credit agencies to the curb and create an honest, transparent, and correctable system for deciding on credit worthiness. We need to change the thinking that profits can only be had by decreasing wages and increasing productivity and quit responding to quarterly statements like they are the most important thing in the world while we ignore the long-term consequences and benefits of a societal view.

It currently cost about $10 billion to borrow $1 trillion. We should be spending money like crazy at that rate to pull ourselves out of this and set our society up for the next 100 years. Instead, we're locked into arguing about "business certainty" and regulations and debt and taxes on the rich and not enough taxes on the poor when it is clear there is a demand problem that the private sector can't come close to dealing with.

We completely blew it after 9-11 when we had a chance to change the world for the better and we completely blew it after the financial crisis to do much of anything that will make a difference. Now we're in a presidential election year and nothing much will get done. If Obama wins, the Repubs will be even more obstinate and if the Repubs win, everyone will automatically forget about the debt and massive spending will be targeted exactly where we don't need it and the disparities and problems will grow worse.

 

There are two forces that are usually at the center of every failure or bubble and that is leverage and the socialization of risk through mutual shared failure.

Socializing risk in Insurance allowed Investment Banks to lever 40 to 1, because they had insurance with AIG, MBIA and others. Greece was able to borrow much more as the socialized risk within the EU afforded them credit they did not deserve. Socializing risk in MBS/CDO securities afforded people the opportunity to get credit they did not deserve and truly could not handle.

Capitalism is the greatest power in the world and has marked the accelerated growth of mankind since its dawn. Unfortunately where capitalism goes, excess follows and its a zero sum games in some points. When we understand that shared risk in certain circumstances forces people to be riskier than they would individually and group behavior in that model the closer we'll be getting to understanding the next phases of growth and sustainability within economies.

 

Having real owners on the Board of Directors of the company (large shareholders) will truly limit the excessive (undeserved) compensation of many executives. The threat of long-term active shareholders will hold boards accountable and through proxy fights can get on the board, not allow the board to be Yes-men to the CEO and pay for performance. Performance may dictate 400x the average employee but it must be based on value creation.

The problem is that the simple laws of shareholders buying stock and making difference is limited. Many states have provisions not allowing investors to buy over certain amounts (lose voting power on shares) unless cleared by the board of directors, other companies institute poison pill's diluting any owners position and many other techniques that limit real owners from being on the board and stating how their money is being spent lavishly on exectutives that don't perform.

 

The problem with the economy/hiring is stability. Change is bad for business. Businessman like to know the rules will not change during the middle of the game. Right now, too many things are in flux. The government, tax systems, mortgage problems, Greece, Arab spring, healthcare to name a few. Businesses aren't going to take any risks until all these get settled.

 

Well said!