Actual News and Outer Space

The ridiculous and unedifying spectacle that has become American politics has finally separated itself entirely from planet earth. It has moved off into space in order to discuss – I use that word because I cannot come up with a more appropriate one – issues that it feels are important. Those of us who remain behind have to deal with actual news. Real things. Problems that exist here and not entirely in the fetid minds of ideologues and lobbyists.

So, in that spirit.

I trust you all noticed the recent spate of news from some of our big companies. They seem to be entering another round of firings. Cisco, Lockheed Martin, and the late lamented Borders are all planning to fire thousands of workers later this year. Poor old Borders has fallen victim to a combination of ill advised expansion and the sea change in book selling. It was doomed to fail eventually. As testimony to the extent of the changes it faced in its business: it failed to find a buyer when it offered itself up for sale at bargain prices. It now is being liquidated. Cisco’s case is more interesting: it is making decent profits and has no compelling need to cut back. More importantly, it is one of the more outspoken leaders of the push to get a tax amnesty for all the cash big business has stashed away in various offshore tax avoidance schemes.

As you may recall there has been a concerted effort in Washington to give big corporations tax relief on their cash they hoard offshore. Their tax avoidance lawyers and accountants have been so successful that many of them have billions hidden around the world. Cisco alone has $30 billion sitting abroad. The demand for routers and networking equipment in the Cayman Islands must never be underestimated. Apparently all three local inhabitants spend freely – about $10 billion each.

Anyway, it is just a bit ironic – as in totally tone deaf – for Cisco to be announcing layoffs and thus adding to our unemployed and the cost of unemployment, at the very same moment it is flaunting its offshore cash hoard, and its desire to extract a tax cut so that it has an “incentive” to repatriate those funds. I can hear the obvious next words coming from the lobbyists mouth: if you give us amnesty we will bring back our hidden cash and invest. That will create jobs back here in the US. We should be rewarded for being good citizens and creating those jobs, so how about a tax break on investment?

The problem is that our politicians always fall for this rubbish. Instead of closing the tax avoidance loopholes, they cave in whenever they hear the magic words: “new jobs”. They overlook those old jobs. The ones cut to make way for the new ones.

But back to the news. Job cutting seems to be back on the agenda. Why?

This is the season for businesses to start their planning for next year. They are looking at the prospect for sales and not seeing much improvement. Since the CEO’s and other executives are paid to keep profits rising, even in years of bad sales, they turn to cost cutting as the most obvious way to ensure their bonus pool targets are met. Since demand is flat or weak, they have every incentive to fire more workers. They are being rational within the game they play.

That they hurt the economy is not their problem.

The people who should be worrying about the economy and how to offset the self-serving actions of our CEO’s are in Congress. And, as I noted earlier, they are off in space somewhere worrying about problems like the debt ceiling, deficits, and the national debt, none of which should be on their short term agenda. And should not get back on the agenda until we have pumped up demand.

Instead – do I need to say this? – reports from outer space tell us that our Congressional leadership has decided to compound our economy’s problems and throw us into cost cutting mode in government. So not only is the private sector – the place where this crisis all started – settling down into more cutbacks, but the public sector is as well.

Enquiring minds are thus led to ask: from whence will the recovery emerge? If the entire economy is moving back into contraction, where exactly will growth come from? Or is that too earth-bound a question?

Nuttiness is an attribute best exhibited in fruit cakes. Not in national economic policy. Someone should let Congress know.

Only don’t write to Washington. Address yourself to outer space.