NYTimes: Industries Find Surging Profits in Deeper Cuts

[brentspeak]

http://www.nytimes.com/2010/07/26/business/economy/26earnings.html?pagewanted=1&_r=1&hp&adxnnlx=1280156408-iDoTQ86DTteLSNJOKKzseQ

By NELSON D. SCHWARTZ
Published: July 25, 2010

snip

This seeming contradiction — falling sales and rising profits — is one reason the mood on Wall Street is so much more buoyant than in households, where pessimism runs deep and joblessness shows few signs of easing.

Many companies are focusing on cost-cutting to keep profits growing, but the benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production. Harley, for example, has announced plans to cut 1,400 to 1,600 more jobs by the end of next year. That is on top of 2,000 job cuts last year — more than a fifth of its work force.

snip

And some of those businesses, including Harley-Davidson, are preparing for a future where they can prosper even if sales do not recover. Harley’s goal is to permanently be in a position to generate strong profits on a lower revenue base.

snip

“There’s no question that there is an income shift going on in the economy,” Mr. Harris added. “Companies are squeezing their labor costs to build profits.”

[mike r]

1. i.e. "Work harder so the CEO gets more money" aka "You're lucky to have a job"

[Enrique]

2. this is why we need unions

so there's limits how much the workers are squeezed. The Dept. of Labor isn't cutting it, though supposedly it's doing better under Hilda Solis.

[kenny blankenship]

3. Gee Olly, do you think seeking profits thru widespread layoffs could prolong/deepen the recession?

[Statistical]

5. Tragedy of the commons.

Individuals reducing consumption also prolongs the recession.
People accepting any job depresses wages which prolongs the recession.
People who have a job and cut spending are reducing the very demand necessary to avoid them losing their job.
Cutting debt and boosting savings while good in general is horrible in a recession.
People waiting rather buying a house because "the hose will be worth less next year" deepens the housing crisis.

Tragedy of the commons.

The most beneficial action for the individual actor is the worst action for the economy as a whole.

[Joe Fields]

4. The shortsightedness of the corporate world....

These corporations (and the one I work for is included) are only looking at the immediate, and not beyond. How far will these companies be able to cut, before they bleed out? There is a tipping point somewhere on the horizon.

[StatGirl]

6. This is an excellent argument for raising corporate income taxes

They are way too low. You can't -- and shouldn't -- force a business to hire someone when they don't need to. But since businesses rely on common infrastructure to thrive, you can demand a portion of it back.

My four-step plan to economic prosperity:

1.) Since corporations are persons, make them fill out a 1040 form (using Schedule C, of course), and pay taxes at the same rate that individuals do. Apply unitary tax principles.

2.) Single-payer health care, funded by these taxes and others. (Forcing an employer to pay for an individual employee's health care creates a disincentive to hire. You can break that link while still having them pay into the health care kitty.)

3.) Mandatory time and a half after a 35-hour work week, double time after 50.

4.) An excise tax on labor outsourced overseas, set so that a foreign worker is not less expensive than a U.S. worker.

I have no idea if the numbers would work out . . .

[dtexdem]

7. Well, I'd been withholding judgement on Wikileaks: promises but no docs released.

Now they've come through. So, good for Wikileaks!