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Progressive Politics in Minnesota, the Nation, and the World

The GOP And Business Concern About Jobs

Category: Economy
Posted: 02/19/14 12:46

by Dave Mindeman

It is interesting to see how concerned about jobs Republicans and business interests get when taxes and wages are involved.

They are not concerned about unemployment benefits for the long term unemployed. In fact, Congressional Republicans have blocked benefits as often as they can. They block stimulus packages that can help create new jobs. They vote against infrastructure investments and whittle down bonding bills that could boost the construction industry.

But their ears perk up when anyone talks about taxes and wages - because suddenly they are very concerned about protecting jobs.

The Medical Device Industry has been working and lobbying around the clock to get rid of the excise tax on Medical Devices. Medtronic blamed the tax for a profit reduction (except all indications are that a write off on a failed research project was the actual reason). And a device association came out with a report which blamed the tax for 14,000 job losses across the industry.

The real story on that report is that it was a sampling of 38 firms and then the data was extrapolated across the entire industry. Too small a sampling to realistically make that claim legitimate.

There are surveys which dispute this report:

Not everyone agrees with the industry that the tax will have ugly effects. A survey of 3,800 managers of medical device companies worldwide by the consulting firm Emergo Group, for example, concluded that the device tax's impact was "not as severe as predicted." Half of those responding said they "did not make significant changes" in response to the medical device tax.

In addition, the Medtronic report, trying to be critical of the excise tax, noted that their tax payments were much higher than last year's quarter -- failing to note that this obviously meant a much higher increase in sales.

But let's also look at the CBO report on minimum wage and its effect on jobs.

Business wants no change in the minimum wage, even though wages are rapidly losing purchasing power compared to a few decades ago...and even though business profits are skyrocketing.

Because business and the Republicans want to maintain the status quo of the poverty ridden minimum wage, they point directly to the CBO estimate of losing 500,000 jobs (if increased to $10.10) over the course of 2 1/2 years. They do not mention the side note that over 900,000 people would be lifted out of poverty due to that wage change.

Yes, Republicans are suddenly very concerned about those jobs. They want to protect them. Which seems a little disingenuous based upon their continued opposition to extended unemployment benefits for workers who have already lost their jobs. And given the fact that they opposed the auto industry bailout that saved thousands of jobs in that industry.

Republicans and business are concerned about jobs only when it coincides with their own best interests. It's not about the people - the individuals - that hold those jobs. They don't concern themselves as to whether those minimum wage jobholders can survive or raise a family or stay out of poverty.

That is not their concern. Their only concern is how much that job will cost the employer. They want to look at the bigger picture - numbers and percentages. Can't be concerned about Joe or Jim or Sally or Jane.

That's the perspective we are dealing with.
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CBO Report On Minimum Wage - A Risk With Potential Reward

Category: Economy
Posted: 02/18/14 16:58

by Dave Mindeman

OK - another CBO report and another round of discussion.

This report was on the effect of raising the minimum wage to $10.10 per hour.....

President Obama's call to raise the federal minimum wage could help lift 900,000 workers out of poverty, but at a cost of as many as 500,000 jobs, according to an analysis released today by the non-partisan Congressional Budget Office.

At first glance, wow, 500,000 jobs is a lot. And of course, the Republicans are jumping all over that.

But let's look at the whole picture......

This report says the job losses would be over a period ending in late 2016. So that accounts for roughly about 20,000 jobs per month. We have monthly readjustments much larger than that.

And again, these jobs are not living wage jobs. The people who try to support a family on those type of jobs are never going to catch up with a means of making a real living.

A lot of these jobs are second jobs. And maybe if their first job gets a substantial raise via a minimum wage increase, then the second job isn't so important.

But the biggest point to take in is that 900,000 people can move out of poverty. By the stroke of a pen and without the taxpayers having to contribute anything, 900,000 people can have some hope. A chance to really be part of society.

And they would spend that money and help to move the economy. Maybe they contribute enough to bring back some of those jobs that were lost.

Really...at some point we have to act on this. Yes, it will be a little bit of a risk to increase the minimum wage by that much. But we have been so neglectful for so long, we need to take that risk.

Yes, some people will get laid off. But when they find a new job, at least they won't have to go back to poverty. And maybe they won't need government assistance to make up the differences of a job that cannot meet their needs.

The CBO report says there is the potential for good and bad. Just like everything else in life - you can look at it as a glass half full or half empty.
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Medtronic Embellishes On Their 3rd Quarter Explanation

Category: Economy
Posted: 02/18/14 16:37

by Dave Mindeman

Medtronic posted their 3rd quarter results and outside of a charge on a failed research project, they were in line with Wall Street expectations. The Street dropped the stock price 1% because of that research charge, which dropped profits.

But Medtronic had to throw in some other "reasons":

Company officials attributed the earnings decline to the absence of a research and development tax credit Medtronic received in the same quarter last year, as well as higher levels of interest expense and U.S. medical device excise tax than it paid in the same quarter last year.

Medtronic also took impairment charges associated with the company's disappointing renal denervation clinical trial that was discontinued as the program is being re-evaluated.

Medtronic couldn't resist a dig at the medical device tax as long as they had to give Wall Street an explanation. Funny how they talk of higher levels of excise tax, yet don't mention the corresponding increase in sales that had to result to cause that.

But let's take a closer look at that. The excise tax began last year...

2/20/2013 Medtronic stock price $45.84
2/18/2014 Medtronic stock price $56.33

That is a 23% gain in value during that one year period. The S&P index, over that same period, gained 20.1% - in what is considered a very good year.

Yes, Medtronic outperformed the index. Despite that horrible tax.

It is also worth noting that Medtronic attributed the earnings decline to the "absences of a research and development tax credit". Wow, let's blame government for this one - loss of a subsidy that they knew was going away and an excise tax increase that has meant increased sales.

That takes some.....guts.

Wall Street reports that without the one time charges for the failed clinical trial, their profits would be in line with expectations. A not very notable stock decline of 1% on the news and its the end of the story.

Except for the Medtronic embellishments.
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