Monday, November 12, 2012

And So It Begans

Trouble with the economy is just beginning my friends.

Hostess is just the latest symptom of the sickness, along with the Stock Market and restaurants, like Papa Johns.

Welcome to the Greater Depression.

If Romney had been elected last Tuesday the press would already be calling the most recent Stock Market crash "Romney's Recession".

I haven't been following the Hostess deal until today, but here are the basic facts: Interstate Brands- the Hostess predecessor- went thorough bankruptcy a few years ago, and came out as Hostess. Now Hostess is in Bankruptcy, and as part of the reorganization has renegotiated their union contracts, which included an 8% pay cut and greater contributions towards their health insurance. Welcome to the New Normal. These changes tended to upset the unions, who promptly went on strike, in selected locations.

Hostess had now closed those locations.

The unions will scream and shout. And then go on on unemployment for 99 weeks. Welcome to the New Normal.

If another company buys the plant and reopens it, it most likely will not be a union plant, and the wages will be lower again by 50%. So, if those workers do happen to find employment there, they won't be down by their 8%, but by 50%, or more.

But that is what has to happen. Companies can't compete by paying a union wage.

Apparently they can't compete anymore by having employees work over 28 hours a week either. Welcome to the New Normal.

People will have less and less money, and its not just from crashing wages. If the reports are to be believed, $2,000 to $4,000 a year more will go to the Federal Government because of the repeal of the Bush tax cuts in January; $40 to $80 a week, or thereabouts. About a tank of gas, depending on what you drive; unless it starts going up, like I expect it to.

And the cost of fuel will drive everything else up; everything that requires energy to manufacture, package or ship.

Food and fuel going up; paychecks going down. Guess who gets squeezed in the middle?

Anybody still trying to get by earning a wage.

Welcome to the New Normal.


engelj06 said...

I looked at one of the articles you linked and there was something in there that it think spoke volumes. We constantly here how the "poor" companies are getting so abused having to provide health insurance to their workers. I found it interesting that the CEO that told his employees that he'd have to cut jobs if Obama was re-elected is building the largest house in America. I have trouble believing that the company would go under if the CEO can build a bigger house than buffet and Romney combined.

An Edjamikated Redneck said...

But whose money is it?

If the evil CEO wants to spend the money he has earned on a massive house- a house I might add that he is HIRING men to build and SPENDING MONEY on building supplies on- I say let him.

Do people found companies on some altruistic do-good ethos?

Hell no; they want to make money. and in order to make that money they will invest their time and risk their capital. When the return on that risk becomes too low to justify the risk, they will take their capital somewhere else.

I'm sure you don't show up at work in the morning because you have a list of people that you need to help so you can feel good about yourself; it's because of payday.

You have traded your time and skill for a fungible commodity- cash- that you can trade for things that make you happy.

When the job doesn't pay enough for you to afford enough happy things, you increase your time at the job or you increase your skills so you can make more cash to buy more happy things.

Why can't a CEO decide that the job of owning a company requires more investment than the results are worth and quit? If the assets of the company are worth more than the company (ie; nobody else wants his job), then he closes the company and sells the assets.

People who have money aren't required to use it to to some government imposed standard.


engelj06 said...

I more so was meaning we are going to be seeing a lot of "joe the plumber" moments over the next few months and were subjected to some pre election. CEO's saying that their companies will go under if so and so is elected or some bill they don't like is passed. In reality the company will be doing exactly the same.

No I don't think companies should be mandated to spend their money a certain way, but sorry I don't believe that trickle down economics is the end all be all savior. Because like you said that CEO isn't under any obligation to hire me and my bet is he buys a foreign made yacht with his tax cut verses giving me a 3% raise to help pay for my tax increase that funded his tax cut.

engelj06 said...

So as to not confuse, I'm not trying to say I'm entitled to a job or a raise. That said its a two way street, companies are not entitled either. I know you view a lot of people as feeling entitled but I see companies being just as bad. Look at omnicare. Think they are no longer in covington because the cost of doing business was too high ? No the city of cincinnati is paying their rent, paying part of their taxes and doesn't charge them any city taxes. Know who is paying for those benefits me a person who doesn't even work at omnicare.

An Edjamikated Redneck said...

The issue with Omnicare is that they entered into a contractualk agreement between them and the City of Cincinnati that gives them a special deal not available to any other company.

I don't fault Omnicare for taking advantage of the deal; I fault the City for being able to make it. Basically they have used the power that they were elected to wield to screw the residents of the city and the current taxpayers.

The deal may make fiscal sense; I've never seen an accounting of that or any other deal that draws a company one way or the other.

Like GE not paying any taxes last year. They spent 200 million in lobbyist to avoid paying 2 billion in taxes.

It may be legal, but it shouldn't be.

An Edjamikated Redneck said...

But you do understand that the more regulation there is, the more money it eats up and the less cash there is for other things.

What if your job paid $100 a week, but paying for gas was $25 a week; paying for special uniforms for teh job was $15; you were forced by government regulation to buy disability insurance at the rate of $20 a week and had to pay rent on an office of $20 a week. So you bring home $20 a week.

Until a new governemnt regulation forces you to pay $15 a week into a displaced worker fund.

At what point do you decide its no longer worth your time and effort?

engelj06 said...

Yes over-regulation is bad but it's a fine line since no regulations can be just as bad. Imagine if there were no FDA or health inspectors. What would stop McDonald's from serving meat that would make you sick? Threat of lawsuits? How many people who get food poisoning can afford to take more days off to go to court to sue a company with a team of lawyers to drag it out months.
Give the restaurant bad press? You pay .50 for a newspaper, McDonald's pays thousands in ads who do you think the press will side with?
Stop going there? How do you know if it was the McDonald's for lunch or the Arby's you had for dinner?
So to me government should regulate the quality of food to protect its citizens where they are unable to protect themselves

An Edjamikated Redneck said...

So the idea that a compnay would want to sell a quality product is a foreign idea, and the only thing keeping any corporation from poisoning their customers is the FDA?

How old is the FDA? 100-110 years max? and only came into being because of a style of 'journalism' known as muckraking.

What kept us safe in the 200 or more years before that?

Even today with the FDA in existence we still have cases of tainted products that make their wasy in to the marketpalce, and each occurance puts the company that caused teh incident into or near bankruptcy.

Remember 10-12 years ago when Jack-in-the-Box had a botulism issue in the northwest? a dozen stores out of their hundreds had a problem with tainted beef and it almost put them under. The press reported it nationwide, even though I don't think at the time they had any resturants in the east.

The FDA fell down on the job; the press didn't and people stopped eating at any of their resturants.

That is not to say we shouldn't have UDSA inspections of any plant that handles food items, but ther eis the law of diminishing returns on teh cost/value of regulation that is eldom examined before a new regulation is inflicted on the public.