Warm Southern Breeze

"… there is no such thing as nothing."

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Posted by Warm Southern Breeze on Monday, September 14, 2020

This now-iconic image of late country music legend Johnny Cash was made at his San Quentin Prison, California concert in 1969 by photographer Jim Marshall, who had said, “John, let’s do a shot for the warden.” The photo was relatively obscure until 1998 when Cash began working with legendary producer Rick Rubin to create Cash’s American Recordings album series, which revitalized his career shortly before his death, and introduced him to a new generation of fans in several musical genres. Rubin, who produced acts such as The Beastie Boys, Slayer, Metallica, and Tom Petty, had never produced a country artist, and quickly called it a “trendy scene” after being snubbed by Nashville. So he paid $20,000 for a full page ad in Billboard magazine which featured this image, and sarcastically read “American Recordings and Johnny Cash would like to acknowledge the Nashville music establishment and country radio for your support.”

Part of the tragic irony of this coronavirus ordeal is that in addition to the modest bailouts that have been given to Americans, and small businesses, they were also to the corporate community.

The need was tremendously underestimated, and much of the benefits, such as a boost to the unemployment compensation, concluded at the end of July… but the needs and the bills just kept coming. There was no reprieve for them, including the rent, and mortgage payments.

Banksters, you know… they love to tell you how much they love mama, babies, apple pie, and the girl next door, but when it comes time for the rubber to meet the road, suddenly, they’re the enemy who’d rather give you a shiv, than the time of day. After all, they have the money – and LOTS OF IT – and you don’t, so they call the tunes. So, pull yourself up by your bootstraps.

Now, if you think about it, that’s just a bizarre, and nonsensical maxim, because well… you’re standing in your boots, and pulling on the straps is a totally useless exercise. It’s like looking for a mythological sky hook, or a snuffleupagus.

But grit, and determination, you know. That’s the American way – and all sung to Frank Sinatra’s version of “(I did it) My Way.”

The reader should infer significant sarcasm in the remarks above.

However, there is no sarcasm in the following commentary.

In this present situation in which we find ourselves, BIG BUSINESS has, once again, made out like a bandit with the handouts given to them by Congress.

In their earnest desire to make things good for the American people, Congress has seen fit to include families and individuals this go ’round in the latest state-funded bailout of the failed economic system. And, that’s a good thing.

I purposely use the word “failed,” precisely because had it not failed, it would not have exposed the weaknesses inherent in it the way it was. But now that masses of people have “suddenly” discovered that they’re just a paycheck, or two, away from total financial ruin, and homelessness, it signifies that the onus of responsibility rests upon the very ones who propped it up in the first place… and who are continuing to prop it up – the Congress, and the administration.

In the ivory-towered theoretical world of the “free marketers,” those individuals who loudly proclaim that “the market will make all things right, but only if it is left alone” (which consists of the Libertarians, and the heterodox Mises Institute crowd), had the government not meddled in the market, it would not have failed.

However, regulation makes anything better, for there are no sports games without regulations (hence, the term “regulation play”), and if an automobile’s engine timing is tinkered and twiddled with outside of the manufacturer’s specified setting, it will eventually self-destruct. Everything is regulated – even the electricity and water coming into your home are regulated, for regulation harnesses their power, and makes it available to us. Without it, we’d be electrocuted and flooded, or even drowned. Even traffic regulation makes roadways safe for drivers and passengers. Think about what would happen if everyone were to consistently disregard STOP signs. What would happen then?

Tragedy.

Once again, proving that regulation is a good thing.

But BIG BUSINESS, which since around the Reagan administration, has become increasingly oligopolic and anti-competitive in practice, was significantly enabled when he refused to enforce the Sherman Anti-Trust Act provisions with the blessing of those affiliated with the so-called Chicago School of economic thought from the University of Chicago, and were reinforced by the judges whom he appointed to the bench. Thus, he created a type of echo chamber in which only his favored voices were heard, much to the chagrin of the long-term economy.

Over the years, slowly, but surely, competition has been significantly reduced or eliminated, power has been concentrated and increased in those businesses, all while they’re lobbying Congress for fewer regulations, which largely Republican-led Congresses have given them – in addition to lowered income tax rates, and other favored treatments.

In stark contrast, the Average American Family hasn’t even gotten a good dose of table scraps, and their incomes have dwindled significantly in comparison to the damage done by the legalization of Profiteering Corporate Pirates.

And as America has grown in population, so have costs, along with our needs. Families find it increasingly difficult to send their children to higher education or technical school. Healthcare costs have never gone down, and catastrophic or chronic illnesses, genetic health conditions, birth defects, or trauma, should not wipe out a family’s savings… what little they may have.

Had Average Employees been paid well – at least at a decently fractional portion of what their companies’ executives have been paid – they would have not suffered as much as they are now during this pandemic, which of necessity has radically changed the ways in which we interact with one another. We’re all on a learning curve with this new infective agent – SARS CoV-2, the disease it causes – COVID-19, and the damage it wreaks on the human body, and the economic body.

But more to the point, and that is the abuses which BIG BUSINESS have wreaked upon the greater economy – the individuals whose purchasing drives any economy – by abusing the well-intentioned laws passed by Congress to assist them.

On Saturday, 12 September 2020, ProPublica published an in-depth feature story headlined “The Big Corporate Rescue and the America That’s Too Small to Save,” which examined a little-known company headquartered in Cleveland, Ohio with over 18,300 employees worldwide – TransDigm Group – founded in 1993 by a man who merged several smaller companies, all which manufacture various aircraft parts. The firm is publicly traded on the New York Stock Exchange, and with an annual salary of $7000, his $60 million annual compensation is almost exclusively in the form of stock and options.

No one should be penalized for doing well, for becoming financially independent, or even wealthy, particularly if it’s earned by the sweat of their brow, their own diligent effort, pluck, and some good luck. And this is not to criticize him, per se, for doing well, or for success. It is, however, to criticize company practices.

As the coronavirus pandemic began to take hold, TransDigm furloughed over 3000 employees nationwide, which helped maintain profit margins over 40%. Revenues last year were well in excess of $5.2 billion.

For those who may not know it, the Federal Reserve has been purchasing private securities – stocks and bonds – of publicly-traded firms. The purpose of that unprecedented move is to “goose” the stock market, in effect, to artificially inflate it in order to maintain a greater cost or price than would otherwise be merited given the present economic conditions in the nation, and world at large.

In March, investors began pulling back from the market and hedging in cash. Thus, the purchases of corporate bonds or lending of new money largely disappeared. A tracking index which consists of so-called risky “high-yield,” or “junk” bonds dropped 20% in the few weeks before the Federal Reserve intervened to purchase securities.

The Fed created two programs to purchase as much as $750 billion of new, or existing bonds, and once they began to purchase them, those actions reassured other investors. And when that occurred, TransDigm borrowed $1.5 billion in cash to use as a “rainy day fund,” and to use for additional corporate acquisitions.

Thus far, the Fed has only purchased $12 billion through their corporate bond program, far short of the $750 cap. But it was the fact that the program existed which boosted the markets, because in effect, the nation’s central bank was guaranteeing that bond prices wouldn’t decline very much. Oddly, the Fed had claimed that their actions were done in order to stave off increased unemployment and layoffs, and in a blog entry in the spring, economists at the New York Fed wrote in part that “If companies cannot issue bonds, they may be unable to pay employees or suppliers.”

Equally oddly, after furloughing employees, which reduced costs, TransDigm became poised to again continue their acquisition objectives, and began targeting companies significantly affected by the coronavirus-wrought economic downturn, and purchased them, thus growing even larger. As the smaller companies closed, TransDigm grew.

And even more oddly, the CARES Act helped big businesses like TransDigm, which further reduced their tax responsibilities by increasing the tax reductions regularly paid by businesses. And in conjunction with other provisions within the law, TransDigm’s taxes would be effectively reduced between 3–8%, which would enable them to reap a profit of at least $30 million, and more likely, significantly more.

Throughout this entire process, the furloughed employees felt expendable, like corporate cannon fodder for their Wall $treet overlords, because some TransDigm-owned companies have gone through at least two rounds of layoffs, with no guarantee of returning to their former jobs.

The losses in TransDigm’s stock price have now been erased, and the price is once again in the $500 range, having nearly doubled from its loss. And yet, the vast chasm in the “successes” enjoyed by TransDigm are nothing in comparison to that which most American businesses have been able to access or enjoy… if they’ve been able to survive. And it precisely those much smaller businesses which form the backbone of the American economy and enterprise – the Mom and Pop type shops, the small merchants, and others who often cater to other employees in city centers, and in other, more rural locales.

Clearly, this is but one instance of a firm which legally used the tools available to it to do what it would otherwise normally do – continue operations, and enjoy profitable growth. Their furloughed employees, however, are not so lucky. Yet they could have been, had the law rewarded companies for NOT laying off employees, and in some way, requiring the companies to continue to pay their employees as they have typically, which would include access to all benefits to which they would normally be permitted.

And it is just as clear that the company TransDigm could have done that, and perhaps even much more.

But they did not.

Therein lies the problem.

That very practice of preserving a company’s most valuable and precious assets – its employees – has been employed in other nations, and with great success.

We must begin to rethink the purpose of a company, of BIG BUSINESS especially and particularly, and how they can be re-imagined and repurposed for an even greater good, and to act as a genuine stabilizer to the economy, rather than in effect allowing them to become a legally-permissible highway bandit during bad times by despitefully using loopholes in laws to their exclusive benefit, while others needlessly suffer.

There is a greater good than the acquisition and accumulation of wealth, either individually and personally, or in entrepreneurial and business operations. It is up to us to acknowledge what we already know in our hearts, and to put into practical exercise that which we know we can do – help improve one another.

Greed and selfishness have never been good companions, nor are they good guides for any rule of life.

This is NOT an all-for-me, none-for-you type proposition.

In THIS world, the ONLY way we ALL can win, or anyone can win, is by working together, because no one achieves success “independently.”

And it’s high time we began to act like it, and to genuinely start rewarding GOOD BUSINESS practices, rather than rewarding the users and abusers, legal though their actions may be.

This is Business Ethics 101.

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