Should You Be Subsidizing Executive Compensation In The Name Of Job Creation?

"On Friday Caterpillar announced they were closing a factory in Canada. They had wanted the workers to take a 50% pay-cut plus a substantial cut to benefits. The workers understandably were not excited at the prospect of going from earning $67,000 a year to $28,000. One might think that Caterpillar was a struggling company, asking workers to accept a 50% pay-cut, one couldn’t be more wrong. Profit was up 36% in 2011 vs 2012. Oddly the CEO’s (also Chairman of the Board) pay package in 2010 (latest available numbers) was quadrupled from 2009, to a total of $22.5 million including a $16 million stock grant.


Caterpillar's decision, ending a standoff with locked-out workers huddled around barrels of burning scrap wood outside the London factory gates, may benefit another downtrodden manufacturing city: Muncie, Ind., where Caterpillar last year opened a locomotive plant and where it is trying to fill jobs at about half the pay workers in Ontario received. At a job fair in Muncie Saturday, Caterpillar will be offering jobs at that plant at wages ranging from $12 to $18.50 per hour. Wages for most workers at the Ontario plant are about 35 Canadian dollars an hour.

If Caterpillar does move theses jobs to Munice what does it stand to get from the City and the State?


When Caterpillar agreed to revitalize a former Westinghouse electrical-equipment plant in Muncie that had been idle for 12 years, state and city officials provided incentives that could reach about $28 million, assuming Caterpillar meets its goals for adding as many as 650 jobs. Those incentives include tax credits, infrastructure improvements and worker-training funds.
If Caterpillar increases its investment in Muncie to replace the Ontario capacity, Muncie officials said it may qualify for further incentives. "We're going to do all we can to help them," said Jay Julian, chief executive officer of the Muncie-Delaware County Economic Development Alliance.

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U.S. companies are booking higher profits than ever. But the number crunchers in Washington are puzzling over a phenomenon that has just come into view: Corporate tax receipts as a share of profits are at their lowest level in at least 40 years.
Total corporate federal taxes paid fell to 12.1% of profits earned from activities within the U.S. in fiscal 2011, which ended Sept. 30, according to the Congressional Budget Office. That's the lowest level since at least 1972. And well below the 25.6% companies paid on average from 1987 to 2008.

This is reverse socialism. It is the redistribution of wealth from the lower to the upper class with explicit State support. It is the sort of wealth redistribution that if allowed to go unchecked leads to social instability."

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