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Robert Whitcomb: Low Rating for Cybersecurity; Low Wages and Benny’s Demise

Monday, September 18, 2017


Robert Whitcomb, Columnist

“Outside the leaves on the trees constricted slightly; they were the deep done green of the beginning of autumn. It was a Sunday in September. There would only be four. The clouds were high and the swallows would be here for another month or so before they left for the south before they returned again next summer.” 

― Ali Smith, from The Whole Story and Other Stories




Credit-rating companies’ neglect of adequate cybersecurity obligations is well known. Thus the catastrophic hacking into the personal data of 150 million Americans at Equifax – including, God help us, Social Security numbers! – wasn’t a total surprise, as outrageous as it was. Taking the expensive actions necessary to improve security at least enough to prevent a hack of this magnitude might cut the companies’ quarterly earnings and stock price. That would be unacceptable to their grossly overpaid senior executives. Now, of course, the future of this far too powerful and arrogant enterprise may be in doubt.


Energetic lobbying by these companies has ensured that they pay a small price for presiding over an environment in which their customers’ economic lives can be ruined. Proposed regulations mandating much tougher cybersecurity provisions and punishment for breaches have been blocked.



And laws must be changed to hold data-product companies, such as Equifax, liable, via lawsuits, for the damage that their negligence (and worse) does to the public, just as are companies that sell physical things. At the same time, GOP efforts to kill the Consumer Financial Protection Bureau should be stopped. With too-powerful credit-rating agencies and corrupt banks such as Well Fargo, consumers need all the champions they can find.


Of course, we know that everything is hackable. There is no final security in cyberspace, and it’s an increasingly nasty place, in which we’re trapped. But many American companies make hacking remarkably easy because they don’t want to spend the money to reduce it.


In any event, “Everything is going to be hacked eventually. That’s just the way it goes,” Russell Vines, a cybersecurity expert at Consumers Union, told The Washington Post. “So everyone has to make provisions for what happens after.”


That means, of course, such measures as changing passwords and combing through credit-card bill and bank statements – for as long as you live.


The convenience of online activities and companies’ relentless campaigns to make you put as much of your life as technologically possible in cyberspace so that the firms can lay off more employees has left us all in swamps teeming with criminals.  But you can cut your chances of being hacked and stolen from by reducing your online financial activities as much as possible. For example, online banking is a menace. Keep it to minimum. Stick to paper as much as you can.


Meanwhile, the Feds and businesses need to come up with ways to reduce the very dangerous reliance on Social Security numbers as primary identification. Consider that these numbers are connected to jobs, taxes, loans, government benefits and security clearances. We need alternate forms of identification. It’s getting urgent.


Equifax is a truly sleazy operation. (Try calling them, by the way.) They discovered the hack on July 29 but didn’t deign to tell the world until Sept. 8. Why? Well, it’s interesting to learn that three Equifax execs sold $2 million of Equifax stock right after the company discovered the breach in July. The execs denied that they knew about the breach.


Given the high-level of the execs that’s very hard to believe. The officers are:

chief financial officer John Gamble; president of U.S. information solutions Joseph Loughran, and president of workforce solutions Rodolfo Plode.





What will it take to land Amazon?

Before Rhode Islanders get more excited about the very remote possibility that Amazon might set up a huge “second headquarters’’ in Rhode Island, with tens of thousands of jobs, they might mull the dangers of a jurisdiction depending so much on one company.


Far better to have 10 medium-size companies in different sectors than one gargantuan one, whose cutbacks could devastate the economy around its big facilities. Diversify! And remember that most Amazon jobs don’t pay well. Consider that an inventory manager in the company gets $14.70 an hour, and the job requires a bachelor’s degree. Presumably, many headquarters jobs would pay more but not much, on average.


In a Department of It’s All One Big story, the success of low-price retailers such as Amazon and Walmart, and the demise of slightly more expensive (but generally more pleasant, higher-service) stores such as Benny’s can be blamed to no small degree on how much senior management refuse to share lucre from high profits with mid- and lower-level employees (i.e., most employees) via higher wages. So while wages, in general, have improved in the last year or so, it is only to the inflation-adjusted level they were at in 1999.


At the same time, most companies have cut way back on health, retirement and other benefits.


Benny's is closing 31 stores

A result of all this is that price has become much more important in buying decisions for most Americans, trumping, for example, the sort of personal service you’d get at a smaller store chain like Benny’s.


We’ll all miss Benny’s, even those who haven't shopped there for years. One wonders if some clever entrepreneur could come along and apply new marketing techniques to make the intimacy and convenience of such stores more profitable. Must that await an extended period of rising middle-class wages since smallness usually means higher prices? Benny’s has some great sites. I hope that some specialty retailers will take over them. Plants? Pets? Art galleries?




In an orgasm of political correctness and, well, silliness, Metro-North, the publicly owned commuter railroad that serves southwestern Connecticut and the lower Hudson Valley, announced that it will no longer note a purchaser's gender identification on month-long train tickets.


The railroad said that it had used such identification to make it more difficult for riders to let others use their monthly passes. Makes sense!  And one would think that police seeking suspects on trains or in train station might, from time to time, like to know the sex of suspects they seek. Gender-identifying tickets could help.


But Connecticut Gov. Dannel Malloy opined. "We should not be using antiquated gender norms as a method of personal identification.’’


The wonderful Chris Powell, managing editor of  the Manchester (Conn.) Journal Inquirer asked:


“{H}ow can the governor be sure that there are no longer any circumstances in which it is useful to distinguish male from female? While the governor seems to think that the right of anyone to assume either gender at any time trumps the right of sexual privacy in bathrooms, he strangely has not yet insisted on erasing the divisions between boys and girls and men's and women's sports.‘’


“But even if the governor really thinks that gender norms are ‘antiquated,’ there's not enough time left in his term for him both to run Connecticut's creaky old government and to persuade the rest of the world that there are no longer boys and girls and men and women, just undifferentiated life forms.’’




The end of burning fossil fuels to generate our electricity may be a lot nearer than most of us think, reports Tom Randall in Bloomberg News. The batteries used to store wind and solar power are getting cheaper and more efficient and could disrupt power markets within the next decade. Hit this link:


To look at some examples of giant batteries in New England, hit this link:





People living primarily on financial assets have particularly thrived in the past few decades compared to those living mostly on wages.  Part of the reason is that tax laws much favor “unearned’’ investment income – capital gains and dividends – over “earned income” -- wages. (This is great for people who chose to have rich parents who can leave their heirs  lots of stocks and bonds.)


Ben Steverman, writing in Bloomberg News, had an amusing example of how this works:


“Let’s say you and I are neighbors. You’re an emergency room doctor, and I don’t work, thanks to a pile of money my grandparents left me.


“You spend your days and nights stitching up gunshot wounds and helping children survive asthma attacks. I’ve gotten really good at World of Warcraft, winning eBay auctions, and frying shishito peppers to just the right crispiness.


Tax rates

“Let’s also say we both report $300,000 in income to the Internal Revenue Service this year. Who pays more in taxes?


“You do, by a lot. You owe the IRS about $38,500 more, assuming each of us pays the maximum with no special deductions. I also have more flexibility to lower my burden with tax planning strategies and other tricks, and I get to skip about $24,000 in payroll taxes that you and your employer must fork over each year.’’


Looking at the economy over the past few decades you see little indication that this tax favoritism toward people with lots of investment income has boosted economic growth. But given the lobbying power of institutions and individuals who live on financial assets, there’s little likelihood of major policy changes.


However, what is clear is that taxes must go up to address the yawning federal deficit. This fiscal year alone it’s $700 billion. But we also must bring under control the vast benefits for the elderly in Social Security and Medicare.  Consider that combined Medicare and Social Security spending in this fiscal year will hit $1.6 trillion – 40 percent of the fiscal 2017 $4 trillion federal budget! These outlays, swelling with the aging of the population,  are taking away money from such crucial programs as defense, infrastructure,  education, Food Stamps, unemployment insurance, National Parks, etc., etc.


Just consider how bad for the economy our frayed and outdated transportation and electricity systems are.


The lobbies for the elderly are very powerful but something’s gotta give. That must ultimately include raising the retirement age for Social Security by a year or two and transforming Medicare into a value-based insurance system from what it remains today – a  fee-based system that maximizes providers’ income, partly through what are often unnecessary tests and procedures.


The irresponsibility of demanding and getting more and more services and lower taxes can’t go on. Income taxes were much higher in the ‘50s and ‘60s than now and we boomed. We’ll do okay with higher taxes. Indeed, imposing some order on disorderly federal finances will raise confidence, and in so doing, improve the economy.


To read Mr.  Steverman’s article, hit this link:





Despite all the fears about Brexit, the British economy remains strong and London remains the world’s greatest financial center. New York is second, with Hong Kong, serving the vast Chinese market, third, reports those who put together the Global Financial Centers Index. (But note that protectionist noises by the Trump administration pulled down New  York by 24 index points.)


I wrote last summer here that I thought that the warnings that Britain would be hard hit by exiting the European Union were exaggerated. I still think that, but of course, we won’t know until 2019, when it completes its exit – barring a decision to stay in after all. Assuming that Britain does leave, expect it to try to sharply increase trade with the United States as a partial offset.




Donald Trump’s evasions, maneuverings, contradictions, and lies about DACA, the “Border Wall’’ and other issues simply display the fact that the president has no fixed principles. He does whatever will make him appear a “winner’’ – including chummy chats with Democratic congressional leaders.


In doing so, of course, he may make many members of his famous right-wing, nativist “base’’ feel betrayed. But the president’s well-documented history of betrayals goes back many years. And perhaps like the followers of other demagogues, most of his fans will follow him everywhere, even if his ever-shifting positions are sometimes 180 degrees away from what he promised them. His relationship with many of his followers seems mostly based on their wishful thinking and emotional needs for a powerful Leader– not rational analyses of policy alternatives.


One of the funniest pieces of outrage and/or naivete about possible DACA/Border Wall deals with Democrats came from a member of Trump’s base. Publicity-hound Iowa Republican Congressman Steve King, a once fervent supporter, lamented that “No promise {from Trump} is credible.” He was surprised? (See trumpthemovie.com.)

An upside: Maybe fairer and practical policies will come out of Trump’s cynicism.



The Worcester Business Journal reports  that the Collings Foundation has begun construction on its 65,000-square-foot American Heritage Museum, in tiny, rich, exurban Stow, Mass. (The neighbors in the residential neighborhood are not particularly pleased.)


The museum will have exhibits from America’s wars. These are said to include 12 warplanes; the largest U.S. private collection of military vehicles – 115 of them -- a life-size replica of a World War I trench and special effects that “re-create sights, sounds, and smells of war (i.e. ‘trench stench’)’’; a theater; classrooms; interactive exhibits, and  such other artifacts as a Revolutionary War cannon, a 1917 American tank and a Scud-B missile from Desert Storm. Yikes! But no nuclear bombs yet.


It’s been increasingly said that there are too many museums competing for too many visitors. Perhaps this one will prosper, especially if it can partner with enough news media, documentary filmmakers, and school, although the associated crowds won’t please the residents of mostly tranquil Stow. People enjoy entertainments based on wars, if not wanting to actually be in one.


There’s an International Museum of World War II in Natick, Mass., by the way.


To read the Worcester Business Journal article, please hit this link:






WalletHub has come out with an interesting ranking of the states by their degree of happiness. The five most unhappy were the deep Red, pro-Trump states of, ranked in order of misery: West Virginia, Oklahoma, Louisiana, Alabama and Arkansas. Given their politics, social services and demography, I doubt they’ll be much happier anytime soon. The happiest? The top five are: Minnesota (Scandinavian-style civic system and courtesy?); Utah (hard-working, honest, strong-family and charitable  Mormons? community spirit?); Hawaii (climate and beauty?);  California (lots of sun? dynamic?),  and Nebraska (friendly, civic-minded, salt of the earth Corn Huskers?).


For the New England states:  New Hampshire was 10th (honest and civic-minded? entrepreneurial? nice scenery?); Vermont 13th (honest and civic-minded? scenery? low jobless rate?); Connecticut 18th  (rich folks? pretty towns?);  Massachusetts 19th (high energy? innovative?);  Maine 25th (natural beauty but economically poor for the region), and Rhode Island 33rd  (Decades of slow economy? (unfairly) low self-image? ). Readers can plug in their own explanations.


Of course, as I’ve written, all such rankings are to varying degrees dubious because they’re all comparing apples and oranges. Perhaps what’s most significant is what the creation of such rankings says about our insecurities.




Here’s a very well reported, if highly opinionated, history: The Golden Passport: Harvard Business, the Limits of Capitalism, and the Moral Failure of the MBA Elite, by Duff McDonald, published by HarperCollins.


Mr. McDonald is an amusingly sardonic author but some of this is dispiriting because of what his narrative says about declining morality in the American economic system --  a decline he blames in part on what he sees as the extreme greed-driven mission of HBS and some other business schools.


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