Tuesday, October 6, 2009

OBAMA TAX REBATE POLICY PROVED TO BE A HISTORICAL FAILURE


Globalization is a reality. And this makes most leaders today realize that populist illusions can't be sustained before they collapse into stagnation and leave their political supporters deeply disillusioned. You can't inflate away your troubles or allow mountains of debt to build up if, as a country, you have to make your living in a globally competitive environment... Building prosperity requires caution and patience. It requires time. Populism is a short cut that doesn't work.


Ever since Obama announced his anti-outsourcing tax rebate policy, contrary to his expectations the volume of outsourced work has increased. The policy was announced to prevent a quo warranto and generate popularity from 100 days of visionless usurping on the most paramount post. The corollary and conclusion is that Obamaenia is fading and monies not materializing. The author believes that the Obama authority has learnt lesson and will show reluctance before making another popularizm stunt.


What went unexpected with the tax policy?


US law states that "any income that is earned outside the US is not taxed until such time it is brought back into the US." By his latest tax policy Obama aimed at an antithesis. He aspired to raise the kitty by another $210 billion in additional tax collections over the next decade for profit earned outside the US by companies having base at US.


Vis-à-vis restrictions were also imposed on H1B1 visa requirements to stop people from developing countries like China and India entering into US. So what was it that the Obama administration tried to promote and what to restraint? Why did not the policy respond positively?


The Obama policy lacked foundation. World trade does not function in isolation; the world is flat, short and too much inter-related. The economies may have different trajectory but are influenced by each others. After Globalization a company searches the world, not just to sell or to source, but to find intellectual capital and Market - the world's best talents and greatest ideas irrespective of nationality. IBM, Microsoft, and Oracle become big corps just because of low cost and strong intelligent and hard working work force in India. The factors that catalyzed this were two forth 1> savings in cost, and 2> US do not have trained human resources to do a certain category of specialized services.


We need to get matured enough to the cost savings economy and start talk sense. Indian call center agent is engaged for 12-15K per month that to 9.6 hours a day. 15 K is about 300 $ in US. Obama administration thought that companies like Citibank will run their call center in US and pay 4000 $ to US call center agent, just for the sake of retaining US jobs. An Indian IT guy can be hired for 20 to 40K rupees which is less than one thousand Dollars per month (40K Rupees is around US $800). How much your computer wizz requires you know Mr. Obama about $100000.00 per year or about $8500/00 per month which is more than 400000 (4 L) Rupees in Indian money per month. How much the companies make due their pay roll in India - believe me it is a mountain of monies and new ideas getting them all for pits just about one eight of the local US Pay for such jobs.


Other area where Obama administration lacked foundation was that the services are getting commoditized day by day. Faster, better and cheaper is the key to success in the market. The Obama administration cannot bind, the new generation (which is an improved bunch and can differentiate quality) to buy GM Chrysler or Fords' lousy cars with lousy engines and sub standard transmissions, just for the sake of retaining US jobs. On the other hand these car companies are earning revenues in developing economies like India. Mac burger, Coke, Pepsi, Dell, HP, IBM hardware, Microsoft, oracle, Google software and Boeing cannot be stopped from doing business in India just for the sake of promoting Indian Companies. Nor can the Indian govt. prevent them from earning revenues, because they offer quality goods at comparative price. US had lost 2, 73,000 jobs in September 2009, so were an equal number of extra workers engaged by outsourcers of the developing countries. NO, Indian outsourcing industry is also affected and is praying for quick recovery of US economy. There may be increase in outsourcing in some sector in the short run but the long-term health of vendor is in the prosperity of customer. When the companies of developed nations will close, from where the developing ones will get outsourced stuffs.


So instead of being analytical to a developing nation's prosperity and announcing boomeranging anti-outsourcing policies the Obama administration could have done better things. Concentrating more on market fundamentals would had helped framing practical policies. Administration could have added more (than $210 billion dollar) by investigating the reasons and locations of revenues pillaged from poor workers in capitalist economy. Mr. Bush donated $750.00 Billion Dollars to his friends before leaving the Presidential Palace to his retreat. It is sensible for President Obama to create a committee and investigate and roll back those taxpayer's funds to the exchequer. Even a billion in investigations ordered on the 100th day celebration should have recovered $210 Billion at least by now. Investigations should have been made to capture the bosses of those big bankrupt organizations who filed for bailout, but paid million dollars as CEO's salary. Control the bank bosses who are nothing but nerds and want to make in hundreds of thousands from the Bank's coffers thus driving foolishly the service charges into billions in the process that exhausted the wealth of the nation and its people. Revamp the Banking industry in USA. The stimulus, without getting credit market work again, without cleaning bad debt is mismanagement. Plan a way out to have better administrative control in capitalist market and stop 1 trillion dollar bailout package next year.


KPO / LPO vendors need to fasten their seatbelts now.


The effect of recession and survival strategy was discussed by the author in a previous post in August and is not repeated for the sake of brevity. The LPO (Legal process Outsourcing) industry claims rejoice of surviving the great depression. The responsibilities ahead are more challenging and the preparedness is outdated. Suffice it is to mention, that this most infant industry was not much hit by recession, there was some stagnancies and decrease in growth rate. But now for the reasons mentioned in the article published in this blog in August, the industry player needs to be prepared to taste the unprecedented boom.

1 comments:

Anonymous said...

OK! What I have prescribed even to Chief Justice of Pakistan is to develop a fair wage tribunals every where in a country.
http://en.wikipedia.org/wiki/Wage_slavery
The only way of America having its economy back is to do a sincere partnership with world. This is true, we can send a whole appellate brief in a second that is much faster than emancipation of proclamation.
We need fair wage and employee protection tribunals in our country, so employers cannot manipulate our labor. Instead, we take a part in a global economy as partners and further strengthen it.

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