Consumer Spending Up, but Can Fast Growth Last?

Consumers spending last quarter increased at an annual rate of 2.6 percent, and this was the fastest consumption growth rate since the fourth quarter of 2006. This growth largely drove economic output to grow at an annual rate of 2 percent.
But there are reasons to worry that such fast-paced growth may not be sustainable.
First, consumers still have debt, and that debt is likely to decrease additional spending.
Additionally, job growth is slow. People cannot spend much more because their income isn't growing much.
Finally, consumers are more attracted to foreign-made goods. That means net exports were a drag on GDP.

poll shows Americans don't know economy esxpanded with tax cuts

Many Americans are unaware that the Obama administration has actually cut taxes instead of raised them, which is the popular belief. Since taking office in 2009, President Obama has made over 200 billion tax cuts to families, but has focused mainly on the middle class. This poll shows that the ratio is 2:1 on people who think taxes have gone up. Also, many people believe that the economy is shrinking. Many people, me included, think this is unacceptable, and the government needs to do a better job communicating facts to the public. The problem is the United States is going through tough economic times, and if the peoples belief is that Obama is taxing more, people will save more money and spend less. But, to get out of this economic situation people need to be spending more money, which is why there needs to be better communication.

College Costs Up Again

Here's some disheartening news for all of us undergraduates: college costs are on the rise again. The College Board just released a report showing that the prices of tuition and fees are increasing this year. At four-year private colleges in the US, the average tuition rose to $27,293, a 4.5 percent increase over last year. Public four-year universities saw an increase in average tuition of around 12%. These schools in particular face shrinking budgets because states currently have to cut back spending, so the difference is being made up in tuition. The fact that costs are rising really comes as no surprise - they have been for decades. However, while many of us were counting our blessings that we weren't out facing the job market just yet, it seems that college is not offering as much protection from the economic downturn as we might hope. 

U.S. Economy Grew At 2% Rate In Q3, Consumers Step Up

The US economy grew 2% in the 3rd quarter, which was up from 1.7% in the 2nd. However, because the unemployment rate is still 9.6%, the Fed is feeling pressure to help boost the economy. Consumer spending rose the fastest this past quarter than it has in the past 4 years. It grew at a rate of 2.6% which added 1.8% to the US GDP. It is expected that the Fed will attempt to jump-start the economy, create jobs and boost inflation, which, as reported by the Fed, is running low.

Why the Fed's bold move won't work

The Fed is still trying to jump start the economy. The Fed is expected to purchase hundreds of billions in new assets. This big purchase will supposedly help the economy recover faster. The theory behind this action is the quantitative easing theory which will drop interest further and encourage businesses and consumers to spend more. This will be the second time that the Fed pumps money into the economy. There are of course people that are against this policy. Many say that quantitative easing will not help the economy. Kansas City Fed President Thomas Hoenig referred to it as a "bargain with the devil."

Immigrants Gaining Jobs, Native-born Americans Aren't

According to a Pew Hispanic Center report, legal and illegal immigrants had a net gain of 656,000 jobs while native-born Americans lost 1.2 million since the recession’s end in June 2009. As a result, the unemployment rate for immigrant workers fell during this period from 9.3% to 8.7% while for native-born workers it rose from 9.2% to 9.7%. From mid-2009 to mid-2010, median weekly earnings of foreign-born workers fell 4.5% compared to a decline of less than 1% for native-born workers. The article suggests that immigrants appear to be more avid in pursuit of jobs where native-born Americans have been dropping out of the labor force while immigrants have been entering the labor force more than they have been leaving it. It might be that immigrants were more accepting of lower wages and reduced hours because many, especially those who are unauthorized immigrants, are not eligible for unemployment benefits.

Poll: Americans Don't Know Economy Expanded With Tax Cuts

In a national poll conducted by Bloomberg, most Americans do not know the recent marginal economic expansion over the last four quarters is due to middle class tax cuts by President Obama. In fact, according to the poll many Americans who's taxes were lowered under Obama's plan, think that they are actually experiencing a tax increase.

Economic growth weak in third quarter

The numbers are in and they're just mediocre. GDP grew at an annual rate of 2% for the 3rd Quarter. Many analysts and economists have stated that these numbers indicate that a double-dip recession is unlikely. Yet, expansion, which usually is indicated by growth rates of about 3.6% is unlikely as well. Sadly, growth will be drastically improving anytime soon according to forecasters. However, consumer spending was up 2.6%, which is a bright spot. Or it would be except that the numbers indicate that people dipped into their savings instead of gaining more disposable income. Oh well, here's to a slow recovery.

Japan's Exchange Rate Problems

Nintendo, a major video game maker in Japan, has recorded a half year loss.

"Nintendo has reported a half-year loss after being hit by falling sales and the high value of the yen, which lowers its overseas earnings.

The Japanese computer games firm posted a net loss of 2bn yen ($24.7m; £15.6m) for the six months to 30 September.

This compares with a net profit of 69.5bn yen for the same period in 2009.

Nintendo's sales for the first half of its financial year were down 34% to 363.16bn yen, partly due to lower demand for its Wii console.

Continue reading the main story

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• Profit alert hits Nintendo shares

The company did not release a net profit figure for its second quarter to 30 September, however its operating profit more than halved to 30.9bn yen."

Looks like a strong currency does have it's drawbacks.

Microsoft's Net Surges 51% on Core Products

Even without the glamour of an iPad or another novel technology hit among consumers in its product lineup, Microsoft Corp. posted a 51% profit jump as two of the most venerable products in the technology business—Windows and Office—continued to thrive.

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The software giant's results suggest the standout growth of two of its biggest rivals,Google Inc. and Apple Inc., haven't yet begun to meaningfully hit Microsoft's cash cows.

Yet the earnings still leave unanswered questions about whether Microsoft can reap financial success in fast-growing markets like mobile phones, tablet computers and Internet search.

Apple, for one, recently showed how it has capitalized on businesses that it wasn't in just a few years ago, posting a 70% quarterly earnings jump partly on robust sales of iPhones and iPads. Apple earlier this year passed Microsoft to become the most valuable technology company, with a $280 billion market capitalization to Microsoft's $227 billion.

Still, Microsoft posted solid sales growth of its own over its fiscal first quarter ended Sept. 30. Revenue was $16.2 billion, up 25% from a year earlier.

In an interview, Microsoft Chief Financial Officer Peter Klein said Microsoft is thriving from a "refresh" of technology purchases by businesses of all sizes, and that the company saw "terrific growth in enterprises and small and medium businesses."

Investors appeared to like what they see, sending Microsoft's shares up 3% in after-hours trading after closing at 4 p.m. at $26.28.

Microsoft's results come after two weeks of relatively strong results from tech companies. Apart from Apple, which was driven by consumers purchasing gadgets like the iPhone, business-oriented companies such as International Business Machines Corp. also reported strong growth.

Other tech companies' earnings suggested computer demand has cooled somewhat, while remaining at high levels. Over the quarter, Microsoft's fastest growing business was Windows, which saw sales jump 66% to $4.79 billion from $2.88 billion during the same period the prior year, when it deferred $1.47 billion in sales.

The sales reflect the positive reception for Windows 7, a new version of Microsoft's flagship operating system that has been more positively reviewed than its predecessor, Vista. The company said it has sold more than 240 million licenses to Windows 7 since the product's debut a year ago, making it the fastest-selling operating system in the company's history.

Still, Microsoft hasn't participated meaningfully in the growing tablet market, now dominated by Apple's iPad. Some industry executives believe tablets are beginning to bite into sales of low-end laptops running Windows. Microsoft executives have said they expect more tablets running Windows 7 to go on sale next year.

"That has a surprisingly big overhang for something that's a relatively small part of the PC market," said Brendan Barnicle, an analyst at Pacific Crest Securities.

Another potential threat to Microsoft's Office business—Google's online suite of free applications—doesn't seem to have hurt the company yet.

In the first full quarter for sales for its new Office 2010 software, Microsoft said sales jumped 14% to $5.13 billion from $4.52 billion from a year ago for its business division, which is dominated by Office.

Mr. Klein said Microsoft has sold 20% more units of Office 2010 since the product's launch than it did of the product's previous version during the same time period. "There's no evidence of the competitive issue at all," he said.

Overall, Microsoft said income for the quarter was $5.41 billion, or 62 cents a share, up from $3.57 billion, or 40 cents a share, from the same period a year earlier.

The coming quarters will be big tests of Chief Executive Steve Ballmer's big investments in new consumer markets. The company continues to lose money in its online services division, as its operating loss in the group widened to $560 million from $477 million in the year-ago quarter.

Microsoft recently completed the transition of search advertisers from Yahoo Inc. to Microsoft's online ad system, part of a multiyear deal between the companies in which its Bing search engine has begun powering searches on Yahoo.

Microsoft next week will also begin selling Kinect, a new device that allows users of Xbox 360 game consoles to play videogames without having to hold a controller.

Another major product for the holidays, its Windows Phone 7 operating system for mobile phones, will go on sale on devices next month.

Weighing New GM's Resale Value

DETROIT—General Motors Co. has made progress tidying up its balance sheet ahead of a planned initial public stock offering next month, but there's still a big question it has to answer for potential investors: Is GM fixed?

The auto maker said Thursday that it will return another $2.1 billion of the nearly $50 billion in bailout funds it got from U.S. taxpayers. The repayment was one of a series of moves GM, which is majority owned by the federal government, announced to reduce its liabilities and show financial strength ahead of the IPO.

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CEO Daniel Akerson has been at GM's helm for fewer than 60 days.

GM said it will repay the money by buying back 83.9 million preferred shares owned by the U.S. Treasury. In a separate move, it said it will immediately pay $2.8 billion to reduce the amount it owes to a trust fund that covers the cost of health care for retired workers.

After the IPO, the auto maker plans to cut its liabilities further by contributing $4 billion in cash and $2 billion in stock to employee pension funds.

All told, the moves will use $10.9 billion, but will save about $500 million a year in interest payments. GM will be left with $24 billion in liquidity, including a backup $5 billion revolving credit line, which company executives believe is enough to keep it moving forward, especially now that it is making money again.

The stock buyback from the Treasury is significant because the Obama administration is seeking to recoup the entire $49.5 billion that taxpayers poured into GM, starting in the final days of the George W. Bush administration. With Thursday's deal, GM will have returned about $9.5 billion of that money, through loan repayments, interest charges and dividends, the Treasury said.

During a stay in bankruptcy court last year, GM slashed its debt and costs, halved the number of brands it sells and swept out its entrenched leadership in favor of aggressive newcomers.

Bolstered by a new, lower-cost union contract, some strong-selling models and an improving economy, GM reported a $2.2 billion profit for this year's first half, a sharp turnaround after losing nearly $90 billion between 2005 and its bankruptcy filing in June 2009. GM's U.S. sales rose 6.8% in the first nine months of 2010.

But, as for whether GM is fixed, the answer is yes—but not completely. Many problems linger.

GM's U.S. market share slipped 2.8 percentage points this year through September as overall car sales recovered. One reason is the company still doesn't make enough models that appeal to a broad spectrum of Americans, particularly young, urban drivers and those on both coasts.

GM faces intense competition from a resurgent Ford Motor Co. and newer rivals such as Korea's Hyundai Motor Co., as well as Toyota Motor Corp., which remains a formidable competitor despite its safety recalls. In Europe, GM has racked up years of losses at its Adam Opel GmbH unit.

While bankruptcy did GM much good, it also left the company with a gap in its product pipeline because development of some models was frozen for months as the company slid toward Chapter 11.

GM also has an image problem. Its bailout came as anti-government sentiment was rising, and many consumers and lawmakers see GM as "Government Motors" because of the Treasury's 61% stake in the company.

Here's a look at what GM has fixed—and what remains to be done.

What's Fixed

Bankruptcy finally enabled GM to shrink its North American operations to fit a smaller and more competitive market. It abandoned 14 of its 47 North American plants, shut down its slow-selling Hummer, Pontiac and Saturn brands, and sold Saab, allowing it to put more resources into Chevrolet, Cadillac, Buick and GMC.

Perhaps the biggest achievement of GM's 41-day stay in bankruptcy court is its new balance sheet. After the measures outlined on Thursday, GM has just $8.2 billion in debt, down from $45.9 billion before it filed for court protection. GM also has $24 billion in cash, $4 billion more than at the end of 2009.

A big part of the debt reduction came from a deal with the United Auto Workers. GM was obligated to pay billions of dollars into a trust fund to cover health care for retired union workers. Instead of paying in cash, GM won union approval to put stock into the trust, which is now GM's second-largest shareholder, with a 17.5% stake.

The cost reductions are boosting the bottom line. In the second quarter, GM made $2,009 on every vehicle it produced in North America. In the three months before it went into Chapter 11, GM lost $4,081 on every car or truck it made in the region.

That the company can make money with U.S. car sales at around 10.5 million a year—compared with 16 million annually earlier this decade—means it should profit handsomely when sales recover further.

For years, GM hurt itself by running too many plants and making more cars than consumers cared to buy. But after closing so many plants, GM has gotten supply in line with demand, and its plants are more productive. In the second quarter, GM's North American factories operated at 93% of capacity, up from 40% a year earlier.

Now some new models are selling at higher prices. The recently redesigned Buick LaCrosse sedan typically sells for $30,000 to $40,000, according to dealers—about $7,000 more than the old version.

In China, GM's joint ventures are booming and it is now the top-selling foreign brand, having overtaken Volkswagen AG. This year, for the first time, GM is selling more vehicles in China than in the U.S.

GM's progress has come under a new board and management team. In the past, GM tended to deliberate endlessly over even minor decisions, delaying tough action.

During GM's bankruptcy, the Treasury stocked the GM board with industry outsiders. Edward E. Whitacre Jr., a no-nonsense Texan who spent most of his career building SBC Communications Inc. into a telecommunications giant, was named chairman. Another telecom deal maker, Daniel F. Akerson, also joined the board.

In December 2009, Mr. Whitacre wanted faster change and took the chief executive post himself, ousting GM veteran Frederick "Fritz" Henderson. The chairman shook up other management as well.

What Needs Work

Though GM is making money and has a clean balance sheet, one of its trouble spots is pensions for its retired workers. The company has more than $27 billion in outstanding pension obligations. Of that, payments totaling $10 billion are due in 2014 and 2015. Making such payments could hamper GM's ability to develop new models and modernize operations.

In Europe, GM's is closing an Opel plant in Belgium as part of a turnaround plan, but also needs to raise market share—a difficult feat in the competitive European market. In private, GM's advisers and some board members acknowledge getting Opel to break even may be the best the company can do.

Questions still hover over GM's executive suite. Mr. Akerson, now CEO, has been at the helm fewer than 60 days, and has little experience running a large manufacturing company.

Speaking to reporters in September, he conceded that the company has a long way to go. "The GM we know today will not be the GM we see five to 10 years from now," he said.

While GM's U.S. sales rose 6.8% in the first nine months of the year, its increase has been fueled by higher sales to rental-car companies and other "fleet" customers. Sales to individual buyers—which generally are more profitable and a truer measure of a car maker's ability to win customers—were down about 2%, according to people familiar with the matter.

In an effort to spark enthusiasm for the Chevrolet brand–which now accounts for more than two-thirds of its sales–GM this week announced plans to blanket the airwaves with a new, Americana-themed ad campaign.

Changing consumer perceptions is easier if an auto maker launches new, head-turning models. GM has that in the form of the Chevrolet Volt, the battery-powered car due in December, and some new small cars, including compacts for Buick and Cadillac.

Beyond that, GM has some holes in its lineup. Bankruptcy forced it o freeze development of several vehicle lines, including a new generation of full-size pickups and sport-utility vehicles. That means GM won't be able to wow potential investors by pointing to a string of high-profit models waiting in the wings. GM won't have new trucks to offer until at least 2013, though it could update current models.

Privately, GM executives acknowledge weakness in the company's product line that could hurt its competitiveness over the next few years.

GM has committed almost $1 billion to revamp its big trucks and SUVs and tripled the size of its truck-design studio to be able to develop SUVs alongside pickups, rather than separately. "We are moving as fast as we can," said GM's design chief, Ed Welburn, in an interview. "But you can only speed things up so much."

White House's Next Task: Rebuilding Policy Team

President Barack Obama, with his party perhaps on the cusp of a major electoral defeat, also faces the burden of recalibrating his presidency while restocking the West Wing's depleted policy team.

The National Economic Council has seen its influence wane with the announced resignation of Director Lawrence Summers and the difficult search for a successor, say former White House officials. The scope and scale of its economic proposals have shrunk drastically and gained little traction.

The White House budget office remains without permanent leadership three months after the departure of former chief Peter Orszag, shifting responsibility to junior staff members as Congress struggles to pass a budget for fiscal 2011, which began this month.

White House Chief of Staff Rahm Emanuel's exit several weeks ago, meanwhile, robbed the president of one of his most powerful policy strategists. The National Security Council also faces a major transition, as James Jones gives way to new National Security Adviser Tom Donilon, admired for his administrative skills but not known as a policy maker.

White House press secretary Robert Gibbs attributed the departures to "a natural churning of personnel."

Other administrations have lost important players in the first two years and at politically sensitive times. Doug Sosnik, a top official in the Clinton White House, said President Bill Clinton faced a similar situation in the run-up to the 1994 election, after he replaced Chief of Staff Mack McLarty with Leon Panetta that July. Only after the new political landscape clarified could Mr. Panetta make "the broad-brush changes" that remade the Clinton presidency and led to his re-election, Mr. Sosnik said.

But Robert Reich, Mr. Clinton's labor secretary, said there was one clear difference: Mr. Clinton had few legislative victories to date to protect. He tacked to the center to work with Republicans. If Mr. Obama chooses to "preserve and protect" his legislative victories, "that doesn't require much of a policy apparatus," Mr. Reich said. "That requires a veto pen."

Nick Calio, a former legislative aide to President George W. Bush, said the holes in Mr. Obama's policy apparatus could shape the direction he takes after the election. Tuesday's election is expected to be hard on moderate Democrats in conservative districts, leaving a more ideologically liberal party that won't want the president to tack to the center, Mr. Calio said. "Without any forceful voices on the policy side, the question is going to be what is he going to do?" Mr. Calio said. "My guess is he relies on his own instincts, and that is to keep going in a liberal direction, which is not what his party needs."

The exodus and uncertainty as Election Day approaches, with polls showing Democrats could lose dozens of seats in Congress, has left the remaining policy makers gun-shy. "There seems to be a desire not to make much more policy, because there's a sense that the policy is what got them into trouble," a former White House official said.

Instead, policy proposals have seemed to be more symbolic. The White House unveiled a $50 billion infusion of infrastructure money that was actually part of transportation legislation that Congress isn't supposed to act on until next year. Likewise, a proposed permanent extension of the federal research-and-development tax credit was only moderately different from a tax plan included in Mr. Obama's budget proposals for two years running.

The staff problems appear especially evident in the economic council, responsible for combating high unemployment, and the Office of Management and Budget, under pressure to address budget deficits. However, Jen Psaki, White House deputy communications director, said the personnel turnover is to be expected. "The economic team is staffed with academics, with business leaders, with career professionals and economists, and the typical length of service for a high level, high-stress position in this area is less than two years," Ms. Psaki said.

She added that the economic team remains engaged, with members having met twice Tuesday and once Wednesday. Former officials say their biggest concern is that Mr. Summers is the one White House policy aide who could routinely out-argue the political hands. His scheduled departure for Dec. 31 shifts the balance of power, they say.

Meanwhile, little on the policy front is advancing. "They haven't calibrated what they're going to do after the election," a former official said. "Are they going to pursue ambitious disruptions of the current economic policies, or are they going to play small ball?"

"The difference between now and the [presidential] transition is that then there was a much clearer path, a game plan," another former official said. "There may be a game plan now, but I would be surprised if there was one."

Between the November 2008 election and Inauguration Day, the Obama team carefully sequenced its legislative game plan, starting with the stimulus bill, putting health care before the Senate and energy and climate change before the House, followed by a Wall Street re-regulation push. Now, this ex-official said, White House aides want to see the post-election congressional landscape before plotting the next steps.

The White House budget office faces a number of challenges. After the election, Congress must return for a lame-duck session to pass spending bills for the fiscal year that began Oct. 1. The process to develop the fiscal 2012 budget has already begun. OMB officials are poring over budget requests submitted by departments and agencies. On Dec. 1, the president's bipartisan commission on the federal debt is expected to issue its recommendations, which are supposed to provide the blueprint for deficit reduction in the next budget, due out in early February.

But Jacob Lew's nomination for director of OMB is being blocked by Democratic Sen. Mary Landrieu of Louisiana, in protest over the administration's offshore oil-drilling policies. The deputy spot is also being held open for Mr. Lew. And Rob Nabors, a former OMB official who joined the chief of staff's office, has returned to lead the process as acting deputy director. Jeff Zients, who is supposed to lead the White House's government management-reform efforts, is acting OMB director.

"We have the ability to fly at a very high altitude. That's what we're doing right now," Ken Baer, the White House budget office's communications director, said of their efforts to put together the fiscal 2012 budget. "We can have the table set for Jack [Lew], but we need him and want him here."

Shell, Exxon Dodge Weak Prices for Gas

By GUY CHAZAN And ISABEL ORDÓÑEZ

Exxon Mobil Corp. and Royal Dutch Shell PLC reported big increases in third-quarter earnings, benefiting from higher oil prices and shrugging off low prices for U.S. natural gas.

But Shell said the lingering effects of the U.S. moratorium on deep-water drilling in the Gulf of Mexico could reduce the company's production. Though the ban ended this month, the government is moving slowly to assess and issue new drilling permits.

Shell said the delays could shave 40,000 barrels a day, about 1.3% of current output, from projected production next year. The Anglo-Dutch company said 2012 output also could be affected.

Exxon barely mentioned the impact of the moratorium. The largest U.S. oil company by market value reported a 55% rise in earnings as production rose 20% and refining margins improved.

The Irving, Texas, company has faced criticism for its June acquisition of natural-gas producer XTO Energy Inc. Natural-gas prices have dropped since the deal was announced, and some investors expressed concern that Exxon bet on the wrong fuel.

Exxon also spent $695 million in the third quarter to buy Colorado-based Ellora Energy Inc., which has acreage in the gas-rich Haynesville shale in Texas and Louisiana.

Oppenheimer & Co. analyst Fadel Gheit said the deal is a bet on the long-term rebound of currently depressed natural-gas prices. With XTO "they bought the tree, they might as well now put on the ornaments," he said.

Exxon's output increased to 4.5 million barrels of oil equivalent a day, mainly because of the addition of XTO. Higher output in Qatar also boosted results.

Exxon reported profit of $7.35 billion, or $1.44 a share, up from $4.73 billion, or 98 cents a share, a year earlier. Revenue rose 16% to $95.3 billion.

While Exxon and Shell have global operations, Shell is a larger producer in the gulf and more affected by the drilling freeze imposed by the White House shortly after the Deepwater Horizon rig blew up in the gulf in April. Chief Financial Officer Simon Henry said in a conference call that Shell has taken $115 million in charges this year for drilling rigs idled by the drilling moratorium.

Oil companies are scrambling to understand the effects of new rules recently announced by the government—such as increased third-party inspection of crucial equipment like blowout preventers, requirements for expanded spill clean-up plans and greater federal oversight of how wells are drilled and tested. The new regulations likely will squeeze small, independent companies, which account for around 60% of U.S. gulf production.

But comments by Shell indicate that big companies also have been hit. Mr. Henry said the moratorium had affected not only Shell's exploration program, but also its plans to drill development wells that would increase production at existing projects.

Shell posted an 88% rise in third-quarter adjusted profit, reflecting higher oil and gas prices as well as a big efficiency drive. Shell's clean current cost of supplies, a closely-watched figure that strips out gains or losses from inventories and other nonoperating items, rose to $4.93 billion from $2.62 billion a year earlier. Oil and gas production rose 5%.

Profit for the quarter rose 6.7% to $3.46 billion from $3.25 billion.

How to keep your star employees

You doled out extra vacation days to make up for paltry bonuses to your top performers. After the 401(k) match was cut, you passed out gift cards to remind your stars how much they mattered. In a tough economy, it's the little things, right? Wrong. Perks and trinkets are nice, but they won't keep your best people when things improve. Some 27% of employees deemed "high potential" said they plan to leave within the year, according to a recent survey by the Corporate Executive Board. That rate of dissatisfaction is rising "precipitously" as the economy stabilizes, says Jean Martin, executive director of the CEB's Corporate Leadership Council, up from just 10% in 2006 and increasing at twice the rate of the general employee population.

Retention rules: How to keep your top employeesThat's the bad news. The good news is that perks aren't the only way to keep your high performers engaged. They want a mix of recognition and challenges that stretch them without completely stressing them out. Liz Wiseman, a former Oracle executive and author of the bestseller Multipliers, says money "never came up" when she interviewed 75 Fortune 500 managers about the leaders who motivated them most. The CEB survey, which asked nearly 20,000 high-potential employees what drove them, found that feeling connected to corporate strategy was tops on their list. But many managers turned inward when the economy sank, giving fewer employees the chance to influence the company's direction. Another way to get your stars involved is to turn them into headhunters. Many companies already do so through employee-referral programs, but they don't realize that there is an upside beyond bringing in new talent. Dave Ulrich, human resources consultant and University of Michigan professor, says such programs can actually boost loyalty for those doing the recruiting. "It sounds tautological," he says, "but when people behave as if they're committed, they become more committed." Even if money isn't the best motivator, it still talks. To make a smaller bonus pool go further, fine-tune your timing. Rewards handed out at tough times can have a major impact. It's also smart to rethink your selection process. More companies are paying bonuses to those with hard-to-replace skills instead of just top performers, says Hay Group comp expert Tom McMullen. Building a real future lies primarily in bigger opportunities. Yet so-called stretch assignments can be tricky; challenges meant to be energizing can feel like punishment for success if they aren't designed well. To avoid that fate, managers should make sure assignments give the employee more independence and are custom-tailored to their talents, says Tom Rath, head of workplace consulting for Gallup. If not, he says, "it can be perceived as piling on. And that's the quickest way to push that person toward the door."

Bye-bye, tax breaks?

NEW YORK (CNNMoney.com) -- Who says there's no bipartisanship? Democrats and Republicans running for Congress are finding every way possible to assure voters they will keep Americans' taxes low forever.

But those will be hard promises to keep after the economy recovers. Tax experts almost uniformly say the next Congress should rethink the more than 200 tax breaks in the federal code that cost more than $1 trillion a year. And, yes, that includes even the really, really popular ones.

Lawmakers may be presented with the idea as early as December, when President Obama's fiscal commission issues its report. There is a possibility the commission may recommend curtailing or eliminating some tax breaks.

Commission co-chairman Erskine Bowles has publicly expressed support for the idea. So has commission member Alice Rivlin, former White House budget director. Another member, Republican Sen. Judd Gregg, who coauthored abipartisan plan for tax reform, supports curtailing some breaks but only to lower marginal tax rates in the context of broader reform.

The $1 trillion-plus in forgone revenue is close to the amount allocated for defense and discretionary spending in 2010, or the equivalent of nearly a third of the latest federal budget.

Cutting back on tax breaks can be a more efficient way to bring in revenue than raising income tax rates because it would subject more work and business income to taxation. If done right, it also promises to make the tax code fairer and simpler.

For years, leading tax experts and economists from the left and the right have contended that tax breaks are, in reality, a form of spending. The cost of tax breaks is mostly invisible, since there's no formal accounting of them on Uncle Sam's books. And once passed into law, they are rarely scrutinized.

"[Tax breaks] are styled as tax savings, but really function as replacements for explicit government spending. Some make sense, but a great many are poorly targeted and would never pass Congress if presented as an outright spending proposal," tax expert Edward Kleinbard wrote in an article this summer called, "Sacred Cows: It's Them or Us."

No double-dip recession

The good news is that the much-feared double-dip recession is not going to happen.

That is the message from leading business cycle indicators, which are unmistakably veering away from the recession track, following the patterns seen in post-World War II slowdowns that didn't lead to recession.For 25 years, we've personally spent every working day studying recessions and recoveries. Based on our work and that of our colleagues at ECRI, we've called the last three recessions and recoveries without any false alarms, including an accurate forecast of the end of the most recent recession in the summer of 2009.

After completing an exhaustive review of key drivers of the business cycle, ranging from credit to inventories and measures of labor market conditions, we can forecast with confidence that the economy will avoid a double dip.

But the bad news is that a revival in economic growth is not yet in sight. The slowing of economic growth that began in mid-2010 will continue through early 2011. Thus, private sector job growth, which is already easing, will slow further, keeping the double-dip debate alive.

Of course, it is the renewed job market weakness, combined with deflation fears, that is behind the Fed's promise to implement a second round of quantitative easing, or QE2.