ataxingmatter

cutting the millionaires' taxes & making the rest work longer/harder and pay more isn't "shared sacrifice"

E.J. Dionne's op-ed is worth reading--The Tea Party is Winning, Washington Post, Feb. 21, 2011.

Look at the states, where GOP governors are using deficits caused by long-term tax cuts and low taxes that didn't raise enough money to pay their pension obligations that they could easily have funded to now benefit (again) big business and the wealthy.  The wealthy double-dip and the poor, the middle class, and those faithful government employees who put in years of labor with the expectation of at least getting their promised pensions at the end get shafted.  Instead of raising taxes equitably and cutting only those programs that are dross, the governors are on a union-busting program.  Why bust unions?  Because if the average worker at the average private job ever realizes that unions are the way to get a fair shake from their employer, the wealthy managers and owners of the big corporations will have to share some of their filthy lucre gotten from the increased productivity with their workers in the form of wages and benefits.  Why, private workers might even find they should form an alliance with public employees, who already understand the importance of unions allowing them to have some collective power in respect of their employer.  Gotta stop that, says the GOP mindset.

Look at the federal government, where the same Republicans insisted that deficits don't matter when they were passing huge tax cuts for the wealthy and big business and and insisted that the poor didn't need the "making work pay credit" .  The wealthy and big business double dipped--low taxes, great benefits, while the poor sacrificed.  Now these same Republicans are now insisting on cutting out anything in the budget that benefits the middle class or poor--or puts any obstacles in the wealthy class's and big business's  rapacious exploitation through casino speculation.   Picking an arbitrary number that just happens to amount to huge proportions of the piddling amounts we spend on Head Start, pollution control, tax enforcement, and programs for the needy, the GOP is aiming to cut cut cut.  But at the same time, all those things that benefit the wealthy are off the table.  Regulation of pollutants or of drilling?  Gotta stop it.  It might prevent those who own most of the financial assets from making exploitative profits from natural resources.  Enforcement against tax cheats?  Gotta stop it by cutting funding for tax collection efforts against wealthy tax cheats (again--as the GOP has done whenever it is in control).  Making big corporations like GE (effective tax rate less than 15%)  and Yahoo (effective tax rate less than 10%)  pay their fair share of taxes to support the legal, patent, transportation, communication and tax subsidies that have made their businesses wealthy by preventing their transfer pricing and leverage games?  Gotta put an end to any such thinking, the GOP apparently believes, or its favored MNEs will have to return to paying taxes equal to a much bigger share of the GNP. 

This country succeeded in the post-war years with very high taxes and significant expansion of government because it supported programs that spread growth broadly and allowed the formerly impoverished to share in the growth.  Now we are moving against our core principles, creating an oligarchy whose GOP minions will see to it that government exists as a tool by for and of the wealthy and the big corporations.  That future may suit Ayn Rand, who basically viewed anyone who got wealthy (whatever the means--though she claimed it was based on 'merit') as a "good guy" and everybody else just fodder for their exploitation. 

It is true that our history is riddled with ruthless men who exploited anyone in their path to wealth.  The railroad barons of the mid 19th century come to mind--they set up separate corporations to receive the largess from the federal government and avoid paying the workers that they exploited (treating Chinese immigrants as expendable cogs in their money-making machine).  Those who set up mines on government lands--and under the 1872 mining act pay no royalties whatsoever to the American people for the wealth they extract from OUR lands--similarly exploited their workers, doing as little as possible for safety.  At every stage, titans of commerce make their fortunes by exploiting workers and passing off to the public as externalities the harms of their commerce--oil spills, water pollution, air pollution, destruction of natural habitats, chemical toxins in lakes and land, abandoned megastores,  abandoned factory shells, union busting that leaves workers with a pittance while the privileged CEO class wines and dines on the productivity of the worker, shadow banks that buy up productive firms (often with leveraged buyouts using the firms own profits to pay for their acquisition), fire workers and move the company offshore or split up and sell its assets to reap a quick profit, damn the workers;  mortgage mills that swindle unsuspecting borrowers and then swindle unsuspecting investors; bankers willing to reap casino gambling profits (often from insider knowledge of their clients' plans or from knowingly hawking risky products) with no concern for the integrity of the system. 

These things are inherent in unregulated "casino" capitalism--it is a brute force that favors oligarchy and plutocracy, greed and rapacious excesses, destruction of the environment and exploitation of ordinary people.  In a democracy it demands to be controlled by the people so that the excesses are limited, and the nation's resources--waters, land, air, workers and human capital--are protected.

At this point, the GOP is assisting in the rape. There is enough excess in the military expenditures to account for every penny that they want to cut from needed human capital and physical infrastructure programs.  They just don't want to go there.  And the Democrats are not stopping the pillage.

Corporate Taxes from the AEI perspective--the AEI report gets an F

[edited to correct typos and add link to CTJ and Leonhardt articles 2/19pm]

Kevin Hassett, an economic grunt at the American Enterprise Institute and frequent contributor to the Wall Street Journal op-ed pages, prepared a report for the institute on corporate taxation.  Guess what--it claims that the US overtaxes its corporations and that is the reason that we are losing jobs.

There are all sorts of things wrong with this report.

1) it disregards the impact of globalization on corporate decisions to move enterprises, and the fungibility of operations if jurisidictions left don't make the exit a highly taxing moment.  It also disregards the lack of protection for US workers--yes, US workers are better paid than workers in undeveloped countries, and if multinational enterprises (MNEs) can merely substitute the one for the other, they will. 

2) It first spends a lot of ink on the US statutory rate, complaining that it is higher than that of most other OECD countries.  That is true, but really meaningless in itself.  You can't have a decent understanding of a country's tax policies without looking at both tax rates and the base against which they are assessed.  Since the corporate tax base in the US has more holes than Swiss cheese, looking at the rate tells you almost nothing about the corporate burden.

3) It notes that corporate taxes raise much less in revenue as a percent of GDP in the US than in other OECD countries.  Somehow, the report intends this to be an indictment of the US corporate tax system as overtaxing corporations.  I suppose the authors reach that by implying that corporations have fled the system and that's why.  But it is really an indication that the thesis in the title of the report--that the US gets an F for bad taxes that are making US corporations uncompetitive--is wrong. The US has such a loophole riddled corporate tax system that corporations are easily able to avoid paying their fair share of taxes. IN fact, other countries have more effective tax systems that get more corporate taxes out of their corporations as a percent of GDP, so the US must be a tax haven.  It is rather surprising that we haven't had an upsurge of grass-roots, tea party-style protests against all the big MNEs that manage to benefit mightily from the use of tax revenues (from roads to water to workers' comp to subsidized health care) yet pay next to nothing in taxes in return. 

For some examples of these MNEs with low taxes and much use of benefits, see David Leonhardt, The Paradox of Corporate Taxes in America, New York Times, Feb. 2, 2011 .  Leonhard points out that Carnival Corporation "wouldn't have much of a business without help from various branches of government" from the Coast Guard to Customs to road building and bridges and port maintenance, but the biggest benefit mayh be the price it pays, since it has only paid total (federal, state, local and foreign) taxes over the last five years equal to 1.1% of its $11.3 billion in profits."  Other major US corporations with substantial economic profits pay corporate taxes less than 10%--Yahoo (7%), Boeing (4.5%), Prudential Financial (7.6%).  Id.  (And wasn't Prudential  one of the banks that got to use the Treasury's ultra vires notice permitting banks that acquired other banks to use their losses without the strict limitation provided in the tax code section 382?)

4) It claims that the US corporations' effective tax rate is still way higher than for other countries.  To do this, it uses two formulaic calculations for effective tax rates, neither of which is particularly trustworthy as to actual effective tax rates. It finds that its two hypothetical measures of effective tax rates come out at 29% and 23.6%.  These are probably too high, but are considerably less than the statutory rate. it doesn't, for example, look at the amount of actual taxes paid compared to the amount of taxable income reported.  That figure would suggest a higher effective rate than actually experienced, since taxable income is much less than economic income.  It doesn't do what makes even more sense, look at actual current taxes paid as noted on financial statements of reporting companies compared to economic income as noted on financial statements of reporting companies.  That number would be fairly accurate, and in fact comes out very low indeed.  See, e.g., CTJ study, Revenue-Positive Reform of the Corporate Income tax, Jan 25, 2011 (noting that a Bush study in 2007 found only a 13.4% effective tax rate for 2000-2005, compared to a 16.1% rate for other OECD countries). 

 5)  In comparing US corporations' statutory taxes to those in other OECD coutnries, it takes into accout state and local corporate taxation (average) rates.  But note that the US has primarily corporate income taxes, while OECD countries may have a host of other taxes, including in most cases a substantial value-added tax system (VAT).  The report doesn't bring that tax into the comparison.  As a result, its comparison is again meaningless, because it isn't really comparing the overall tax burden to determine whether the US corporations are in fact paying tax haven rates or being stymied in competition. 

6) And of course, these corporate excusers provide only the slimmest of rationales for asserting that the US is aided by improving the competitiveness of MNEs in other countries--usually along the lines that helping them invest more abroad will also have a spillover effect in terms of more investment here.  Actually if we help them succeed there by reducing taxes here, we are cutting off our noses to spite our face, since they will move operations there and do less here. We'd be much better off using that money to fund education and basic scientific research that can improve our quallity of life and give us new things to manufacture! 

As usual with the AEI, the ideological agenda has resulted in a report that primarily serves a propaganda purpose.  I'd say that it isn't US corporate taxes that get an F, but rather this AEI report!

GOP deficit-reduction hype used in ideological "values" war?

[edited to correct typos]

There is concerted effort to portray Social Security as ruining the country by being a significant cause of the current deficit , and this is not accidental.  Social Security has been funded by payroll taxes that are supposed to be dedicated to the payouts.  But the GOP since Reagan has worked to cut income taxes and increase military funding (especially with the Bush "pre-emptive" wars of choice that Stiglitz now says will cost us a minimum of FIVE TRILLION), and has borrowed from those Social Security pension funds to pay for those tax cuts and military excesses. It's the tax cuts and runaway military spending that are choking this country's economy, not Social Security.  That fact gets lost unless Social Security's income and outflows are portrayed fully.  It's a fact that the GOP wants to be lost, I think, along with the overall amount of military and related spending in our budget.

The cost of treating Social Security as part of the deficit is that workers who have been locked out of sharing in productivity gains will pay, while the benefits have gone especially to the upper class that owns most of the financial assets and most of the military-industrial complex.

The deficit hype appears to be a concerted effort, in other words, to destroy the programs that were created in reaction to the colossal inequities that were contributory causes of the Great Depression and were intended to safeguard the broad-based society that is essential to democracy, one where growth is shared and everyone has opportunities.  I just found that Robert Reich has similar thoughts, noting that this is a divide-and-conquer strategy built on three kingpins:  the battle over the budget, the assault on public employees, and the distortion of the Constitution. See The Real Republican Strategy, Salon.   What the GOP aims to do, I suppose, is to weaken the 90% who aren't in the race to be the richest plutocrats of the country, and make sure that they secure the spoils for those at the top.

It would seem that the GOP is using this moment to

• Get rid of programs that have advanced gender equality. 
  • See Rebecca Traister, This is what pro-life means?, Salon.com, Feb. 18, 2011, noting that "Morality is on the side of women, on the side of children, on the side of a society that offers aid to its impoverished and to its young and does not discriminate against half its population. In Moore's words, 'Planned Parenthood is healthy for women, it’s healthy for children, and it’s healthy for our society.' "  The post includes a video of Rep. Jackie Speier's impassioned response to the lack of understanding about abortions. 
  • See, e.g., Top 10 Shocking Attacks from the GOP's War on Women,  MoveOn's political action group, noting the attempt by various state and federal Republican groups to reduce access to abortions and redefine victims of rape  (but not of other crimes like burglary) as mere "accusers"; expand legitimate "defense" to permit killing abortionists; cut funding for food and other assistance to low-income pregnant women and families; allow hospitals to refuse abortions necessary to save a woman's life;  eliminate preschool programs for poor kids at state levels and Head Start at the federal level; cut funding for services for the elderly poor (most of whom are women); cut all funding for Planned Parenthood; cut all funding for family planning.
•  Get rid of public employee unions (and reneg on pension promises made years ago at the same time). The mainstream media has lapped this up like the lapdogs they are.  See, e.g., Wall Street Journal, New York Times stories.  
  • Gov. Walker in Wisconsin--the state where there is a pitched rhetorical battle to get rid of public employee unions and defund public pensions--did not inherit a budget shortfall.  Like at the national level, GOP policies are driving the attack on public employee more than the actual deficits involved--especially since those shortfalls at states are related to the toll of the Great Recession and to states' long-term habits of borrowing from Peter (their own employees' pension funds) to pay Paul (e.g., their other creditors or even their wealthiest taxpayers who were spared taxes by the borrowing).  See, for example, Mark Thoma at Economist's View on the spreading use of recession-induced budget gaps to target unions. Gov. Walker has pushed the "tax cuts create jobs" idea, signing various business tax cuts into law. See Walker Gins Up Crisis to Reward Cronies, The Cap Times, Feb. 16, 2011;  Wisconsin Legislative Fiscal Bureau, annual review of the State's Fiscal Status (Jan 2010) ( even with the recession and various changes that caused the state to have less revenues, projecting a surplus of more than $55 million at the end of the 2009-2011 biennium which, though below the statutory surplus of $65 million required, means that the state was still doing well); Walker Signs 2 More Business Incentive Bills, Journal Sentinel, Jan. 31, 2011.  Exacerbating the future shortfall created by the tax cuts, the state has about $260 million of unfunded obligations-- from taking $200 million out of a dedicated fund for general fund purposes and from an unpaid obligation to Minnesota under a tax reciprocity agreement (an obligation that is earning interest at more than $4000 a day).  So the public employees aren't the cause of the state's problems. 
  • This is particularly worrisome for higher education.  See Inside Higher Education story on impact on Wisconsin academics.  These attempts to hit public employees generally start with some of the studies that suggest that public employees have better benefits than private employees.  As noted in earlier posts, that is debatable.  Commensurability is a problem, since many state and federal government jobs require higher education and experience levels.  Wages are negotiated  in exchange for better long-term benefits, which the states are now talking about reneging on.  It's as though the private industry owners wrote the following script based on this "time to get even" rationale. 

for years, we have underpaid our workers while keeping all the productivity gains for ourselves and paying ourselves knock-out pension and health benefits. 

We've made sure that workers couldn't unionize, by spending lobbying dollars to fight fair systems (like card-check) and using all the powers of the employer to intimidate workers (see, e.g., Wal-Mart's long history of unfair labor practices).   

Now it is clear that unions do benefit workers--just look at the fact that public employees have decent wages and benefits because they are able to bargain collectively with a decent employer that doesn't use these methods to squelch workers. 

We've got to stop that--let's paint a picture of underpaid private workers who have very little in benefits, in order to incite jealousy of public workers. 

Then we can use the deficit that we created by evading taxes, lobbying for tax cuts, and charging ridiciulous amounts for contracts through the military-industrial-banking complex to justify taking away both the benefits that public employees long ago gave up wages to receive and the collective bargaining rights that allowed them to get decent wages and benefits.

After all, the alternative would be for workers in our industries to realize that they've been cheated by not sharing in productivity and not being permitted to unionize. 

We can't have that--they might get some share of the wealth that has been increasingly accruing to us. 

And we deserve all that wealth, because we've run our companies so well by making sure that they can't unionize and that workers understand that they, not us, are expendable.


• Hamstring or get rid of the EPA --The script here sounds very familiar. 

We can't have the EPA regulating carbon dioxide.  That would cut back on our profits.  So what if we are contributing the the rapidly accelerating global warming debacle.  We just can't have environmental safeguards preventing us from making a killing (in more than one way) with oil and ore.  If we want to use highly toxic chemicals in fracturing rock to extract gas, we should be able to do it.  That's the free market we believe in.  Free for us, risky for those who have to clean up after us (remember the Great Recession and TARP--same thing).

• Get rid of public broadcasting.  Public Broadcasting has provided a voice for diverse perspectives in local communities that otherwise are completely left out of commercial media for lack of the funding to buy a way in.  But that voice is not necessarily monotonal--it often has religious or conservative perspectives, but it also permits liberal or atheistic perspectives.  So call up the script again, which in this case might go something like this:

hey, we've allowed media companies to consolidate so that most are owned by a very few media conglomerates (Rupert Murdoch, SONY, Sinclair, etc.).  That's great for us, because it permits us to control the way things are cast.  Look at how Murdoch has made even the conservative Wall Street Journal a right-wing rag on our side--not just the op-ed pages anymore, but the way the stories are chosen and cast.  PBS, on the other hand, stillmanages to show some leftie stuff--even with the fear we've put into them with Ken Tomlinson and the Corporation for Public Broadcasting's requirement of balance.  (We know that there isn't always a right-wing side that's worth covering, but no matter--they MUST adopt the Fox News view of "fair and balanced" or funding will cease.  Better still, let's just cease the funding anyway.  Bill Moyers and his ilk is a threat to every multinational corporation that is attempting to protect its hordes of cash from the US treasury by offshoring jobs and offshoring all intangible rights.

Gail Collins notes the same mentality when she discusses the way Congress "saved" the Defense Department's budget to sponsor Nascar racers.  Sacred Cows, Angry Birds, New York Times, Feb 19, 2011.  Yes, that's right--Defense wanted to torpedo the funding, but Congress found it was too important to woo Nascar fans to the military-industrial complex way of thinking.  They refused to cut it. 

The newly ascendant Republicans have been howling that the deficit is so big, so threatening, that no target for cutting is sacred.  "Everything is on the table.  We're broke," said Boehner.

But the table is mainly crowded with stuff the Republicans didn't like to begin with.  Family-planning money and environmental protection, but not oil tax breaks or Nascar sponsorships.  "Sesame Street" is fair game, ut the Dayton 500 is untouchable.

The fight for public broadcasting: time for a dedicated tax, says FAIR

Among the many targets of the GOP for budget cuts is the Corporation for Public Broadcasting and NPR/PBS.  The claim is that these media are represent a liberal bias, and taxpayer money shouldn't be spent on biased media.

IN fact, public broadcasting has shifted perceptibly rightwards with every threat to funding--as intended by the GOP.  The rationale for the CPB was that it would protect public broadcasting--which serves localities and allows voices not otherwise heard on mainstream media--from political pressure.  But the relentless push from the GOP to ensure that it carries the same old conservative voices that are quite well funded in the mainstream media.

The solution, says FAIR in "How to Save Ourselves from the 'Save PBS' Routine", is to have a dedicated tax that supports public broadcasting, and then leave it alone to do whatever it does without pressure from Congress.  FAIR suggests a 1.5% dedicated tax on TV advertising, that would raise sufficient money to fund public broadcasting efforts.

Sounds like a good idea to me.  I've done a few mini-studies of the voices on the PBS NewsHour.  It appears to attempt to have at least one conservative for every liberal, no matter the issue".  I have thought about doing a statistically valid sampling of the amount of time that representatives of each "side" are allowed to speak.  In the few trial runs that I did, it turned out that the conservative speakers got about 2.5 times the actual speaking time as the liberals.  That may partly be because the right has perfected the "bully" system of outshouting its opponents, but at least in those samples it was also because the PBS interviewers allowed those on the right to go on and on.  Of course, time talking is not the only measure.  There is also the question of whether the interviewer asks forceful questions and doesn't let the speaker get away with misrepresentations or evasions.

More on the Mortgage Mess

As our banking giants engaged more and more in speculation, and as the shadow banking system saw a way to make money off of people's bad financial decisions by betting against subprime loans, the financial crisis took off.  So redressing the problems that caused the crisis shouldn't overlook mortgages.

The Treasury has now come out with a "plan" for addressing the government sponsored enterprises Fannie and Freddie, which played a role in the crisis though were not the drivers of the subprime origination mess.  The plan, Reforming America's Housing Finance Market: A Report to Congress (Treasury and Housing and Urban Development, Feb. 2011), claims that it will "reform America's housing finance market to better serve families and function more safely in a world that has changed dramatically."  It also claims that it is intended to limit the government's primary role to "robust oversight and consumer protection, targeted assistance for low-and moderate-income homeowners and renters, and carefully designed support for market stability and crisis response."

Both of those claims are worrisome.  First, the alternatives proposed seem better designed to serve the financial services industry than famililes.  Not only is there still no provision for mortgage modification in bankruptcy, but securitization is intended to "continue to play a major role in housing finance", even though the securitization process has brought a nightmare of foreclosure mills and uncertainties about who owns debt and has the right to foreclose.  While the Administration walks the GOP-favored walk of decreasing government/increasing private markets, it nonetheless leaves government as the one that backstops the private mortgage market, retaining the possibility of private gains and social losses.

Second, the statement that government will be limited to "carefully designed support for market stability and crisis response" means that the government will continue to backstop the securitization losses, as Yves Smith at Naked Capitalism puts it in The 7 Things Really Wrong with the Treasury's GSE Proposal:

Of the Treasury three proposals, the last is the same as one advanced by the big guns, from the Mortgage Bankers Association, the Fed (both the New York Fed and the Board of Governors), the Financial Services Roundtable and Mark Zandi of Moodys. This alternative preserves too many bad elements of status quo ante, in particular significant and largely hidden subsidies for banks, for anyone to hail it as reform. Although each proposal has some distinctive wrinkles, all call for the creation of “private” entities that would provide insurance to mortgage backed securities that would then be reinsured by the government, with a full faith and credit guarantee.

What is to prevent huge public losses?  The proposal relies on a guarantee fee and higher bank capital requirements.   This isn't good enough because it builds too much on the status quo ante.  Yves Smith provides her list of the Treasury proposal's problems:

1. The most pressing problems related to the crisis of abuses in the housing securitization markets outside of Fannie and Freddie are still not addressed
2. The plan continues to use a poor tool to address housing goals, by focusing on mortgage financing.
3. Reliance on the old 30-year fixed rate prepayable mortgage is outdated and fails to address today's markets.
4. Continued use of the private (owners of the entities)/public (backers of the entities debts) structure is fated to suffer the same problems with increasing risk and lobbying as Fannie and Freddie
5. This just props up the housing market; it isn't really a help to consumers.
6. The new entities will continue the conflicting roles of the pre-crash Fannie and Freddie of propping up liquidity and making credit decisions.
7. There's nothing to keep these new entities from being too big to fail.

Truth in Budget Numbers

[edited 2/19 to clarify that it was a failure to extend the American Recovery and Reinvestment Act credit that was, like the Bush Tax cuts, originally enacted for a limited time only]

Seems like everybody these days is into misrepresenting, distorting, or at least stretching the facts to suit the spin they want to give. 

One issue that I raised in my snarky post on the 15th about the Budget commentary was the way most media has described the December 2010 Tax Relief ....and Job Creation Act.  As you will recall, that bill extended the Bush tax cuts for another two years, and most of the media talks about it as a "tax cut" bill.   The GOP pushed hard to make sure that the Bush cuts would be extended, on the claim that it wouldn't be fair to have ANY tax increases due to failure to extending existing cuts.   But in fact that bill ended (i.e.,  did not extend)  the "Making Work Pay" provision from the American Recovery and Reinvestment Act of 2009, a cornerstone of the Obama Administration's attempt to make the stimulus package work for ordinary Americans.  The end of that provision resulted in a substantial tax increase for 51 million Americans in the lower income distribution.  See, e.g., Floyd Norris,  Some Taxes Went Up   (Feb. 4, 2011); Tax Policy Center, Table on the 2010 tax bill (Dec. 13, 2010).  When we talk about that bill, then, wouldn't it be more accurate to discuss it as a tax bill that increased the burden on some of those in the most unfortunate circumstances, while giving substantial tax cuts to those at the top?

FactCheck.org, of course, spends its time looking for just those kinds of distorting statements and trying to set the record straight so that we are all talking about the same set of facts.  They did an analysis of the "Budget Spin" that both sides put out surrounding the release of the President's Budget.  Both sides get very bad grades.   Both sides misrepresent facts--neither Democrat nor Republican is immune.  And those misstated facts spread like wildfire over the net, as illustrated by Sarah Palin's "mis-tweet" claiming that the White House is proposing a mere $775 million in cuts amounting to less than 1/10th of 1% of the deficit and linking to Glenn Beck's right-wing website as proof. The truth is quite different--$33 billion in discretionary cuts for 2012, and the website link  from which she got her information was a mischaracterization of some examples offered by White House Budget Director Lew that was posted 5 days before the budget release. But Palin's "mis-tweet" has been "re-tweeted" and that is the way misleading information is spread so easily on the net.

PS  if you enjoyed this you will also enjoy Floyd Norris on Life at the Dakota, noting the miracles (or at least, loopholes) achieved by someone with a mere $1.5 million in taxable income and outlays considerably greater just on housing...

Corporate Tax "Reform"?

The Republicans are pressing for corporatism on a grand scale, it seems--they want to cut government spending --especially on any program that originated as part of FDR's New Deal--and keep taxes where they are (at the lowest level since the Korean War), while continuing to make live easier for corporations.   

One may detect a hint of hypocrisy.  When the Bush adminstration pushed through the first in a series of tax cut bills in 2001, it was clear that the reduction in tax revenues would result in record deficits.  The cots of the 2001 bill was around $1.3 trillion dollars over ten years.  Republican leadership basically said "deficits don't matter anymore."  Their rationale--tax cuts lead to economic growth.  Their justification--they just knew it was so.  Tax cuts, however, have not historically led to growth.  In particular, what growth there is can be (and is) significantly distorted.  What we have seen as the right's tax cut agenda has played out is that growth goes increasingly to those who already enjoy the lion's share of the benefit. 

And now that the huge tax cuts have been in effect for a full decade along with the hugely increased military spending (due to the wars of choice in Afghanistan and Iraq), the deficit suddenly becomes something to do something about.  We could address it by cutting back drastically on the military industrial complex.  But that doesn't seem to be a very high priority in the House.  We could address it by restoring the tax system to sanity--eliminating most of the Bush tax cuts and leaving in modest cuts for those in the bottom of the income distribution (and restoring the "making work pay" credit for that lower-income group as well).  But that isn't even on the GOP list of possibles. 

What the GOP wants to do is use the deficit situation which their own policies have created to roll back FDR's New Deal--reduce Social Security, reduce Medicare and Medicaid--while they keep funding the military, continue deregulating so that big polluters and big gamblers can continue to carve out economic gains for themselves whle leaving the rest of us holding the bag on air pollution, health problems, and the volatility and crashes associated with a casino economy.

The GOP wants corporate tax reform too.  The Senate Finance Committee scolded Treasury Secretary Geithner at its meeting February 16 for not laying out a plan for "meaningful tax reform on both the corporate and individual side."  BNA Daily Tax RealTime, Feb. 15, 2011 (quoting Sen. Mike Crapo, R-Idaho).  Geithner's response?  "I suspect that we're going to get [to] that point sooner on corporate than on individual, but we'll meet that challenge.  We're trying to figure out how to build consensus now before we take that next step so that we maximize the chance that we get it done."  Id.

The problem, of course, that when the GOP says it wants "corporate tax reform", what it really means is "lower corporate taxation".  Obama has said he supports lowering rates while removing loopholes and special provisions.  There is really not much ground for consensus between those two positions.  fIn similar situations (such as the question of retaining a public option in the health care reform act), Obama has been the first to give.  If he does so here, we can expect that corporations will pay even less of their hoarded profits into the fisc and even more to their top managers, adding to the inequality bubble.

Not on the President's Budget or the House GOP's rampage against ordinary folks; On the Inequality Gap in the US

I'll write soon on the Obama budget proposal, I promise.  Right now I am trying to let my snarkiness fume off, as I wonder how anyone could think Obama is a liberal when he has so bought into the right wing's propaganda-heavy effort to use their (fake) concern about the deficit to justify the destruction of the progressive state established under FDR.  What they are aiming for is the complete dismantlement of Social Security and Medicare, while they satisfy Big INsurance in the dismantling of the modest effort we've managed towards heatlh care reform.  They want to freeze public worker pay for years and support efforts by states to renounce their obligations towards public employee pensions and health care/  They've already voted for increasing the tax burden on the working poor when they passed an extension of the absurd Bush tax cuts (primarily benefitting the wealthy and big corporations) while refusing to extend the Obama Making Work Pay program (primarily benefiting the working poor): that tax increase for the poor/tax cut for the rich bill passed in December meant a significant tax increase for 51 million Americans in the bottom of the income distribution was used to pay for more and more egregious handouts to the filthy rich (people and corporations) such as the extension of the 2003 dividend tax rate at 15% and the extension of the Bush tax cuts, and the ridiculous extension of the R&D credit, the section 179 expensing, and similar provisions. 

Meanwhile of course, the House GOP is planning to cut funding for all those things it has hated through the years because it represents what the liberal half of America thinks is just ordinary American caring for one another.  They plan to zero all funding for family planning--that isn't because those services aren't needed, it is because their aim is to target all the stuff they don't like.  See House GOP Declares War on Planned Parenthood, Mother Jones, Feb. 9, 2011.   They want to cut things they count as wasteful--let's see, that would be pollution control and environmental safety--probably including banning the EPA from regulating deadly carbon monoxide (that stuff that makes the air a killer for us, which of course must not be a pollutant since Big Business is the main producer of it, in the GOP unscientific model of the universe), food safety, law enforcement, education spending, high-speed rail (see Samuelson's ridiculous op-ed in the Washington Post today), nutrition support for poor pregnant women (can't have an abortion before birth on federal dollars, but you can't get food so your baby will be healthy either!).  For more than you need on all this, see Challenging Obama, House GOP calls for deep cuts, Espo & Taylor, AP, Feb. 9, 2011. They want to force the entire country to abide by their moral set--a kind of establishment of fundamentalist religion via the House's funding provisions.  And remember, this is the same group that passed a $1.3 to $1.6 trillion tax cut during Bush's first year that was entirely financed by borrowing, so that they could give a huge tax cuts to the wealthy.  This ain't got nothing to do with the deficit.  It has everything to do with seizing a moment of public ignorance to use to undo worthy programs and keep spending on the Reagan misguided bloated and continually over used military budget.

So folks, after my snarkiness recedes a little, I'll try to write about the budget, the House's idiocy, and the typical commentary on it.  Right now, I can't bring myself to say a word about them.

In the meantime, here's something worth looking at.  Before It's News, "9 Pictures of the Extreme Income/Wealth Gap", Feb. 14, 2011.

The writer claims that if people only understood the enormous concentration of wealth in this country and its deletrious impact on  politics, democracy and people, they'd stand up and demand (a la Tunisia and Egypt?) that our politicians do something about it.  I suspect that is true.  That is the main reason that the mainstream media--especially the Fox News and Rupert Murdoch Wall Street Journal type right-wing propaganda centers make sure that they talk all about the 'entitlements" that (they claim) are breaking the fiscal back of the country as those socialistic things we do for public employees and poor people etc, and fail to mention the far greater number of "entitlements" for the wealthy that are what is really breaking all our backs (from the huge proportion of the benefit of the tax expenditures in the Code to the way we build roads, situate police, and service needs of propertied people). 

Here's a noteworthy paragraph from the article.

How Much Is A Billion?

Some Wall Street types (and others) make over a billion dollars a year – each year. How much is a billion dollars? How can you visualize an amount of money so high? Here is one way to think about it: The median income in the US is around $50,000, meaning half of us make less and half of us make more. If you make $50,000 a year, and don’t spend a single penny of it, it will take you 20,000 years to save a billion dollars. . . . (Please come back and read the rest of this after you have recovered.)

What Do People Do With SO Much?

What do people do with all that money? Good question. After you own a stable of politicians who will cut your taxes, there are still a few more things you can buy.

Remember that we had some fund managers with multiple billions of profit in one year.  And we have typical MNE corporate CEOs making 7 or 10 or 20 million annually.  The CEO with a $20 million annual salary makes more in a day than his average workers will take home in an entire year.  Does the CEO really add that much--is it true that the enterprise couldn't exist, couldn't function without that person in that office, that the productivity of the workers would stagnate?  One has to doubt that, since what we hear is that CEOs are often the causes of huge losses, as they over-acquire and over-leverage their enterprises to up the ante on their own performance pay.

And of course we have had fund managers getting compensation (in their "2 and 20" or "5 and 50"--20% or 50% of the profits of the partnership they manage) with both deferral and capital gains preferences, in the case of private equity funds and real estate partnerships in particular but also in many cases with the hedge funds.  My My, that's a nice perk for the very wealthy.   But do they contribute so mightily to the US economy as to be worth this kind of excess?  No way.  Paulson--remember, the guy that garnered all the praise for having foreseen the mortgage loan crisis and shorted those CDOs that he talked a bank into filling with bad loans, making $20 billion for his fund in the year of the breakdown?  That naked short is no service to the economy.  The demand for bad loans drove the production of them, and the bad loans are at the heart of the mortgage loan meltdown that has millions of ordinary Americans out of their home looking around them wondering what happened to their own American dream.  Naked short speculation was nothing but devastating and Paulson is no here.  (See Yves Smith, Naked Capitalism, for more, among others.)

So what kind of things can these oligarchs who reward themselves at our expense afford, according to the website?  A billion'll buy you, for example:

• a thousand expensive Maybachs, a car costing $1 million apiece
• 137 years of nights in the Burg Al Arab in Dubai at $20,000 to $30,000 a night
• ten $100 million yachts
• 25 Gulfstream G550 private jets, at  about $40 million a pop
• 40 private islands, castles included (at about $24.5 million each)
• 125 estates at $8 million each 
• 200 watches that cost $5 million each

The point of all this is that these prices themselves are ridiculous, fostered by the huge wealth now available to America's super-elite, the result of the "inequality bubble" that has put more and more of the product of millions' of people's hard labor in the hands of an oligarchic few.   There are people at the top who "are amassing multiples of billions, paying very little in taxes and using it in ways that harm the rest of us."    Resources are concentrating, heavily, at the top, in ways that are fostered by the tax policies and the spending policies supported by the GOP. 

"Between 1979 and 2008, the top 5% of American families saw their real incomes increase 73%, according to Census data. Over the same period, the lowest-income fifth (20% of us) saw a decrease in real income of 4.1%. The rest were just stagnant or saw very little increase. This is why people are borrowing more and more, falling further and further behind. (From the Working Group on Extreme Inequality)."

***

[One of the bad results of such inequality is the psychological effect.] People need to feel they earned that they have earned what they have, and develop theories about why they have so much when others do not. Bizzare and cruel explanations like Ayn Rand's psychopathic theories about "producers" and "parasites" take hold. Regular people become little more than commodities, blamed for their misery ("personal responsibility") as they become ever poorer.

 

 

David Cay Johnston on Stiffing the Working Poor

David Cay Johnston, former New York Times tax reporter and now a columnist at Tax Analyst's Tax Notes, writes this week about  the way both the Obama White House and the Republican party conspire to provide every-increasing benefits through the tax system to some while stiffing the working poor.  Download David Cay Johnston. Obama and the GOP United Against the Working Poor. TN 14Feb11.

The beginning paragraphs make the critical points.

The tax compromise passed in December has been hailed everywhere as a payroll tax cut combined with an extension of the Bush tax cuts, despite the fact that it raised taxes on a third of Americans. The killing of Obama’s Making Work Pay tax credit, which the White House called the biggest middle-income tax cut ever, and the replacement of it with the Republicans’ payroll tax cut raised taxes on single workers whose wages come to $20,000 or less and married couples with less than $40,000 in wages. That’s 51 million taxpayers, the Tax Policy Center estimated.

[Two-thirds of the poorest quintile had a tax increase of $134 (about 1.3% of total cash income), whereas] at the top, just 1.8 percent of the top 1 percent ([those with] more than $564,600) were hit with a tax inrease.  Just 1.3 percent among the top tenth of 1 percent ([those with] more than $2 million) got a tax hike.  These best-off one in 1,000 Americans got a tax cut worth on average $45,000 each, all financed with borrowed money.

Health Care and the Anti-Abortion Right

Apparently, there is no issue too petty for the right wing of the new Republican House.  NPR reported last week on the GOP's efforts to make it hard for a woman to use her own money to purchase insurance covering a full range of health care, including abortions, with the introduction of HR3 by Speaker Boehner and Majority Leader Eric Cantor.   See GOP Takes Latest Abortion Fight to the Tax Code (hat tip Francine Lipman). 

The bill takes away tax advantage for health insurance--such as the ability to purchase with pre-tax dollars--if that health insurance covers abortion.  Since most private insurance does now cover abortions (largely because we finally woke up as a country to the barbarity of allowing young women to die on the tables of malpracticing doctors performing cheap abortions hidden from the public eye), this represents exactly the kind of government intrusion into personal choices and the operation of the marketplace that the new Republican right wing claims to care so much about.

As Sen. Barbara Boxer noted, this bill "punishes women and businesses with a tax hike...if they wish to keep or buy insurance that covers the full range of reproductive health care." 

Moreover, even these rightwingers will admit that abortions in some circumstances are a matter of life or death or of psychological health.  Sara Rosenbaum noted that "the IRS would have to make technical decisions about what types of abortions can and can't be covered so it can decide what kind of insurance is eligible for tax deductions and credits.  We're going to need the INternal Revenus Service to define a rape; potentially a forcible rape, incest, potentially incest involving minors, as opposed to incest not involving minors, physical conditions endangering life, and physical conditions that don't endanger life."

This is one more attack in the culture wars--the attempt by the right to roll back the clock to pre-FDR.  They want to privatize or eliminate Social Security, cut back on Medicare and Medicaid, remove the few steps of progress we've made on treating health care as a right and not something that only the rich are entitled to.  The right has managed to prevent government funding for any kind of abortion counseling, and now it wants to make it very difficult for a woman to choose to make a private payment for insurance for a procedure that is a constitutionally guaranteed right.  It is also one more example of the way in which the nation's right seeks to impose its particular moral values on the entire society--particularly when it means reducing the independent choices available to women.