The Republicans held the government hostage til the last minute last week, averting a shutdown one-hour before the deadline with a "solution" that basically gave them what they had demanded. Obama then says he is going to offer his own spending plan, and that it will include the entitlements that are the object of all this tax-cuts-for-the-wealthy deficit creation and deficit blather from the right.
( One can't help suspecting that Obama's position is just a reflection of the economic advisers he has surrounded himself with, from Max Baucus's former aide Messina--favorable to tax cuts to the wealthy, including the estate tax repeal enacted under Bush-- to Tim Geithner and the rest of the crew.)
Obama, in other words, has failed to show any leadership for a progressive vision and has allowed the historically illiterate and factually compromised arguments of the "starve the beast" radical right to take center stage. He should have used his bully pulpit to relegate it to the "bats in the belfry" wings.
All you have to do is look at the makeup of the Deficit Commission to be convinced that there was never a progressive vision there in the first place. As Citizens for TAx Justice points out, a key business leader was Dave Cote, CEO of Honeywell. Honeywell is one of those corporate citizens that manages to earn significant U.S. profits but pay miniscule U.S. taxes. See Dave Cote, Member of President's Deficit Commission, CEO of Corporate Tax Dodger Honeywell, Citizens for Tax Justice, Apr. 12, 2011.
That's the tax system that Paul Ryan wants to "reform" by cutting big multinational corporations' taxes even more (as well as their wealthy shareholders' and managers' taxes).
As CTJ reports, Obama in his State of the Union was already singing the line that the radical right wrote--"reform" corporate taxes in a revenue neutral way--ie, use the cleanup of some of the ridiculous corporate tax giveaways in the Code to fund a corporate tax rate cut (taking from corporations and giving it back to them). CTJ notes that "[i]t is unclear why President Obama has not called on Congress to use corporate tax reform to raise revenue and reduce the deficit. A report issued by the Treasury in 2007, under the Bush administration, concluded that the share of profits paid in taxes is actually lower for U.S. corporations than it is on average for corporations of other OECD member nations."
We are spending trillions on militarization while cutting taxes for the elite who have so much influence in Washington and who own most of the financial assets. A corporate rate reduction is uncalled for. Instead, Congress should reinforce corporate taxation by enacting a "manage and control" definition for domestic corporations, enacting various provisions to discourage expatriation of corporate assets (including elimination of deferral and the active business offshoring subsidies, including the active financing exception devoted to offshore finance subsidiaries along with complete revamping of the way we tax corporations when they move fungible intellectual property offshore that they would never sell to a third party).
GOP policies are almost unilaterally responsible for the current deficits. Some of it was done intentionally, like not paying for wars of choice and providing tax cuts in reliance on the Laffer myth that tax cuts create higher tax revenues. Some of it was done naively under ideological adherence to faith in a distorted economic world-view that expected essential players to self-regulate in a casino capitalist system.
And the GOP is now using the deficits it created to justify undoing programs that we have put in place over decades to protect the vulnerable and to provide a strong foundation for solid economic growth. The programs the GOP wants to destroy are the ones that ensure that ordinary Americans who lose their jobs and can't get another one can still pay for food, shelter and other necessities through unemployment compensation. They are the ones that guarantee that elderly Americans can have decent health care, through the highly efficient single payer system of Medicare supplemented by Medicaid. They are the ones that ensure that retirees won't be subject to the volatile winds of the casino markets, but will be able to have a steady flow of income from required savings through Social Security.
Instead of howling about the deficit that GOP policies created or cutting programs vital to the social safety net and to human capital development, Congress should set about further reforms to undo those tax policies that are primarily responsible for the difficult economic straits ordinary Americans find themselves in. Elliminate all of the Bush tax cuts for the rich. Eliminate loopholes in the corporate tax provisions. Quit "patching" the alternative minimum tax--let it clawback the Bush tax cut from those that are in the upper 30% of the income distribution (the group that pays most of the AMT). And eliminate the capital gains preference, either in the regular tax or by treating it as a preference in the AMT.
This is the time of year when everybody thinks about taxes, since the deadline for calendar-year taxpayers to file their 2010 tax return is fast approaching on April 18.
There is a good bit of tax rhetoric out there intended to encourage people to see taxes as a bad thing. The right-wingers talk about "starving the government"--meaning that if they can just keep taxes low enough, then revenues will lag so far behind expenditures that they can more easily convince households used to thinking in terms of balancing their own budgets that the government is "bankrupt" or "out of control" and that spending needs to be cut, period. That's what has been going on in this year's Congressional chicken games. The GOP, with lots of financial backing from "tea party" supporters like the Koch brothers and the major corporate lobbyists like the U.S. Chamber of Commerce, having been hitting the "yikes, it's a deficit" button and conditioning the American public to thinking that we have to cut government spending to the bone (except for the GOP's favorite boondoggle, the American military complex).
There are two important things worth remembering when these "starve the government" "government is bad" "taxes are bad" ideologies are being trumpeted on every corner.
First, Ronald Reagan lied when he said "the government is the problem." We have government because we can do things collectively that it is well nigh impossible for a single person to do. Important actions that require the government collective include pollution control, disaster prevention, holding financial giants accountable, holding big manufacturers accountable for negligent harm caused by their products, funding basic research that can be a factor in making millions of lives better, funding human capital development (education, job training), and creating a safety net for those we don't know or don't see who are nonetheless vulnerable because of age, illness, job loss or other factors. To know how much government funding we need, we have to decide first what government needs to do.
Second, all those anarcho-libertarians are wrong when they say "taxation is theft" and "taxation is evil". Taxation is one of the important threads that binds a society together. BECAUSE we are a community, we know that our community needs have to be met and taxes provide the revenues to meet those needs. By taxing ourselves, we establish even more firmly the community that we share. Taxation acts as a binding force and it also acts to ensure that resources are allocated more appropriately than they would otherwise be in a world of "brute capitalism" that would always reward the have-mores with more and the have-lesses with less. Taxes from the community members are spent in pursuance of the many government programs that the community wants to carry out.
Some of our "tax exempt" organizations are busy trying to make people feel negatively about taxes. Look at the Cato Institute, or the Claremont INstitute, or the American Heritage Foundation or the Americans for Tax REform organization, or the various branches of the so-called Tea Party, or the (purportedly nonpartisan) Tax Foundation. They expend vast efforts and sums of money preaching a gospel of tax cuts and suggesting that taxes are anti-competitive, theft, discouraging of investment, etc. They don't disseminate the many wonderful things that our tax dollars, working on our behalf with out a privateer in the middle skimming off vast shares of "rent profits" can and have done for us, from the engineering marvels of the Hoover Dam to the inception of the WorldWideWeb to protection of our food and water to cures for deadly diseases.
So it is always good to see other groups that help to "illuminate the importance of taxes in providing for our country's past and continued success" and provide ordinary Americans a window on the intricate world of sophisticated tax avoidance planning by wealthy corporations and individuals, as in the Demos policy center's campaign to shed more light on American taxes.
Today's piece is called "Loophole Land: Time to Reform Corporate TAxes", Our Fiscal Security.org, Apr. 12, 2011. It includes some good graphs (reprinted below) showing the decline in the role of corporate taxation in funding our important government programs--from 4.3% of GDP in 1955 to only 1.3% of GDP in 2010. In spite of our reasonable statutory tax rate--the tax code says that corporations with roughly $20 million or more in income will pay taxes at 35%--our corporations pay tax at much lower rates, generally ranging from 0% to in the lower to mid twenties. It shouldn't be a surprise, therefore, that the United States is a tax haven for corporations, with corporate taxes as a percent of GDP much less than for our peers like Canada, France, the UK, and Germany and loopholes lobbied for and written into the tax code that permitted two-thirds of corporations to pay no tax from 1998-2005, even though many of them reported high profits for financial accounting purposes.
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FAIR has a couple of great pieces on the way the media fails to cover issues that matter but instead provides profiles of people in the news. The mainstream media may be giving us entertainment news, or people profiles, but not information we can use so certainly not independent news. FAIR looks at the coverage of Paul Ryan's so-called "path to prosperity" budget proposal. (See earlier ataxingmatter entries regarding the path to mediocrity Ryan's proposals would put us on.)
1) Paul Ryan, Serious Numbers Geek (Aside from his Fuzzy Numbers), which takes on a discussion of Ryan's budget by Crowley and Newton-Small in Time magazine. Excerpts follow:
Michael Crowley and Jay Newton-Small tell us that Ryan is "the new face of federal frugality":
Just 41 years old, with jet black hair and a touch of Eagle Scout to him, the House Budget Committee chairman unveiled an ambitious package of huge budget cuts designed to dig the country out of its crippling debt crisis. For Ryan, reining in spending is nothing less than an act of patriotic valor.
Valor. Eagle Scout. Great hair!
Ryan's critics have noted that his plan actually does very little about the "crippling debt crisis." Brian Beutler at Talking Points Memoreports that the Congressional Budget Office's score of the plan "finds that by the end of the 10-year budget window, public debt will actually be higher than it would be if the GOP just did nothing."
The Time reporters add:
...... Now a married father of three, Ryan is a PowerPoint fanatic with an almost unsettling fluency in the fine print of massive budget documents. "I love the field of economics," Ryan says. "I have a knack for numbers. And I've just delved into this issue for my adult life, basically."
Deep into the piece, after these tributes to Ryan's wonkery, comes this parenthetical:
(He's also been criticized for peddling fuzzy math and rosy projections. A Washington Post factcheck deemed his budget full of "dubious assertions, questionable assumptions and fishy figures.")
Huh. I thought he had "an almost unsettling fluency in the fine print of massive budget documents"?
2) The Washington Post and Paul Ryan's Wonky Math, which takes on the April 6, 2011 article by David A. Fahrenthold in the Washington Post. Excerpts follow (first indent quotes the FAIR article; second indent are quotes from the WaPo article):
[The Fahrenthold article] leads with this:
This is the essential question for Rep. Paul Ryan: Can this man really manage the hardest sales job in U.S. politics?
That might be "essential" for him, but it's of little importance to us. We need to know what the plan actually wants to do. ......
So far, the sales pitch appears to be classic Ryan. He will make his case with earnestness and a hope that a quiet explanation of budget math can swing the country in a way that previous politicians could not
He's just trying to explain math! That's nice, since the Post article doesn't:
The vision also includes a change in the Medicare program, in which the federal government acts as a health insurer for seniors. In coming years--Ryan's plan does not apply to people who are already 55--he would shift the program so that seniors would choose a private health plan. The federal government would then provide "premium support" to help them pay for coverage.
The main math question is how much "support" seniors will get. The answer is not much, and certainly not enough to cover the skyrocketing cost of healthcare. Pointing this out should be part of every story--even ones that tell us that Paul Ryan's a "wonk."
Consider that the Supreme Court is rapidly extending its foolish "money = speech" holding to mean that there can be no restraints on the power of wealthy corporations and individuals to influence elections in their favor.
Add to that the fact that the media, owned in large part by corporate giants, fails to provide the kind of in-depth coverage and independent views of policy issues that are needed for the electorate to be informed.
And you have a recipe for turning our democracy into a realm of have and have-nots, in which the have-nots make up the vast majority of the population, but the oligarchs at the top have all the influence bought by their wealth.
OMB Watch provides another progressive perspective on the ideology driving the Ryan budget proposal.
Like all congressional budget resolutions, House Budget Committee Chair Paul Ryan's (R-WI) fiscal year (FY) 2012 Budget Resolution is not simply a chart of preferred spending and revenue levels, it's also a political statement guided by ideology. And Ryan's ideology demands that the federal government divert ever increasing sums from middle- and low-income families to big business and high-income families.
Importantly, they note that the call for cuts to programs that serve the more vulnerable amongst us is justified by an arbitrary decision to cap federal revenues at a level guaranteed to create deficits unless there are significant spending cuts. This is the "starve the beast" idea at its culmination.
On the revenue side, Ryan's budget revolves around locking down federal revenues to below 19 percent of gross domestic product (GDP). While this number is the average for the past 30 years, it has consistently lagged federal spending, resulting in the steep deficits we see today. In order to maintain this deficit-inducing level, Ryan's plan calls for cutting income taxes for high-income earners from today's top marginal rate of 35 percent to 25 percent. (Interestingly, the last time we saw federal budget surpluses, between 1998 and 2001, the top marginal rate was 39.6 percent.) Ryan plans a similar giveaway to corporations, slashing the corporate tax rate from 35 percent to 25 percent.
Pay-fors for the big tax cuts to Big Business and the wealthy? Well, those should come partly from those pesky large subsidies in the Code, right? But Ryan avoids naming any of those. My guess is that he knows the GOP isn't serious about eliminating large tax expenditures that primarily benefit the wealthy and Big Business, such as (i) active financing exception for overseas finance subs, (ii) deferral for multinational corporations' active business income, (iii) mortgage interest deduction that primarily gives huge tax cuts to elites with million-dollar homes, (iv) charitable contribution deduction that lets the wealthy donate stock and take a deduction for its value rather than for what they actually paid for it and have invested in it, etc.. And besides, even if he thought that the GOP might have to eliminate a very few of those nice juicy wealthy-friendly provisions, he isn't about to name them and then get a well-funded lobbying group working against him on this. The GOP has benefitted much too much from having those well-heeled lobbying groups for Big Business and wealthy families (like the Walton heirs) on their side, along with the right-wing purported "think" tanks like Cato, American Enterprise, Tax Foundation, etc.....
The proposal also indicates that "large" tax expenditures should be eliminated to pay for tax cuts for the rich. It states that "deductions, credits and special carve-outs" in the corporate tax code should be modified to pay for tax cuts for businesses. Notably left out from the discussion of removing these tax code "distortions" is any identification of which tax expenditures Congress should nix. Far from being bold, Ryan's proposal ducks these critical questions, shifting the heavy lifting and political daring to the tax writing committees, staving off attacks from powerful special interests that will no doubt flex their campaign contribution muscles to retain their federal largesse.
Not really cutting the rich doesn't mean that the GOP won't carry through with cutting the vulnerable. Ryan is quite willing to list specifics here--after all, the poor and the young and the unemployed and the underemployed don't have much way to work together to have their voices heard (especially in those states where the GOP's anti-union drive is squelching unions).
In exchange for these tax cuts, spending for the old, the young, the poor, and the sick would be lopped off by two-thirds. Ryan laments the notion that the current social safety net is a "hammock, lulling able-bodied citizens into lives of complacency and dependency," while worrying about Medicaid health care providers "fleeing the system to escape endless red tape and underpayments." His solution is to apply the same failed "get-back-to-work-you-lazy-bum" policy that ended the old income assistance program and created Temporary Assistance for Needy Families (TANF).
In fact, the welfare reform of the 1990s that is approvingly cited in the budget plan did nothing to curtail poverty, and it only managed to reduce welfare rolls by forcing low-income parents to take low-wage jobs A similar approach to health care, nutrition, and housing assistance will likely result in only cutting families off from these vital programs when they need it the most.
Headlining the section of Ryan's proposals to "strengthen the social safety" are $771 billion in Medicaid cuts. Ryan's plan would convert this low-income health care program from a system in which states and the federal government share costs into a block grant program that would allow states to abandon the eligibility and benefit guidelines currently in place. Ryan argues that relieving states of this "one-size-fits-all" approach would result in significant cost savings, allowing states to pay for higher-quality care. But this is just window dressing beautifying almost $800 billion in health care cuts to low-income families that will ultimately result in poorer health outcomes for millions of people.
Nutrition and housing programs are also prominently featured on Ryan's chopping block. Ryan is clear that far too many people have access to the Supplemental Nutrition Assistance Program (SNAP, formerly "Food Stamps") and housing assistance. Applying a circular logic, Ryan insists that without kicking people out of these programs, the expenditures will be so great that people will have to be kicked out of these programs. Thus, he is just doing what will have to be done eventually. Yet cuts to health care, nutrition, and housing for low-income families is the bedrock on which Ryan builds his tax-cutting and corporate support programs.
OMB Watch points out that Ryan's plan is really a "two-fer"--it manages to take away from the vulnerable (the young, the poor, the elderly) even while giving to Big Business by letting corporations skim off the cream from the federal funding formerly dedicated to the vulnerable. Here's where the Reagonomics mantra of privatization comes in--tax cuts with privatization is just another way of saying let's convert this funding for the poor into a subsidy for Big Business.
Ryan's plan was formulated with the goal of allowing private corporations greater access to federal funds. At the front of this effort is a form of privatizating Medicare. He calls for use of “premium supports,” which means Medicare would be changed from an entitlement with defined benefits to an insurance system in which the government provides a fixed sum of money to individuals to buy coverage. The phrase “premium supports” is used because “vouchers” doesn’t poll very well today. But a rose by any other name is still a rose. By giving vouchers to seniors to pay for their own health care, Ryan's plan would insert a middleman between patients and health care providers, giving health insurance companies the ability to skim untold billions in federal health care spending.
Ryan's plan would also voucherize federal jobs programs by doing away with them and creating a "career scholarship" program that would have the effect of giving for-profit colleges a bigger bite of the national education and training budget. And although having little, if any, impact on the budget, Ryan's proposal calls for gutting the recently passed Wall Street reform – a boon to big banks who loathe the legislation – and removing sensible oil drilling regulations despite last year's BP disaster in the Gulf of Mexico.
But if you think that this means an open look at the way we waste billions annually on militarization (one of the other four cornerstones of privatization, deregulation, militarization and tax cuts that make up the GOP's radical reagonomic agenda for continuing the devastation of the American economy that began when Reagan took office), think again. Eisenhower's view that we had to maintain a military-industrial complex but should be very wary of its power has been translated with reaganomics into the view that we should constantly feed the military-industrial complex because it is the friend of the rich and Big Business, and we need never hold it accountable for anything.
Security spending, however, would go untouched compared to President Obama's budget request, increasing compared to the Congressional Budget Office (CBO) baseline. This aspect of the budget proposal makes it a rarity among the many floating around Washington – the president's deficit commission plan is clear in its call for "equal percentage cuts from both [defense and non-defense]". The Pentagon awards hundreds of billions of contracts to private corporations every year. Cuts to the Pentagon's budget as deep as those to non-security programs would have significant impacts on the bottom lines of the nation's biggest businesses. The Ryan budget keeps the taps wide open and continues to pump billions of dollars of federal funds to these contractors.
So the Ryan budget is a disaster.
Despite claims to the contrary, Ryan's proposal would increase the debt in its first ten years. According to the CBO's analysis of Ryan's plan, in the first ten years after the enactment of his proposal, debt held by the public would actually increase compared to doing nothing. Under the hood of this clunker of a plan are draconian cuts to non-security spending that are less than the tax cuts that would be handed out to the rich and big businesses. The real cost savings in Ryan's plan come after the ten-year budget window that budget resolutions typically address. In 2022, the Medicare voucher system comes into effect, which essentially shifts health care costs from the government to senior citizens. In short, even with drastic spending reductions, the first ten years of Ryan's budget have no positive fiscal impact, while the out-years look improved because of radical Medicare cuts.
This is the budget of Big Business and the anti-government crowd. Ryan's budget doesn't dial back the laundry list of national priorities so much as it simply hacks away at the amount of resources devoted to accomplishing them. And in areas where he can, he opens them up to private corporations to skim funds as they flow from the Treasury to the provisioning of services. For what's left of programs operated by the federal government, Ryan's budget leaves a fraction of the funds necessary to implement an effective social safety net, protect the public, and invest in the economy as businesses and the wealthy contribute less.
Yesterday I vented my frustration with the right-wing budget proposal (labeled "path to prosperity" but bearing the obvious stench of "path to prosperity for the rich and their hangers-on, and who cares about the rest"). Read it at The Budget Crisis (Apr. 6, 2011).
There was also a discussion of the Ryan proposal on Salon.com, by Andrew Leonard, that is worth reading. Paul Ryan's Plan to Erase the Great Society. Leonard examines the politics that have made it possible for us to go from an election in 2008 centered on finding a way to address the abysmal failure of the existing health care model that relies on private health insurers for most health care needs to a discussion in 2011 that is focused not only on repealing the Affordable Care Act that made some progress towards addressing that goal, but also on slashing Medicaid and replacing the highly successful Medicare program with a "scrawnily funded voucher program." As Leonard notes, "the inevitable outcome [of Paul Ryan's plan] is that even fewer Americans will have healthcare coverage than before Obama's election, and those who do still qualify will likely be paying more for less." Meanwhile, the wealthy will continue to enjoy the stellar health care that their obscenely disproportionate accumulation of the country's wealth can provide. Rationing a la right-wing GOP planning is a much more dastardly world than the bugaboo they created to defeat the cure for our ailing health care system, the public option of a Medicare-like plan for all. (A public option would mean rationing, they claimed, which would be evil and awful.)
The punditocracy, of course, owned mostly by Big Business and leaning further to the right with every passing issue, is a big factor in the play that Ryan's ridiculous purported budget proposal has received. As Leonard puts it,
[D]espite the fact that Republicans control only one chamber of Congress, the punditocracy is treating Ryan's proposals with the kind of obsessive focus that suggests Ryan's plan isn't a mere pipe dream. The proposals set forth in Obama's own Simpson-Bowles fiscal commission set off a damp squib of reaction in response to the firestorm that has erupted in the wake of Ryan's budget release.
Leonard has three "key elements" for how we got from 2008 to our current situation: "The economic crash, the successful generation-long Republican campaign to cut taxes, and the failure of Democrats, Obama very much included, to articulate their own vision for the future."
What is so distressing is the following. The crash was a direct result of the failed Reaganomics of tax cuts, privatization, militarization and deregulation. The GOP campaign to cut taxes has been funded by Big Business and wealthy advocates like the Koch brothers and has utilized a stream of misleading statements that are repeated ad nauseum even after they are shown to be false (just as Paul Ryan smilingly talked on the PBS NewsHour Tuesday night about the economic growth and jobs that would be created by a budget that eliminates the safety net for vulnerable Americans and gives yet more ridiculously huge tax cuts solely to Big Business and the wealthy through a rate reduction to 25% instead of the rate increase on really high incomes to 45 or more that we should see). And the failure of the Democrats to articulate a vision for the future is a failure of will and a failure of empathy. Too many Democrats are too wealthy to understand the issues. There are too many like Max Baucus who has actively advanced the Republican agenda on corporate taxes, estate taxes and similar wealth-favoring provisions. There are too many Democrats who were not willing to support a bill to tax Private Equity Fund managers on their billions in "carried interest" compensation as the compensation for services that it is rather than at the favored low rates for capital gains. And Obama has too often admitted defeat before he started, in a stupid scramble for "bipartisanship" that suggests he never intended to fight in the first place, and has too often accepted the advice of the Wall Street cartel that influences the Democrats rather than listening to the needs of Main Street.
Leonard has it right when he notes that the GOP has designed the current deficit "disaster" and is delighted with it.
You can't keep cutting taxes and provide decent government healthcare. That's just not sustainable. Republicans know this -- and are delighted by it. We're witnessing the final apotheosis of Grover Norquist's starve-the-beast theory of government. Since the election of George W. Bush, Republicans have been remarkably successful at choking off the flow of government revenue. When you combine the purposeful reduction of revenue with the costs of the economic disaster, it's easy to see how Obama ended up in a bad strategic position.
I would just add--for which ordinary Americans will be the losers if the Republicans are ultimately successful. Leonard suggests that Obama should be paying attention to this, else there's little reason to support his recently announced re-election plans.
The wealthiest Americans and corporations are getting tax breaks while healthcare for the most vulnerable Americans is under assault. That should not be a hard message for Obama to use as a rallying cry. The timing is perfect: He declared his plans for reelection this week. Why not tell us why we should care?
CBPP in full at this link includes a great chart on "Rising Inequality Since 1970s a Sharp Break from Shared Prosperity of Earlier Era".
Yglesias, ThinkProgress.org, Here we go again (about the entitlement battle at stake given the radical Ryan approach to slash and burn Medicaid, Medicare and Social Security), an excerpt of which follows.
For example, you might be wondering about this notion of cutting Medicaid spending. Maybe Medicaid is a wasteful boondoggle. Maybe the marginal family would actually be better off buying health insurance out of pocket rather than relying on it. But no! As you can see courtesy of this CBPP chart, Medicaid is actually a highly efficient way of delivering health care services to children and adults alike.
Of course this doesn’t mean that cutting Medicaid won’t save money. It very well might. Thanks to Paul Ryan some families who can currently afford to take their kids to see the doctor won’t be able to take their kids to see the doctor. That will reduce aggregate health care expenditures and increase aggregate “kids get sick and die” nationwide. Of course a lot of kids who get sick and don’t get treated won’t die. It’s not as if the death rate from illness and accidents was 100 percent in the era before modern health care. People just suffer and life goes on. And with the extra budgetary headroom created, rich people can pay lower taxes and buy more really expensive refrigerators.
Ok, the title sounds formal, like maybe I'm gonna throw some empirical research at you or something. Naw. Just thought you should read BadTux the Snarky Penguin on "Gleaners" . To tease you with an excerpt, here's the last paragraph.
In the future there will be two kinds of people: The filthy rich (the top 1%), and the rest of us, who will make our living as gleaners upon whatever junk they've thrown out. Perhaps I should have been making an effort to talk to some of the people gleaning stuff off my street and get some tips, given that I was looking at the future of America, and indeed probably my own future at some point, right outside my front door...
[edited to add a link to the Washington Post article by Glenn Kessler and to correct Rand typos in references to Ryan--somehow the two must have blurred themselves in my mind]
As most of you undoubtedly know, the federal government is operating under spending authority that ends Friday. Without some resolution, government will partially shut downm resulting in closed national parks, no processing of paper returns at the IRS, no paychecks for military personnel (who will nonetheless still report for work), delays in clinical trials at the NIH, and many other impediments to decent functioning of government. See e.g., Nicolas Johnston, Government Shutdown Would Suspend IRS Audis, Close Parks, Bloomberg.com, Apr. 6, 2011.
As the Johnston article notes, this kind of a shutdown is not just an easy exercise in downsizing government--it would have a sizable, negative economic impact as 800,000 government workers would essentially be furloughed (no income), loan guarantees from FHA would stop, construction projects under review by the EPA would stop, and many other vital governmental functions would be slowed or stopped pending approval of a budget. That negative impact would have repercussions throughout the local, regional and national economy. Government workers would buy fewer commodities and stay home more, impacting local and national businesses from bus services to movie theaters, restaurants to new car manufacturers. Delays in construction, of course, would add to the problems that this sector has had since the onset of the Great Recession, leaving construction companies and workers in the lurch yet again. Not a pretty scenario when the economy has just begun to turn the corner.
Why are we facing a shutdown? Because the House, controlled by right-wing Republicans, wants to excise all the government spending represented by programs that (i) benefit low-income, vulnerable Americans, such as Head Start, public education spending, basic research funding, , etc. OR (ii) require Big Business to take on at least some of the costs (externalities) associated with the business being able to reap huge profits, such as environmental protection, business regulation, consumer protection, financial consumer protection, etc.
How do we know this? Look at the "The Path to Prosperity: Restoring America's Promise: Fiscal Year 2012 Budget Resolution" drawn up by Paul Ryan (Rep. Wisc.) who is chair of the House Committee on the Budget. This document is the right-wing flim-flam artistry at its peak. And it will not take us on a path to prosperity. It is, instead, a recipe for oligarchy. It will leave the lower income sectors of the American population in a trench of despair from stagnant or declining wages coupled with decimated or non-existent social safety nets. This document augers well only for the Wall Street banksters, the big multinationals, and those who own them. The wealthy and ultra rich will do fine, as their GOP stooges in Congress (and in the Tea Party) enact legislation to ensure that the rich continue to garner most of the productivity gains in the country, camoflaged with enough of the "values" issues that appeal to the lower-income religious fundamentalists to get them to continue to vote with the rich against their economic interests.
Let's consider the intro (page 4) and the summary of Ryan's budget pages 5-. One thing should jump out at you--this document just repeats ad nauseum the same old, historically invalidated, right-wing economic "free market" fundamentalism ==> a claim that tax cuts for Big Business and the wealthy, combined with spending cuts that favor Big Business (and the wealthy) but take away important public functions and safety nets for those who are not well off, will result in economic growth and jobs (that will trickle down to the lower-income rungs).
Translation guide (hat tip to Lloyd Doggett): whenever Paul Ryan says he wants to "save" or "reform" or "advance" or "repair" a program that benefits ordinary Americans, please translate with "eviscerate" that program. Whenever Paul Ryan says he wants to "reform" a major area of federal law (like environmental protection, federal income taxation, corporate taxation or health care), please translate as "make it work to the benefit of the wealthy or Big Business".
It says it is committed to "timeless principles"--"liberty, limited government, and equality". Liberty is meaningless unless it includes opportunities to lead a decent life and to fulfill one's own potential. This use of liberty is an excuse for creating oligarchy.
It says that it wants to "free the nation from the crushing burden of debt". But we don't have a crushing burden of debt. And the debt we do have can be resolved by borrowing more long-term at these cheap rates, undoing the revenue-side silliness enacted during the Bush years by restoring most of the tax laws to the pre-2001 tax legislation provisions (but getting rid of the preferential rate for capital gains and enacting a more progressive estate tax, etc.), and pulling away from the obscene military expenditures that we have been embarked on in particular dating from Reagan's presidency when militarization became one of the fundamental pillars of all his decisionmaking.
Claims to cut $5.8 trillion over 10 years; "curb[] corporate welfare" and "bring[] government spending to below 20% of the economy
note that there is nothing sacred about having spending be below 20% of the economy; historical patterns have ranged up and down but in fact we could spend much more than 20% of the economy if we think that is a high priority--this therefore represents a decision that spending at less than 20% is an a priori "good" without any basis for reaching that decision, since of course one has to know what one is spending on to know whether it is good to do so or not
the Ryan plan does not curb corporate welfare--it extends it incredibly
Claims to "reach primary balance in 2015"
this claim is absurd on its face.
it uses the Heritage Foundation's figures (based on so-called "dynamic" analysis) which means that it assumes its conclusion--ie., that cutting government spending and cutting taxes for the rich and for Big Business will create economic growth
the plan repeals the health care reform legislation passed by Congress; therefore, it eliminates the savings achieved by that bill, which means it will increase the deficit by more than a trillion over a decade. The document absurdly claims (with no basis), however, that eliminating health care reform will reduce the deficit
claims to "keep taxes low so the economy can grow"
This is just the so-called Laffer "theory" out for yet another GOP ride--this is the false mantra (tax cuts promote growth) that has been repeated by the GOP for four decades to justify cutting taxes no matter what the economic situation and no matter what the result of prior tax cut legislation;
tax cuts are not panaceas for economic growth or job creation;
Bush tax cuts didn't work as sold to the public--things got worse for everybody but those at the top
There is no reason to think that these will either. In fact, it is less likely that the Ryan proposal for tax cuts will have a good impact on the economy, since they continue to favor outsourcing of US business, decreasing revenues from corporate multinationals, decreasing revenues from the ultra wealthy, and by negatively impacting job growth and retirement benefits and health care, will more than likely cause the economy to shrink.
claims that the tax code resulting will be "simpler and less burdesome for households and small businesses" while "top rates for individuals and businesses [are set] at 25 percent [to] improve incentives for growth, savings, and investment":
70% of households do not itemize their returns. That's a very simple tax return. So except for the earned income tax credit--which is a complexity worth having, since it gives a positive refund to those in the lowest income distributions--tax returns are already really simple for the vast majority of American taxpayers
a top rate of 25% is a huge tax cut--yet again--for the wealthiest Americans and for Big Business --that provides no benefit whatsoever to the overwhelming majority of Americans who have been "losers" in this economy at least since 2007 and a huge benefit to the very few at the top who have been the "winners".
The assumption that lowering taxes provides an incentive for growth, savings and investment is unproven and, to the extent it does, it is beneficial only to the wealthy who have enough so they can save and invest. Investment incentives are not good if they result in American wealthy elites investing even more of their excess profits in other economies (which is the likely result of this proposal). Investment incentives are only a good thing for the country if they result in more money supporting small entrepreneurial business undertakings--something with which cutting the top rate on wealthy Americans and Big Business has almost nothing to do.
Claims to "create nearly 1 million new private -sector jobs next year" and 2.5 million in 10 years from now; to "spur economic growth", and to "unleash prosperity and economic security" with "higher wages" and more income per family
note that this disregards the fact that it will result in the loss of at least the same number of public sector jobs as the federal government downsizes and the states cut jobs (as they have already begun to do) because of the lack of federal redistribution funding revenues
besides which, this is just wishful thinking--there is NO SUBSTANCE WHATSOEVER IN THESE FIGURES FOR JOB CREATION, ECONOMIC SECURITY, or WAGE INCREASES.
every GOP taxcutter from Reagan forward has claimed that the particular tax cut proposed will create jobs. But tax cuts don't create jobs--they just make the rich richer.
Private entrepreneurialism in the US can create jobs--but not much here supports private entrepreneurialism in the US. To do that, you need funding for public education (especially higher education, as in the GI Bill), funding for basic research, funding for extended unemployment periods so that the un-and under-employed can buy stuff and give business to small businesses in their community, a health care system that works (ideally, single-payer to remove the "rent" profit-taking of health insurance companies from the system; certainly not the return proposed by Rand to the problems that the health reform act begins to deal with), etc.
For the last few decades, what prosperity we have had has gone to the benefit of the upper class, not to the benefit of ordinary wageearners. There is nothing in this proposal to reverse that--in fact, it continues the same failed policies that got us into this situation
the claim for economic security is a particularly laughable claim. Remember that Paul Ryan and his radical right GOP cohort intend to eviscerate Social Security, Medicare and Medicaid, with the result that the baby boomer generation would find itself without retirement income or medical care. That is no promise of "economic security". It would be a joke if it weren't so deadly seriously devastating for ordinary Americans.
On health care, for example, Ryan wants to just give states block grants for Medicaid, resulting in cuts to even more vulnerable Americans. Ryan claims to "save Medicare" by getting rid of it--replacing a government-payer system with "the same kind of health care options now enujoyed by members of Congress". While not directly dealing with specific "reforms" to Social Security, Ryan claims to "advance Social Security solutions" to force changes that "ensure solvency". But the Social Security system will likely be still solvent 75 years from now, and if we needed more funding, we could simply lift the cap on the wages that are subject to the payroll tax. That would solve any problem that might exist years down the road by taxing the wealthy the same way we tax the poor. That isn't on Paul Ryan's agenda.
The "entitlement" provisions--Medicaid, Medicare, Social Security--reveal the heart of the right-wing agenda. The intent is to get rid of the New Deal while giving the savings to the wealthy and Big Business in terms of yet more in tax cuts and relief from regulatory oversight that protects ordinary Americans.
It's worth reminding everybody yet again that most of those same Republicans who are crying crocodile tears about the deficit these days voted for the $1.3 trillion Bush tax cut package in 2001, and for the 2003, 2004, 2005 etc tax cut packages that got us into most of the deficit situation, as well as for the AMT "patches" for the mostly upper-middle class group with income from 350,000 and up. They weren't crying about the deficit then. They intentionally structured the tax cuts as temporary through a "sunset provision" that would make them look like they cost less than they actually did cost--even though they intended, explicitly admitted at the time, to make all of the changes permanent. They just didn't want to have to put it in writing that the tax cuts were going to cause such incredibly huge deficits, but they didn't mind actually causing them. The mantra then was that "deficits don't matter". They also said that the huge Bush tax cuts, enacted in a series of bills over the entire Bush presidency, was going to "stimulate the economy" and "create jobs". Remember that the 2004 tax bill that allowed multinationals to repatriate billions from overseas while paying almost no tax on it--a "repatriation tax holiday"--was labeled the "American jobs creation act"; instead; most of the companies that brought home big amounts of cash used it for share buybacks and actually laid off workers in the US instead of creating jobs.
Remember that along with their "tax cuts create growth and jobs" mantra they also said that "deregulation will create growth and jobs". Deregulation, of course, led us directly to the Great Recession--and we now have tens of millions of ordinary Americans out of work because of that, as well as tens of millions of ordinary Americans who have lost their homes because of that.
The Reagan fundamentals--deregulation, militarization, privatization, and tax cuts--didn't work under Reagan and haven't worked since. Yet here Paul Ryan is, like one of those salesman in the old West who went from town to town selling watered down whiskey as the "miracle cureall"--only Ryan is smiling sweetly, looking genuine, and trying to sell us the same old melarkey that tax cuts and deregulation will give us an astounding cure for the Great Recession by creating growth and jobs.
Don't buy that "hair of the dog" argument, folks. It's the same old song, sung no matter what the facts are. Tax cuts for the wealthy, less help for the vulnerable, and the gradual demolition of the social safety net that we established in this country after the Great Depression based on our understanding that allowing all the benefits to go to a few wealthy leads to disaster.
Of course, when even the ever-GOP-friendlier Washington Post says watch out for the trickery and in the Ryan budget document, you know there must be something there. Glenn Kessler, Fact Checking the Ryan Budget, Washinton Post, Apr. 6, 2011 does just that, concluding that "the Ryan budget relies on dubious assertions, questionable assumptions, and fishy figures."
Lloyd Doggett's statement at the Budget Committee markup session says a good deal of what needs to be said in response to this GOP idiocy: "This is not a 'Path to Prosperity'--it is a path to mediocrity, insecruity, and the wrong path for America". Here is the prepared statement as released:
This is not a path to prosperity; it is a path to mediocrity; it is a path to insecurity; it’s the wrong path. We welcome a spirited debate about our economic future. Mr. Ryan fails to offer a balanced approach to achieve our shared objective of a balanced budget. You might say that in short, we Democrats say that this budget is just not our cup of tea.
Yes, this is a “choice of two futures” for our country, but the choice that this budget presents is really one between their ideology and reality, it’s between a fact-based analysis and fiction-based mythology and ideology. The only thing that is real about this budget are the harsh cuts that will bring real insecurity to the many while providing a largesse for the wealthiest Americans who have been taking a bigger and bigger share of our national wealth.
In this budget, wherever you read the terms “modernize” or “reform,” just understand that these are Republican euphemisms for a four letter word that hurts—“less”—less retirement security, less educational security, less health security, less economic security. This budget does not share the sacrifice, but it certainly does spread the pain.
We get less of what matters not because they tackle our soaring national debt in a courageous way, but because of how they choose to tackle that debt consistent with their ideology. This proposal, I believe, makes very wrong choices for our future.
There is, for example, a much better alternative than eliminating $4 billion from early education or student financial assistance that will only deny students the means to get all of the education for which they are willing to work to achieve their full God-given potential. Instead of cutting that $4 billion, I would cut the $4 billion that is being spent every year through the Tax Code to enable Wall Street financial enterprises to avoid taxes on profits from loans and financial activities overseas and which are, at the same time, encouraging the export of American jobs.
Instead of eliminating $500 million in cancer research and other scientific research that saves lives and creates jobs in America, I would eliminate the $500 million a year spent through the Tax Code, in what's called the look-through provision, which enables multinationals to shift income earned abroad among through their foreign subsidiaries.
Instead of eliminating $3 billion a year from our crumbling bridges and roads, I would eliminate the $3 billion loophole in the Tax Code that grants a corporate tax deduction on interest charges when you borrow money to build a factory overseas without having to pay taxes on the income you earned from that factory. We need to stop exporting American jobs, exporting American manufacturing, exporting American tax revenues, and start developing a more competitive workforce and rebuilding America. And we can choose to have the same effect on the deficit by choosing to close harmful loopholes instead of yielding to harmful Republican cuts.
You can watch Doggett at the Budget Committee April 6 markup session on YouTube here:
For all of us ordinary wageearners who file our income tax returns on a calendar-year basis in April, it's that time of year again. Of course, it is also that BUSY time of year for tax return preparers, but they don't usually complain (much) since it is also a quite profitable time for them.
The IRS reminded everybody in IR-2011-35 that the deadline this year is just two weeks away, on April 18. (It's April 18 rather than the 15th because of a District of Columbia holiday.) And about 70% of taxpayers (those with $58,000 or less) can use the "IRS Free File" service to file the return or an extension. Go to the release and linke above for more on the free file process for 2011.
How are returns going so far? According to the release:
As of March 25, the IRS has received more than 82 million individual income tax returns, which is 58 percent of the 141 million returns expected this year. The IRS has received about the same number of returns so far this year as it did at this time last year, while processing of returns is up 3 percent from the same time last year.
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Usually, 20 to 25 percent of all taxpayers file in the final two weeks of the tax season. And, usually, about 7 percent of taxpayers seek a six-month extension to file.
Many taxpayers will get a refund. One last tidbit of information on the filing season so far--the average refund is $2,952.
Thanks goodness there are a few economists who can still say it like it really is.
Krugman's op-ed on Mellonism is a must-read. Krugman, The Mellon Doctrine, NY Times, Mar. 31, 2011. He notes the GOP report that suggested that slashing jobs would be a good thing to do to create jobs. The GOP today (with very little pushback from Democrats who seem to have forgotten how to fight in their constant whine of being bipartisan) has decided that firing people is the way to achieve economic growth and fuller employment!
Here’s the report’s explanation of how layoffs would create jobs: “A smaller government work force increases the available supply of educated, skilled workers for private firms, thus lowering labor costs.” Dropping the euphemisms, what this says is that by increasing unemployment, particularly of “educated, skilled workers” — in case you’re wondering, that mainly means schoolteachers — we can drive down wages, which would encourage hiring.
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In fact, across-the-board wage cuts would almost certainly reduce, not increase, employment. Why? Because while earnings would fall, debts would not, so a general fall in wages would worsen the debt problems that are, at this point, the principal obstacle to recovery.
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[I]n Britain, where the government that took power last May bought completely into the doctrine of expansionary austerity, the economy has stalled and business confidence has fallen to a two-year low? And even the government’s new, more pessimistic projections are based on the assumption that highly indebted British households will take on even more debt in the years ahead.
But never mind the lessons of history, or events unfolding across the Atlantic: Republicans are now fully committed to the doctrine that we must destroy employment in order to save it.
Look at Wisconsin and Ohio's anti-union stance, and Wisconsin's governor's threat to fire more workers if he couldn't get his ideological anti-union bill. Public employees are being tarred and feathered just because they work for the government. Schoolteachers as cast as villains. The solution that the GOP is pushing is of course no remedy at all. But it is the direction we are heading nonetheless, unless somebody wakes up and fights.
Americans have been watching protests against oppressive regimes that concentrate massive wealth in the hands of an elite few. Yet in our own democracy, 1 percent of the people take nearly a quarter of the nation’s income—an inequality even the wealthy will come to regret. ... While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous—12 percent in the last quarter-century alone. All the growth in recent decades—and more—has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.
Economists long ago tried to justify the vast inequalities that seemed so troubling in the mid-19th century—inequalities that are but a pale shadow of what we are seeing in America today. The justification they came up with was called “marginal-productivity theory.” In a nutshell, this theory associated higher incomes with higher productivity and a greater contribution to society. It is a theory that has always been cherished by the rich. Evidence for its validity, however, remains thin. The corporate executives who helped bring on the recession of the past three years—whose contribution to our society, and to their own companies, has been massively negative—went on to receive large bonuses. In some cases, companies were so embarrassed about calling such rewards “performance bonuses” that they felt compelled to change the name to “retention bonuses” (even if the only thing being retained was bad performance). Those who have contributed great positive innovations to our society, from the pioneers of genetic understanding to the pioneers of the Information Age, have received a pittance compared with those responsible for the financial innovations that brought our global economy to the brink of ruin.
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An economy in which most citizens are doing worse year after year—an economy like America’s—is not likely to do well over the long haul. There are several reasons for this.
First, growing inequality is the flip side of something else: shrinking opportunity. Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible. Second, many of the distortions that lead to inequality—such as those associated with monopoly power and preferential tax treatment for special interests—undermine the efficiency of the economy. This new inequality goes on to create new distortions, undermining efficiency even further. To give just one example, far too many of our most talented young people, seeing the astronomical rewards, have gone into finance rather than into fields that would lead to a more productive and healthy economy.
Third, and perhaps most important, a modern economy requires “collective action”—it needs government to invest in infrastructure, education, and technology. The United States and the world have benefited greatly from government-sponsored research that led to the Internet, to advances in public health, and so on. But America has long suffered from an under-investment in infrastructure (look at the condition of our highways and bridges, our railroads and airports), in basic research, and in education at all levels. Further cutbacks in these areas lie ahead.
None of this should come as a surprise—it is simply what happens when a society’s wealth distribution becomes lopsided. The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs. The rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves. In the process, they become more distant from ordinary people, losing whatever empathy they may once have had. They also worry about strong government—one that could use its powers to adjust the balance, take some of their wealth, and invest it for the common good. The top 1 percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.
That third point is crucial. The rich associate with the rich, and they have very little understanding of the lives of the vast majority of the people. It seems to me that their complacency with wealth's prerogatives has grown enormously in the last few decades. They think they deserve every penny they have. So they cannot see that they are the reason that others have shrinking opportunities. They blame it on laziness, unions, globalization, lack of personal responsibility--anything but their own greed.
The IRS announced in IR-2011-32 that it was making the complaince assurance process (CAP) for large corporate taxpayers permanent and expanding it to other corporations. The process is designed to allow the IRS and corporate taxpayers with assets of $10 million or more to work out potential problems prior to the time of the filing of the return, helping to avoid problems on audit. The program started in 2005 with 17 taxpayers, and has expanded to 140 corporate taxpayers at this time.
With the CAP program growing in popularity, it is being expanded to include two additional components. A new pre-CAP program will provide interested taxpayers with a clear roadmap of the steps required for gaining entry into CAP. A new CAP maintenance program is intended for taxpayers who have been in CAP, have fewer complex issues, and have established a track record of working cooperatively and transparently with the IRS.
“CAP is a program where the tax system is at its best -- when the taxpayer and the IRS are transparent and issues are resolved before a return is filed,” Shulman said.
I admit that I am skeptical about this program, as I am skeptical about the contractual process "advanced pricing agreements" whereby the IRS signs off on taxpayer proposals for transfer pricing. A the recent discussion of corporate offshoring and other activities demonstrates, corporate taxpayers are able to afford sophisticated tax advice, and they use that advice to avoid taxes wherever possible. They know their own situation intimately, and may well be in a position to cast transactions that are primarily tax avoidance arrangements as though they were germane to the business. The IRS may be understaffed and short on time, and may not give these processes the time they demand. The worry, at least, is that the IRS will satisfy itself that the company is a good tax citizen and then not focus on that taxpayer much at all once the CAP program is in place. If the corporate taxpayer has fooled the IRS in the process, that makes for a tidy tax package for the corporation, but not such good news for the fisc.
Does this happen much of the time? I don't know. And it is very hard for an outsider to assess the program without reviewing confidential tax information. So that is another worry--that these types of relationships with taxpayers are behind the scenes and it is hard to hold the IRS accountable.
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