ataxingmatter

Tea Party fundamentalism is trumping fiscal responsibility

The freshmen GOPers from the Tea Party wing of the radical right are close to causing an economic catastrophe because of their ideological fixation on reducing the size of government.  Note that it is a fixation on size per se--not on whether this or that program is a good one that is important to the American people.  They want to cut spending no matter who it hurts.  Maybe, like Pete Peterson, the billionaire who wants to break the New Deal Social Security and Medicare programs, they think that an elderly widow living alone on less than $15,000 a year in Social Security is 'enjoying a taxpayer subsidized retirement vacation' (to paraphrase a recent Peterson snide remark on the subject).  And they refuse to raise taxes on the rich and big multinational corporations, even though the rich did quite fine even when they paid more in taxes and even though having the rich pay more in taxes is beneficial for democracy.

These Tea Party radicals are like all other fundamentalists.  They have adopted an absolutist view of the world (that doesn't actually match the factual reality of the world or even the factual reality of the capitalist market system that they claim to foster).  That absolutist view has become an ingrained belief for them.  No facts can dislodge it.  No logic can deal with it.  And accordingly, no description of the havoc they are creating will dissuade them from continuing to create havoc.

So what's the solution?   Obama and the Democrats would be fools to sacrifice the social justice programs on the alter of the radical right's dogmatic beliefs  that they can and should set an arbitrary number for debt and spending that has no relation to real needs or real priorities.  So Big Business had better get busy, because it will be the biggest loser if these tea party radicals don't buckle under.  Why?  Because the US debt rating downgrade will result in higher interest paid on the US debt, leading to greater debt service needs and lower liquidity for business.  Business won't enjoy those nice comfortable spreads they've been enjoying--their costs will go up and their profits will go down.  Even Big Business knows that the debt ceiling has to be raised and should be raised without any strings attached, much as it wants the fundamentalists in the Tea Party to get it the tax-free pass it so heavily lobbies for (territorial taxation, zero taxation, freedom to engage in globalization at the expense of US workers when decent policies would extract serious taxes to pay for the harm done, etc.)

That is, somebody needs to educate this bunch on the way the world works.  And the way the debt ceiling in the US works.   Big Business is the one that matters to this bunch, not ordinary Americans.  So the US Chamber and the National Association of Manufacturers and other business organizations had better get on the horn and tell those green behind the ears freshmen GOP House members that their naivete is rapidly leading them down the road to  the destruction of the American Way of Life.

The so-called 'Fair Tax' proposal and the debt ceiling shenanigans

[editorial note:  please forgive my prolonged absence, due to a family medical emergency that required me to travel unexpectedly back to my home state of Texas, where the thermometer seems to be permanently esconced at 100+ degrees and nary a rain cloud darkens the sky.]

The GOP is still at it.  They took a ridiculous pledge put together by Grover Norquist, the government-hating, rich-adoring, tax-fighting 'guru' of the tea party anti-tax movement.  And they are determined to stick to their dogma no matter what it does to the country.  Economic terrorism, in short, continues apace.

Now, any person who looks at the historical performance of the economy and the changes in taxes will note that tax increases don't kill the economy.  IN fact, economies do quite well with high taxes, if those taxes are used to fund public infrastructure and educational opportunity, all of which redound to the benefit of the population by helping businesses do business and people become skilled enough to work in those businesses.  Taxes, in other words, are a winning proposition.

The wealthy made off like bandits under George W. Bush.  So they can clearly stomach a return of that pre-Bush tax world without it doing them any great harm.  IN fact, they are wealthier now than ever, so they could pay even more in taxes without it doing the economy harm.  Having the wealthy and the Big Corporations pay more in taxes would be the smartest move we could make. 

And we need to raise the debt ceiling, of course.  I find it just slightly amusing that the very bastards who drone on and on about fiscal responsibility are the ones who are pushing the position that it doesn't matter if the U.S. defaults on its obligations.  The debt ceiling has to be raised because  of things we have already committed to pay for.  Failing to pay for things that you have bought is the height of fiscal irresponsibility.  So I guess the Tea Partiers are just kidding when they claim to be interested in fiscal responsibility.  T

The Tea Partiers really have only one target in mind--privatization of Social Security and Medicare, and thereby elimination of the best social justice programs this country has.  That's their goal--making sure that vulnerable elderly people don't have Social Security to depend on and that Medicare disappears so there can be no cry for "Medicare for all" in the next health reform debate.  The Tea Partiers want to eliminate working government. They claim private is always better than public.  But the simple truth is that it is not. 

'Course they also want to eliminate the estate tax and income tax systems.  Why?  Because those systems are the only things that partially act to prevent the consolidation of wealth among the very few in the top 2%.  Without the income and estate taxes, upward mobility in the US will stagnate even further, because those at the top will pay even less of their share of taxes to support public infrastructure.

They want to replace all our current federal taxes with a 'consumption tax'--a sales tax that would be excessively regressive.  Like the changes they want to make to Medicare and Social Security, the adoption of the national sales tax would shift the tax burden to the middle class and poor, even further away from the corporate managers and wealthy who benefit so much from what passes for Tea Party 'policies. 

Huckabee testified on the national sales ta before Congress (the House, of course, which is putting on a show of talking about 'tax simplification' and 'tax reform' even while they are holding the country's economy hostage over the debt ceiling and their ideological desire to bring the government down).  He argues that a sales tax would be so 'simple' and that most people can't understand the income tax.

Folks, most people--70% of us--don't really need to understand much about the income tax.  70% of us file using the standard deduction.  All that group has to do is fill out a two-page form.  It isn't all that hard, really.  The only people that need to understand the complicated stuff are the rich people who have most of the financial assets of the country.  So when Huckabee talks about simplification, it's the rich people and the corporations that he is really protecting.  That figures, since the 'national sales tax' would shift the tax burden away from that group and smack onto the middle class.

And of course the pie-in-the-sky  proposal (Republican Bruce Bartlett's term for the so-called Fair Tax national sales tax) would never end up at the rate that Huckabee touts on the campaign trail.  He says a 23% tax.  'Course that's a tax-inclusive rate, meaning that it is a 30% rate in the terms that we understand.  If you buy something that costs 100, then you will pay 30 in tax, making the tax-inclusive tax rate 30/130 or 23%.  But even that isn't realistic.  It will likely end up much closer to a tax -exclusive 50% rate, just to cover the huge costs of military, defense, and all the other programs that we currently fund. 

Now you may think you want a smaller government.  But just what part do you really want to give up.  National roads?  National rules for airport security?  National analysis of epidemics?  National courts?  National legislature?  National agencies to protect our water, land, air from pollution?  National agencies to aid us in disasters--earthquakes, fires, floods?  National agencies to protect against fraud? 

Most of us are protected by, and make use of, national government protections many times a day.  The Tea Partiers apparently want to take us back to frontier times when we had to depend on our own families and neighbors to survive.  But back then there weren't so many of us; we had thousands of square miles of clean land, clean water, and native virgin forests to use up.  Now, we've run through our natural resources so fast that we have left ourselves with very little for the rest of our civilized lives.  We may even yet decimate the few wilderness areas we have left, because we allow major corporations to destroy things without paying for the destruction they cause, because we do not have the guts to practice  environmentally sustainable living.

We do so much so poorly.  That's a fact.  But the Tea Partiers want us to return to a past that nobody has ever lived in.  They want to pretend that civil rights never expanded to cover African Americans and immigrants.  They want to pretend that women belong in the home raising the children and that only men are needed in the workforce.  They want to pretend that personal responsibility can solve the problems of banks that are 'too big to fail' taking advantage of ordinary Americans that are too little to succeed in a world made by and for the wealthy.  They want to pretend that letting the rich get richer will benefit everybody, but they know that letting the rich get richer will just increase the divide between the successful class and the rest of America, leading to a national gated community where ordinary Americans start to feel like Third World citizens.

The so-called Fair Tax is a rip-off.  It's just another notch on the class-warfare gun designed to hand everything over to the winning class and strip every asset from this earth that isn't considered important to those that have more.  The GOP's debt ceiling stalemeate is a rip-off.  It's just another way that dogma substitutes for intellect in the GOP's anti-government agenda, an unskilled game of economic terrorism designed to strip every asset from this earth that isn't considered important to those that have more.

Hey, all you who have less.  Wake up.  Stand up.  Call up your congressman or congresswoman and tell them that ordinary people are the vast majority of this country.  Maybe someday soon, it won't matter how much money the Koch brothers spend, because ordinary people will recognize that they are being had.  When that happens, all hell just might break loose.  At a minimum, they'll tell Grover Norquist to go jump in a lake.....(if he can find one, with global warming heating everything up so much).

Reaganomics and the GOP's Economic Terrorism

This debt-ceiling crisis is one of the GOP's making and relates directly to the failed  policies of militarization, deregulation, privatization, and tax cuts espoused by Ronald Reagan and his satraps.  Even the Washington Post (a right-of-center mainstream paper with a reduced staff and a tendency to describe economics and policy in the 'received wisdom' of Washington circles, which means that it tends to reflect corporatist and elitist perspectives more than it reflects ordinary Americans' thinking) recognized the way the Reaganomics tax-cut train has gained speed as it moved out of the station (spurred, of course, by the Koch and Walton money and the power of a dozen propaganda tanks spewing out the dogma on a daily basis): 

This singular focus has been several decades in the making. The Reagan Revolution was spurred by “supply side” animus, but Reagan himself presided over several tax increases. He escaped GOP opprobrium, but when George H.W. Bush signed a deficit deal with higher taxes, he was cast as a traitor. George W. Bush passed two big tax cuts, which nonpartisan budget experts now say were a major factor in today’s deficits.  Five Questions on the Debt Ceiling, Wash. Post, July 16, 2011.

Even some of the GOP leaders are now realizing that starting a game of chicken over something as critical to the US economy as the debt was probably pretty stupid.  See, e.g., Tennessee Republican Bob Corker's admission that 'maybe the debt ceiling was the wrong place to pick a fight."  Id.

But the tea partiers are still adamant that the US should just stop spending and all will be fine.  Eric Crawford is one of those who is so out of touch that he does not see the irony of the party that preaches 'responsibility' as the answer to driving down medical costs (e.g., apparently by having people who are being transported to an emergency room do a quick web search to see which hospitals are best at keeping costs down, and thus showing that they can buy bad medical care responsibly) being the party that suggests its just find to renege on all of your obligations except the ones that you 'want' to comply with.  See this excerpt on Crawford's thinking (if you can call it that) about the debt ceiling.

Crawford, a freshman legislator, said that the president could cope with a full stop on U.S. borrowing by using incoming tax revenue to pay for the services he thinks are essential — soldiers, Medicare and Social Security, and interest on existing debt.  That approach, outside experts have said, might mean the government wouldn’t be able to afford the FBI, veterans’ benefits or other federal services.  That’s all right with Crawford.  “That wouldn’t work for just a few days. That would work for a few years,” said Crawford.  GOP Dissent Complicates Path to Resolving Debt-Ceiling Crisis, Washington Post, July 16, 2011.

Note that Crawford seems to think failure to pay health, pension and disability benefits for veterans would be 'all right'.  Those benefits of course are already earned--through arduous service on the battlefields that left WWII vets with loss of limbs, hearing, functions; that left Vietnam vets with the emotional scars of post-traumatic stress syndrome; that left Iraqi and Afghanistan vets with all of the above as well as a terrible homeless problem that the VA is only scratching the surface of addressing as is.

The way to decide what programs to fund is to debate those programs and make appropriations decisions and then  either raise tax revenues to match the spending plans approved or borrow to make up the difference.  Oh, wait.  That's what Congress did when it made the commitments that led to the need to increase borrowing.  So now these unpatriotic government-hating, economy-destroying idiots (sorry, folks, there's just no other word for them) want to renege on the decisions Congress has made by just not raising the debt ceiling, simply because this anachronistic mechanism happens to be there available for them to use as a tool in their economic terrorism fanny pack.  This isn't the way to make appropriations decisions or tax policy folks.  It's the way to destroy the economy.

The only solution is to boot the gang out of Congress before they bring the whole nation down.  Trouble is, we don't have an opportunity to do that before they cause economic mayhem if they don't approve the debt-ceiling increase.  Better get on the phone, write letters, send emails, folks.  Someone has to wake these dolts up to the real world of obligations to make payment on obligations.

Credit Suisse Investigation for Assisting Tax Evasion

On Friday, it was announced that the US is investigating Credit Suisse for assisting US residents in evading taxes with secret bank accounts.  According to reports, the bank turned up in the information gleaned by the government through its voluntary disclosure program.  Taxpayers who came forward and sought the generous terms of the program were required to provide detailed information on their banking contacts.  It was expected that such information would lead to many more accounts and potential prosecutions of other banks similar to the UBS prosecution that garned so much attention.

Treasury officials have said that Credit Suisse assisted in tax evasion since 1953, helping two generations of US taxpayers hide their assets offshore. 

Friday Animation: Obama vs GOP on Debt Ceiling

So here's an animated cartoon that at least gets the gist of the story right--the GOP tea-partiers in Congress are trying to hold the US economy hostage with the debt ceiling decision.  The minority party says that if the country doesn't do what it wants, it will not support a debt ceiling increase.

http://www.nma.tv/obama-faces-gop-debt-ceiling/

 

What does the GOP want?  Let's consider the list.

1. No tax increases, even for the wealthiest Americans who are getting more than ever but paying less in taxes. 

This is a class warfare position.  The House GOP argues that increasing taxes on private equity and hedge fund managers, for example, would harm the economy because the tea partiers treat these elite classes as the only true entrepreneurs.  The people who are being protected are the carried interest elite who get their compensation as mostly capital gains and often deferred, through a gambit of treating a profits interest in a partnership as though it were an investment of their own money even though it is not after tax dollars;  the wealthy families who own most of the financial assets of the country; the wealthy families whose estate taxes have been reduced to a dribble by the Bush tax cuts and the new temporary estate tax 'compromise' enacted under the same type of economic terrorism; and the corporate managers who benefit from the many corporate loopholes so that most corporations pay almost no taxes and those that do pay taxes well below the statutory corporate rate.

This is class warfare because the US is a tax haven for the wealthy who can often 'monetize' their financial assets to provide money to live on without actually selling them, thus paying no taxes and passing the assets to their heirs with almost no taxes then either under the new estate tax.  Meanwhile the middle class pays substantial income and payroll taxes and sales taxes.

The wealthy can well afford to pay more in taxes.  The wealthy should pay more in taxes, because taxes represent one of the few ways that we can help reduce the huge inequality that has boomed under the four decades of reaganomics.  Vast inequality of income such as we have in this country today creates social strife and balkanizes the population because the 'haves and have-mores' don't give a damn about the have-lesses.

2. Substantial spending reductions--even in programs that actually bring money into the Treasury by holding tax cheats and securities cheats accountable.

   Consider, for example, the House-passed bill's REDUCTION of funding for SEC enforcement.  Note that the SEC enforcement office isn't paid for by tax dollars.  It is paid for out of penalties, fines, assessments, etc.  But the budget sets the limit on the amount of money that can be collected.  So the GOP House just voted a $135 million subsidy to the big banks that are guilty of getting us into this mess in the first place.  See the article today in the New York Times.

Enforcement at Treasury is a great investment for taxpayer dollars.  With adequate tax enforcement, we have a fairer system that is less able to be gamed by the wealthy and sophisticated, meaning that ordinary taxpayers are not as likely to bear the burden of their own taxes AND the tax cheats' unpaid tax burden.  But the GOP isn't interested in funding the IRS at all.  Remember that this House GOP is dominated by government haters who think private companies can do everything better than government.  That's absurd, of course.  It has never been the situation in our history, since we have always involved government in various ways in making the kinds of systemic infrastructure that supports business.  We have learned over time that private actors charged with self-regulation do not regulate--they rip off.  That is apparently the kind of universe that the House GOP tea partiers want.

3. Spending cuts that are set without regard to programming needs but in terms of an arbitrary figure as a percentage of GDP.

What's even worse than the fact that the Republicans are (i) playing economic terrorism with the debt ceiling, (ii) refusing to consider any revenue increases -- after themselves being responsible for the revenue shortfalls that began in 2001 with the passage of Bush's 2001 $1.3 trillion tax cut package and continued with each additional tax cut especially the 2003 package and the 2004 corporate wish-list package,  and (iii) insisting on ridiculous spending cuts that don't even save taxpayer money? 

How about the idea of deciding how much you are going to borrow and/or tax based on a phony notion of how well the economy is doing, and without thinking about what the essentials are that you need to cover?  That is what the tea partiers are up to when they say that spending or borrowing should be no more than some arbitrary percentage of GDP.

The right-wing as a group tends to like absolutes--they treat government as the problem, not the way that democracies give people a voice in the solution to problems that they cannot resolve by themselves; they want all wealthy people's income to be tax free--that is what zero capital gains taxation means, of course; they want all corporations to be able to shift resources wherever without any repercussions, speculate at will, and then be rescued by the federal government if they get into trouble (that is what the GOP really means by 'free market'--freedom of those that have to rape and exploit for profit, with the knowledge that ultimately there will be a soft landing provided by the very system that they have defiled); they want the entire nation to adhere to the set of moral rules that they have adopted for themselves, in their fundamentalist mixture of constitutional revisionism, seizing of the government for promulgation of their evangelical brand of christianity, and their dogmatic refusal to look at economic reality because of their clinging to a utopian, 'free market' notion that allowing brute capitalism to operate without protections for ordinary people enhances rather than destroys individual liberty.

So these absolute-thinking ostriches who disregard the failures of the Friedman 'free market' ideology want to impose an austerity program on the poor and the elderly and those in the middle class who dare to support unions and think that they are entitled to the pension benefits that they have already earned (especially those that they bargained for and took lesser wages in order to secure).

The austerity program they are interested in is one that will have short-term benefits for the elite class the GOP represents in this class warfare.  They want to cut Social Security, so that there will not be a demand to have the wealthy contribute more to the program .  They want to cut Medicare, so that they can push all Americans into privately run health insurance--the system that we already have and one that has failed utterly to provide decent health care to all or reasonably priced health care to anyone.  They want to cut Medicaid, so they can shove aside the poor and vulnerable and blame their inability to afford health care on their 'irresponsibility'.

4.  A continuation of the misinformation and propaganda campaign that has misled the American public about debt, deficits, monetary systems, spending and taxes. 

You'll note that the rhetoric advanced by the right often compares the US government to a family.  It suggests that borrowing to make ends meet is irresponsible, and therefore the only solution is to quit 'cold turkey'--to have the US cut spending drastically, no matter the consequences.

That is a false analogy and a false cure.

It is a false analogy because the US government is a sovereign that has its own monetary system.  Families and local governments and states cannot adjust the supply of money to suit the economic needs.  Families can only earn more to have more.  States, of course, can tax more, but the tea partiers--aided by the Koch Brothers and all of the well-funded propaganda tanks on the right like the Cato Institute, the Heritage Foundation, the American Enterprise institute, Grover Norquist's ill-named "americans for tax reform', etc.--have been able to mislead most Americans into thinking that taxes kill jobs or that Americans are terribly overtaxed and there are few politicians with the decency and courage to vote for the tax increases they know is necessary. 

Folks, the US is a tax haven.  We pay way too little in taxes.  That's why our bridges are falling, our highways are full of potholes, our health care is inferior to, yet more expensive than, most of the developed world's, and our infrastructure basically is stagnating like the middle class itself.  We should be building super-fast trains to connect the country and connect within cities.  We should be creating a stellar publicly provided, free, wireless communcation network.  We should be spending more money on schools, to ensure that our children enter their adulthood prepared for a better life.  Instead, we are letting roads crumble.  Instead, we are privatizing our schools in order to let profit-makers make profits off of teaching the best students while breaking unions and thus making even higher profits, and while leaving the poorest students in the public schools. Instead, we are continuing with a patchwork health care system that doesn't put the public in the center by recognizing that access to decent health care throughout life is an inalienable human right that government should foster.

It is a false cure, because the 'free market' ideology pushed by Hayek and Friedman and the rest of the Chicago (and Austrian) school is based on false assumptions about society.  The version of free market economics that the tea party GOPers are espousing is one that is so radically unrepresentative of the way real economies work that those tea party advocates like Michele Bachmann can actually say (apparently with a straight face) that they don't think it would matter much if the debt ceiling isn't raised and the US defaults on its debts.

That's Economic Terrorism, GOP style (meaning served with a large dose of corporatism and elitism). 

  

Debt Ceiling Schmeiling, Deficit Schmeficit

As Naked Capitalism's Yves Smith points out, the GOP doesn't give a damn about the deficit or the debt ceiling  This is all just political games. See Debt Ceiling Hypocrisy, Naked Capitalism (cross posted from Credit Writedowns) (July 7, 2011). here's an excerpt.

During the Bush administration, when a budget surplus tuned to deficit and debt piled up, Republican leaders in Congress voted to raise the debt ceiling 5 times, increasing the limit nearly $4 trillion. We’re talking about Speaker John Boehner, House Majority Leader Eric Cantor, Senate Minority Leader Mitch McConnell and Senate Minority Whip Jon Kyl. Combined, they voted 19 times for a debt ceiling increase without complaint or conditions.

When the 2001 and 2003 and 2004  Bush tax cuts were passed, the GOP KNEW that the cuts would cause huge record setting deficits.  When they were passed and the war costs for Bush's wars of choice raged on, the GOP KNEW that this would result in huge, unprecedented budget deficits. 

Remember that the 2001 cuts alone--not needed and opposed by 65% of the American people--cost more than $1.3 trillion over the last ten years.  That's 1.3 trillion that would have been in the US coffers to pay workers more unemployment compensation or to undertake drastically needed infrastructure projects, from bridges to high speed passenger trains to waterways to katrina repairs.

The GOP is a bunch of hypocrits folks.  They don't care if they put the US in default for debt that was necessitated by their tax cutting, tax-dodger condoining, wealthy coddling tax and spend policies.  They don't care if your grandmother can't afford the nursing home she needs or that poor mother of two can't afford the surgery for her son or that retired 70-year-old gets stuck with a lower pension (private equity bought out his firm and got rid of all the union workers) and lower Social Security (don't believe that it won't impact current retirees, folks--what goes around comes around and once Social Security is no longer a sacred cow, it will be butchered grotesquely and finally by the reagonomics privatization crowd).

They're bamboozling us, and Obama is betraying us: failing to use the bully pulpit to shame the GOP, he caves instead on core social justice issues

Let me repeat the title.

They're bamboozling us

And Obama is betraying us. 

Obama is failing to use his bully pulpit to shame the GOP with its ridiculous attempt to double-down on failed right-wing friedmania economic fundamentalism.  See Joseph Stiglitz, The Ideological Crisis of Western Capitalism, Commentary, Project Syndicate  (July 6, 2011) (Hat Tip, Mark Thoma at Economist's View).  Sitglitz notes what I have often pointed out--that friedmania is a failing ideology, yet the GOP is pushing that failed ideology, based on ridiculous and proven-wrong assumptions about human society, to the brink, arguing for austerity when we need stimulus, tax cuts when we need tax increases (at least on the wealthy), and more military when we need to end our endless wars and get smart.  Says Stiglitz:

Even in its hey-day, from the early 1980’s until 2007, American-style deregulated capitalism brought greater material well-being only to the very richest in the richest country of the world. Indeed, over the course of this ideology’s 30-year ascendance, most Americans saw their incomes decline or stagnate year after year. ...

I was among those who hoped that, somehow, the financial crisis would teach Americans (and others) a lesson about the need for greater equality, stronger regulation, and a better balance between the market and government. Alas, that has not been the case. On the contrary, a resurgence of right-wing economics, driven, as always, by ideology and special interests, once again threatens the global economy.

Instead, Obama is agreeing to let the Republican's adle-brained ideology get a victory in this battle, a victory that will be a resounding defeat for ordinary Americans as it undermines an already shaky social welfare system and favors further the corporate giants that are being advanced by the Supreme Court's radical right and the Tea Party alliance with the economic fundamentalists like the Koch brothers, Heritage Foundation, Cato Institute and others.  Instead of shaming them, Obama--surrounded by right-wingers in moderate clothing such as Geithner and the rest--is caving yet again and letting them set the agenda for Congress.

A minority party with a radical slant followed by less than a third of Americans is setting tax, war, and civil rights policy, because we have a president who is either afraid of his shadow,  being handled by those who don't give a damn about the issues that matter, or so sold out by being surrounded by the big money guys that he doesn't even recognize that he has betrayed union workers, ordinary Americans, the elderly, and everybody who dreams of freedom from a country run by the corporations and the ir wealthy managers and owners for the corporations and their wealthy managers and owners.

Read Mark Thoma on Economist's View on this issue, as Obama offers to cut Social Security.  As Thoma says at one point about the 'new' GOP willingness to engage in so-called negotiation""Close loopholes in return for cutting taxes on the wealthy, that kind of thing. I wonder who the winners would be when all is said and done?"

Hmmm.  Doesn't take much wondering to figure out that the only winners are the big corporations and their wealthy managers and owners.....

They're Bamboozling us: say no to more subsidies for multinational corporations (i.e., no to 'repatriation holiday')

In 2004, corporate lobbyists successfully lobbied for a doozy of a corporate tax break--after already getting years of tax deferral on their offshore profits (often profits that should have been taxed in the US, for which companies had dreamed up transfer pricing schemes  to move the profits offshore, such as selling IT properties to their offshore subsidiaries at a claimed third-party comparable price, even though they would NEVER really sell it to any third party so it was truly priceless), they got added to the deferral tax break a near-zero 'repatriation' tax break.  As CTJ notes (see below) this was a downright ridiculous reward to the very corporate tax dodgers who had intentionally kept profits offshore to keep from paying tax and then paid an army of lobbyists to get them the tax break they wanted to bring it back. 

The republicans in control of the House and Presidency at the time claimed it would be a big job booster--they even named the disastrous bill that enacted that and myriad other corporate tax breaks (the wish list that corporations had been vying for going on 20 years) the "American Job Creation Act".  HAH!  The joke was on Congress and the workers who bore the brunt of the job cutting by these same corporate giants.  Of course, the bill did nothing of the sort.  Some of the biggest repatriation dollars went to share buybacks (ie, benefited the wealthiest amongst us that make up the investor class) while tens of thousands of workers were laid off.  Hewlett-Packard was a prime example.

Repatriation was a flop,that is,  for everybody except the managerws and wealthy investors who own most of the financial assets in the country and are pushing the corporatist agenda that is dominating the GOP and much of the blue-dog Dems these days. Repatriation lost money in gobs for the Treasury, adding to the deficit.  It cost jobs, since the multinationals are all thinking short-term profits that can most easily (lazily) be achieved by cutting workers and getting big share prices.  It supported the continuing 12% growth rate in CEO pay while the workers' pay stagnates or declines.  It had a negative impact on the future rate of offshoring of profits, since even the 'good guy' companies saw the benefit to the 'bad guy' companies that had hoarded profits abroad, and the measurable result of the 2004 repatriation holidy was even more hoarding abroad.  Those hoarders are now demanding their (nearly) tax-free repatriation of their hoard.  Congress and Obama would be fools if they give it to them.

It hasn't got anything to do with having enough money to invest in expansion of the business.  There's cash floating around multinationals in the US as well as abroad, cash that they aren't using to reinvest.  they won't use the additional cash to reinvest either.  They'll pay it out to shareholders, who are much more likely to take their payment on their secondary-market purchased shares and buy emerging market shares than they are to fund a venture capitalist firm or a startup entrepreneurial firm or buy shares in an IPO of an entrepreneurial firm.  Remember, ONLY directly purchased shares from a company go to aid that company's ability to expand its business.  Secondary market purchases of shares just trade cash flows between rich guys.

Citizens for Tax Justice is trying to spearhead a citizens' campaign to tell Congress to say no to the corporate lobbyists on this issue.  Reprinted below is the CTJ release.  Read it.  Call your senators and representatives and tell them not to be stupid.  Ultimately, the people in this country are going to realize that selling the economy to multinationals who lay off workers without a qualm is not good for workers and is not good for the economy. 

Call Lawmakers to Oppose the Amnesty for Corporate Tax Dodgers

Call both your Senators and your member of the House of Representatives at the toll-free number below and tell them:

“Oppose the amnesty for corporate tax dodgers, which corporate leaders call a ‘repatriation holiday.’ This giveaway to corporations should not be part of the deal on raising the debt ceiling or any other legislation.”

Call this number to be connected to your members of Congress.

1-888-907-8574

Here’s why this is important.

A “repatriation holiday,” which has been proposed by some Republicans and Democrats in Congress, would remove all or almost all U.S. taxes on the profits that U.S. corporations bring back to the U.S. from other countries, including profits that they shifted to offshore tax havens using accounting gimmicks and transactions that only exist on paper.

If you want to give your lawmakers’ staffs more information, you can also tell them that:

1. Another repatriation holiday will cost the U.S. $79 billion in tax revenue according to the non-partisan Joint Committee on Taxation.

2. Another repatriation holiday will cost the U.S. jobs because it will encourage corporations to shift even more investment offshore.

3. The repatriation holiday is an amnesty for corporate tax dodgers because those corporations that shift profits into tax havens benefit the most from it.

4. Congress enacted a repatriation holiday in 2004, and the benefits went to dividend payments for corporate shareholders rather than job creation, according to the non-partisan Congressional Research Service. Many of the corporations that benefited actually reduced their U.S. workforce.

For more information, see the recent post from Citizens for Tax Justice on one senator’s repeated flip-flops related to the repatriation holiday.

Thanks to AFSCME for providing the toll-free number to enable constituents to get in touch with their members of Congress regarding this critical issue.

 

 

They're Bamboozling us: GOP extremism and Dem reluctance to fight

On a post about   over at Naked Capitalism on Mark Ames: why the American right never liked Naipaul, Sundog's comment reminds us that even Republican-leaning economists are beginning to fret about the outlandish positions taken by the (today) mainstream GOPers (the quoted excerpts are incomplete and out of order here):

The sad fact of the GOP and the American right more generally is that they're dedicated to destroying the legitimacy of government, organized labor and any form of collective action other than industry lobby groups and what drifts from the miasma of an apocalyptic middle-eastern death cult.

Mike Lofgren might be joining the club [of Republican economists recognizing the problem]. Apparently he’s a Republican with long years in DC, working as staffer on both House and Senate budget committees.

Raising the debt ceiling isn’t, as the GOP tries to say, Congress giving itself permission to continue excessive spending: It’s something that’s necessary to pay for past congressional decisions on taxes and spending, and those decisions were made primarily when Republicans were in charge.  "Borrowing and spending the GOP way"
http://www.latimes.com/news/opinion/commentary/la-oe-lofgren-budget-republicans-20110626,0,7490630.story

Talking about the seeming inability of Dems to act strategically to show up the Republican greed-and-stupidity of "either I get my way or we burn the house down", Mark Thoma over at Economist's View, in The Number of Vacancies in Top Economic Posts is Stunning, has this to say:

Republicans are running around with matches threatening to start new fires if they don't get their way, and the administration seems to think calm, rational negotiation in the face of all of this will somehow win the day instead of allowing Republicans to take them to the cleaners yet again.

Obama and handlers--are you paying attention?  The debt ceiling should never become a crisis, since the spending legislation should always carry with it, as it did under Gephardt, the necessary borrowing implied by the amount of spending and the revenue projections.  Republicans' use of the extremely harmful results of a US default to try to get their way on cutting 'entitlements' (meaning the social programs that were instituted in the New Deal for the benefit of ordinary people) and never asking Big Business and its wealthy owners and managers to ante up a penny more (meaning that we will continue in fact the disastrously growth-reducing policies of redistribution upwards instituted by Ronald Reagan with his reliance on the  'free market' economic theory that favors investors over everybody else--George W. Bush's 'haves and have-mores' ) shows just what color their patriotism is--it is a vivid royal blue attuned only to the wealthiest 'investor class' amongst us.  Negotiating with people carrying torches in hayfields is not a workable approach.  Crazy and irrational people who don't care if they burn down the entire country in order to get their way aren't capable of making wise decisions for the common good.  Figure out a way to put them in their places, show them up for what they are, and get the American people to understand just who is willing to sell the majority out in order to placate their investor-class masters.

They're Bamboozling Us: Chang's "23 Things They Don't Tell You About Capitalism"

The national discussion on budgetary matters and proper expenditures of the federal government is enormously distorted.  The right repeats 'free market' mantras as though they are the answer to all problems, but doesn't acknowledge the very failures of that free market system that landed us in the Great Recession and kept us there out of the right's insistence on tax cuts as a major part of the pitiful economic stimulus package put together in the early days of the Obama administration and refusal to allow tax increases that are required to fund important programs that every American cares about.

We are being bamboozled to believe that we "have to" cut Social Security and Medicare and other aid packages, that we 'have to' cut public employees' benefit packages, and on and on.  Brute capitalism is taking over, as corporations are treated as though they were living people with speech rights (tomfoolery that results, under the right-wing activism of Scalia, Roberts, Alito and Thomas, from the foolish original Supreme Court decision equating spending money to support political speech as equivalent to engaging in speech).

None of this is true.  So it is worth reading a book by Ha-Joon Chang, "23 Things They Don't Tell You About Capitalism (Bloomsbury Press 2010).  Chang's introduction is a good riff on the problems with Friedmania (free market economic theory) and worth excerpting here.

The global economy lies in tatters.  While fiscal and monetary stimulus of unprecedented scale has prevented the financial meltdown of 2008 from turning into a total collapse..., the 2008 global crash still remains the second-largest economic crisis in history, after the Great Depression... [A] sustained recovery is by no means certain. In the absence of financial reofrms, loose monetary and fiscal policies have led to new financial bubbles, while the real economy is starved of money....Some of those who lost their jobs and houses during the crisis may never join the economic mainstream again. 

This catastrophe has ultimately been created by the free-market ideology that has ruled the world since the 1980s.  We have been told that, if left alone, markets will produce the most efficient and just outcome.  Efficient, because individuals know best how to utilize the resources they command, and just, because the competitive market process ensures that individuals are rewarded according to their productivity.  We have been told that business should be given maximum freedom. ...If we let them do what they want, wealth creation will be maximized, benefiting the rest of society as well.  We were told that government intervention in the markets would only reduce their efficiency.....[G]overnment cannot improve on market outcomes, as they have neither the necessary information nor the incentives.... In sume, we were told to put all our trust in the market and get out of its way.

Following this advice, most countries have introduced free-market policies....privatization, ...deregulation...,,  liberalization of international trade and investment, and reduction in income taxes and welfare payments. ...

The result of these policies has been the polar opposite of what was promised. ... Prior to [the financial meltdown], and unbeknown to most people, free-market policies had resulted in slower growth, rising inequality and heightened instability in most countries.  IN rich countires, these problems were masked by huge credit expansion; thus the fact that US wages had remained stagnant and working hours increased since the 1970s was conveniently fogged over by the heady brew of credit-fueeled consumer boom.  The problems ... were even more serious for the developing world.  Living standards in Sub-Saharan Africa have stagnated for the last three decades, while Latin America has seen its per capital growth rate fall by two-thirds during the period. ...

Thus, what we were told by the free-marketeers--or, as they are often called, neo-liberal economists--was at best only partially true and at worst plain wrong. ...[T]he 'truths' peddled by free-market ideologues are based on lazy assumtions and blinkered visions, if not necessarily self-serving notions. ...

This book is not an anti-capitalist manifesto.  Being critical of free-market ideology is not the same as being against capitalism. .... There are ways in which capitalism should, and can, be made better. ...

[This book does not] go into many of the technical details that even a basic introductory book on economics would be compelled to explain. However, the neglect of technical details is not because I believe them to be beyond my readers.  95 percent of economics is common sense made complicated....

[This book does question'] many received economic theories and empirical facts that those [advanced economics] books take for granted.  ...[T]his is a lot easier than it sounds, once you stop assuming that what most experts believe must be right.

Here is the start of the list of the "23 Things".  I'll expand in later postings.)  Readers will doubtless see some similarity to my own thoughts in various efforts to de-bunk reaganomics and the free market storyline.

1. There is no such thing as a free market.  

The gist here, as Chang notes, is  that all markets have rules that restrict, in one way or another, freedom of choice and those rules are politically defined.   Government is always involved in establishing market boundaries. 

One example is child labor.  Not too long ago, free marketers argued that "labor ought to be free'  to be exploited--children need to work, and factory owners want to hire them, so there is no problem.  Today, we know that the right of children not to have to work is more important than the right of factory owners to hire whoever they find to be the most profitable. 

A corollary is that the free market view that prices automatically take in information and reflect what things are worth is a farce--all prices are ultimately politically determined, whether they be wages for labor, prices for commodities, and all other prices.  People aren't paid 'what they are worth':  CEOs don't get paid 400 times their average workers because they are 400 times as important to the productivity of the company.  

Bush's intervention with the $700 billion TARP program was not, as Bush claimed, just a workaday market process but rather a clear demonstration that what is necessary state intervention consistent with capitalism is a matter of opinion--there are no scientific boundaries and thus an attempt to change the way the market currently functions (what parts are free and what parts are subject to more state control) is as legitimate as an attempt to defend it.  Ending slavery, for example, was state intervention to set boundaries for the market process that didn't exist before, just as finding the Illinois governor guilty of trying to sell Obama's Senate seat sets boundaries for things that we consider beyond the market process.

2. Companies should not be run in the interest of their owners. 

In fact, Chang notes that this makes for "an unholy alliance between the professional managers and the shareholders" that in our recent history, illustrated in the case of GE, "was all financed by squeezing the other stakeholders in the company" with jobs ruthlessly cut, workers fired and re-hired as non-unionized labor with lower wages and fewer bvenefits, and wage increases suppressed (by relocating our outsourcing or the threat to do so).  Shareholders nowadays are short-term profittakers who buy and sell shares with no stake in the long-term viability of the industry, but only about getting more money out of it.  Other stakeholders (community, workers, suppliers) are excluded from the calculation.  The ultimate result of this approach is "immediate income redistribution through profits."  That is, income inequality soars; corporations enjoy a boom (until they bust); while the vast majority of workers "share in the (apparent) prosperity only through borrowing at unprecedented rates." 

Accompanying this boom for corporations and bust for workers is a decline in the economy--"investment as a share of US national output" fell from 20.5% in the 1980s to 18.7% during the Bush years.  The growth rate of per capital income fell from 2.6% in the 1960s to 1.6% during the Bush years.  This is all because "the easiest way for a company to maximize profit is to reduce expenditure, as increasing revenues is more difficult--by cutting the wage bill through job cuts and by reducing capital expenditures by minimizing investment."

3. Most people in rich countries are paid more than they should be. 

The wage gaps between rich and poor countries aren't due to rich country individual excellence.  "Productivity is in great part due to the system, rather than the individuals themselves."

4. The washing machine has changed the world more than the internet has. 

The problematic fascination with the IT revoluation "has made some rich countries--especially the US and Britain--wrongly conclude that making things is so 'yesterday' that they should try to live on ideas.  ...[This belief in a 'post-industrial society' has led those countries to unduly neglect their manufacturing sector, with adverse consequences for their economies."  Worse still, the belief in the post-industrial era has cause many countries to deregulate, especially regarding cross-border flows of capital, labor and goods, to their detriment.  It is politics, not technology, that determines the degree of globalization--and failure to recognize this can lead to making bad policies.

5. Assume the worst about people and you get the worst. 

A nice little gem here is the discussion of "working to rule"--when employees cannot strike but slow productivity by doing only what they are required to do.  Working to rule tends to reduce output by 30-50%.  So that means that "productive processes rely heavily on the workers' goodwill to do extra things that are not required by their contracts or exercise initiatives and take shortcuts in order to expedite things. ... The bottom line is that companies, and thus our economy, would grind to a half it people acted in a totally selfish way, as they are assumed to do in free-market economics."

6. Greater macroeconomic stability has not made the world economy more stable.

 "The free-market policy package, often known as the neo-liberal policy package, emphasizes lower inflation, greater capital mobility and greater job insecurity (euphemistically called greater labor market flexibility), essentially because it is mainly geared towards the interest of the holders of financial assets."

"Inflation has become the bogeyman that has been used to justify policies that have mainly benefited the holders of financial assets, at the cost of long-term stability, economic growth, and human happiness."