ataxingmatter

Inequality and its corrosive effects on democracy

[edited to correct typo on poverty rate]

Obama has proposed a jobs plan --including payroll tax relief for workers--that would be paid for, among other things, by treating carried interest as the ordinary income compensation that it clearly is. In these times when so many Americans are suffering and a very very few are continuing to haul in much more of the economic income than any work they do merits, you'd think that the right-wing in Congress would finally realize that their allegiance to the wealthy sacrifices the vast majority of ordinary Americans and may indeed result in the construction of an oligarchy and the destruction of our democracy. 

But today's papers are full of the Republican commitment to their ideological 'no tax increase' pledge.  See, e.g., Cooper & Steinhaurer, Obama Offers Jobs Bill, and GOP Balks, New York Times (Sept. 12, 2011).

This is true even if one of the main increases under discussion is to redress the markedly unfair advantage that fund managers have in claiming preferential capital gains rates for their compensation when it comes in the form of a "carried interest" (i.e., allocation of a partnership's income to the manager in respect of his services to the partnership via a "profits' interest in which he makes no capital investment).  You'd think that taxing the hedge and equity and real estate partnership fund managers on their compensation income like everybody else is taxed--i.e., at ordinary income rates in current time, rather than at capital gains rates (and likely deferred)--would be a no-brainer in these difficult times.  But the right-wing is still servile to its uber-rich masters.  See e.g., Peter Lattman, Carried Interest Tax Break Comes Under Fire Again, Deal Book (Sept. 12, 2011).

There is something deeply wrong with our political system if our representatives in Congress are so wedded to maintaining the advantages that operate in favor of the "over-class" of the extraordinarily rich --those fund managers make tens of millions or even hundreds of millions of dollars in 'carried interest' annually--that they cannot see fit to cause them to be taxed fairly on what they earn for services.

This undue heeding of the wishes of the uber-rich accompanies a scary decline for ordinary Americans.  See, e.g., this post on Zero Hedge, Median Male Worker Makes Less Now Than 43 Years Ago, Sept. 13, 2011 (hat tip Francine Lipman at Chapman); Mark Thoma, Poverty Report shows 'doubling up' is on the rise,  CBS moneywatch.com/maximum utility (poverty rate increased to 15.1% in 2010, and more people are moving in with others in order to manage); Fletcher, U.S. Poverty Rate Reaches 15.1 Percent, Washington Post/Bloomberg, Sept. 12, 2011.  When you combine the declining livelihood of ordinary Americans with the exorbitant wealth (and low tax rates) of the super-wealthy, you are left with the hollowing out of the American middle class at the same time that corporations (and their managers and owners) have been empowered by an elitist Supreme Court whose majority was appointed by right-leaning Presidents also beholden to the uber-class of 'have-mores', to buy elections (and get the politicians that suit them and thus the policies, tax and otherwise, that suit them). 

  A new norm of redistribution upwards, being enforced with economic terrorism by the minority right-wing in the House and Senate, allows the wealthy to fortify their private islands to suit, while having states fire public school teachers, remove people from Medicaid, and otherwise leave ordinary Americans already on the brink of financial disaster ready to topple over the cliff upon the occurrence of any small tragedy. The result can only be the demise of sustainable democracy.

House GOP Response to Obama Jobs Bill Speech

The House GOP responded to Obama's jobs act speech by writing a letter asking for the text of his proposed legislation. 

Two things are noteworthy here:  the insistence on offsets, and the presupposition that deregulation would do more for creating jobs than unemployment expansion, payroll tax cuts, and credits for hiring the long-term unemployed and the other Obama proposals.

The letter says that Republicans "look forward" to receiving information about the offsets proposed for the jobs proposals.  This  highlights one of Obama's mistakes in the jobs speech and in fact throughout his administration.  He has allowed the GOP to set the agenda.  Even when it is obvious that the economy is stalling, he still walked the "deficit reduction" walk --including calling for changes to workers' earned benefit programs (Medicare and Social Security) in line with the GOP's four-decade campaign to decimate them as unjustifiable 'entitlements'.   That permits the GOP to practice their obstructionism in two places--first, in the jobs-supporting proposals and second, in the pay-for proposals. 

The letter presages that battle by noting that the House GOP wants to look back to GOP-sponsored bills that would "remove government barriers to private-sector job creation". In other words, the GOP is repeating the same worn mantra that government regulation that protects ordinary Americans from the air, water, land pollution, bad labor practices, and other anti-consumer actions of a too-powerful corporate business sector is the thing hindering job creation. 

Everyone (except perhaps the low-information American voters who have been constantly misled on this issue by the corporate media) knows that isn't true.  What hinders job creation is the lack of a consumer base to buy the products that would be produced by new jobs.  It isn't regulation--regulation is at most a cost that limits the corporate managers' and owners' profits, since it forces business to internalize costs that it had foisted off on the public prior to the regulations.  It isn't taxes--taxes are similarly just a cost of doing business.  Remember that corporations have had an enormously profitable time, and they have huge warchests of cash, both abroad and at home.  They have plenty of money to hire if there were only people to buy the products and services to be provided by the new hires.  Until that vicious cycle is broken, stagnation will continue.   

Other than its repetition of the Reaganomics anti-regulation mantra, the letter says nothing in substance.  It claims to approach the Obama jobs proposals with bipartisanship and cooperation.  But the years of the Obama administration have demonstrated that there is no such thing as cooperation among the current Republicans in Congress.

Lofgren's Exodus from GOP Politics--a worthy farewell

Mike Lofren, long-time GOP operative, decided it was time to leave the cult.  His farewell, published on Truth Out, is well worth reading:  Goodbye to all that: reflections of a GOP operative who left the cult, Sept. 3, 2011.

First, he acknowledges that both political parties fall short of what they should be ("are rotten"), but that the GOP is so bad because the "Party is full of lunactics."

Both parties are rotten--how could they not be, given the complete infestation of the political system by corporate money on a scale that now requires a presidential candidate to raise upwards of a billion dollars to be competitive in the general election?  Both parties are captives to corporate loot.  The main reason the Democrats' health care bill will be a budget buster once it fully phases in is the Democrats' rank capitulation to corporate interests--no single-payer system, in order to mollify insurers; and no negotiation of drug prices, a craven surrender to Big Pharma.  But both parties are not rotten in quite the same way.....

[I]t may have come as a shock that the Republican Party is so full of lunatics.  ..[T]he crackpot outliersw of two decades ago have become the vital center today:  Steve King, Michele Bachman (now a leading presidential contender as well), Paul Broun, Patrick McHenry, Virginia Foxx, Louie Gohmert, Allen West.   The Congressional directory now reads like a casebook of lunancy. ...

I could see as early as last November that the Republican Party would use the debt limit vote...in order to concoct an entirely artificial fiscal crisis.   They, they would use that fiscal crisis to get what they wanted, by literally holding the US and global economies hostage....It should have been evident to clear-eyed observers that the Republican Party is becoming less and less like a traditional political party in a representative democracy and ... more like an apocalyptic cult, or one of the intensely ideological authoritarian parties of 20th century Europe.  ...

Second, he notes that this new ideological purity means that the democratic institutions cannot function properly, and the GOP is undermining democracy itself by its extremist approach to governance.

During periods of political consensus...the Senate was a 'high functioning' institution: filibusters were rare and the body was legislatively productive.... [Now] virtually every bill, every nominee for Senate confirmation and every routine procedural motion is ... subject to a Republican filibuster. ...As Hannah Arendt observed, a disciplined minority of totalitarians can use the instruments of democratic government to undermine democracy itself. ...[Quoting John P. Judis, the author notes] "If there is an earlier American precedent for today's Republican Party, it is the antebellum Southern Democrats of John Calhoun who threatened to nullify, or disregard, federal legislation they objected to and who later led the fight to secede from the union over slavery."  ....[A] Republican committee staff director told me candidly ...what the method was to all this obstruction...By sabotaging the reputation of an institution of government, the party that is programmatically against government would come out the relative winner.

Third, the reason this sabotage of government by a radical right GOP is working is the ignorance of most US voters.

There are "tens of millions of low-information voters"  whose "confusion over who did what allows them to form the conclusion that 'they are all crooks' and that 'government is no good'.... This ill-informed public cynicism ... further intensifies the long-term decline in public trust in government that has been taking place since the early 1960s--a distrust that has been stoked by Republican rhetoric at every turn. ...

Fourth, the corporatist media "are also complicit in this phenomenon" because they dare not tell the truth or distinguish facts from fiction or even point out when a side is completely in the wrong, for fear of not appearing 'evenhanded.'

Ever since the bifurcation of electronic media into a more or less respectable 'hard news' segment and a rabidly ideological talk radio and cable TV political propaganda arm, the 'respectable' media have been terrified of any criticism for perceived bias.  Hence, they hew to the practice of false evenhandedness.  ...[Discussing Chris Cillizza, the author notes that ] the pundit's ironic depreciation falls like the rain on the just and unjust alike, on those who preciptated the needless [debt ceiling] crisis and those who despaired of it.  He seems oblivious that one side--or a sizable faction of one side--has deliberately attempted to damage the reputation of Congress to achieve its political objectives....

Fifth, as more voters become disillusioned by the GOP's anti-government propaganda and the media's misleading depiction of the parties' actions, it allows the radical fringe to acquire even more power.

And if the uninvolved middle declines to vote, it increases the electoral clout of a minority that is constantly being whipped into a lather by three hours daily of Rush Limbaugh or Fox News.  ...

[T]he deindustrialization and financialization of America since about 1970 has spawned an increasingly downscale white middle class--without job security (or even without jobs), with pensions and health benefits evaporating, and with their principal asset deflating in the collapse of the housing bubble.  Their fears are not imaginary; their standard of living is shrinking.

Sixth, the Republican method is "schizophrenic", in that it claims to be based on reverence of the Constitution yet denigrates  key constitutional principles, including the very federal government that the Constitution was written to create after the failure of the loosely joined states under the Articles of Confederation.

[The party] embodies a "caustic" denigration of the "very federal government that is the material expression of the principles embodied in that document....  [M]ost Republican officeholders seem strangely uninterested in the effective repeal of Fourth Amendment protections by the Patriot Act, the weakening of habeas corpus and self-incrimination protections in the public hysteria following 9/11 or the unpalatable fact that the United States has the largest incarcerated population of any country on earth.  If anything, they would probably opt for more incarcerated persons, as imprisonment is a profit center for the prison privatization industry, which is itself a growth center for political contributions to these same politicians.  Instead, they prefer to rail against those government programs trhat actually help people.  And when a program is too popular to attack directly, like Medicare or Social Security, they prefer to undermine it by feigning an agonized concern about the deficit.  That concern ... is largely fictitious.

Seventh, the Democrats cede the ground and fail to combat the Republican madness, and the Republicans succeed with faux populism that hides their destructive agenda.

Democratic Leadership Council-style 'centrist' Democrats were among the biggest promoters of disastrous trade deals in the 1990s that outsourced jobs abroad: NAFTA, World Trade Organization, permanent most-favored-nation status for China.  ...While Democrats temporized, or even dismissed the fears of the white working class as racist or nativist, Republicans went to work.  To be sure, the business wing of the Republican Party consists of the most energetic outsources, wage cutters and hirers of sub-minimum wage immigrant labor to be found anywhere on the globe.  But the faux-populist wing of the party, knowing the mental compartmentalization that occurs in most low-information voters, played on the fears of that same white working class to focus their anger on scapegoats that do no damage to corproations' bottom lines: instead of raising the minimum wage, let's build a wall on the Southern border (then hire a defense contractor to incompetently manage it).  Instead of predatory bankers, it's evil Muslims.  Or evil gays.  Or evil abortionists.

How do they manage to do this?  Because Democrats ceded the field.  Above all, they do not understand language. ...You know that Social Security and Medicare are in jeopardy when even Democrats refer to them as entitlements.  'Entitlement' has a negative sound in colloquial English: somebody who is 'entitled' selfishly claims something he doesn't really deserve.  Why not call them 'earned benefits.' which is what they are because we all contribute payroll taxes to fund them.  ...

It was not always thus.  It would have been hard to find an uneducated farmer during the depression of the 1890s who did not have a very accrurate idea about exactly which economic interests were shafting him. ...  But that is not the case in the present economic crisis. After a riot of unbridled greed such as the world has not seen since the conquistadors' looting expeditions and after an unprecedented broad and rapid transfer of wealth upward by Wall Streeet and its corporate satellites, where is the popular anger directed, at least as depicted in the media?  At 'Washington spending'--which has increased primarily to provide unemployment compensation, food stamps and Medicaid to those economically damaged by the previous decade's corporate saturnalia.  Or the popular rage is harmlessly diverted against pseudo-issues: death panels, birtherism, gay marriage, abortion, and so on, none of which stands to dent the corporate bottom line in the slightest.

Eighth, the GOP has three basic tenents that the party carries out with ideological purity.

A. The GOP cares only about the corporate elite and the rich owners and managers thereof.  That class warfare and corporatism is the reason for their opposition to tax increases, their groundless claims that capital gains preferences are necessary to create jobs, their repetition of myths about small businesses as job creators or American tax rates as so onerous that it chases the jobs away.

"Their caterwauling about deficit and debt is so much eyewash to con the public. ...The GOP refused [Obama's proposed $4 trillion defict reduction package] becdause it could not abide so much as a one-tenth of one percent increase on the tax rates of the Walton family or the Koch brothers, much less a repeal of the carried interest rule that permits billionaire hedge fund managers to pay income tax at a lower effective rate than cops or nurses.  ...

Republicans have attempted to camouflage their amorous solicitude for billionaires with a fog of misleading rhetoric. John Boehner is fond of saying 'we won't raise anyone's taxes' as if the take-home pay of an Olive Garden waitress were inextricably bound up with whether Warren Buffett pays his capital gains as ordinary income or at a lower rate.  Another chestnut is that millionaires and billionaires are 'job creators'.  US corproations have just had their most profitable quarters in history; Apple, for one, is sitting on $76 billion in cash, more than the GDP of most countries.  So, where are the jobs?

Another smokescreen is the 'small business' meme, since standing up for Mom's and Pop's corner store is politically more attractive than to be seen shilling for a megacorporation.  Raising taxes on the wealthy will kill small business' ability to hire: that is the GOP dirge. ...But the number of small businesses that have a net annual income over a million dollars is de minimis. ...And ...small businesses account for only 7.2 percent of total U.S. employment. ...

Likewise, Republicans have assiduously spread the myth that Americans are conspicuously overtaxed.  But compared to other OECD countries, the effective rates of US taxation are among the lowest.  In particular, they point to the top corporate income rate of 35 percent as being confiscatory Bolshevism.  But again, the effective rate is much lower.  Did GE pay 355 percent on 2010 profits of $14 billion?  No, it paid zero.

When pressed, Republicans make up misleading statistics to 'prove' that America's fiscal burden is being borne by the rich and the rest of us are just freeloaders. ...All of these half-truths and outright lies have seeped into popular culture via the corporate-owned business press. ...And when misinformation isn't enough to sustain popular support for the GOP's agenda, concealment is needed. ...

B. The GOP "worship[s] at the altar of Mars" with a "sheer, libidinous enthusiasm for invading other people's countries."

About a month before Republicans began holding a gun to the head of the credit markets to get trillions of dollars of [spending] cuts, these same Republicans passed a defense appropriations bill that increased spending by $17 billion over the prior year's defense appropriation.  ...A cynic might conclude that this militaristic enthusiasm is no more complicated than the fact that Pentagon contractors spread a lot of bribery money around Capitol Hill.  That is true, but there is more to it than that.  It is no neceesarily even the fact that members of Congress feel they are protecting constituents' jobs.  ...Some areas ... are heavily dependent on Department of Defense (DOD) spending.  But there are many more areas of the country whose net balance is negative: the citizenry pays more in taxes to support the Pentagon than it receives back in local contracts.  And the economic justification for Pentagon spending is even more fallacious when one considers that the $700 billion annual DOD budget creates comparatively few jobs. ... [A] disproportionate share is siphoned off into high-cost research and development (from which the civilian economy benefits little); exorbitant management expenditures, overhead and out-and-out padding; and, of course, the money that flows back into the coffers of political campaigns.  A million jobs appropriated for highway construction would create two to three times as many jobs as a million dollars appropriated for Pentagon weapons procurement. ...

The results of the last decade of unbridled militarism and the Democrats' cowardly refusal to reverse it have been disastrous both strategically and fiscally.  It has made the United States less prosperous, less secure and less free. ...

C.  The GOP has merged politics and religious fundamentalism to replace Eisenhower Republicanism with a "system of economic royalism, militarism and fundamentalism"

[The GOP embracing of fundamentalism has had the] "consequent normalizing of formerly reactionary or quaint beliefs", including backward positions on evolution versus creationism, scriptural inerrancy, and the existence of angels and demons, resulting in a "prevailing anti-intellectualism and hostility to science." ...

The Constitution to the contrary notwithstanding, there is now a de facto religious test for the presidency. ... Politicized religion is also the sheet anchor of the culture wars.

[This] rise of politicized religious fundamentalism (which is a subset of the decline of rational problem solving in America) may have been the key ingredient of the takeover of the Republican Party. ...

In summary, the GOP is out to make sure that ordinary Americans suffer and that the elite have everything that they want.

Having gutted private-sector pensions and health benefits as a result of their embrace of outsourcing, union busting, and 'shareholder value', the GOP now thinks it is only fair that public-sector workers give up their pensions and benefits, too.  Hence the intensification of the GOP's decades-long campaign of scorn against government workers. ...They will move heaven and earth to force through tax cuts that will so starve the government of revenue that they will be 'forced' to make 'hard choices'--and that doesn't mean repealing those very same tax cuts, it means cutting the benefits for which you worked.

The attack on public workers and their pensions is particularly galling in light of the way the super-elite have accumulated wealth while paying very low taxes.  See, e.g., this article on Alter.Net regarding Paulson and the carried interest advantage he enjoyes.  Les Leopold, hedge fund gamblers earn the same in one hour as a middle class household makes in over 47 years, AlterNet, April 2011.  As some point, ordinary Americans must claim back their lives and livelihoods from the corporatist/elitist agenda.

More on Obama's Jobs Plan

There's lots of commentary out there on Obama's jobs plan. 

One worth noting (published before the speech to Congress) is Dan Shaviro, What Would Nixon Do?, Start Making Sense (Sept. 7, 2011).   Shaviro makes the point that most progressives have been trying to make to Obama for months--that ceding to Republican talking points at the outset does nothing to advance good policy and in fact merely ensures that Obama takes the blame when the same old Republican policies fail once again!  Shaviro suggests that Obama pick up some of 'Tricky Dick' Nixon's political savvy about these things.  Go bold!  he says, so that when Republicans don't pass it, they can bear the blame for the failed economy.  

 Nixon was a big fan of proposing legislation that he knew couldn't be passed, specifically because if it wasn't passed he would get a campaign issue. E.g., supposedly in 1970 he was disappointed by his success in getting the Democratic Congress to pass a tough crime bill that contained provisions that, under the quaint standards of the time, were considered odious by civil libertarians. Nixon had deliberately put these things in the proposed legislation, although they were largely symbolic and expected to have little actual impact on crime, because he wanted the Democrats to refuse to pass the legislation, whereupon he would make it a campaign issue and blame rising crime levels on them. They took the issue away by acceding.

How would such a scenario play out today? If Nixon faced Obama's current political circumstances, he would not be trying actually to enact stimulus legislation. He would know that he had zero chance of getting anything that would make a significant difference. He would want to propose something that the opposition WOULDN'T pass, and that he could then campaign on. (And it is clear this time around, unlike with the 1970 crime legislation, that the Congress won't accede in order to take away the issue.)

We could use a bit of that thinking today. Why not propose something that is actually big, dramatic, and well-designed? And why not make reasonable, economically supportable arguments about why and how much it might actually help? Then Obama could rightly criticize the Republicans and blame the labor market on them when they fail to pass it.

This would not just be Nixon-style maneuvering. It would also help make the correct point that, since at least mid-2009, we have actually been following Republican budget policies and they haven't worked. As things stand, by repeatedly acceding to them, even in what he proposes, he accepts a state of affairs in which they actually set the policy yet he takes the blame.

Obama went a little bit closer to that strategy in his speech, since he claimed to be laying out a workable plan to create jobs and essentially dared the Republicans in Congress to bare the blame for blocking it.  The problem was that too many of the ideas were washed over Republican tax incentives like lower corporate rates and further extension of the useless and wasteful expensing provisions that the Republicans began pushing as part of the Bush tax breaks for business, rather than direct funding of programs that we know work.

While you are reading, pick up Ken Houghton's post over at Angry Bear: Private Sector Employment in Jobless Recoveries, Sept. 8, 2011, which notes that the place where people are hurting is in the loss of public-sector jobs at the state and local level.  Towards the end of the post, he tells us what Obama should have said in the Thursday night speech, reminding us that the US government can borrow at amazingly low rates right now, and could use that cheaply borrowed money to put Americans back to work in the states simply by increasing the grants to the states to make up for the hard hits they have taken. 

The latest few years have been difficult for you.  Almost every state in the Union has to balance their budgets, and with record levels of unemployment and job losses, that’s not easy to do.  So they made decisions that affected you, your children, and your friends.  ...  Your classrooms are more crowded, your property taxes are higher, and you’re getting less for your money while you have to put in more effort.

The Federal Government doesn’t have to balance its budget, and the bond market has given us a rare opportunity to borrow money for less than it will cost us.  I plan to take full advantage of that now, so that your children will have food, your streets will be safer, your opportunities for education will be greater, and the services for which you pay will be more available.

The private sector  ... cannot rebuild if there is no demand, and you cannot demand things if you cannot pay for them. So, along with $1T in infrastructure improvements to be made over the next 15 years, I will tomorrow send a bill to Congress to triple the total of the two previous grants-in-aid to the States that were made as part of the ARRA.

Now you have heard many people—and to my shame, I am one of them—who live in fear of deficits. They pretend that the government “has to be like a family”—a family that never takes out a mortgage, never borrows to buy a car, never needs a loan to pay for schooling or training, and never uses a credit card.  I’ve seen families like that. ...  They’re impoverished.

The United States is not impoverished,.... We will rebuild opportunity now and build our superhighways—information and otherwise—for life in the 21st and 22nd Centuries.  The bankers—grateful for the bailouts that have been heaped upon them by my predecessor and myself—are willing to loan us money for less than the cost of inflation. We would be foolish not to borrow.  ....

We have a unique opportunity. We have massive unemployment because the states do not have the money to employ and hire workers—workers who help keep our streets and homes safe, who keep our roads in good condition, who educate our children, who find us opportunities for work and ways to keep us healthy so that we can do that work.  And the bankers are telling us, “We will give you that money for free!”  And some people are telling you that we should not take that money.

We have given the bankers enough.  Now, they are willing to Pay It Forward, to give some small portion of that money back to us for less than it will cost them to do it. I intend to take that money and use it to make a better present—and the chance for a better future—for the American family.

Not surprisingly, 'centrists' like Len Burman (now a professor at Syracuse University and still affiliated with the Urban Institute/Brookings Institution's Tax Policy Center) think it was a good idea for Obama to say that workers' benefit programs need to be cut.  Len Burman, Very Quick Thoughts on President Obama's Jobs Speech, Forbes, Sept. 8, 2011.   Burman is probably correct that the employer-side payroll cut is a waste of money. 

But the idea that worker benefits have to be cut in order to balance a sovereign nation's budget in what is still the richest country in the world is, quite simply, hogwash. 

• First, remember that George W. Bush painted his attempt to privatize Social Security and reduce benefits as "saving" Social Security.  Back then, here's what I wrote in 2005 on this blog, More on Bush's Social Security Doublespeak, about that (beginning with a quote from Bush White House materials):

"President Bush has discussed the importance of Social Security and the need to fix the Social Security system for future generations of Americans. The President has assured Americans that he will not change the Social Security system in any way for those born before 1950.

• Social Security was one of the great moral successes of the 20th century by providing a critical foundation of income for retired and disabled workers.
• For one-third of Americans over 65, Social Security benefits constitute 90% of their total income."

Now isn't it interesting that the [Bush] White House acknowledges that Social Security ends up providing 90% of the income of one-third of our seniors, yet Republicans are proposing to "fix" Social Security by cutting those very benefits for seniors.   Funny, but it doesn't seem logical that anyone should claim to be saving Social Security, a benefit program, by cutting benefits.

• Second, we still have in place the unnecessary Bush tax cuts.  Allow them all to expire--including the many wasteful ones benefiting multinational corporations that are outsourcing jobs faster than we can say scat. 
• Third,  move to single payer and 'available to all' Medicare and Social Security, with full taxation on all working income (including 'carried interest' and any other 'profits interest' payment out of a partnership) for Social Security and on all economic income for Medicare.  (And that includes eliminating Congress's  exclusive system into which they pay zilch and for which they get cushier benefits than ordinary Americans.)  Moving to Medicare for all will put in place a national healthcare system like the rest of the civilized world that will permit the government to bargain on behalf of ordinary people who are taxpayers/citizens/patients/beneficiaries of that system so that hospitals, doctors and private insurance companies no longer get away with price-mugging:  they would have to accept more reasonable prices  than the insanely high salaries/charges and other perks that they now enjoy. 

[edited to expand]

Obama's Jobs Act Plan

Obama's jobs speech Thursday night on his proposed American Jobs Act bill was a step in the right direction, though far from perfect.  See also the White House Fact Sheet.

Obama did make clear that the wellbeing of the middle class is essential to economic progress, and that means we need jobs that provide economic security.  He offered a number of proposals that neither right nor left should object to--payroll tax relief, jobs credits for hring long-term unemployed, needed infrastructure spending, needed spending on school renovations--while for the first time in quite a while enunciating the progressive message that we are all in this together, that America has shined best when government works to accomplish that which we cannot do as individuals.  See this brief analysis by Elizabeth Jacobs, a fellow at the Brookings Institution.

Not surprisingly, the GOP reaction was negative.  Even though these are mostly programs that they have supported in the past, various Republican commenters to BNA "said short-term tax incentives have not worked in the past to stimulate the economy and will not work in the future because businesses need tax certainty and permanence."  BNA Daily RealTime, Sept. 8, 2011.  Instead of helping the middle class and the long-term unemployed, Kevin Brady (Rep. Texas on the House Ways and Means Committee) would prefer to do another repatriation tax break for the huge multinationals and give "small businesses" (many of them not really 'small' and most of them not really providing any kind of job creation engine) an automatic 20% deduction.  Id. That would essentially lower corporate taxes to very close to zero, all in all, and shift even more of the burden of government on the poor and middle class. 

The GOP response fits with the corporatist agenda the party has been pursuing full force since Nixon--tax cuts that hobble the ability of government to take on bold ideas serving its citizens; militarism that spends millions in programs that do little to create jobs or ensure the peace; privatization that moves programs that should be performed in the public interest into the private sector with the potential for significant 'rent' profits and poorer services (as in the mercenary soldiers hired for our foreign wars); and deregulation that sanctifies the status quo and permits large businesses to continue to pass real costs--polluted air land and water, malpractive) onto ordinary people.

Furthermore, the complaint about temporary provisions is a laugh.  The GOP is the primary user of tax gimmicks like temporary provisions--from the active financing exception (temporarily passed many times) to the Bush tax cuts (almost all enacted as temporary provisions).  There is no such thing as tax permanence or certainty, except in the ideological handbook of the radical right fringe that wants to cut all taxes and abolish most government that isn't in support of the military-industrial complex.

There were two particularly weak elements, though, in Obama's speech.  First, Obama again fed progressive programs to the wolves, proclaiming that we had to reform Medicare and Medicaid--in ways that clearly meant reducing benefits, not taking hold of the excessive medical costs due to the 'highway robbery' rate of hospital charges and doctor/nursing charges  Second, Obama can't seem to understand the fact that this country is a tax haven for corporations--he repeated the right-wing line about improving US companies' competitiveness and talked about reducing the corporate tax rate.  Yes we have a statutory rate of 35%.  But in fact no company pays that rate on its actual economic income, and most companies pay no federal income tax at all even when they have billions in economic income.  His line about reducing the corporate tax rate was one of the few that brought Republicans to their feet--because that fits the corporatist agenda that has driven everything the GOP has done in Congress recently.

[edited to add link to White House Fact Sheet]

Patent Reform Bill Passes Senate

The Senate on Thursday passed the patent reform bill, H.R. 1249 (passed by the House in June) that makes significant changes to US patent law, including a ban on new tax strategy patents.  (There is an exception for tax filing and preparation software and financial management software.  The protection for financial management software--dear to all the too-big-to-fail banks--was added by the House in June.  Many who have been following the controversy over business method patents consider those exceptions problematic since such items shouldn't be protected by patent but by copyright.)  The bill now goes to the President for his signature.

Senators Baucus and Grassley justified their position in support of the ban as protecting the right of taxpayers to have equal access to tax planning strategies.   The bill's ban on tax strategy patents in section 14 relies on the requirement that patents be non-obvious, indicating that tax strategy patents are deemed to be within prior art. Too bad the legislation didn't just say outright that legal strategies are not patent-eligible material because they are not appropriate subject matter for patents under section 101.

I'm not sure the many other patent reforms make sense--in particular, it seems that they make life better for the giant corporations like Microsoft and Goldman Sachs, but likely remove protections from the real inventors, the not-so-well-funded innovative kid working out of his garage.  See, e.g., Patent Reform Ok'd: Critics Say It Impedes Startups, Milwaukee Journal Sentinel, Sept. 8, 2011.  The bill generally furthers the corporatist agenda as a "sellout to big business," with a "first to file" rule replacing the "first to invent" rule and provision for third parties to initiate patent litigation (rewarding big businesses with big litigation warchests).

Your Money or Your Life--Health Care In the US

Thoughtful people should be asking why the U.S.'s health care costs are so exorbitantly high compared to every other developed nation.  Our health care costs are higher and more people in the US have indecent health care.  That means something is pretty badly wrong with our system of health care provision. 

Many on the left have argued that what is wrong is that we need to treat health care as a public utility and regulate the pay of doctors (they are currently paid too much) and the role of private insurers (they currently play much too central a role in deciding who gets what care, and they add their profit-taking onto the problems of the health care system) and the role of for-profit and not-for-profit hospitals (the one charges too much, and the other operates with a public subsidy without providing much of a public benefit to compensate). 

Here's what BadTux has to say about the issue.

Health care inherently cannot be responsive to market forces. If you choose a shoddy mechanic because he's cheaper and he ruins your car, you shrug and buy another car. If you choose a shoddy doctor because he's cheaper and he ruins your cancer treatment, you lose your life. And you can't buy another life. In short, because health care is all about something literally of infinite value to you -- your life -- health care providers are in the situation of being able to play Central Park mugger and say, "Your money, or your life." And they do. They do.

Finally, regarding costs: Yes, health care has risen in cost everywhere because of medical innovation. But the U.S. is in a unique position where its health care costs have gone up even higher. The only difference between the U.S. situation and other Western nations is that the U.S. for some reason thinks "Your money, or your life" is a viable strategy for arriving at health care costs, while every other Western nation treats that as akin to a Central Park mugging, i.e., as a crime. And what happens if you allow a crime to continue unpunished? Hint... you get MORE of it! And as long as providers are allowed to continue to say, "Your money, or your life", there will be no end to it. 

Comment on May 28, 2011 at 3:54 pm to economist's view, We have no idea what the inflation rates for health care expenditures really are

 

More on John Huntsman's Tax Lies

Fellow tax prof Jim Maule also does a take-down on John Huntsman's ridiculous "workers pay all; rich folks pay nothing" tax plan and his even more ridiculous arguments in favor of said plan.  He hits many of the same points that I did in my earlier posts (John Huntsman's Tax Proposals, More on John Huntsman's Tax Proposals, John Huntsman's Wall Street Journal Op-Ed--Warmed Over Reaganomics), but provides some good examples for those who need walking through the way basis works.  Maule's title says it all: You know the election season has started when the tax talk gets even dumber, MauledAgain, Sept. 5, 2011.

[edited to add links to earlier ataxingmatter posts]

Swiss Bankers Fighting Back on behalf of offshore banking secrecy

The US has threatened to sue more Swiss banks unless they hand over information on tax-dodging US taxpayers.  See Thomasson, U.S. Threatens to Sue Swiss Banks, Huffington Post (Sept. 4, 2011).  The article reports a letter from  U.S. deputy attorney general Cole demanding that Credit Suisse hand over information by today and that nine other banks follow suit.  One reason for the smaller banks--many of the US taxpayers that failed to disclose their accounts after the tax evasion charade at UBS became public simply moved their accounts from UBS to smaller Swiss banks.

Switzerland had already offered to turn over certain information that would  be made available under the new treaty negotiated around the time of the UBS brouhaha, even though the treaty is still pending before the U.S. Senate.

This isn't making Swiss bankers happy.  The Swiss Bankers Association is mounting a campaign to persuade the Swiss Government not to enter into further agreements with the US requiring banks to reveal more US taxpayers' hidden Swiss bank accounts.   John Helprin, Swiss Bankers Oppose Another US Tax Treaty, Associated Press (Sept. 6, 2011). 

The banks are under pressure from more than just the US, as the UK, Germany and France also close in on their own tax evasion problems by pressuring banks for new tax conventions.  See, e.g., Kaffish, Swiss Agreement: the international ramifications, AccountancyAge.com (Sept. 1, 2011) (regarding the Swiss-UK agreement to apply withholding at just below the top rates--meaning 48% for capital gains realized in Switzerland and other types of income such as dividends and interest!). 

But the UBS case in the US  was the apparent first breach in the dam, leading to a special bilateral agreement that forced the Swiss government to permit disclosure of accountholders at UBS.  and now Credit Suisse and others may be in line for similar treatment.  The bankers want to stop it.  Now.  Not surprising, but one has to hope they do not succeed.

 

Justice Department Tax Division

Obama nominated Kathryn Keneally, a partner at Fulbright & Jaworski and longstanding officer in the ABA Tax Section as chair of several important committees, as head of the Justice Department's tax division.  

Obama's  prior nomination, Mary Smith, was blocked in the Senate because of her lack of tax experience.  Keneally, in comparison, has extensive experiecne in tax controversies.  As her firm blurb notes, she 'has represented financial institutions, public and private corporations and individuals in commercial litigation matters, in addition to representing individuals and companies in federal, state and locasl tax proceedings, sensitive criminal investigations, trials and appeals."  Areas include "tax controversy, tax fraud, money laundering, currency trnasaction reporting, securities fraud, bank fraud, false statements, RICO and issues under the U.S. Sentencing Guidelines."

Keneally has been a pro-taxpayer litigator, arguing strenuously for taxpayer-favorable interpretations of the Code and common law privileges, including an article castigating the First Circuit for its decision in Textron that tax accrual workpapers, prepared in the ordinary course of business for financial accounting purposes, were not protected by the work product doctrine.  If confirmed as litigator in the Justice Department on behalf of the government, which there is every expectation that she will be, she will need to look at these issues more closely from the government's perspective.