Dana Chasin at 2020 Vision does a good job of encapsulating key issues that surface in the Democratic debates.
Let's get this out first: most listeners will admit that the debates seem both too long and too short, as mentioned on Stephen Henderson's Detroit Today program this Wednesday 1/15 morning. They are too short, because candidates are interrupted at the 30-second time limit and not allowed to develop nuanced, considered answers to questions. They are too long, because they go on for 2 hours. I'd add that they are problematic, because the media pundits have their own views of what creates energetic dialogue that makes good 'copy' for programming, versus the kinds of in-depth discussions about issues like climate change, health care, education, the Supreme Court, congressional oversight/checks and balances, tax policy, wealth inequality and income inequality, plutocracy and oligarchy, etc. that people want to hear.
One important distinction that Chasin notes for thinking about socio-economic programs is the distinction between means testing and universality. A means-tested program is generally available to lower-income people and often phases out and is capped at some income level beyond which it is no available. A universally offered program is one that is available to all, rich and poor alike. So the Earned Income Tax Credit is a means-tested program that is capped (too low, in my view), and Social Security is a universally available program (though there is a graduated payout scale and the funding formula caps pay-ins to the program at a ridiculously low level that means the rich pay only a pittance into the program)
As Chasin notes also, the right tends to reject universally available programs as having unreasonably high costs and allowing for free-riders. The left tends to favor universally available programs for ease of administration and--not noted by Chasin--for the collegiality and collaborativeness they can build in having rich and poor in a program together, where it cannot be dismissed as 'mere' welfare for the poor (which, as we know, often gets translated in the hands of the ultra wealthy like Mitt Romney into "handouts for 'takers' from 'makers')
Two points here about the two most progressive candidates, Bernie Sanders and Elizabeth Warren:
"Sanders is the strongest proponent of universality. ... Sanders has maintained support for universal healthcare (in the form of single payer, Medical-for-all), higher education, and social security expansion." (quoting Chasin in a 2020 Vision emailing)
Quote from Sanders at the debate: "My democratic socialism says healthcare is a human right."
"Warren's policy agenda includes programs that are both universal and means tested. Warren's healthcare and free college program are universal. Her childcare proposal is means tested. ... Warren stands apart from some of her rivals by providing explicit pay-fors, includer her two [per]cent wealth tax levied on the country's wealthiest households." (quoting Chasin in a 2020 Vision emailing)
Quote from Warren at the debate: "The lowliest millionaire that I would tax under this wealth tax would be paying about $19 million in the first year in taxes. If he wants to send his kid to public university, then I'm okay with that."
Here's something about the GOP House and the GOP Senate: they each passed tax bills (supposed to come out in a "conference" agreement sometime today) that diss the United States' working class taxpayers. White or black, Christian or Jew or other, citizen by birth or naturalized citizen--workers are treated as an inferior "taker" class and owners are treated as a superior "maker" class--the same old GOP class warfare that has been evidenced in Republican-driven tax legislation for decades. That shows in the provisions that have been discussed quite a bit already, even though there is no official distributional analysis and even though the Treasury Department put out a one-pager claiming to provide an analysis showing huge economic growth would eliminate any deficits (based on both the tax "reform" legislation and promised cost-cutting "reforms" to Medicare and Social Security):
the significant reduction in impact of the estate tax,
the huge reduction in the statutory corporate tax rate of most benefit to officers/shareholders (it was 35%, it will be 21% under the conference agreement, apparently, even though the "effective" corporate tax rate ranged from negative to around 24-25%--essentially more favorable than many of our fellow advanced economies' corporate tax rates);
the territoriality of the corporate tax (generally, zero tax on foreign earnings of U.S. companies);
immediate expensing of company investments (a five year provision that allows companies huge tax benefits for those five years);
the elimination of the corporate alternative minimum tax (AMT), at a cost of about $250 billion in revenues.
the reduction in the top rate for wealthy individuals (from 39.6% to 37%),
the substantial reduction in the State and Local Tax Deduction for workers (thus changing entirely the economics of paying for a house already purchased, while allowing sole proprietors, partnerships and other "owners" of equity in businesses the ability to deduct such State and Local Taxes in full);
a larger standard deduction but the elimination of personal exemptions;
a larger child tax credit that only becomes refundable over time (limiting how much it helps the poor) but is available to wealthy households (starting to phase out at half-a-million of income!);
the only slight reduction in the ability of wealthy individuals to take advantage of the mortgage interest deduction (reducing the debt limit to $750,000 instead of $1,100,000)
the elimination of the corporate AMT (which cuts taxes for wealthy shareholders/owners/managers) but the retention of the individual AMT (which primarily affects the upper middle class and not the wealthiest taxpayers under the current rate bracket system);
the elimination of the Affordable Care Act mandate and penalty (which reduces the amount of Medicaid and insurance subsidy funds for poor and middle-income taxpayers, as well as guaranteeing the deconstruction of the health care system for 13 million or more Americans by 2027 and increasing insurance premiums for upper-middle-class taxpayers); and
the opening of the Arctic National Wildlife Refuge to rape by fossil fuel oligarchies (a piddling amount of revenue, but sufficient to buy off the principle-less Sen. Lisa Murkowski from Alaska );
making the corporate tax changes permanent (and effective without any transition period) while making the individual tax cuts other than benefits for the wealthy like the estate tax changes temporary.
(just to name a few).
When the health care mandate removal is combined with the other provisions, "On net, the poor would actually lose out in all years once this effect is taken into account." Dylan Matthews, The Republican tax bill that could actually become law, explained, Vox.com (Dec. 14, 2017). The following Tax Policy Center graph from the Vox article (using the Urban-Brookings Microsimulation Model) shows that by 2027 the top 0.1% end up doing much better (average tax cut for the top 0.1 percent is $221,550 a year). The bottom 20% do worse while the middle--the second and third quintiles--have a very insignificant plus (average tax cut of the third quintile is $490). Within the third or middle quintile, more than 62% of taxpayers that earn between $54,700 and $93,200 would see their taxes go up, "[b]ut only about 0.1% of the very richest one-thousandth of Americans would see a tax hike." Id. Early gains--though small, intended perhaps to benefit the GOP in earlier votes--don't last because the individual cuts aren't permanent. A change to chained CPI for indexing brackets amounts to a tax increase on individuals, while the permanent corporate tax cuts mean rich and very rich do well while middle and upper-middle lose out.
Maybe the most damnable characteristic of these House and Senate provisions, other than the sheer favoritism for the already wealthy, is the favorable treatment in determining the rate at which income is taxed for "owners" compared to the disfavored treatment for taxation of workers' wages. As the Tax Policy Center notes, the Senate version of the tax bill "would reduce taxes on business owners, on average, about three times as much as it would reduce taxes on those whose primary source of income is wages or salaries." Paul Krugman, Republicans Despise the Working Class, NY Times (Dec. 15, 2017), at A27. And this dissing of the working class goes along with treating partners in real-estate partnerships (like the Trump family and many other real estate developers) with kid gloves: "a partner in a real estate development firm might get a far bigger tax cut than a surgeon employed by a hospital, even though their income is the same." Krugman, Republicans Despise the Working Class, NY Times (Dec. 15, 2017) (quoting Howard Gleckman at the Tax Policy Center).
The Vox article describes the pass-through provision as part of its "here's who would be better off" section:
Pass-through companies, like the Trump Organization, which get a new deduction reducing their tax burden. The House-Senate compromise bill allows people with pass-through income to deduct a portion of that income from their taxes; the deduction is reportedly for 20 percent of pass-through income, less than the 23 percent under the Senate-passed bill. Dylan Matthews, The Republican tax bill that could actually become law, explained, Vox.com (Dec. 14, 2017).
Note that this is an off-the-top reduction of what would otherwise be personal taxable income taxed at the taxpayer's individual tax rate. Workers who are paid wages get no such break. And wealthy people will use good lawyering and tax planning to organize their businesses so that their income is counted as pass-through income rather than wages. This is just a continuation of a trend of favoring passive ownership of capital in this country. See, e.g., the Berkeley Blog, Wealthy investors to win bigly with Republican tax plan ( Nov. 9, 2017).
Imagine a company where two siblings as owners and a third sibling is the principal employee. They all receive about the same income from the company--for the worker bee, as wages and for the other two, as a profit share. The worker bee does all the creative thinking and working. So the two owners pay tax under this provision on 20% less income than the worker bee. And this is true in an economy in which economists are generally agreed that pass-throughs are currently taxed favorably, taking everything into consideration, and "don't need another break". Dylan Matthews, The Republican tax bill that could actually become law, explained, Vox.com (Dec. 14, 2017). This pass-through provision is as clear a snubbed nose to all those who work hard to earn a decent living as one can imagine. Fact is, the "owners" are often the takers, and the "workers" are the makers.
PS. The Vox article suggests that the corporate tax break is justifiable, based on the GOP "economic theory" that claims that a lower corporate tax rate will "spark so much additional investment in the United States that it would bid up wages and leave the middle class better off through its indirect effects." Id. This is just another way to state the "supply-side" "trickle-down" theory that has been relied on for decades by right-wingers but has never been shown to be justified empirically. In 2004, the GOP made the same claim for its "repatriation tax holiday" for multinational corporations, claiming that the low tax would allow those corporations to invest and expand, leading to job creation. It didn't. It led, instead, to share buybacks and more money for the shareholders. In fact, a large number of repatriating corporations that did share buybacks with the money also laid off thousands of workers.
PSS. The Vox article also suggests that the limitation of the state and local tax deduction for individual taxpayers (but not for businesses) has a "reasonable case" supporting it. Sure, the benefit of the state and local tax deduction is regressive, in that higher income taxpayers in larger houses with larger property taxes and larger incomes get more of a deduction. And yes, it tends to benefit those states with higher state income taxes that are used to develop infrastructure and education. But that misses several points in response. First, for people at the upper-middle income bracket, the Alternative Minimum Tax generally limits the availability of the state and local tax deduction. Second, people who currently own homes and are paying taxes on those homes and living in states with higher taxes likely took the availability of a property tax deduction into account in determining what they could pay for their home: the bill does nothing to provide a reasonable transition for these folks that takes their expectations into account. Third, when the GOP is trying to counter a Democratic president, it always makes the argument that it makes more sense to support states in allowing them to experiment with different ways of raising revenues and supporting their economics. That's what the "blue" states have done: they have recognized that having higher taxes allows development of infrastructure, support for education, funding for research and other priorities, and these expenditures have created a more sustainable economy and better standard of living in those states--exactly what the "state experimentation" is supposed to do. Yet the GOP provision on state and local taxes is now justified as a way to undo the benefit for "rich" states without doing anything to help the "poor" states. (In fact, Ryan and McConnell have made it clear that their goal is to harm the poor states by reducing funding for Medicaid, Medicare and Social Security on which those states in particular depend.)
The Republicans' proposed tax legislation--whether the House or Senate version--is despicable. It will exacerbate the already devastating income and wealth inequality in this country, leave the federal government without adequate funds for real infrastructure and social safety net needs, and place in almost inviolable power the wealthiest oligarchs of the country (and even the good ones exert a power that no one should possess in a democracy).
My previous posts on this so-called "tax reform" "simplification" package (it is neither) have outlined a number of pernicious provisions in the bills. There are a few I haven't mentioned, such as the likely inclusion of taxation of tuition benefits to undergraduate and graduate students. That will have an immediate impact on education and on basic scientific research. Not surprising, given Paul Ryan, Donald Trump, and Mitch McConnell's aversion to fact-based science and intellectuals, but nonetheless devastatingly harmful to the country in loss of prestige for our universities, loss of the top minds to other countries, and loss of entrepreneurial and innovational thinking that will hamstring commerce and productivity. Another is the "new" talk in the House of lowering the tax rate on the weathiest bracket by as much as two and a half percentage points--adding to the largesse for the wealthy otherwise larding the legislation and making it even more obvious that the only Americans the Republican Party sees itself as serving are those with at least millions and probably billions of net worth. The Republican charade of right-wing "alternative facts" (shown most clearly by the Treasury Secretary's inability to provide a supported rationale for the absurd corporate and oligarch-favoring tax cuts) would have a destructive impact on the entire U.S. economy. And it is not simplification--it is a huge complication that is ripe for tax abusers to abuse the complicated categories of differently taxed income.
But today there is a ray of hope that this tax scam might just not get passed --or might get turned around very quickly if it does get passed. Doug Jones' defeat of constitutional scofflaw and likely multiple-sexual-predator Roy Moore should cause any thinking Republican in the House and Senate to take a step back and listen to the views of constituents across the country, where dislike of this tax legislation is the majority view. The #MeToo movement and its impact on powerful media and other industry harassers, together with the fact that Democrats and Independents got out the vote in Alabama and defeated Roy Moore -- and another 20,000 likely lifelong Republicans decided to write-in another Republican name other than Roy Moore--should tell current GOP congresspeople that "the times they are a changin' ". Reaganomics--trickle-down, supply-side tax policies--don't work. Kansas proved that, if anybody actually had any doubt before. If the Republican majorities in the House and Senate pass this " Class War" tax legislation--written and argued and honed to a tee to serve the wealthiest multinational corporations and individual campaign donors while stabbing the middle and low-income classes in the back--they will potentially pay a big price at the polls in 2018 and 2020. They will pay that price because their tax legislation will send the U.S. economy into another tailspin that will lead to cuts in the standard of living of ordinary people so people like the Trumps can have even more gaudy gold faucets in their many mansions.
I call on everyone who can to write and call Jeff Flake (Arizona)--ask him to stand on principle and vote against the end of the Obamacare mandate, the giveaway to the wealthy and big corporations, the ridiculous scammable complication of different rates for the same income depending on what job the taxpayer worked at or whether the taxpayer owned the business or was an employee. Ask him to vote down this despicable tax legislation for the good of the country and ALL the people. Do the same for Susan Collins (Maine), who already has expressed real concerns about the impact of the elimination of the health insurance mandate. Even her 'bargained for' (but not actually promised) two-year patch wouldn't do much good: millions of people, the most vulnerable amongst us, will lose health insurance and therefore health care if this tax legislation passes. And let Bob Corker (Tennessee) know how much we all respect him for actually standing firm against this tax legislation travesty--and ask him to stand even taller by resisting the pleas to compromise principles 'just to get a win for Trump'. Let's push our Senators and Representatives to stand tall for a sustainable economy based on fiscal responsibility (don't create a $1.5 trillion dollar deficit) and distributive justice (don't push the middle class into dead-end living conditions) and end the giveaways to the wealthy oligarchs.
I predict that if this bill passes the expected accounting for the Republican Party will come even sooner and with even more strength against those who supported Trump's daily vitriol of falsehoods and the Trump Administration's filling the DC swamp with those who put pollution, despoiling the environment, destruction of the wilderness and national public lands foremost on their agenda.
The Republicans in the House and Senate continue on their downhill rush to pass their so-called "tax reform" plan before the holiday break. It's a mad rush to nowhere, a corrupt process of "please the oligarch" that will cause a huge deficit increase (on the scale of $1 to $1.5 TRILLION over ten years) and be used by the Ryan, McConnell and Trump cadre of liars to justify a domino effect of Medicare, Medicaid, and Social Security cuts. It is class warfare of the one percent against everyone else. And it is being sold to the American people with a litany of falsehoods.
Almost all the provisions in the bill are designed to be generous to the ultra wealthy and stingy to the middle class and poor.
Corporations and their owners and managers--among the wealthiest people in the country--get the only permanent tax breaks. It's done in the name of competitiveness, but that's bunk. It essentially encourages corporations to continue to move profits out of the US because foreign profits are taxed at zero while US profits are taxed at 20%. It pretends that the multiple tax breaks for big corporations are necessary (under disproven trickle-down and supply-side theories) to lead to more investment in business in the US and to more jobs and higher pay for workers. But in fact corporations are enjoying record profits under current law and they aren't using those record profits to pay their workers more or to create more jobs or even necessarily to invest in the US. Mostly they are just doing share buybacks for shareholders (ie, owners/managers and other shareholders) that include the wealthiest people who own the most corporate stock. That's because it is demand, not capital, that determines what business expansion is needed and results in labor shortages that give workers leverage to demand more pay. Tax cuts for corporations just add to the already existing capital glut.
The estate tax cut (elimination in the House bill; doubling the exemption to levels that only the very few multi-billionaires will pay any at all in the Senate) ensures that the wealthy will pay almost no tax at all. They borrow against their wealth while alive. Their estates pay no tax on the accumulated wealth when they die. Their children inherit with a "step up" in basis so they get a huge windfall. And their children can pay off the parents' debt by selling a few items (because of the basis step-up, with no taxes either) and live on their windfall without ever lifting a finger to do any real work.
Individual workers really lose out in these bills. Under the House bill, the rate on the lowest wage earners is INCREASED 20%--from 10% to 12%. And all of the 'tax cuts' for ordinary taxpayers sunset after a few years, while the corporate cuts are permanent. Shows where the GOP loyalties lie--not to the worker base that put them in office, but to the wealthy oligarchs like the Koch Brothers who donate to the GOP political campaign chests.
The pass-through provisions (a 23% "deduction" from income before tax is one version)--along with the ability of businesses but not individuals to deduct state and local taxes--are a great boon for wealthy owners of real estate partnership interests, like the Trump family. But they make no sense at all. The more different kinds of income categories that are created with different rates, the more you empower the wealthy to gamesmanship with the tax system. That's what this legislation does in spades.
And after the American people spoke up in Town Hall after Town Hall that they wanted the Affordable Care Act health insurance system protected, the Senate's version of the so-called "tax reform" bill (developed in utter secrecy by Republicans bargaining with Republicans as though nobody else counts) eliminates the individual health insurance mandate (and accompanying penalty). Without that, the entire idea of affordable insurance through government-operated exchanges fails, because the only people on those exchanges will be those who are sick enough or old enough or vulnerable enough to realize that they will need health insurance soon. Insurance works by diversification of risk--that's why the Republican insurance plan in Massachusetts, the model for Obamacare, called for an individual mandate and penalty. Without that core feature, the exchanges can't work because the risk isn't sufficiently diversified. The Republicans who are trying to gut Obamacare know that, and apparently they don't care that this particular "tax cut" will in fact cost more than 8 million Americans the possibility of having affordable health care, likely leading to early deaths for a large number of that group. They don't care, I guess, because "those people" are less likely to be wealthy and less likely to vote Republican. If you are so blinded by partisan fealty that you no longer care about legislating for the good of the nation, you descend to the garbage dump level of this Republican tax bill.
Of course, the elimination of the individual tax cuts, the expansion of the real-estate-industry favorable tax cuts, the inclusion of what can only be called a 'mock' provision to deal with carried interest (it doesn't), the elimination of the medical expense deduction (in the House bill) that will leave the disabled, the injured, and the elderly in dire straits, the decimation of the casualty loss provision that helps ordinary people recover from natural disasters, the huge cutback to the state and local tax deduction for individuals (while continuing to allow it for all businesses)--all these provisions prove that Republicans don't care a fig about ordinary people. We won't be spending money on basic scientific research (needed to be competitive in a global marketplace and needed to save lives from cancer and other diseases). We won't be spending money on infrastructure (needed to have safe roads, trains, airports. etc). We won't be spending money on education (other than Betsy DeVos's favored religious charter schools that teach falsehoods on a daily basis). We won't be creating a sustainable economy that serves all of our citizens.
Oh, but we will be decimating the environment, as Trump's lineup of industry trolls continues to reduce wilderness areas, as Lisa Murkowski sells her tax and healthcare vote to get to open pristine and irreplaceable Arctic wildlife refuge to the oil and gas fossils that have grown obese off 200 years of government subsidies (see The tax bill is bringing drilling in the Arctic National Wildlife Refuge closer than ever, Vox.com (Nov. 28, 2017)), as Zinke reduces FOR THE FIRST TIME EVER national monuments set aside by other presidents so that those obese coal and oil and gas guys can get even wealthier (see Zinke backs shrinking more national monuments and shifting management of 10, Washington Post (Dec. 5, 2017)), as Pruitt ensures that nobody at the EPA does anything to protect the air, water and land from industry pollution, see Goodby science, hello industry, LA Times editorial board (Nov. 6, 2017). .....
The passage of a tax bill that will create an additional one-to one-point-five trillion-dollar deficit is proof that the Republicans don't care if they destroy this country in their effort to return to the Gilded Age of the past (or, in Roy Moore's definition of the time that America was great, the slavery era when (white) families stayed together and were able to sell black babies away from their black mothers (or half white babies away from their raped black mothers)).
What is the Republican response to the deficit and mal-distribution problems created by such a huge tax cut for the already wealthy?
1) The tax cut will pay for itself. This is trickle-down gobbledy-gook. The vast majority of economists and tax experts are quite clear that this is simply not a supportable claim. It's pie-in-the-sky ideology with no basis in fact when there have been a number of attempts to find such a basis. It wasn't true for Reagan, back in an economy for which tax cuts held much more promise of economic stimulus than they do for our current situation. The Kansas experiment shows this trickle-down reasoning is without foundation. Russell Berman, You Better Learn Our Lesson: Kansas Republicans say they are worried that Congress and the Trump administration will repeat the mistake they made in enacting budget-busting tax cuts, The Atlantic (Oct. 11, 2017). But Treasury has now put out a one-page analysis--compared to the careful, extensive, fact-based analyses usually prepared to support well-researched tax proposals--saying that the GOP plan would produce record growth and that growth would pay for the tax cuts. See Alan Rappeport and Jim Tankersley, Treasury Defends Tax Plan Cost with One-Page Analysis (Dec. 11, 2017). Event the speculative Treasury 'defense' assumes away half of the deficit with legislative cuts that aren't even on paper yet. It's pure fiction.
2) Medicare, Social Security, Medicaid (the "entitlement" programs) will have to be cut to make up for any deficits. That, of course, is the underlying plan. See Jeff Stein, Ryan says Republicans to target welfare, Medicare, Medicaid spending in 2018, New York Times (Dec. 5, 2017). Create a deficit and use it to 'starve the government' to justify cutting any programs that don't serve the oligarchs. Most of that minority of people who voted Trump into the presidency (assuming there wasn't a good bit of ballot falsification, which I think went on in Detroit to not count everyone's ballot) will suffer from this--they depend on Social Security when they retire and on Medicaid when they become incapacitated in their old age and need nursing home or assisted living care. Under the Republicans, we'll return to the "good old days" of the Great Depression when old folks became homeless and the government didn't have to bother with caring about the vulnerable.
We all should be hitting the phones and telling every GOP member of Congress that they are not there to protect their wealthy donors: they are there to protect us and ensure that the economy is sustainable and viable for all of us. This tax legislation stinks. Tell Congress to ditch it in the sewers where it belongs.
[Edited at 8:54 pm to add House action Monday night and Senate leader statement]
The Senate voted 54-46 to reject the House's plan to hold the government hostage to its whims (including delaying Obamacare, okaying the Keystone Pipeline without regard to environmental objections, and imposing other anti-regulatory measures).
The President addressed the nation tonight on the Tea Party's attempt to hold the nation hostage to its demands about a law it doesn't like. As Obama noted, a minority in Congress does not get to "extract a ransom" to dictate its will to the majority on the basis of its undenied ability to cause great harm to the country and all of our citizens. Tiron, Rubin & Hunter, Government nears shutdown as Obama says he won't pay ransom, Bloomberg Businessweek (Sept 30, 2013).
The Tea Party/GOP set up another situation--planning to re-pass a measure that the Senate has already rejected and that Obama threatened to veto. Boehner refused to allow a vote on a spending bill without the Tea Party's conditions. Peter King, one of six responsible members of the GOP who voted against taking up the bill, admitted that what the GOP is doing is "leading ourselves into a government shutdown for no reason." The House just passed the new conditional funding bill 228-201, making its last offer the same old delay Obamacare offer that already failed.
Not surprisingly, every one of the 10 main industries in the S&P 500 dropped on the news.
Richard Hudson, a new Republican from North Carolina, claims that he doesn't want a shut down but "I also want to protect my constituents from this law." Fact is, the law is the first possible improvement in health care that this country has seen in decades. It is not perfect, but without the obstructionists Tea Party/GOP coalition, Americans would be eagerly awaiting the chance to get health insurance for pre-existing conditions and all the other improvements this law makes. Yet these Congresspeople are willing to put the country at risk in order to appease their rabidly irrational base. The Sacramento Bee (see Editorial: House GOP owns the shutdown, below) has it correct:
They can spin it all they want, but House Republicans manufactured the crisis that now threatens to shut down the federal government and wreak havoc on world finances. Unless they budge, they will go down in history as hostage takers willing to tank the economy if their demands are not met.
The Senate leaders announced that they would immediately pass the spending bill without the health care language and send it back to the House. See House Passes Another Budget Bill that Delays Health Law, New York Times (Sept 30, 2013 at 8:47 pm).
The Tea Party/GOP needs to stand down and start acting like legislators who have a duty to act for the good of the country rather than just the narrow interests of their base.
The House, dominated by Tea Party/GOP politicians (or those fearful of their impact on upcoming primaries) passed a bill that attempted to tie the continuing operations of the government to compliance with Tea Party ideas about getting rid of the health reform legislation duly enacted four years ago. See Weisman, House Bill Links Health Care Law and Budget Plan, New York Times (Sept. 20, 2013). Ted Cruz has now run his non-filibuster filibuster in the Senate, and then voted against his own "principled" filibuster position (presumably out of a quite justifiable fear that he would be shown for the fool he is as the only one voting in support of his "principles", since the Senate vote was unanimously on the other side). Ted Cruz Filibuster, NY Daily News (Sept. 27, 2013).
Remember, these are the same Tea Partiers who cried "Get Government Hands Off My Medicare," so one can't expect to see much rational debate about facts and ideas, especially on health care. The fact that Obamacare is based on a Republican, business-centered idea is lost on the Tea Partiers, who seem to simply hate anything associated with Obama and Democrats. Similarly, the fact that the reforms for the first time ensure that people who have pre-existing conditions can find insurance to help pay for catastrophic health costs at reasonable rates doesn't seem to penetrate the Tea Party conscience.
The Tea Party and its amenable GOP politicians, however, apparently aren't done trying to use whatever tool however destructive to get their way on health care. Having a sustainable economy is not even on their agenda. After not succeeding in repealing the health care reform law that at least offers some Americans a chance for needed health coverage (including those with pre-existing conditions and those whose employers offer no plans and who cannot afford the typical premiums for non-group plans), the Tea Party/GOP coalition is using the threat (and likely reality) of a devastating government shutdown unless it gets its way on a matter that the American people as a whole have soundly rejected. It is ready to push the country off the fiscal cliff all over again. So after the Senate voted cloture to consider the House bill and then passed a clean funding bill to get us through at least a few more months, the House GOP (with the Tea Party reactionaries in charge) again voted on Saturday to add amendments intended to destroy Obamacare to the funding bill (a one-year delay plus a repeal of the medical device tax, one of the measures intended to cut health care costs and pay for needed reforms).
The message is simple. The GOP is attempting to hold hostage the entire federal government, including at least 800,000 federal employees who will be furloughed but who need their paychecks to live, and many towns and cities across the country that depend on their federal government agencies and employees for their own livelihoods. The Tea Party/GOP coalition has demonstrated that it doesn't care about the government, the long-term harm to the country, or the suffering of individuals caused by these actions. The Tea Party/GOP coalition is willing to keep going its selfish way, like a petulant child determined not to let anybody have anything at all unless he gets his way.
And even then, it apparently intends to continue to wreak havoc, with the threat of causing the US government to default on its debt for the first time ever, using the silly comparison of the federal government to a family operating on a fixed budget as its equivalent of P.T. Barnum's fictitious but real-seeming mermaid to scam its "Tea Party" members.
While we need to make judicious choices about how and what we spend on, we shouldn't make those decisions based on a single-minded and short-sighted goal of cutting tax revenues and not increasing the federal debt limit. We are an enormously rich country. We could work miracles of ending poverty, repairing infrastructure, funding basic research, and creating educational opportunity if only we had the will to do so. And doing those things would create jobs and hope for the under-and un-emplolyed. This is because the federal government is not a family operating on fixed wages. It can print money. It can also raise taxes. We are one of the lowest-taxed countries in the OECD, down at the bottom of advanced countries with the likes of Turkey and Mexico. We have allowed corporations (and their mostly very rich shareholders) to avoid taxes, through legislation and through sharp-witted corporate tax attorneys, to the point where they are only paying a pittance of their enormous profits to the government. We have allowed our tax brackets to become fossilized at the upper range at extraordinarily low levels of income, when the top earners get so many millions that they pittance that even the top rate brings in is just a gnat's bite for the rich.
These facts scream for recognition that the Tea Party goals are not only damaging in the process of government-hostage-taking being used to try to reach them, but highly unfair and irresponsible in their likely impact of accelerating the increasing inequality in this country--inequality that means the rich are getting rich while the poor and middle class are losing ground. Thus, the Tea Party/GOP coalition is pushing forward in what amounts to class warfare on behalf of wealthy Tea Party funders like the Koch Brothers and their corporate empire and the "silver-spoon" crowd like Mitt Romney who think that they got where they are through their "merit" (ignoring the many advantages of networks and educational opportunities that helped them "make it" in the status-and-power-based world of crony capitalism).
Charles Reid at Huffington Post concluded that Cruz was a huckster primarily intent on self-promotion appealing to a Tea Party/Republican base that invites itself to be huckstered. Here's his description:
[A] good half of the Tea Party is pure, old-fashioned American hokum. There are the conspiracy theorists selling their tales of devious plots by the Federal Reserve. And the gold dealers who spin elaborate yarns of out-of-control inflation which the government keeps secret. And there are the Second Amendment fanatics warning ominously about plots to disarm law-abiding American constitutionalists. There are even the patent-medicine folks. Newsmax, a principal Tea Party news organ, is filled daily with claims about cures for everything from diabetes to Alzheimer's. Charles J. Reid, P.T. Barnum, Joe McCarthy, and the Rise of Ted Cruz, HuffingtonPost (Sept 27, 2013).
This mode of thinking is darkly conspiratorial. The world is sharply divided -- "us" against "them." And those who stand against the heroic defenders of justice and the American way are always secretly scheming to run not just the country but the entire world.
***
[T]o enter today's GOP base is to cross the border from reality into Glenn-Beckistan. There are the young-earth creationists who see the whole of empirical science as a diabolical plot to conceal divine creation. There are the global warming skeptics, found even in the pages of the formerly great Wall Street Journal. And then there are the folks who come out of the woodwork at conservative workshops and rallies: The ones who want to abolish the IRS. Those who wish to dismantle whole government agencies. Those who believe Social Security is irretrievably insolvent, an accusation first made by Alf Landon in 1936. Even the next generation of segregationists who once thrilled to Wallace and Goldwater.
This is what the U.S. Congress is reduced to--paranoid hucksterism parading as compassion for the people. A minority of flim-flam artists huckstering for attention that will, they think, win them reelection and please their paranoid-prone base of Tea Party/GOP constituents--the group who thinks their religious freedom is being oppressed when they can't repress everybody else's religious rights; who thinks a conspiracy to undermine them exists when saner thinking attempts to impose some kind of reasonable restrictions on the gun mayhem that is killing this country's children and youth and elderly in what we once thought were relegated to movie depictions of Old West shoot-em-outs; and who combines this paranoid conspiracy-thinking with anarchic libertarianism to conclude that "taxation is theft" and "government is the problem" even when these majority-Republican rural constituencies from Alaska to Mississippi depend on government employment and other federal dollars for their very livelihoods. See In Republican States, More Government Jobs, New York Times (Sept. 27, 2013).
There's the rub. The inability of the Tea Party base to listen, to consider facts, to accept the importance of community and the important role of taxes in maintaining the institutions that make community possible through collective action. It makes me think of George Orwell's 1984, as depicted in the movie with John Hurt and Richard Burton --a population that has taught itself not to think with home-schooling and religious indoctrination, reinforced by political demogogues who retain power and perks by figuratively beating the proletarian to a nonthinking mass that resents any attempt to act collectively for the greater good of the people.
One of the common assumptions about health care costs (and the costs of benefit programs like Medicare) has been that the increasing life spans of Americans will result in significantly greater health care expenses. It is common knowledge that much of the highest cost medical care occurs near the end of life, as the elderly need more medicines and assistance in daily living. So speculation has suggested that as Americans live longer, health costs will increase correspondingly.
A recent study provides a glimmer of good news--apparently, most of the highest medical care costs occur in the last year of life, even for those that are living longer. That means that the longer lifespans aren't translating into more time in intense medical care, but rather more years of generally healthy and active lifestyle followed by a similar duration of end-of-life care. See Michael Fitzgerald, Old Age May Not Ruin Medicare Budgets After All, Salon.com (Aug. 22, 2013).
What should that information mean for policy makers? It seems to support the progressive, social justice goal of ensuring that we have a system for universal health care coverage like "Medicare for all". Under democratic egalitarianism, a combination of general revenue support and additional premium payments from those who have the ability to pay provides a means for decent protection of all of our citizens and the creation of a just society. By asking those with the ability to pay to carry more of the burden, such a system ensures adequacy for all even in times such as ours when there is extraordinary inequality of wealth or income. Our forebears handled that kind of situation through one-on-one charities, back when communities were much smaller and people knew that they depended on their neighbors for help in tough times, so were willing to help out when they were able. The modern version of that neighborly compassion is a government that creates safety net programs for all of its people, with public programs in those areas where a profit motive interferes with the creation of adequate, sustainable, just programs for everyone. Education and health services are clearly two key areas where people acting together through government create fairer and more adequate systems that serve all of the people.
I suppose it shouldn't be surprising that the mostly-to-the-right Detroit newspapers would have a center-page opinion piece calling for the elimination of the IRS, that ages-old mantra of the radical right and of those corporate-backed propaganda tanks and radical-liberatarian idea pushers like Cato and Heritage Foundation and Claremont and many of the Tax Party groups, etc. But this one is so bad that it is necessary to call it out for what it is--a bunch of hog-wash. See Nolan FinLey, Let's Get Rid of the IRS, Detroit News (June 10, 2013).
Finley starts out with a presupposition that the scandal-mongering about the IRS is not only completely accurate (which it isn't--liberal and conservative groups were selected for scrutiny, and scrutiny was called for in respect of groups that had "tea party" in their names, since most of them were in fact mainly doing politicking) but that it was also "obvious[ly]" done from at the orders of Obama operatives to aid the President's election chances (which is completely unfounded conspiracy-mongering speculation). He states that "the IRS has been caught red-handed targeting conservative political groups for special scrutiny in what seems obvious was an attempt to aid the reelection bid of President Obama."
An initial scaffolding of distortions and malicious speculation cannot bode well for any opinion piece. So it isn't a surprise that the rest of the piece doesn't hold water, either. He calls the required statutory scrutiny of applicants for 501(c)(4) status a "dragnet"--failing to even acknowledge that the statutory requirement states that such groups must be "exclusively" operated for social welfare purposes and that it is in fact through administrative dispensation via interpretative regulations that the IRS applies instead a "primarily" for social welfare purposes test, thus permitting (too much) politicking as long as it isn't the primary activity.
He goes on to claim that use of the term "patriot" as a screening filter for politicking groups implies that "the United States government finds something sinister in patriotism". Again, that's a ridiculous association of what may possibily have been a perfectly reasonable though politically unwise filter term--i.e., if there are lots of groups with "patriot" in their names that do a lot of politicking, then it is a reasonable term to pick for giving those groups extra scrutiny to see if they do too much politicking, though the expectation that conservatives would rise up in arms if those types of groups receive extra scrutiny should have been a red flag cautioning against use of that term in spite of its usefulness.
Then Finley asserts that this conspiracy-theory thinking provides "more than enough reason to jettison plans to make it [the IRS] the enforcement arm of Obamacare." Now, it is true that the IRS has so many different federal programs that it has to oversee that it is almost impossible for it to do an appropriate task of doing so. Congress has loaded it with tasks (including all the tax expenditure programs embedded in the federal income tax code) and consistently underfunded it so that it is usually understaffed and overstretched. But the answer to that is not to take away a task that it is perhaps best suited for out of all the agencies, but rather to fund the IRS appropriately so that it can do the tasks assigned to it by Congress. Finley completely ignores the underfunding problem, since--as revealed later on--he really wants to decimate or eliminate the IRS entirely.
Finley talks about the IRS as "an institution America no longer trusts" because it is "the most feared agent" and on "that has proven itself willing to manipulate the levers of government to achieve a political end." Again, many problems in this rhetoric.
If the IRS is actually the "most feared" (I personally suspect the CIA and FBI and NSA would come in ahead in that race, but haven't seen any actual empirical study on this issue)--even after the enactment of three laws pulling back on its power to enforce and essentially hamstringing its employees with the "ten sins" provisions included in the 1998 act (see earlier post)-- it is because for decades the right-wing propaganda tanks and media have been pushing distrust of the IRS and of taxes and of government generally. People are influenced by that constant cry of "bad guy" based on blowing up of individual anecdotes into massive (presumed) patterns.
And the claim that the IRS "has proven itself" using its power for political purposes is simply unfounded. There is no "proof" of the assertion made by Finley. He is merely playing the Bill O'Reilly game of asserting speculation--or even worse, falsehoods,-- as fact in order to buttress his own personal vendetta against the IRS and its employees. Most IRS employees are civil servants, not political appointees. I've known quite a few Republican IRS employees in my years as a tax practitioner, and have considered writing about what I consider a related problem -- that too many IRS employees are too willing to court the pleasure of taxpayers such as big multinationals or large law firms or accounting firms that may well become their future employers or clients when they leave the Service.
Now Finley hits his stride with his real objective--arguments for disbanding the IRS, eliminating the income tax, and replacing it with a (regressive and hard to enforce) national sales tax.
The most fitting punishment would be to disband the IRS. And junk the income tax, too. Mike Huckabee, former governor of Arkansas and now a TV talk show host, is urging Congress to replace the income tax with a national sales tax. You’d pay tax on the money you spend instead of the money you earn.That would eliminate the need for an IRS that audits tax returns, hands out non-profit status and enforces a tax code that is egregiously complex and unfair. Id. (paragraphing removed).
Finley reveals his true ignorance here (if he hasn't done for most readers already). Let's just consider first some of the ancillary issues around "disbanding the IRS".
Because the IRS does function as the major enforcement agency for many things besides the income tax, Congress would have to undertake a comprehensive analysis of all of those activities and assign them to some other agency. In all likelihood, that other agency would lack agents with expertise to handle the assigned task, and the result would be essentially a transfer of those currently staffed with the activity to the other agency, requiring considerable time to merge functions and perhaps failing to do it well enough to maintain current operating efficiency, much less improve it (just as huge mergers or consolidations of businesses often go awry).
Further, the time to do the study, legislate the transition, and implement the transition would require continued operation of the current agency and the replacement agency, duplicating costs at a time when conservatives like Finley claim they want to cut wasteful government spending.
The Internal Revenue Code is not really "egregiously complex."
Read earlier posts on the right's tendency to overstate (by tens of thousands of pages) the "size" of the Code and to treat "size" as an appropriate substitution for any analysis of complexity.
Only 30% or so of individual taxpayers itemize, and itemization is the primary complexity faced by individual taxpayers. Most of those who do itemize are in the relatively wealthy part (upper 30% )of the income distribution, and most of those who have difficult and complex decisions to make are the very wealthy who have expensive tax experts to do their work for them.
Most of the complexity in the Code stems from two factors--(a) tax expenditures (subsidies) that benefit (substantially, in most cases) particular types of wealthy and business taxpayers lobbied for by those taxpayers and (b) anti-abuse rules necessitated by the clever tax strategies invented by the wealthy taxpayers' (especially corporate and business taxpayers') expensive tax experts.
It is naive to think that any tax system--whether income or excise or transfer or territorial or worldwide or sales or VAT-- could be "simple" for wealthy individual and corporate taxpayers with a global playing field and incredible sums able to be spent on avoidance and at the same time generate sufficient revenues to provide for the most basic of public goods and services, including a decent safety net for those caught in vulnerable positions by age, illness, or other lack of privilege.
5. Most sales tax systems include incredible arrays of exemptions (for example, for non-profit groups and charities) and exclusions (for "necessities" where the sales tax could make a difference between life and death for those living in poverty) and special provisions (lobbied for by particular industries). A VAT (if that were the form required) would in all likelihood require the same complexities about what is income or not that an income tax requires. A VAT or a national sales tax would require a mechanism for enforcement of collection not unlike the IRS's function and a mechanism for tracking individual's payments not unlike the IRS's current function. It would not permit the elimination of audits of tax returns (just different kinds of returns), handing out nonprofit status (just a different rationale and basis) or enforcing a complex tax code (just a different one).
Finley's ignorance is further revealed by his claim that a "similar outcome" (disbanding or making the IRS much smaller) could be achieved by "vastly lowering current income tax rates in exchange for eliminating all deductions and credits" because there would be "no reason to examine returns."
lowering rates doesn't achieve anything but less revenue--which will have to be made up for in other ways (adding complexity) or by further hardship on the already suffering ordinary people of this country who bore the brunt of the Great Recession, the foreclosure crisis, the unemployment crisis, and the corporatisation of education that has paid administrators twice or more what they are worth while cheating professors, teachers and students;
eliminating all deductions and credits might simplify somewhat the income tax, but at the cost of considerable unfairness in many cases--for just a few obvious examples, removing the foreign tax credit for taxes paid to other countries would result in some instances in "double taxation" of the same revenue by the US and the other country; removing the "standard deduction" and "personal exemption" would undermine a universal view that the income tax shouldn't reach the amount necessary to maintain a barely sustaining level of income for food, shelter and clothing;
even if it were possible to "lower rates and eliminate all deductions and credits", it wouldn't be possible to get rid of the IRS or eliminate audits or curtail enforcement or reduce the tax code to something a kindergartner could understand--a critical question for the Code is "what is income"--and therein lies a huge portion of the complexity and most of the ways that taxpayers have found to abuse the rules by claiming "phantom" losses. (Note that Finley doesn't talk about removing elections, exemptions, and exclusions--was that intentional?) There would still be the same need for returns, audits, and enforcement, and there would still need to be all the procedural provisions for litigation and regulations and penalties and interest on overdue taxes. There would be rules still for all the different types of entities (much of the complexity of the Code lies in the rules for permitting partnerships to have considerable flexibility in their allocation of income and losses among the partners). Certainly Finley wouldn't suggest that the tax code should get to tax gross income and taxpayers be required to forego claiming any losses!
Finley ends with what he thought was a question requiring an obvious answer of "none"--essentially asking that if we can eliminate the IRS and get rid of the health care "entitlement", "what's the downside?"
The answer is not the one he so ignorantly professed to believe. The downside is huge, and there is little upside. Finley disregards the growing inequality in this country and the continuing poverty in what is still the richest country in the world. He doesn't care, apparently, that his "solution" would create even more problems for the poor, as programs that they depend on administered through the IRS-such as the Earned Income Tax Credit and the standard deduction and personal exemptions--would be eliminated with his proposal. Further, without a tax collection and enforcement agency, much of the good done by the federal government would wilt on the vine--from the Centers for Disease Control to the NIH and the Smithsonian, from transportation safety to education funding, and even the right's much beloved military. We simply can't and shouldn't get rid of the IRS--every advanced country in the nation has a bureau that collects and enforces the tax laws. We could get rid of the particular health care reform enacted as Obamacare, but we shouldn't --rather, we should continue to improve it, ultimately instituting Medicare for all and removing the rent-seeking profiteers from the picture except for those who have so much money that they can afford to buy luxury health care.
Finley's proposal amounts to more hot-air from the right about their favorite target--taxes and tax enforcement--that would have regressive results lopsidedly benefiting their favorite beneficiaries--the wealthy and Big Business (owned mostly by the wealthy). Apparently, people like Finley really want a country where brute market forces allow a few to reap all the benefits and the many to suffer, resulting in a classed society with the few living in relative splendor and the rest living off the dregs. That would be the result of most of these proposals for turning to a regressive sales tax and shutting down federal tax enforcement, making such proposals a form of class warfare pure and simple.
(if you don't believe me about "rent-seeking profiteers" in the health care business, read Saturday's New York Times story about the way Questor--a Big Pharma company--has reaped huge profits by essentially building a monopoly power over an immune-disorder drug called Acthar and now intends to purchase a competitor's potential threat (selling for tens of thousands less) because a US startup wanted to make it available cheaply in the United States. Questor bought Acthar in 2001 when it was selling for just a few hundred dollars a vial. By 2007 questor had increased the price to almost $1500 a vial. And in 2007, Questor increased the price in a single jump to $23,000 a vial--yes you read that number correctly. This is the perfect example of the fact that the right's beloved "market" doesn't work if the government doesn't provide the right framework--in this case, enforcement of anti-trust laws much more stringently than has been done in the last few decades as anti-trust has practically dropped from the national vocabulary.)
“The President of the United States should explain tomorrow what Mr. Shulman was doing at the White House so many times,” O’Reilly added. “There’s no way on earth this Shulman should not have to explain in detail what he did inside of the IRS. So again we call upon President Obama to clarify the situation. Make Shulman testify as soon as possible.” Id. (quoting O'Reilly on Fox program).
If you were the head of an agency that was doing something you know your boss would approve of - if only in private - wouldn't you brag about it to him and get a good chuckle about the discomfort visited upon your boss's political enemies? Id.
This is the kind of conspiracy craziness that abounds in Washington these days. It makes for blogposts going viral and conjures up donations for tea party politicking.
But the first response of most reasonable people was NOT to see a report of visits by the IRS commissioner to the White House complex as a scandal but rather as something perfectly expected and, in fact, mandated by the job. Anyone who is aware of the broad range of responsibilities that have been heaped on the (underfunded, understaffed, and outmgunned) IRS's shoulders by Congress knows that there would be plenty of reasons for an IRS commissioner to visit the White House complex, since the IRS Is the critical agency central to the implementation of Obamacare and dozens of other federal government programs. Banking secrecy --FATCA, the effort to get Switzerland to open up its bank records--could also require consultation with White House executives.
The second response of responsible journalists was to doublecheck the records to see if there was other information to shed light on this purportedly "unique" access of the IRS commissioner to the White House. Something important to recognize--these are the first public records we've had of such visits--Obama made them public; other presidents before him did not. That means that you can't compare how often a Bush or Clinton IRS commissioner had clearance to visit the White House complex, because the records for that aren't public. Those who checked the records found some very interesting facts--very very very very many of those visits approved for Shulman to the White House complex were for routine meetings of the group putting together the implementation of Obamacare. Very very very few were face-to-face meetings with Obama, and those were not the kind of secretive sessions where the right-wing conspiracy theorists orders for "targeting" conservative groups could take place.
In a prior posting on "The real IRS scandal", I noted that right wing commentators have spewed a lot of hot air to make a scandal out of something that really isn't one. Even the TIGTA report seems to fall into that line--it may have been politically insensitive to use "Tea Party" as one of the search terms for likely politicking groups, but it probably was a quite efficient choice and not clearly "inappropriate" as the TIGTA report dubbed it.
At any rate, for anyone truly interested in how accurate right-wing pundits like Bill O'Reilly actually are, you might want to read the Atlantic story fairly closely. It is a detailed, fact-based study of the actual and potential visits that Doug Shulman was cleared for attending.
Here's what Franke-Ruta says about Bill O'Reilly and that group.
[F]ew of those pushing this line have bothered to read more than the topline of that public information. Bill O'Reilly on Thursday called them the "smoking gun" and demanded of Shulman, "You must explain under oath what you were doing at the White House on 157 separate occasions." His statement built on a Daily Caller story, "IRS's Shulman had more public White House visits than any Cabinet member." An Investors Business Daily story and [a] slew of blog items repeated the charges.
"The alibi the White House has wedded itself to is that it had to work closely with the IRS to implement ObamaCare," the Investor's Business Daily has written -- as if that were not true."
The Atlantic story proves the weakness of journalistic investigation by O'Reilly, the Daily Caller, and the Investor's Business Daily, since the public record clearly shows that the vast majority of the Shulman cleared visits to the White House complex were to work on the ongoing health-care implementation.
Shulman was cleared primarily to meet with administration staffers involved in implementation of the health-care reform bill. He was cleared 40 times to meet with Obama's director of the Office of Health Reform, and a further 80 times for the biweekly health reform deputies meetings and others set up by aides involved with the health-care law implementation efforts. That's 76 percent of his planned White House visits just there, before you even add in all the meetings with Office of Management and Budget personnel also involved in health reform.
But the cleared visits and attended visits are two different things. And there is public information that shows that Shulman actually signed in to attend very few visits.
According to the White House records, Shulman signed in twice in 2009, five times in 2010, twice in 2011, and twice in 2012.
Folks, if anybody talks to you about the "evidence" that Shulman met with Obama more than a hundred times, make sure you set the facts straight. This kind of misleading punditry appears to have no purpose other than the arousal of anti-Obama partisanship and furthering the anti-tax/"starve the beast" mentality.
Some in the GOP have realized what progressives have been saying all along--that by winning the election, President Obama is in a much better negotiating position on taxes and spending than before, and the GOP really doesn't have many hands to play.
The trouble is, the GOP thinks if it "gives" on any tax increases on the wealthiest Americans that it should have the "right" to a "balanced deal" and get the Dems to go along with the decimation of Medicare, Medicaid and Social Security. This is the main battle of the radical right's class warfare against ordinary Americans--their goal is to eliminate, reduce, or privatize Social Security, Medicare, and Medicaid benefits. They created the fiscal cliff with brinkmanship temper-tantrum threats to throw the United States into default unless they got their way, and they are trying to use the December 31 deadline that they themselves set in place to push the Democrats into being the ones to destroy the most effective social welfare programs that the Democrats have created.
See, e.g., Hiedi Przybyla, Republican Defectors Ready to Back U.S. Tax-Rate Compromise, Bloomberg.com (Dec. 5, 2012). Some members of the GOP have "signed a letter calling for exploration of 'all options' on taxes and entitlement programs"; Petition signers like Mike Sampson (R-ID) say this means he would be willing to "accept higher rates for married couples earning more than $500,000 a year, in exchange for an overhaul of spending on entitlements such as Medicare." "We've [the GOP,that is, has] got to have entitlement reform," he says. Id.
Steny Hoyer--the center-right Democratic whip in the House--said that "proposals to raise the eligibility age from 65 to 67 and other entitlement changes 'clearly are on the table'."
Hoyer is writing a suicide note for the Democratic party with that statement, for two reasons.
1) Tax increases cannot be significant enough if they are limited to married couples with $500,000 or $1 million of income, as Simpson suggested, nor if they do not raise the top rate to at least the Clinton era rate of 39.6 percent.
In reality, they should introduce additional brackets above that rate level for the top earners (e.g., 4o% for 750,000 or more, 45% for 2 million or more , 50% for 10 million or more, up to perhaps 65% for those who make hundreds of millions of income per year).
And the capital gains preference should be eliminated. But the GOP is also digging its "line in the sand" against any increases in taxes on investment income--even though this is an income category that creates tax arbitrage opportunities for the wealthiest Americans and high-income Americans (like Mitt Romney) end up paying tax at rates substantially less than ordinary Americans because of the preferential treatment of their capital gains income. See, e.g., James Politi, Republicans in capital gains tax fight, Financial Times.com (Dec. 4, 2012) (noting that Republicans in the House are "fighting tax increases on capital gains and dividends, ruling out investment income as an acceptable source of additional revenues in increasingly urgent talks to avert the fiscal cliff") [hat tip--Yves Smith at Naked Capitalism].
2) Democrats were elected as the party most likely to protect earned benefit programs, not destroy them. There is no way that Democrats should accept ANY "overhaul" of Medicare or the other social program eligibility requirements as a way to cut spending. They are vitally essential to Americans, and the GOP suggestions take the brunt of cuts out on the most vulnerable populations. The GOP's cuts include lowering the COLA for the elderly for Social Security, when the elderly actually have a HIGHERr cost-of-living than ordinary Americans, or raising the eligibility age for Medicare, when those who labor all of their lives often need EARLIER eligibility because they need to retire earlier and have no health care outside of work and can't afford to pay what private insurers will charge.
The savings from these stingy GOP proposals are de minimis, but the impact will be to create a momentum for reducing benefits as a way to save. That is treating a symptom and not the problem.
The problem of increasing health care costs comes from the inordinate profit-taking by parties at every link of the health care chain--consultants who bid out to insurers, insurers, hospitals, doctors, Big Pharm, Big Nursing Home, and shareholders. The only way to address the problem is to do what every other advanced civilization in our era has already done--move to a single payer system that treats health care as a citizen's right and treats the provision of health care as in some sense a public good that the government must provide. Single payer allows the government to bargain on behalf of its citizens, reducing the monopolistic rights of pharaceutical, hospital and other health care intermediaries.
The article notes that about 120 Dems would need to "buy in" to entitlement cuts in the House for the GOP to agree to tax increases. The Dems should say no. The tax increases will come into law on January 1, and then the Dems can propose a bill that will cut taxes for those for whom it makes sense, without decimating the star programs that have supported the middle class since FDR. (Note to Dems--progressives will not vote for anyone who goes along with such entitlement changes.)
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