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The Inequality Gap

Robert Reich, former labor secretary, has some worthwhile advice for the President's State of the Union address:  he notes that the focus should be the "central issue you want the nation to help you take action on".  That's "not immigration, guns or the environment" (though "[a]ll are important") but rather "joblessness, falling real wages, economic insecurity, and widening inequality" . See Robert Reich, Memo to Obama: Focus on the inqueality gap, Salon.com (Feb. 11, 2013).

He's right.

"It's the economy, stupid", that old slogan from the Clinton campaign days, goes only so far.  It doesn't tell us, for example, what parts of the economy are most important--is it the stock market's well-being, and indirectly the fortunes of the very few at the top of the income distribution who own significant amounts of those items being sold on the market?  Or is it the unemployment data, with its distressing litany of continuing failure of our economy to provide decent jobs for ordinary people?  Is it the way that corporate owners and managers can use the powers of government to make unionization difficult and thereby make it much easier for corporate management and shareholders to retain all the productivity gains while workers wages stagnate (everything from Wal-Mart's tendency to tear down union fliers in worker areas (based on my personal observation) to the CEO's determination to beat unions down any way possible (see the New York Times story in the 2/12 edition, At Cablevision, Norma Rae's Been Escorted Outside, New York Times (Feb. 12, 2013), at A23, regarding Cablevision's firing of two  dozen employees for being off work, after claiming to have an "open" management that invited worker conversations yet allowing those same employees to cool their heels for 40 minutes waiting to talk to him and then walking out and firing them for not being on the job)?  Or is it the general optimism of the upper class, who can pass on untaxed estates to heirs who will get those stocks at stepped up basis and renew the cycle of monetization without taxation for their own account?

Stock market statistics mostly tell us about the upper class, along with the upper part of the middle class that has some share of that bounty:  they don't tell us about how well the economy is serving others, unless the general well-being of corporate America spills over to the general well-being of average Americans.  It doesn't do that in an era of push-down on unions to ensure that workers have no voice, push-back on taxes to ensure that the wealthy managers and owners not only get all the productivity gains but have to pay too little in taxes to support the system that made those gains possible.  Mostly, stock market statistics tell us about how the privileged are maintaining their privilege, as their ownership of most of the financial assets continues to mean their heightened influence over most laws and their garnering of most of the gains that do take place.

This is well noted in a post on Economist's View (Mark Thoma), embedding a post by Miles Corak on Free Exchange about research on inter-generational social mobility.

The real lesson from the historical research is not that there is anything inevitable about a low degree of inter-generational mobility, or that it signals more persistence than other research. The most privileged will do everything they can to perpetrate their status across generations, and in past eras the structure of labor markets and public policies permitted, and in some measure continue to permit, a non-level playing field.

I've long argued that the way to evaluate the economy is in terms of how well it is serving ordinary people who make up the middle class (roughly defined as the middle three quitiles of the income and wealth distribution)  and how adequate is the safety net it provides for those who make up the lower class (the bottom quintile of income and wealth).  What matters is economic sustainability, in terms of  adequacy of those many intangibles by which we measure quality of life--like accessible quality health care, accessible quality education, accessible quality jobs, decent wages for decent work.  That means that government's intervention in the economy will need to be on the side of the little guy, ensuring that resource allocation isn't so skewed to the already rich that we become an oligarchy where most of us live off crumbs and a few of us live like kings.  If we want a sustainable economy and sustainable democracy, democratic eqalitarianism demands that governments temper market forces with protections for underdogs, providing counterforces to the redistribution upwards tendency of brute force capitalism.

Today, the rise of the US oligarchy and the frightening power of wealth in determining how laws work have put us in a terrible situation:   "debtor prisons, once a relic of the 18th century, are making a frightening comeback in the U.S. justice system."  Alex Kane, Miss a traffic ticket, go to jail?, Salon.com (Feb. 11, 2013).

So an appropriate slogan for progressives today should be something along the lines of "It's the inequality, stupid."  And that certainly doesn't mean more of the same old failed GOP policies that favor the wealthy, mistakenly labeled "job creators" by the GOP in its constant effort to undo unions (witness Michigan's disastrous anti-union legislation or Cablevision's determination to aid anti-union forces and squelch union activists), favor capital over labor (from the problematic preferential rate for capital gains to the ridiculous "carried interest" taxation of the compensation payments to so-called profits partners (a category of "partner" for tax purposes not provided for in the tax code but essentially an invention of Wall Street) to the squandering waste of an estate tax and charitable contribution deduction that favor meritless accession to and use of untaxed wealth and pushes the burden for government revenues to laborers instead).  And it certainly doesn't mean more of the same "deficit hawks, austerity mavens, trickle-down charlatans, and government haters who have commanded center stage for too long."  Memo to Obama: Focus on the inqueality gap, As Reich says:

The President should make it clear that any Republican effort to hold the nation hostage to the GOP's ideological fixation on the budget deficit and a smaller government will slow the economy, likely pushing us into another recession.  And that those most imperiled are the middle class and the poor. 

He should emphasize that the real job creators are not the rich but the vast majority of ordinary Americans whose purchases give businesses reason to add jobs.  And that if most Americans still cannot afford to buy, the government must be the spender of last resort.  Id.

Reich goes on to make some specific policy suggestions for acting to reduce inequality.  These include

• reversing the impact of the reinstatement of the higher Social Security tax rate by exempting the first $20,000 of income from the tax and lifing the ceiling on income subject to it;
• reviving government-run work corps, like the WPA and CCC, "to put the long-term unemployed directly to work"
• raising the minimum wage
• imposing a 2% tax surcharge on wealth in excess of $7 billion to be dedicated to education
• Cutting corporate and military welfare
• not cutting public investments or safety nets
• giving tax credits for actual job creation
• supporting states that rehire teachers, firefighters police and social workers.  Id. (quoting and paraphrasing).

Sounds like a pretty good plan.   As Corak noted (in the Economist's View post cited above):

[D]ynamic labor markets offering new opportunities to the population as a whole, progressive public policies of relatively more benefit to the relatively disadvantaged, and strong families with growing incomes and human capital will lead to much more mobility than aristocrats of a pervious era could ever have imagined.

And the Reich plan is certainly better than what most of the GOP-led state experiments like Michigan are coming up with, which read like a plan for even more redistributing upwards to the top few, including:

• eliminating income taxes in favor of regressive sales taxes,
• eliminating business taxes in favor of regressive user fees (a GOP-led Michigan "upward" redistribution "innovation"),
• pushing hard against unions  (a GOP-led Michigan "innovation"),
• reducing safety net support like Medicaid (being considered in Michigan),
• taxing vulnerable seniors on pension income (another of Michigan's recent "innovations"),
• cutting support for state universities while reallocating the support that remains to those that serve the upper class rather than underprivileged who will generally need to borrow more and take longer to succeed (another of Michigan's redistributionist efforts).

Related articles

Red state tax "reform" and "economic growth"

Robert Reich: Coming Tuesday (Hopefully): The State of the Union's Economy

FOCUS | The State of the Union's Economy

Rising inequality in America is causing the economy to sputter

Let the Wars Start--only when we are willing to pay for them

The op-ed page of the New York Times often has some thoughtful items worth reading.  Russell Rumbaugh's A Tax to Pay for War, New York Times (Feb. 11, 2013), at A17 is one of them.  As Rumbaugh notes, the slight delcine in military spending since 2009 has provided some breathing room on solving the fiscal crisis, but that breathing room could quickly vanish if we undertake new military interventions.  As he notes

[W]ar spending--like all government spending--wrecks public finances only when more money is spent than is brought in.  ...Three years ago, the Senate Budget Committee adopted a bipartisan amendment requirement that wars be paid for.  ...[But] none of these proposals resolved the question of whether to pay for future wars through spending cuts or raising more revenue."

Rumbaugh urges that we "make a choice and require a tax surcharge to pay for any military operation." 

He offers three primary rationales for instituting a war surcharge: 

1) Historic norms and traditions for financing wars:  we have historically made major changes in tax poli:y in connection with undertaking wars, from the development of the income tax initially in the Civil War to its permanent inclusion in the US Code during WW I to the use of withholding in WWII and the enactment of a tax surcharge during Vietnam to pay for that war. 

2) Ease of implementation: The "savings" from leaving Afghanistan coupled with the passage of the Budget Control Act with a cap on military spending offer a similar opportunity for a war surcharge.  Any "necessary" military spending above the cap would result in an automatic surcharge to raise the necessary revenues. 

3) Proper consideration of the costs and benefits of war:  Rumbaugh notes that a surcharge will mean that argumnents for military action "would explicitly include a call for increased taxes, forcing the question of whether the stakes in the military situation are worth the cost.  If the American people agree they are worth it, the president will get both the political support and [the] financing he needs."  After all, "[i]f military action is worth our troops' blood, it should be worth our treasure, too."

 These arguments seem sound.  Certainly one factor in causing the Great Recession we are still coming out of was the decision to go to war in Afghanistan and Iraq--wars likely to be long and costly in terms of technical equipment as well as lives and costs of caring for wounded soldiers (physically and psychically) afterwards--and just put it on the credit card by LOWERING taxes at the same time for the very wealthy amongst us in particular.  Whereas tax rates in war have been very high in the past, the Bush wars of choice were fought with borrowed money.  And perhaps those wars were more easily entered into because there was no direct cost obvious to Americans at the outset.  The use of a volunteer armed force left most of us more removed from the conflict; the use of "embedded" journalists who did not have the opportunity to capture iconic images of the war outside the scope of what the Pentagon wanted to be seen left most of us with uncertainty about what was really going on in the war zones; and the use of borrowed money to fund the wars meant Americans could go about their daily lives with little recognition that we were a country engaged in a very costly military battle.

PS I would note that government spending even when it is based on borrowing doesn't necessarily "wreck" the economy as he implies--Krugman, Stiglitz and other economists will tell you that it is much better to borrow and spend after a recession than to adopt silly austerity measures.  When the private sector isn't spending, government needs to.  But we should spend wisely--infrastructure spending, for example, might make a lot more sense than military intervention spending, as Blodget suggests in the post linked below.  Even wiser--tax ourselves to pay for whatever wars we decide to fight.  The war tax is a win-win Tobin tax--if we go to war, at least we have the revenues to pay for the war.  If the potential tax take discourages us from going to war, then we have less war, which I suspect most of us would think is a pretty good outcome......

Related articles

A Tax to Pay for War - NYTimes.com

A Tax to Pay for War

Yes, Of Course We Should Cut Military Spending!

We're being bamboozled--debt ceiling, cuts to ordinary folks' programs, and the corporatist state continues apace

I almost can't stand watching or reading the news these days and have delayed posting on this blog because it seems there is a need to repeat the same suggestions over and over again.  Don't cave to the right.  Don't cut important social welfare programs that have enabled this country since the 1930s to treat its elderly and vulnerable populations with respect.  Quit trying to strip unions of power--they are one of the important ways that ordinary people can emplower themselves to demand a share of the prooductivity profits their labor has produced.  Quit repeating the garbage free market mantras suggesting that the wealthy investors and managers are entrepreneurs (they're not generally) and that allowing such gross accumulation of wealth as our current CEO pay of 3-400 times the salary of average workers (earning in a half day what a worker earns in a year) is somehow necessary to a good  economy in a democratic political system.  Allowing the owners and managers to continue to reward themselves with grossly oversized compensation and profits packages so that they can maintain their 20,000 square feet marble palaces with kitchens that only a caterer needs (and that the denizens of the house hardly ever use on their own) is just one of the excesses of the brute capitalism that the 'tea partiers' and other right-wing economic policy gurus are supporting.

This free market, brute capitalism where workers are expendable and the entire economy is forced to support the accumulation of wealth at the top is what we have in fact pushed on (and sometimes assisted in imposing on) developing nations in the past .  Think Argentina--where the Chicago Boys oversaw the decimation of the economy and the imposition of austere conditions on the majority so that the economy could be 'remade' to suit the owners of capital (including foreign investors and multinationals). Think Brazil, where in the 1960s we helped their military coup against a leftish president in order to support the ability of US multinationals to continue exploiting Brazilian resources. 

But now the right is so invigorated, through its ability to bamboozle the American people and elect a majority of economic extremists in the House who either don't understand history well enough to know that they are speaking gibberish, or don't care.  They are determined to undermine the meagre social welfare system of Social Security, Medicare and Medicaid, with constant untruths about 'bankruptcy' and similarly misleading statement on almost every issue.  Presidential candidates who make up facts are toasted by the purportedly 'leftleaning' mainstream media (this assertion itself a made-up fact used to continue to bamboozle the people).

The most outrageous spectacle of all is the pontificating dogmatic right in the House and Senate, threatening to cause a U.S. default on the debt ceiling issue in order to pursue their ideological dream of a 'pure' economy.  Their economic model is a disgraced one --the free market, corporatist model that ensures that the small, wealthy investor class is doing well and that Big Business gets what it wants but doesn't give a damn for ordinary folks, whatever verbiage about caring for workers, and ordinary people with mortgage difficulty, etc. they spout.

Truth is, folks, you don't get an economy working well for ordinary people when you (i) make pledges NEVER to increase taxes, (ii) reject cuts in the grossly overlarge military expenditures this country makes in order to secure the world's resources for its multinational enterprises (that then lobby for close to zero taxation on their obscene profits from that secured wealth), or (iii) try to solve all perceived fiscal problems by taking it out of the hide of ordinary folk, thus  stifling the real economy (the one where workers work in businesses that serve local people and that work generates profits that are shared with workers and owners in a way that leads to expansion of the local economy based on the broad-based workers' participation in it) and at the same time bringing the kind of class warfare that the Friedman school has long waged on Latin America and other Third World countries right here to America.  The result of those kinds of policies is concentration of income, wealth, and influence at the top, with ordinary folks in the middle class struggling just to stay even.

The idea that you cannot tax natural resource extractive industries more (by taking away the tax expenditures subsidies that literally hand them outsize profits on a silver platter) when they are making windfall profits is absurd.  The idea that you cannot reimpose a decent estate tax on the estates of the wealthiest 2% in the country, to assist with meeting the heartfelt needs of the struggling middle and lower classes, is pathetic.  The suggestion that you cannot increase taxes on financial transactions and increase capital requirements in banks to stifle the too-rapid innovation and liquidity within the financial institutions that underlies the crisis we just went through (and the worse one we will suffer within the decade if we don't enact even stronger reforms than already in Dodd-Frank) reflects the dogmatic fixation on service to the wealthy investors and financiers that permeates the right-wing in Congress.

Folks. we can't let them do this.  Congress is supposed to serve the people, and this 'tea party'/right-wing extremism that was reflected in Newt Gingrich's 'contract on America' and John Boehner's contract with the investor class is the worst of class warfare.

There was a time when the neo-imperialists and corporatists didn't dare do the same thing in America that they were  pushing for, and secreting doing in Third world countries.  Exploiting the environment without a care for the pollution that ordinary people suffer in their daily lives.  (Think of the Banana Republic attitudes of United Fruit  and  the Latin American oil enterprises conducted by US multinationals.)  Supporting militaristic regimes with a right wing flavor and a taste for torture and imprisonment of radical left thinkers. (Think Chile, Argentina, Nicaragua, Guatemala, etc.)  Labeling governing concepts that pay a lot of attention to the needs of ordinary people as 'subversive' and 'socialist' in order to bring up myths of communistic monsters that hide under the bed and eat the economy.  (Think Cuba and Brazil, especially, and Chile, and now Venezuela.)  All these tactics exist to keep ordinary people in their place as workers who get a pittance of their productivity profits and are "flexible" (meaning can be fired upon short notice by private equity firms flipping companies for their own (preferentially taxed) profits) while the military can control the resources and make good deals (for US multinationals and the military leaders, not for the people of the exploited country).  Read Chomsky's "Year 501" for a (somewhat rambling) account of the neo-liberal corporatist agenda in Latin America.

But now those same ultra corporatist, class-warfare policies are being implemented right here, in the open, with brazen disregard for our historical social contract, for the plight of the poorest and most vulnerable amonst us, all in the name of keeping the 'investor class" and Big Business (generally one and the same, since the investor class is mostly the owners and managers of Big Business) happy.

They paper it over with talk, as Joe Lieberman does in calling for cuts to Medicare, for 'bipartisanship"  or they claim the US is living beyond its budget because it doesn't pay its bills.  But of course they don't really care about that, since the budget put forward by the Republican House majority carved a multi-trillion dollar hole.  IN other words, they don't pay attention to their own rhetoric.  They just want to use the (absurd in itself) requirement in the US that we have a debt ceiling extension vote as an opportunity to blackmail the American people to get concessions on their favored targets--the programs that ameliorate, somewhat, the brute capitalism of the American economic system after forty years of reaganism, friedmania, and the rest of the Chicago School garbage that has been treated as "God's truth" so long by politicians that they don't even realize, perhaps, that they are letting a bunch of mathematicians who like to escape the real world into made-up formulas decide the policies for the nation.

Big Business has had its enablers in place for four decades--Grover Norquist, the Koch brothers and their 'tea party' followers, the various propaganda tanks like the American Enterprise Institute, the Cato Institute, the Heritage Foundation, and the rest  that have spent millions to brainwash Americans into thinking that the failed 'free market' ideas of Milt Friedman and Alan Greenspan and Wall Street are the only way to go.  It has a majority on the Supreme Court willing to be extraordinarily activist in overturning precedents on class action lawsuits (a way for ordinary people to empower themselves against Big Business) and free speech (a way for corporations and their owners/managers to control the political debate through the use of their overwhelming dollar power).  And that right-wing majority is serving its masters well, while Big Business's minions in Congress continue to roll over to make sure that the right-wing panacea of deregulation, militarization, tax cuts, and privatization contines apace. 

The US debt burden is high, but we are not Greece or Ireland or even Portugal.  We have a strong economy.  We have our own monetary system, unlike the Euro nations that are facing much higher debt burdens and can't individually control their monetary flows.  Austerity measures like the IMF has imposed on Latin America to satisfy foreign investors (not the natives of those countries) and like the Euro world is now imposing on its own members are not needed here (and probably are the wrong answer there as well).  Those measures are driven again by the failed corporatist economic model that assumes that the entire world should be run to satisfy the wishes of financial institutions, big money investors and the big multinational corporations that they own and manage. 

The world should be run to satisfy the needs of ordinary people.  Banks should be stripped of the power to create a world-wide crisis with their haystacks of derivatives that catch flame much too easily.  Big Business should make do with lower profits, paying their workers more and their managers (and owners) less and paying their fair share of taxes.  Hedge fund managers should pay tax on their "carried interest" compensation like ordinary people, and private equity firms should be subject to much more red tape that makes it much harder to buy companies and take them private in order to fire their workers.   In fact, consolidation and mergers among big businesses should be made much more difficult through new limitations on the tax-free restructuring provisions. Unionization should be strengthened, in order to give ordinary Americans something with which to have leverage over the hierarchical authorities that undermine economic growth by concentrating everything on the investor class.

Let's start a letter and call-in campaign to every Republican legislator in the coutnry, telling them that we are sick and tired of being treated as lambs led to the slaughter in order to place endless platters on the tables of the rich.  Tax policy should be based on what works, not on ideological dogma that has been the underlying cause of catastrophes and crises worldwide. 

 

Congressional Progressive Caucus People's Budget beats Ryan's corporatist budget by a long shot, but doesn't get media coverage

FAIR has a good point on the way the media have covered the US budget debates.

Fact is, the radical right wing budget proposed by radical right Ryan gets lots of coverage. FAIR noted that he was on Meet the Press 4/10, Face the Nation 4/17, ABC'sThis Week 5/1, PBS News Hour (one on one) 5/1, ABC Good Morning America 4/13, and he's been profiled personally, showing that he has learned the key to Reagan's success--you can say the most absurd things that are ultimately extraordinarily dangerous for ordinary people, and get ordinary people to think you are great, just by smiling and coming across as "genuine" and acting like you believe the lies you are spreading.  Be a good actor, that is, and you can move the corporatist agenda forward at huge cost to ordinary Americans, because they will (regrettably) trust in your (fake) genuineness that you will do right by them.  The budget plan has been covered in nightly news shows many times--though not with the kind of piercing analysis that would expose its corporatist bones for what it is.  Instead, in the segments I've watched, it is almost always treated as though it is what it claims to be, an attempt to put the US on sound fiscal footing.  That's simply bullshit.  It's an attempt to eliminate the New Deal and move the US back to the pre-New Deal period when regulators were weak-kneed and Business could pretty much do whatever it wanted, and the military would serve Big Business interests around the globe.

Fact is, a very reasonable budget proposed by the Congressional Progressive Caucus, "The People's Budget", that is based on sound economics, has gotten almost no coverage at all.  What does it do?  It increases tax on the wealthy (after a decade of their enjoying super-rich tax cuts), cuts military spending (after decades of enormous investments in the military, with the base budget for Defense doubling between 2000 and 2009 under George W. Bush), and imposes on a tax on Wall Street speculation (the kind of speculation that got us into a Great Recession that the rich have eased through and ordinary Americans are still suffering enormously from).  The Budget proposes investments in public infrastructure that would spur economic growth, create jobs and ensure that the US does not continue to move towards third-world status in terms of its infrastructure.  It includes a new public health insurance option as part of the national exchanges for health care plans, providing economies of scale and lower premiums. It also preserves Social Security benefits by raising the taxable amount of income. 

Under the current system, income above a taxable maximum is not subject to any Social Security tax, meaning that high-income individuals pay less as a share of their income than everyone else. As income inequality has widened, a greater share of income has fallen outside of the taxable maximum, with the percent of earnings covered by the program slipping from 91% in 1983 to just 83% in 2009.

See the Economic Policy Institute for a technical analysis of the proposals, here.

Why is it that media covers the obscene Ryan plan and ignores the reasonable Progressive Caucus proposal?  Probably because the radical right budget proposed by Ryan satisfies all the points of the corporatist agenda--cutting funds to support Social Security, Medicare and Medicaid, the social programs that blunt the edge of brute capitalism while keeping the gravy train going for the military-industrial-financial complex.  Also, the Ryan budget is built on the same ideas of reagonomics that get touted as wonder workers even while they have wreaked economies from ours to Argentinas.  Free marketarianism doesn't work, never has, never will--it is brute capitalism that allows big business, and especially multinational corporations, to exploit little people at will while the few elite at the top (managers and owners) reap all the benefits.l That's the Ryan budget in short.  Instead of restoring the taxes on the wealthy to where they were before the George W. Bush regime in which economic idiocy reigned supreme along with neoliberal warmongering thinking that led us into two huge neverending wars that feed the military-industrial business machine, the Ryan budget would cut programs that make the difference between a decent life and a miserable one for aged and sick and poor Americans, while handing big business every gift it asks for.

And maybe because the corporate owners of corporate media are support the corporatist agenda to keep ordinary people from having real information about options that are in their interest, so that it will be easier to pass legislation (and issue court rulings) that favor multinational corporations over people.

The Budget Crisis: OMB Watch's Analysis of Ryan's path to mediocrity proposal

OMB Watch provides another progressive perspective on the ideology driving the Ryan budget proposal.

Like all congressional budget resolutions, House Budget Committee Chair Paul Ryan's (R-WI) fiscal year (FY) 2012 Budget Resolution is not simply a chart of preferred spending and revenue levels, it's also a political statement guided by ideology. And Ryan's ideology demands that the federal government divert ever increasing sums from middle- and low-income families to big business and high-income families.

Importantly, they note that the call for cuts to programs that serve the more vulnerable amongst us is justified by an arbitrary decision to cap federal revenues at a level guaranteed to create deficits unless there are significant spending cuts.  This is the "starve the beast" idea at its culmination.

On the revenue side, Ryan's budget revolves around locking down federal revenues to below 19 percent of gross domestic product (GDP). While this number is the average for the past 30 years, it has consistently lagged federal spending, resulting in the steep deficits we see today. In order to maintain this deficit-inducing level, Ryan's plan calls for cutting income taxes for high-income earners from today's top marginal rate of 35 percent to 25 percent. (Interestingly, the last time we saw federal budget surpluses, between 1998 and 2001, the top marginal rate was 39.6 percent.) Ryan plans a similar giveaway to corporations, slashing the corporate tax rate from 35 percent to 25 percent.

Pay-fors for the big tax cuts to Big Business and the wealthy?  Well, those should come partly from those pesky large subsidies in the Code, right?  But Ryan avoids naming any of those.   My guess is that he knows the GOP isn't serious about eliminating large tax expenditures that primarily benefit the wealthy and Big Business, such as (i) active financing exception for overseas finance subs, (ii) deferral for multinational corporations' active business income, (iii) mortgage interest deduction that primarily gives huge tax cuts to elites with million-dollar homes, (iv) charitable contribution deduction that lets the wealthy donate stock and take a deduction for its value rather than for what they actually paid for it and have invested in it, etc..  And besides, even if he thought that the GOP might have to eliminate a very few of those nice juicy wealthy-friendly provisions, he isn't about to name them and then get a well-funded lobbying group working against him on this.  The GOP has benefitted much too much from having those well-heeled lobbying groups for Big Business and wealthy families (like the Walton heirs) on their side, along with the right-wing purported "think" tanks like Cato, American Enterprise, Tax Foundation, etc.....

The proposal also indicates that "large" tax expenditures should be eliminated to pay for tax cuts for the rich. It states that "deductions, credits and special carve-outs" in the corporate tax code should be modified to pay for tax cuts for businesses. Notably left out from the discussion of removing these tax code "distortions" is any identification of which tax expenditures Congress should nix. Far from being bold, Ryan's proposal ducks these critical questions, shifting the heavy lifting and political daring to the tax writing committees, staving off attacks from powerful special interests that will no doubt flex their campaign contribution muscles to retain their federal largesse.

Not really cutting the rich doesn't mean that the GOP won't carry through with cutting the vulnerable.  Ryan is quite willing to list specifics here--after all, the poor and the young and the unemployed and the underemployed don't have much way to work together to have their voices heard (especially in those states where the GOP's anti-union drive is squelching unions).

In exchange for these tax cuts, spending for the old, the young, the poor, and the sick would be lopped off by two-thirds. Ryan laments the notion that the current social safety net is a "hammock, lulling able-bodied citizens into lives of complacency and dependency," while worrying about Medicaid health care providers "fleeing the system to escape endless red tape and underpayments." His solution is to apply the same failed "get-back-to-work-you-lazy-bum" policy that ended the old income assistance program and created Temporary Assistance for Needy Families (TANF).

In fact, the welfare reform of the 1990s that is approvingly cited in the budget plan did nothing to curtail poverty, and it only managed to reduce welfare rolls by forcing low-income parents to take low-wage jobs A similar approach to health care, nutrition, and housing assistance will likely result in only cutting families off from these vital programs when they need it the most.

Headlining the section of Ryan's proposals to "strengthen the social safety" are $771 billion in Medicaid cuts. Ryan's plan would convert this low-income health care program from a system in which states and the federal government share costs into a block grant program that would allow states to abandon the eligibility and benefit guidelines currently in place. Ryan argues that relieving states of this "one-size-fits-all" approach would result in significant cost savings, allowing states to pay for higher-quality care. But this is just window dressing beautifying almost $800 billion in health care cuts to low-income families that will ultimately result in poorer health outcomes for millions of people.

Nutrition and housing programs are also prominently featured on Ryan's chopping block. Ryan is clear that far too many people have access to the Supplemental Nutrition Assistance Program (SNAP, formerly "Food Stamps") and housing assistance. Applying a circular logic, Ryan insists that without kicking people out of these programs, the expenditures will be so great that people will have to be kicked out of these programs. Thus, he is just doing what will have to be done eventually. Yet cuts to health care, nutrition, and housing for low-income families is the bedrock on which Ryan builds his tax-cutting and corporate support programs.

OMB Watch points out that Ryan's plan is really a "two-fer"--it manages to take away from the vulnerable (the young, the poor, the elderly) even while giving to Big Business by letting corporations skim off the cream from the federal funding formerly dedicated to the vulnerable.  Here's where the Reagonomics mantra of privatization comes in--tax cuts with privatization is just another way of saying let's convert this funding for the poor into a subsidy for Big Business.

Ryan's plan was formulated with the goal of allowing private corporations greater access to federal funds. At the front of this effort is a form of privatizating Medicare. He calls for use of “premium supports,” which means Medicare would be changed from an entitlement with defined benefits to an insurance system in which the government provides a fixed sum of money to individuals to buy coverage. The phrase “premium supports” is used because “vouchers” doesn’t poll very well today. But a rose by any other name is still a rose. By giving vouchers to seniors to pay for their own health care, Ryan's plan would insert a middleman between patients and health care providers, giving health insurance companies the ability to skim untold billions in federal health care spending.

Ryan's plan would also voucherize federal jobs programs by doing away with them and creating a "career scholarship" program that would have the effect of giving for-profit colleges a bigger bite of the national education and training budget. And although having little, if any, impact on the budget, Ryan's proposal calls for gutting the recently passed Wall Street reform – a boon to big banks who loathe the legislation – and removing sensible oil drilling regulations despite last year's BP disaster in the Gulf of Mexico.

But if you think that this means an open look at the way we waste billions annually on militarization (one of the other four cornerstones of  privatization, deregulation, militarization and tax cuts  that make up the GOP's radical reagonomic agenda for continuing the devastation of the American economy that began when Reagan took office), think again.  Eisenhower's view that we had to maintain a military-industrial complex but should be very wary of its power has been translated with reaganomics into the view that we should constantly feed the military-industrial complex because it is the friend of the rich and Big Business, and we need never hold it accountable for anything. 

Security spending, however, would go untouched compared to President Obama's budget request, increasing compared to the Congressional Budget Office (CBO) baseline. This aspect of the budget proposal makes it a rarity among the many floating around Washington – the president's deficit commission plan is clear in its call for "equal percentage cuts from both [defense and non-defense]". The Pentagon awards hundreds of billions of contracts to private corporations every year. Cuts to the Pentagon's budget as deep as those to non-security programs would have significant impacts on the bottom lines of the nation's biggest businesses. The Ryan budget keeps the taps wide open and continues to pump billions of dollars of federal funds to these contractors.

So the Ryan budget is a disaster.

Despite claims to the contrary, Ryan's proposal would increase the debt in its first ten years. According to the CBO's analysis of Ryan's plan, in the first ten years after the enactment of his proposal, debt held by the public would actually increase compared to doing nothing. Under the hood of this clunker of a plan are draconian cuts to non-security spending that are less than the tax cuts that would be handed out to the rich and big businesses. The real cost savings in Ryan's plan come after the ten-year budget window that budget resolutions typically address. In 2022, the Medicare voucher system comes into effect, which essentially shifts health care costs from the government to senior citizens. In short, even with drastic spending reductions, the first ten years of Ryan's budget have no positive fiscal impact, while the out-years look improved because of radical Medicare cuts.

This is the budget of Big Business and the anti-government crowd. Ryan's budget doesn't dial back the laundry list of national priorities so much as it simply hacks away at the amount of resources devoted to accomplishing them. And in areas where he can, he opens them up to private corporations to skim funds as they flow from the Treasury to the provisioning of services. For what's left of programs operated by the federal government, Ryan's budget leaves a fraction of the funds necessary to implement an effective social safety net, protect the public, and invest in the economy as businesses and the wealthy contribute less.

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

[edited to correct typos]

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

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

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

It would seem that the GOP is using this moment to

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

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

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

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

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

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

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

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

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


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

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

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

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

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

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

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

If Dems go Down--outlook for taxes, financial industry, military and war, unions and public employees...

I voted this morning in the mid-term elections.  Did you?  I am nonetheless a frustrated citizen who is deeply worried about the future of my city, my state, and my country.   And while I am deeply disappointed in the Dems' ability to translate progressive ideas in to working legislation and change, I am even more deeply disappointed in the loss of a moderate GOP voice and the way most of the GOP candidates embrace the corporatist agenda.

While I understand and even empathize with some of the anger and frustration expressed by the Tea Party groups, I am very worried about their impact on this election in light of their apparent lack of comprehension about the essential problems facing us and their failure to understand that it was the four decades of Reagan-inspired policies of deregulation, militarization, privatization and tax cuts that got us deep into these problems culminating in the Great Recession of the Bush Administration and the too-lax TARP bailout provisions for banks.  (The bank bailout was, I believe, necessary by that point, but it could have been handled--as I argued at the time--by methods that would have exacted a much higher price from bank managers and shareholders, without the Paulson-originated, bank-friendly provisions that allowed bankers to retain (privatize) their gains while casting on us (socializing) their losses.) 

The Tea Partiers, in other words, have muddled ideas that forecast wrong-headed policies on taxes, finances, income inequality, the role of unions in protecting the U.S. middle class, and the role of the big multi-national corporations in influencing government to favor their own businesses and the rich who own or manage them (via lobbying and especially since the Supreme Court's Citizens United case, via the use of huge sums of money to influence elections and essentially buy legislation made to order).  The Tea Party groups in particular misinterpret the corporatist agenda that pits large corporations and their wealthy managers and shareholders against the vast majority of hard-working, middle class Americans and that casts unions (in spite of their undeniable flaws and failures)  almost as evildoers, rather than what they actually are--the only successful means that the middle class has to create a level playing field so that workers can get their fair share of productivity gains mostly produced by them.  Further, the Tea Party groups seem incapable of recognizing that their visibility and influence is being bought by those very powers that consistently work to suppress middle class gains--the anti-tax, anti-union, pro- "free market" purported think tanks and lobbyists and wealthy businessmen and the right-wing media empires of huge corporations such as the Sinclair stations, the Murdoch media empire (Wall Street Journal, Fox News, etc.)-- such as the Koch brothers and Dick Armey's so-called Freedom Works. 

"Free market" is in quotes because there is no such thing as an absolutely free market: to the extent that we shift the balance too far towards business "freedom" and too far away from consumer--and environment--protecting restraints, we take away everyone's freedom to live decent lifestyles in a sustainable economy within a sound environment.  Markets are wonderful, but the ability of businesses to compete "freely" in fact requires a number of restraining and opposing influences to avoid the inevitable development of self-perpetuating monopolies and oligarchies from asymmetries of information combined with the natural biases and follies of humans (including the corruption from money and power, the self-interested actions that can cause significant detriment to others from sheer greed), not to mention the vulnerability of ordinary people left to suffer from the brute-force harms of such "free" markets.   Government regulation/remedies (administrative and judicial) and worker unions are two necessary restraints on unbridled corporatism. 

So let's hypothesize that many of the right-leaning GOP and Tea Party candidates are elected.  Here's my prediction of the policies that will be pushed by this right-wing coalition. 

1. Taxes:  likely passage of various bills reducing corporate taxes either temporarily or permanently, including 100% expensing, repeat of the 2004 almost tax-free repatriation of foreign profits, further extension of tax-free restructuring provisions (the Bush Treasury through regulations practically gave away the store, and there appears to be a wholesale commitment to continuing the rush to make gain recognition as a part of a tax-free reorg a thing of the past, and make loss recognition as a part of a tax-free reorg a thing of the present); likely attempt to make the Bush tax cuts permanent for everyone including the wealthiest amongst us or at least to extend them for another 2 years until the 2012 election possibly restores a GOP president to make them permanent; likely renewed attempt to repeal or sharply reduce the estate tax that even in its pre-Bush form was paid by a tiny minority of estates each year and paid at a very low effective tax rate by many of those few that paid it; discussion of tax cuts by the GOP/Tea Partiers won't address the role these cuts play in creating deficits or in reinforcing a harmful level of income inequality that threatens the very heart of democratic governance.  We definitely won't get legislation cutting the carried interest entitlement out of a right-dominated Congress--the capital gains and deferral advantages that private equity and hedge fund managers glean through their interpretation of the partnership rules for "profits-only" interests would be allowed to continue, generating multi-million dollar low-taxed income and encouraging a continuing distortion of the allocation of endeavor towards this high-income, low-tax-producing work and away from other endeavors that would be better for the economy (such as engineering rather than financial engineering, etc.).  In other words, we can expect a resurgence of the many-times-now-proven-wrong-"freshwater"-economic-free-marketarian and Laffer-style budget and tax ideas, carried out even more extremely!
2. Dodd-Frank financial institution regulation:  attempt to undo or deeply eviscerate many of the protections for the financial system disliked by the Big Banks, particularly the (limited) ban on proprietary trading, potential for naked credit default regulation, and  the existence and powers of the Consumer Financial Protection Agency (which is the primary part of the bill that addresses the way that big banks use their clout to collect from customers at every opportunity while making it enormously hard for customers to fight back when they are treated unfairly by the banks)
3. Social Security:  drive to dismantle post-war protections for the poor and elderly, through partial or whole privatization and reduction of benefits; use of the worries about the deficit as the power for wielding the ax cutting old age security benefits (in spite of refusal to forego any of the Bush tax cuts which will cost $5 trillion over ten years, if extended). Job creation will be touted as a rationale for most of this, though it is a very unlikely outcome.  (There will be no further stimulus package of public infrastructure spending which would have a decent chance of saving, creating jobs.)
4. Health care:  drive to dismantle the progress made towards a fairer health insurance system out of a distorted understanding of the way that non-insured individuals require insured individuals to cover their expenses and a failure to comprehend the way that health insurance companies benefit from the ability to arbitrage 50 states' rules to select those that serve them best and serve ordinary Americans least
5. Environmental and Global Warming Efforts: drive to dismantle anything already done to address the significant harms from global warming and environmental pollution (including toxic chemicals in our land, air and waterways); attempt to open the Arctic National Wildlife Refuge to oil drilling; attempt to give all the rest of the US reserves to the oil companies along with even more tax cuts for the natural resources extractive industry (which will be touted as "incentives" for development); attempt to peel back protections for endangered species, particularly wolves and small creatures whose protections are seen by the right as "threatening" lucrative developments in wilderness settings; attempt to ensure that the National Forest Service serves the forestry industry with even more roads and cheap sales, rather than putting forest and wilderness protection goals above commercialization/privatization of the national forests
6. Gun laws:  attempt to peel back gun registration provisions--moving even closer to the absurd "wild west" model apparently sponsored by activist right-wingers on the Supreme Court providing for open carrying of handguns in bars, coffee shops, stores and public meeting places
7. Unions/public employees:  attempt to ensure that the corporatist agenda succeeds in the workplace by continuing the process of distorting American's views of the role of unions in protecting workers from corporatist power and by weakening even further American workers' ability to organize and by giving employers even more "rights" in the context of a union drive; in particular, at the state level we can expect drives to cut public employee pension benefits and cut state funding of pension plans, and at the national level we can anticipate continued demonization of federal employees as lazy bureaucrats protected by public employee unions from merited discipline and firing
8. Elections:  refusal to pass laws forcing full disclosure of all corporate donations related to elections on the corporations' financial statements, SEC filings and on publicly available filings of all 501/527 organizations receiving corporate donations; refusal to write disclosure rules forcing public information regarding major individual or other noncorporate donors to organizations engaged in election campaigning
9. Military/war:  little or no commitment to removing the impediments for gay servicemen and women;no commitment to cutting military expenditures and even likely some support for pushing the Pentagon to continue with expenditures that it has already determined are inappropriate and wasteful; little commitment to pushing for a pull-back from foreign invasions/occupations and even possible push for renewed "surges" in Afghanistan; likely commitment to increasing military support for Israel in spite of its continuing violation of international law on colonization of occupied territories; likely push for aggressive response to Iran, including warmongering

Worth noting:  if the election results in the GOP controlling the House and the Dems the Senate (and presidency, of course), we will likely have gridlock.  The GOP agenda won't be likely to be enacted because of that gridlock.  Accordingly, everything above is in terms of where their attempts, commitments will be, not what they will succeed in doing.  But what will they actually do?  Mark Thoma, Economist's View, Gridlock? Not in Politics (Nov. 2, 2010), speculates that they will "take advantage of this by introducing legislation they know won't pass but scores political points by forcing Democrats to vote against it...then use the noise machine to talk about how terrible this is for America.  We'll see Tax Cuts for Working Americans (where you give a few pennies to the masses, much, much more to the upper echelon, then, since there are so many people getting small breaks, claim that the majority of the tax cuts go to the middle and lower classes), the Deregulation of Apple Pie Act (which somehow turns into an attack on the FDA, financial regulation, etc., etc.,), we'll see poison pills attached to legislation that must be passed to operate government...."  Thoma also castigates the Dems (appropriately, I think) for failing to "take its arguments to the public and convince them that they were, in fact, fighting for their interests. ... Instead, they allowed the other side to take the initiative and demagogue the policies without much of a challenge."  When will the Dems ever learn?

Economic stimulus--the right and the wrong of it

Clearly, for ordinary Americans, the US economy is still in a funk from the financial crisis caused by the housing boom funded by the easy credit of turnover securitization of mortgage loans, coupled with the casino banking mentality spurred by proprietary trading and naked credit default swap bets.  (The wealthy, on the other hand, seem to be recuperating nicely, thank you, or at least still spending on luxury goods.  See Even in Moribund Economy, Wealthy Spending More on Travel, Luxury Goods, Kiplinger, Sept. 24, 2010.)

The political parties have two very different answers to resolving this ongoing economic crisis for ordinary Americans. 

• The GOP thinks that we need more of the same "medicine" that got us into this mess to start with--deregulation, privatization, tax cuts, and militarization. On deregulation, see, e.g., The Electricity De-Regulation Con Game, PRWatch.org (discussing the coalition of conservative groups supporting deregulation, including Heritage Foundation and Tom DeLay), Republican Candidate Seeks Return of De-Regulation , Newark Democrat Examiner, Sept. 30, 2010 (discussing NJ candidate Little's support for Tea Party "free market" with the "absence" of government regulation).  On tax cuts, see, e.g., Senate Republicans Firm on Tax Cuts for Rich, Reuters, Sept. 13, 2010; Republicans Pledge to Fight to Preserve Bush-Era Tax Cuts, Washington Post, Sept. 13, 2010 (noting that the GOP, unlike the Dems, wants to pass a new law providing a tax cut to the wealthiest Americans when the Bush cuts expire as scheduled at the end of 2010).  On privatization, see, e.g.,  104 Republicans in Congress Want to Privatize Social Security, ThinkProgress, Oct. 27, 2010; GOP Budget proposes to Ration Medicare, Privatize Social Security, CrooksandLiars, Feb. 5, 2010 (discussing the GOP alternative to Obama's budget proposals); GOP's Pledge to America would end up privatizing Social Security, The Nation, Sept. 24, 2010 .  On militarization, see, e.g., Hard Line: The Republican Party and US Foreign Policy since World War II, The Nixon Center, Oct. 31, 2010 (suggesting that there is some division within the party based on its mantra of fiscal conservativism, but that most Republicans, and neo conservatives especially, support military spending even while demanding cuts elsewhere); David Broder, The War Recovery?, Washington Post, Oct. 31, 2010 (apparently suggesting war, and its huge military expenditures, as a way out of recession, in spite of the already huge costs of Bush's two wars of choice) ; Conservatives Profess Support for Defense Budget Cuts But Still Want Weapons the Pentagon Calls Unnecessary, ThinkProgress, July 2010;  Benjamin Fordham, Evolution of Republican and Democratic Positions on Cold War Military Spending (noting that the Republicans originally opposed increased military spending after WWII, but in the 1960s, the party began supporting militarization).   It's hard to believe that the American voters can be gullible enough to fall for the argument that we need "more" deregulation and tax cuts to cure the problem caused by deregulation and tax cuts, but apparently a good many may be.  Party acolytes mouthe the mantra of tax cuts and spending cuts, but what few spending cuts are ever discussed are ones targeted at the so-called "entitlements"--meaning, programs that aid the down and out, the elderly, and the unemployed, like Social Security (and pensions generally, especially public pension plans for public employees), health care, and other such programs.   Meanwhile, privatization includes privatizing Social Security (at least in part) and eliminating the progress (not complete) that we've made under the Democrats towards a more sustainable health care system (preventing insurance companies from refusing to cover someone, alowing children to stay on parents' plans longer, making sure that insurance companies don't refuse to pay covered items, creating a universal system so that the people who pay for their health insurance are not also forced to pay for those who gamble on having no health insurance but end up with expensive hospital stays, etc.).  Presumably, if the GOP candidates win a majority, they will fight to ensure that tax cuts extend to the wealthy who have garnered an increasingly huge share of the income stream from GDP growth as they cut out the safety net from those whose wages have stagnated and declined because of their policies.

 

• The Dems (the ones that aren't too afraid to talk about what their polilcy views really are) generally are on the other side of those issues--re-regulation (to prevent the kinds of casino banking problems that occured under Bush), maintaining public safety nets (rather than leaving the vulnerable at the mercy of the "markets"), decreasing military spending (especially for unneeded weapons systems and ideally by ramping down Bush's wars), and tax cuts for the middle class but not for the rich who've gotten all of the growth while the middle class declined).   They are also aware that when the private economy is slack, government spending needs to pick up the slack.  Ideally, that government spending will be aimed at real needs--unemployment compensation, more money in the pockets of consumers in the bottom half of the income distribution who will spend it on things that they need, and/or public infrastructure that will help our economy expand (like public transit projects, research projects, support for research universities, etc.). 

Now, in that context, what to make of David Broder's Washington Post op-ed talking about war--it took a war, he says, to get us out of the Great Depression, and he seems to be suggesting that a war with Iran wouldn't be such a bad idea to get us out of this Great Recession.  

"What else might affect the economy? The answer is obvious, but its implications are frightening. War and peace influence the economy.

Look back at FDR and the Great Depression. What finally resolved that economic crisis? World War II.

Here is where Obama is likely to prevail. With strong Republican support in Congress for challenging Iran's ambition to become a nuclear power, he can spend much of 2011 and 2012 orchestrating a showdown with the mullahs. This will help him politically because the opposition party will be urging him on. And as tensions rise and we accelerate preparations for war, the economy will improve.

I am not suggesting, of course, that the president incite a war to get reelected. But the nation will rally around Obama because Iran is the greatest threat to the world in the young century. If he can confront this threat and contain Iran's nuclear ambitions, he will have made the world safer and may be regarded as one of the most successful presidents in history."  Id. (Broder in WaPo)

This from a person who has consistently opposed government spending and other Keynesian ideas for stimulus as inappropriate.  War, he appears to think, is ok, but government spending on major public infrastructure is not?  Now that is crazy.  I refer you to  Mark Thoma's Economist's View for a full dress-down of Broder's essay, David Broder Calls for War with Iran to Boost the Economy, Oct. 31, 2010. 

That Broder column fits with the rest of the GOP policies, which generally suggest that spending on military might is just dandy, but spending on the public infrastructure and safety net for the vulnerable is wasteful, or that tax cuts for the super-rich are fine, but earned income tax credits for the poorest amongst us are not, or that deregulation of banks will lead us to growth while regulation to include a consumer protection agency will hamper banks' ability to make profits.  What a warped view of society.  I just hope that Americans aren't naive enough to fall for it.

Dealing with the Sunset of the Bush Tax Cuts (Part V in a series)--dividends at capital gains rate

IN this series, i've been discussing the merits of enacting a new series of tax cuts that mimic, at least in part, the Bush temporary tax cut legislation that expires at the end of this year. 

The primary arguments for the original Bush temporary tax cuts were either bogus to start with or proven weak over the period of the tax cuts. 

1. The Republicans who pushed the cuts claimed first that they were intended to return to taxpayers the surplus.  Of course, that argument was laughable from the beginning: Bush deficits started in the first year of the Bush regime and got worse for the long term as the costs of a military budget pumped up by preemptive war and other augmenting of government spending at the same time that tax revenues were cut again and again throughout the regime. 
2. Various Republicans also admitted that their goal was to cut the size of government--though they didn't mean the military and they did mean any programs that protect average Americans (such as Social Security, unemployment compensation, environmental programs, OSHA, etc.).   But the size of government grew in spite of the reductions in revenue, resulting in expanding deficits.
3. The various  expensing provisions; repatriation with almost no taxation (in the 2004 "American Jobs Creation Act"); tax breaks for oil and other natural resource companies; international tax breaks; and other corporate-favorable provisions were supposed to stimulate entrepreneurial activity and job creation.  Instead, businesses used the low-tax repatriated income to pay managers more and workers less, and laid off workers at the same time.  The expensing provisions allowed corporations tax breaks for equipment they would have bought anyway, but didn't create new jobs--the Bush regime's jobs record was terrible, barely keeping up with inflation and certainly not spurring new job growth.  The tax breaks for natural resource companies fed their complacency about everything from jobs to safety to environmental protection--giving companies more for less doesn't create better citizens and doesn't get us cheaper energy either.  The record from the tax cuts as far as entrepreneurialism and job creation was dismal--the mainstream neoconservative and neoliberal theories of market fundamentalism didn't work out as claimed.
4. The lowering of capital gains taxation and the taxation of dividend as a net capital gain at the lower rate were also heralded as ways to spur investment in new businesses (entrepreneurialism) and job creation.  Bullshit.  Most of the result was just more money in the pocket of the richest Americans who own most of the financial assets, and that money in the pocket was as likely to be invested in offshore bank accounts as put to work supporting a new business here in the US.  The dividend tax cut didn't even lead to much in the way of dividend payouts--except perhaps for firms whose managers and directors saw a chance to benefit themselves.  Even if those expiring tax cuts are not renewed with new tax legislation, it is not likely to have much of an effect on companies' dividend policies.  See Higher Taxes May Not Push Firms to Cut Dividends, Wall St. J., Aug. 30, 2010.
5. The cuts in individual rates were supposed to provide more money as an economic stimulus.  But the Republicans who passed those rate cuts knew that the AMT would act as a clawback to the cuts over time, except for those at the very top who were always subject to the AMT and those in the bottom who are hardly ever subject to the AMT.  And they knew that amending the AMT to conform to the temporary tax cuts would be tremendously expensive--at least a trillion in revenue lost for the decade of the tax cuts, where the "temporary" nature of the bill had been necessary to claim that the cost was "just" 1.3 trillion over a decade.  In other words, the tax cut bills passed during the Bush regime with the 2010 sunsetting gimmick were a sham from the beginning--they cost much more than those who passed them wanted to admit, and they carried with them a clawback mechanism that would undo the cuts in rates for many individuals.  The various annual "patches" to the AMT are extraordinarily costly in terms of lost tax revenues since they are essentially an extension of the tax cuts to an even broader base, and the corporate changes to the AMT have reduced its effectiveness in cutting back on corporate preferences while costing the fisc billions.
6. The estate tax scaleback and one-year repeal was the most gimmicking of all.  Cutting the budget by $30 billion a year in order to fund a giveaway to the wealthiest and most privileged Americans is hard to justify in any budgetary climate.  So Republicans pushing estate tax repeal and the various "coalitions" funded by wealthy families like the Walton heirs have painted a facade of "helping little guy farmers and businesses" on their efforts--a facade that many Americans may have bought hook, line, and sinker since they do not tell the truth, much less the whole story.  Very few family farms and very few small businesses are threatened at all by the estate tax. 

So what should this list of bogus and failed reasoning tell us about what the Congress should do on taxes for 2011 and thereafter? 

1. I say let the Bush cuts expire according to the way they were written.  But enact a new set of tax cuts that are better targeted to jumpstart the economy and to put money where it is needed.  
2. Let the corporate giveaways  expire as slated.  
3. Let the estate tax mess expire as slated.  Enact a new estate tax law that (i) increases the exemption amount to a reasonable level (say, $2 million) and indexes it for inflation and  (ii) enacts a progressive rate structure (ranging from 55% on the estate that exceeds the exemption amount, up to some higher rate of 65% or 70% on multi-billion-dollar estates. 
4. Let the capital gains changes die as slated, and do not enact any further capital gains preferences (so dividends would go back to being treated as ordinary income). 
5. Let the individual rate changes die as slated, and enact a new tax cut for individuals making $100,000 or less, with a temporary tax cut for individuals making up to $200,000 for a three year period to aid us in getting out of this recession.
6. Enact genuine AMT reform--in which capital gains are treated as a preference and which provides a significant exemption amount based on gross income.  See the earlier articles (2005-2006) in ataxingmatter on AMT reform for more specifics about the kinds of reforms to the AMT that make sense.
7. In conntection with the rate cut and AMT legislation, enact measures to pay for the tax cut, including

(i) a carried interest provision taxing all profits interests as ordinary incom

(ii) a corporate tax provision limiting the benefits of tax-free reorganizations and consolidations, and

(iii) a charitable contribution provision eliminating the deduction of value in excess of basis.

Torture--It's the Economy, Stupid.....

Naked Capitalism ran a "guest post" by "George Washington" yesterday on Cheney's role in furthering the Bush Administration's torture agenda: Cheney Admits to Being a War Criminal, Naked Capitalism (Feb. 16, 2010).  

Washington notes that the mainstream media's approach to Cheney--letting him argue for torture without ever challenging him with tough questions--is "no different than interviewing Charles Manson and letting him argue--without challenge--that murder is a great thing." And we are all guilty.  "By failing to demand that torture stop and those who ordered it--like Cheney--be held to account, Americans are complicit in war crimes, just like the Germans who failed to stand up to Hitler were complicit in crimes against humanity." 

The preface argues that "torture is bad for the economy", with a link to Washington's own blog post on January 9 noting that "The Military-Industrial Complex is Ruining the Economy." 

The impact of militarization is huge, and the long-term wars we are engaged in currently, and their high costs, surely impact our economy.   Surely the military-industrial complex and its demands on the tax system (and its potential threats to our democratic institutions) are viable topics at ataxingmatter, as part of the discussion of tax policy and institutional sustainability.  The military-industrial complex gobbles up huge portions of the tax revenues that our system brings in.  At the same time, our income tax provisions are extraordinarily vulnerable to the intensive lobbying of members of the military-industrial complex--from provision of multiple tax breaks to soldiers in the military front line to enormous subsidies for the natural resources extractive industries that feed barrels of oil into the pipeline of energy inefficient ships, planes, drones, trucks, and other energy gobblers in the military supply network. Taxing and spending go hand in hand--even when their relationship has been warped by the kinds of tax cuts passed in the Bush Administration that built in huge shortfalls of revenues in order to benefit the owner/manager class while at the same time treating war expenditures (and the future expenditures for replacement equipment and care of wounded necessitated by today's war) as after-thoughts that could be added as supplemental budget items that are slipped through the legislative process without the kind of in-depth discussion and understanding that is required.  As a result, we have followed a "make war now, figure out how to pay later" mentality.   Put together with the huge, multiple Bush tax cuts--especially those for big corporations and their owners/managers--and the enormous financial commitment that was required to bailout the financial system because of its one-way-casino mentality (gamble the house's money and if you lose, the house makes it up to you; if you win, you eat it all yourself and leave no crumbs for the house), we are left with an economic system that requires deep and thoughtful intervention to right itself--tax reforms to undo at least a portion of the disastrous Bush policies, financial institution reforms to break up the Big Banks and return them to quasi-public utility status where the public interest counters their private greed in the types of decisions they can make, and military reforms  that include long-term thinking about the relationship between military decisions and the sustainability of democracy are at the very top of the list .

So how does torture--and the question of holding Bush administration officials accountable for using torture and advocating its use as a cornerstone of their approach to terrorism--relate to the economic/tax issues connected with the military-industrial complex?   The following offers a sketch of considerations that support considering torture a tool of war that has particularly bad connotations in connection with the over-militarization of the economy.

First, torture was, under Bush, a key factor of war policy.  It was openly advocated for by Cheney, and lawyers like Yoo in the administration pushed the boundaries (I would argue even "went beyond" the boundaries) of ethical requirements and competent representation to create some semblance of a legal foundation supporting the policy (and protecting the state actors who were embarking on it).  Torture was thus demonstrably a key factor in the way the Bush Adminsitration fought its wars.  

Second, torture as a practice weakens democratic institutions, since it can only be furthered through methods that run counter to our constitutional protections for due process--it demands that the executive powers be permitted to treat harshly those that are considered "other" without ordinary processes for first determining guilt before meting out punishment.  In the Bush case, there was an affirmative decision to torture stemming from the undemocratic (and unsupported in our constitutional history) notion of a president with unilateral powers to do anything domestically or internationally, even actions contrary to domestic law and international treaties, under the presidential powers to conduct wars that Congress has declared--the absurdly undemocratic, fascist, militaristic, and anti-constitutional concept of a "unitary executive" pushed by the neo-cons to support the accretion of incredible powers to Bush because of his role as "commander in chief" of the armed forces. 

Third, the use of torture invites a cycle of non-diplomatic and non-democratic responses.  In a world context where even Democrats and Republicans have lost the art of reasonable compromise in pursuit of the greater good, it is not surprising that cultures that are as deeply opposed in values as (a) open democracies that strive for equal rights for women and men and freedom from religion as well as freedom of religion and (b) male-dominated theocracies where religion is imposed will find it hard to find avenues for working together for the common good.  Add bias and assumptions about violence to the mix, add torture of those who perhaps are most prone to violent jihad to the mix, and the mixture becomes explose.  As noted, torture represents a decision to deal brutally with those who are considered "other" than the governed people but for whom there have been no public processes to determine guilt or innocence.   That lack of due process and lack of transparency breeds contempt for the government that embraces it--especially by those who bear the brunt of it.  The widely disseminated photos of torture in the Abu Ghrab prison firmly fixed the image of "America as a torturing state" for those who were already prone to view the nation as biased against Islam and as a brutal state pursuing capitalism at any expense.  Just as news of the Nazi concentration camps spread from one group of potential targets to another, the news of American use of torture and the intentionally anti-Islamic techniques (menstruating women, dogs, nakedness) must clearly have spread from one fervent Islamic group to another, reinforcing any hate and buttressing militant responses.  Torture, in other words, breeds contempt, and contempt breeds war in a vicious cycle of brutal torture-hate-brutal response. 

Thus, when torture and war crimes are furthered by  top officials, the military economy is benefited and both democratic institutions and ordinary Americans are the losers.  As one commentator on the Naked Capitalism post noted:

The only people who are intelligent, informed, AND support torture are the ones who WANT the US to have a lot of enemies, because they are in the pay of the military industrial complex. ...They want a forever war. ...[I]n the end, the neocons and the jihadis need each other for [their] own self-interests.  Unfortunately, it's the rest of us that end up paying. -Comment by "Skepticus Maximus"

So adding to the human rights and international treaty and domestic law arguments about holding the Bush Administration accountable is this economic/democratic institution argument .  People like Cheney who advocated torture and legal advocates like John Yoo who facilitated it ought to be be held responsible not only because their actions violated the Geneva Convention and  human rights agreements (we hanged Japanese prisoners for waterboarding) but because the advocacy and use of torture continue to threaten the foundations of the democratic institutions that we hold dear by underpinning an "above the law" military-industrial complex that is extraordinarily powerful and able to garner spending and tax provisions to its favor with apparent ease, with long-term deteriorative impact on the economy.