Showdown Fatigue

Robert Reich

We’re one week away from a massive cut in federal spending — cuts that will hurt millions of lower-income Americans who’ll lose nutrition assistance, housing, and money for their schools, among other things; that will furlough or lay off millions of government employees (adding more competition for jobs in an already horrible job market--jef), reduce inspections of the nation’s meat and poultry and pharmaceuticals and workplaces, eliminate the jobs of hundreds of thousands of people working for government contractors, and, according to Leon Panetta and other military leaders, seriously compromise the nation’s defenses.

Bad enough. If the spending cuts go through next week our fragile economy will slow further, causing more unemployment and misery. When consumers don’t have the money to buy enough to keep the economy moving, and government pulls back this much, businesses can’t justify keeping people on.

Yet the silence is deafening.

Republicans won’t deal. Obama has already cut $1.5 trillion out of the budget but Republicans insist on far more. They want the White House to propose major cuts in Social Security and Medicare.

Meanwhile, the Bush tax cuts have been extended permanently to everyone earning up to $400,000. Only the richest 2 percent have to pay at the rate they did under Bill Clinton, which was far lower than rich paid before 1981. That will generate $600 billion — less than half of the cuts Obama has accepted.

No one in their right mind would call this a balanced approach to deficit reduction. Yet Republican’s won’t even consider raising taxes on the most fortunate members of our society. They won’t limit deductions and loopholes that have driven down the super-rich’s tax rates to single digits (remember Romney’s “carried interest” loophole for private-equity mavens?).

So where’s the outcry? Why aren’t more people up in arms? Why aren’t big businesses (including major military contractors) and Wall Street screaming into the ears of the GOP? Where’s the outrage from Main Street?

I suspect most Americans are suffering showdown fatigue. After all, we got through the debt-ceiling showdown of August 2011 and the fiscal-cliff showdown on January 1, and the world didn’t end. So most people figure Washington will find a way out of this one, too.

Others have bought the Republican-Fox News lies that the deficit is our biggest economic problem, and government spending is to blame. So a massive, abrupt, and indiscriminate cut in spending seems okay.

It’s not okay. It will hurt the most vulnerable members of our society, and much of the middle class.

Yet it would be even worse if Obama and the Democrats were to give in to Republicans, and not demand more from those who have never been wealthier. Inequality is widening again. All the economic gains since the Great Recession have gone to the top. The richest 400 have more wealth than the bottom 150 million Americans put together.

Why not limit the mortgage interest deduction to $25,000 a year, so the rest of us don’t have to subsidize mansion mortgages? Why not a wealth tax on assets in excess of $5 million to pay for early-childhood education? Why not a small tax on financial transactions (as Europe is now instituting) to finance better schools? Why not close the loophole that private-equity and hedge-fund moguls live off of, to finance child nutrition and social services for the poor?

It’s no time for showdown fatigue. It’s time to fight.

The Bi-Partisan Fiscal Scam

Obama Gave It All Away
by JILL STEIN


As daylight begins to shine on the fiscal cliff deal just passed by Congress, it’s clear the expected bipartisan betrayal has occurred. And even worse, it lays the groundwork for much more to come.

In brief, the deal protects wealthy households earning up to $450,000 annually from tax increases, as it makes Bush tax cuts permanent for 98.5% of Americans. With this provision, Obama broke his promise to raise taxes on those earning over $250,000 per year.

The deal also ended the payroll tax holiday, hitting vulnerable working and middle class families with significant tax increases likely to take further steam out of the economy. This increased tax burden – of about $1000 for a family earning $50,000 per year- should have been replaced by another tax break for working families to prevent a reduction in demand that’s likely to further stall the ailing economy.

The deal also ushered in an additional $205 billion in wasteful corporate tax favors. New racetracks will get tens of millions, Goldman Sachs gets $1.6 billion in tax-free financing for its new massive headquarters, banks get a $9 billion dollar loophole for offshore financing, and U.S. multinationals are allowed to dodge taxes on income earned by foreign subsidiaries – giving them all the more reason to move jobs offshore.

Taking care of ill family members at home was dealt a set-back with a provision in the Affordable Care Act designed to let millions of elderly and disabled people get help at home rather than be placed in institutional care being repealed.

The deal included an urgent renewal of unemployment insurance, though many observers considered this virtually a given. It also deferred the self-inflicted devastation of the ‘sequester’, which would impose $110 billion in across the board domestic and military cuts, but only for two months.

In supporting the bill, President Obama gave away the one bargaining chip – the expiring Bush tax cuts – that he could have used in the upcoming negotiations on spending cuts and the debt ceiling. Not only did Obama get little of substance in return for his only bargaining chip. He actually ceded nearly half the $1 trillion in new revenue that John Boehner agreed to, (getting only $600 billion in tax increases on the wealthy over the next decade).

This lays groundwork for a disaster. Obama has already agreed to 4 trillion in deficit reduction. The revenue side of the deal he just signed generates little more than $600 billion. That means we can expect bipartisan collaboration on more than $3 trillion in cuts going in to the next round of brinksmanship over the debt ceiling. Obama has already indicated his willingness to cut Social Security, Medicare and other health programs. Now, thanks to his early capitulation, the Republicans have all the cards in their hands.

Stay tuned. Our voices are needed more than ever to continue the fight for strong Medicare, Social Security and Medicaid – and for an economy that works for all of us. Once again we’re seeing that real solutions will not be coming from the corporate sponsored political establishment. You can be prouder than ever of your vote against the continued bipartisan sell out. More than ever, we – the people – are the ones we’ve been waiting for.

Conceder In Chief?

December 31, 2012 - Paul Krugman NYTimes
OK, I’ve had my own sorta-kinda briefing on the apparent fiscal cliff deal, and I’m pretty much with Noam Scheiber. Viewed on its own, it’s a bad and upsetting deal but not as terrible as initial rumors had it. But the strategic consequences are likely to be very bad indeed, and in very short order too.


As background, it’s important to understand what Obama clearly could have gotten just by going over the cliff. Basically, he could have gotten the whole of the Bush high-end tax cuts reversed, which would mean close to $800 billion in revenue over the next decade. What he couldn’t get, or at least couldn’t count on getting, were various spending items. This included the extension of unemployment benefits and various “refundables” on things like the Earned Income Tax Credit, that is, pieces of tax legislation that end up having the government cut checks to families instead of the other way around.

So what Obama appears to have done is trade away part of the revenue from high-income taxpayers in return for some of the spending items he wanted. Extended unemployment benefits for a year, and the refundables either extended in perpetuity or for 5 years.

The revenue loss seems to be on the order of $150 billion, or maybe a bit less. The reasons it isn’t bigger is that while the threshold for the top marginal rate is moving up to 450K, the thresholds for other things — phaseout of deductions, higher taxes on dividends and capital gains — aren’t going up, they’re staying at 250K.

And at least one positive thing can be said: no giveaway on Social Security, Medicare, or Medicaid. Basically, no spending cuts at all.

If you want think about the longer-term implications here, they’re ambiguous. The deficit is no problem right now, but there will eventually be a collision between the rising costs of social insurance programs and the inadequacy of the revenue base. Something will have to give.

There were two big risks, from a progressive point of view, in Obama’s eagerness to get a Grand Bargain. One was that he would allow the Bush tax cuts to be locked in, making it very hard to get additional revenue; the other was that he would give in on fundamental benefit cuts. Well, he did #1, partially, but didn’t do #2 at all. This sets up a future confrontation: it will be very hard for progressives to raise taxes, but also very hard for conservatives to cut those social programs.

I suppose the best case you can make here is that raising rates on the top 2 percent was never going to be enough anyway, so Obama getting less from that than he should have isn’t that big a deal. And the nightmare in which he cut Medicare and/or Social Security, only to have Republicans run against those cuts in 2014, seems to have been averted.

OK, now for the really bad news. Anyone looking at these negotiations, especially given Obama’s previous behavior, can’t help but reach one main conclusion: whenever the president says that there’s an issue on which he absolutely, positively won’t give ground, you can count on him, you know, giving way — and soon, too. The idea that you should only make promises and threats you intend to make good on doesn’t seem to be one that this particular president can grasp.

And that means that Republicans will go right from this negotiation into the debt ceiling in the firm belief that Obama can be rolled.

At that point he can redeem himself by holding firm — but because the Republicans don’t think he will, they will play tough, almost surely forcing him to actually hit the ceiling with all the costs that entails. And look, if I were a Republican I would also be betting that he’ll cave.

So Obama has set himself and the nation up for a much uglier confrontation than we would have had if he had set a negotiating position and held to it.

Update: I should mention that on one issue, the estate tax, the problem is apparently with the Senate; there are, unfortunately, some heartland Dem Senators who are extremely solicitous of the handful of super-wealthy families in their states, so that Obama’s people don’t think they can get a majority for higher taxes here. It’s bizarre: states like New Jersey have far more large estates, not just total but per capita, than states like Montana, but it’s the Senators from the latter that are eager to preserve the inherited privileges of the few.

The Obscenely Rich Men Bent on Shredding the Safety Net

They want to cut social security and medicare to line their own pockets, not to address the budget deficit/national debt.--jef

##########

CEOs talk about shared sacrifice, but the only thing they want to share is your retirement money with their wealthy friends. 

By Lynn Stuart Parramore | AlterNet

New York magazine calls it a “Mass Movement for Millionaires.” The New York Times' Paul Krugman sums up the idea: “Hey, sacrifice is for the little people.”

The Campaign to Fix the Debt is a huge, and growing, coalition of powerful CEOs, politicians and policy makers on a mission to lower taxes for the rich and to cut Social Security, Medicare and Medicaid under the cover of concern about the national debt. The group was spawned in July 2012 by Erskine Bowles and Alan Simpson, architects of a misguided deficit reduction scheme in Washington back in 2010. By now, the "fixers" have collected a war chest of $43 million. Private equity billionaire Peter G. Peterson, longtime enemy of the social safety net, is a major supporter.

This new Wall Street movement, which includes Republicans and plenty of Democrats, is hitting the airwaves, hosting roundtables, gathering at lavish fundraising fêtes, hiring public relations experts, and traveling around the country to push its agenda. The group aims to seize the moment of the so-called "fiscal cliff" debate to pressure President Obama to concede to House Republicans and continue the Bush income tax cuts for the rich while shredding the social safety net. The group includes Goldman Sachs’ Lloyd Blankfein, JPMorgan Chase’s Jamie Dimon, Honeywell’s David Cote, Aetna’s Mark Bertolini, Delta Airlines’ Richard Anderson, Boeing’s W. James McNerney, and over 100 other influential business honchos and their supporters.

Corporations represented by the fixers have collected massive bailouts from taxpayers and gigantic subsidies from the government, and they enjoy tax loopholes that in many cases bring their tax bills down to zero. Sometimes their creative accountants even manage to get money back from Uncle Sam. For instance, according to Citizens for Tax Justice, Boeing has paid a negative 6.5 percent tax rate for the last decade, even though it was profitable every year from 2002 through 2011.

These CEOs talk about shared sacrifice, but it seems that they don’t intend to share anything but your retirement money with their wealthy friends. As New York mag reports:

“Most on-the-record comments are a mishmash of platitudes about shared sacrifice and working together for the good of the country. But interviews with a number of organizers and CEO council members point to a massive networking effort among one-percenters — one that relies on strategically exploiting existing business relationships and appealing to patriotic and economic instincts."

As the Fix the Debt gang moves around the country spreading their message, they are starting to attract public protests. On November 27, they were greeted in North Carolina with a rally  from NC Progress, which called for an end to the Bush tax cuts for the wealthiest 2 percent and told the group to keep its hands off the middle-class wallet. The fixers are often vague about their mission, and they tend to speak in coded language that conceals their actual goals. Let’s have some blunt talk about what the fixers want to do and why they want to do it – talk you're unlikely to hear in mainstream media supported by corporate advertising.

1. “Fix” means cut: When they say “fix” Social Security, they mean cut Social Security. Fixers want to convince the public that a well-managed, hugely popular program that does not add to the deficit (it’s self-funded) is somehow in crisis and requires intervention in the form of various cutting schemes. They seek this because many of the rich do not want to pay taxes for Social Security, and financiers want very much to move toward privatization of retirement accounts so they can collect fees on such accounts.

2. “Reform” means rob. When the say “reform” the tax code, they mean “make taxes even lower for the rich.” The wealthy do not pay their fair share of taxes in the United States, which is a major reason there is a large deficit in the first place. When the very wealthy pay lower tax rates than ordinary working people, the result is an increasing redistribution of income upward that puts the U.S. in the top 30 percent in income inequality out of 140 nations, according to the Central Intelligence Agency [7]. We’re a shameful #42. Income inequality is not only unfair, it’s dangerous and makes society unstable.

3.“Bipartisan” means all of the rich. Fix the Debt is a pro-business ideological movement pretending to be a bipartisan group of concerned citizens. But the group is really just a coalition for the greedy, unpatriotic rich. There are plenty of financiers and other 1 percenters in the Democratic Party, and some of them have decided to join forces with their GOP counterparts to work toward a goal that means a great deal to all of them: Making the rich even richer.

4. “Concern” means covet. There was a time, a couple of generations ago, when business leaders would not dare to go public with their desire to increase income inequality and stick it to hard-working Americans. When Owen D. Young, CEO of General Electric in the '20s and '40s, spoke to an audience at Harvard Business School in 1927, he emphasized that the purpose of a corporation was to provide a good life not only to owners, but also to employees. Corporations, he said, were meant to serve the larger goals of the nation:

“Here in America, we have raised the standard of political equality. Shall we be able to add to that, full equality of economic opportunity? No man is wholly free unless he is both politically and economically free.”

Fast forward to 2012: Jeffrey Immelt, the current CEO of GE, is a member of the Fix the Debt Campaign, which is designed to lower the expectations of hard-working Americans. Goldman Sachs honcho Lloyd Blankfein explained this recently in a CBS interview:

 “You’re going to have to do something, undoubtedly, to lower people’s expectations of what they’re going to get, the entitlements, and what people think they’re going to get, because you’re not going to get it.” ~ Goldman Sachs CEOLloyd Blankfein

5. “Fiscal conservative” means economically confused. Longtime Wall Street executive Steve Rattner, one of Obama’s auto bailout czars, has been using his influence to attract tycoons from the financial industry to the Fix the Debt movement. Over the last year, Rattner has been on a crusade to convince Americans that they should put aside their worries about real crises like unemployment to focus on the deficit. Rattner, like many of his cohorts, poses as a moderate whose thinking is needed to counter the advice of respected economists like Nobel Prize-winners Paul Krugman and Joseph Stiglitz, who have long been warning that defict hysteria is not only counterproductive, but based on a lack of understanding of how the economy actually works.

Political economist Thomas Ferguson, who teaches at UMass Boston and is a senior fellow at the Roosevelt Institute, described the dubious policies the fixers defend:

“Talk about the audacity of hope! The people who brought you the Great Recession by pushing deregulation and financial leverage to insane dimensions are back. Now they propose to ‘fix the debt’ by throwing average Americans who generously bailed them out in 2008-09 over the fiscal cliff.

One trusts that even in our money-driven political system, their transparently self-interested nonsense will be firmly rejected. There is no reason why anyone needs to do anything at all about Social Security for a long time; as even Peter Orszag admits in the fine print. It just isn't a driver of the deficit.

The U.S. does need to reduce its spending on defense and it certainly needs to aggressively contain medical costs. But you do both of those the old fashioned way. In the case of defense, you stop plunging into wars and attend carefully to what actually is needed to defend America. In the case of medical spending, you end ‘fee for service’ schemes that reward endless tests and procedures and you vigorously pursue anti-trust and regulatory remedies. You don't simply cut Americans off from health care. It's ridiculous that we have ‘single payer’ for ailing banks, but not citizens. If you are worried about the deficit, just let tax rates rise back to the levels of the Clinton era, when growth ran far ahead of today's economy, and tax dividends, carried interest, and capital gains at the rates working Americans pay. And don't, absolutely don't, let American companies escape taxation by stashing their money abroad.”

6. "Strip-mining is not leadership." Fixers present themselves as magnanimous, responsible leaders doing what they believe is best for the country. But that’s a tough sell when you’re advocating policies that mainly benefit…yourself.

Economist Rob Johnson, director of the Institute for New Economic Thinking and also a senior fellow at the Roosevelt Institute, shared his view of the Campaign to Fix the Debt in an email. As he memorably put it, "strip-mining is not leadership":

“I believe that a convincing argument depends upon the demonstrated self-sacrifice of the leader offering a vision. This group does not appear to be doing something for the nation. They are doing something for their own self-interest (tax liability). There is confusion between: 1) what is good for business and therefore jobs, something we all should be concerned about; and 2) the personal benefit of CEOs based on who bears the burden of the debt reduction plan. This group does not seem to gain the credibility that comes from generous contribution through self sacrifice. As a result they will arouse great suspicion rather than inspire us as 'leaders' who are guiding the design of a just, productive and coherent society.  

With all of the suspicion of leadership in America,  business, media, scholars and politicians have to lead in a credible way. This just looks like guys defending their self-interest in a dysfunctional period of our nation's history because elites take so much for themselves.”

It's no secret that the wealthy have done extremely well over the last several decades, even since the Wall Street-driven financial crash that devastated millions of Americans. In 2010, the top 1 percent of U.S. families raked in as much as 93 percent of the country’s income growth, according to Emmanuel Saez, a UC Berkeley economist who looked at IRS data.

Which raises several important questions for Bowles, Simpson, Blankfein, Rattner & Co.: How much is enough? How far are you willing to tip the balance of income in the country toward the wealthy? What concern do you really have about the deficit, or for that matter, the future of America? Inquiring minds want to know. 

Bush tax cuts and wars account for half the public debt by 2019

Our Collapsing Economy and Currency

By: Paul Craig Roberts| December 1, 2012 | 

Is the “fiscal cliff” real or just another hoax? The answer is that the fiscal cliff is real, but it is a result, not a cause. The hoax is the way the fiscal cliff is being used.

The fiscal cliff is the result of the inability to close the federal budget deficit. The budget deficit cannot be closed because large numbers of US middle class jobs and the GDP and tax base associated with them have been moved offshore, thus reducing federal revenues. The fiscal cliff cannot be closed because of the unfunded liabilities of eleven years of US-initiated wars against a half dozen Muslim countries--wars that have benefited only the profits of the military/security complex and the territorial ambitions of Israel. The budget deficit cannot be closed, because economic policy is focused only on saving banks that wrongful financial deregulation allowed to speculate, to merge, and to become too big to fail, thus requiring public subsidies that vastly dwarf the totality of US welfare spending.

The hoax is the propaganda that the fiscal cliff can be avoided by reneging on promised Social Security and Medicare benefits that people have paid for with the payroll tax and by cutting back all aspects of the social safety net from food stamps to unemployment benefits to Medicaid, to housing subsidies. The right-wing has been trying to get rid of the social safety net ever since Franklin D. Roosevelt constructed it, out of fear or compassion or both, during the Great Depression.

Washington’s response to the fiscal cliff is austerity: spending cuts and tax increases. The Republicans say they will vote for the Democrats’ tax increases if the Democrats vote for the Republican’s assault on the social safety net. What bipartisan compromise means is a double-barreled dose of austerity.

Ever since John Maynard Keynes, economists have understood that tax increases and spending cuts suppress, not stimulate, economic activity. This is especially the case in an economy such as the American one, which is driven by consumer spending. When spending declines, so does the economy. When the economy declines, the budget deficit rises.

This is especially the case when an economy is weak and already in decline. A declining economy means less sales, less employment, less tax revenues. This works against the effort to close the federal budget deficit with austerity measures. Instead of strengthening the economy, the austerity measures weaken it further. To cut unemployment benefits and food stamps when unemployment is high or rising would be to provoke social and political instability.

Some economists, such as Robert Barro at Harvard University, claim that stimulative measures, the opposite of austerity, don’t work, because consumers anticipate the higher taxes that will be needed to cover the budget deficit and, therefore, reduce their spending and increase their saving in order to be able to pay the anticipated higher taxes.

In other words, the Keynesian effort to stimulate spending causes consumers to reduce their spending. I don’t know of any empirical evidence for this claim.

Regardless, the situation on the ground at the present time is that for the majority of people, incomes are stretched to the limit and beyond. Many cannot pay their bills, their mortgages, their car payments, their student loans. They are drowning in debt, and there is nothing that they can cut back in order to save money with which to pay higher taxes.

Many commentators are complaining that Congress will refuse to face the difficult issues and kick the can down the road, leaving the fiscal cliff looming. This would probably be the best outcome. As the fiscal cliff is a result, not a cause, to focus on the fiscal cliff is to focus on the symptoms rather than the disease.

The US economy has two serious diseases, and neither one is too much welfare spending.

One disease is the offshoring of US middle class jobs, both manufacturing jobs and professional service jobs such as engineering, research, design, and information technology, jobs that formerly were filled by US university graduates, but which today are sent abroad or are filled by foreigners brought in on H-1B work visas at two-thirds of the salary.

The other disease is the deregulation, especially the financial deregulation, that caused the ongoing financial crisis and created banks too big to fail, which has prevented capitalism from working and closing down insolvent corporations.

The Federal Reserve’s policy is focused on saving the banks, not on saving the economy. The Federal Reserve is purchasing not only new Treasury bonds issued to finance the more than one trillion dollar annual federal deficit but also the banks’ underwater financial instruments, taking them off the banks’ books and putting them on the Federal Reserve’s books.

Normally, debt monetization of this amount results in rising inflation, but the money that the Federal Reserve is creating in its attempt to manage the public debt and the banks’ private debt is hung up in the banking system as excess reserves and is not finding its way into the economy. The banks are too busted to lend, and consumers are too indebted to borrow.

However, the debt monetization poses a second threat that is capable of biting the US economy and consumer living standards very hard. Foreign central banks, foreign investors in US stocks and financial instruments, and Americans themselves observing the Federal Reserve’s continuous monetization of US debt cannot avoid concern about the dollar’s value as the supply of ever more dollars continues to pour out of the Federal Reserve.

Already there is evidence of central banks and individuals moving out of dollars into gold and silver bullion and into other currencies of countries that are not hemorrhaging debt and money. According to John Williams of Shadowstats.com, the US dollar as a percentage of global holdings of reserve assets has declined from 36.6% in 2006 to 28.7% in 2012. Gold has increased from 10.5% to 12.8% and other foreign currencies except the euro increased from 38.4% to 44.4%.

Russia, China, Brazil, India, and South Africa intend to conduct trade among themselves in their own currencies without use of the dollar as reserve currency. The EU countries conduct their trade with one another in euros, and although not reported in the US media, Asian countries are discussing a new common currency for trade among themselves.

The world is abandoning the use of the dollar to settle international accounts, and the demand for dollars is falling as the Federal Reserve increases the supply of dollars.

This means that the price of the dollar is threatened.

Concern over the dollar means concern over dollar-denominated financial instruments such as stocks and bonds. The Chinese hold some $2 trillion in US financial instruments. The Japanese hold about $1 trillion in US Treasuries. The Saudis and the oil emirates also hold large quantities of US dollar financial instruments. At some point the move away from the dollar also means a move away from US financial instruments. The dumping of US stocks and bonds would destabilize US financial markets and wipe out the remainder of US wealth.

As I have previously written, the Federal Reserve can create new money with which to purchase the dumped financial instruments, thus maintaining their prices. But the Federal Reserve cannot print gold or foreign currencies with which to buy up the dollars that foreigners are paid for their US stocks and bonds. When the dollars in turn are dumped, the exchange value of the dollar will collapse, and US inflation will explode.

The onset of hyperinflation can be as sudden as the collapse of a currency’s exchange value.

The real crisis facing the US is the impending collapse of the US dollar’s foreign exchange value. The US dollar’s value in relation to silver and gold has already collapsed. In the past ten years, gold’s price in US dollars has increased from $250 per ounce to $1,750 per ounce, an increase of $1,500. Silver’s price has risen from $4 per ounce to $34 per ounce. These price rises are not due to a sudden scarcity of gold and silver, but to a flight from the dollar into the two forms of historical money that cannot be created with the printing press.

The price of oil has risen from $20 a barrel ten years ago to as high as $120 per barrel earlier this year and currently $90 a barrel. This price rise has come about despite a weak world economy and without any supply restrictions other than those caused by the attempted US occupation of Iraq, the Western assault on Libya, and the self-harming Western sanctions on Iran, impacts most likely offset by the Saudis, still Washington’s faithful puppet, a country that pumps out its precious life fluid in order to save the West from its own mistakes. The moronic neoconservatives wish to overthrow the Saudi Arabian government, but what more faithful servant has Washington ever had than the Saudi royal house?

What can be done? For a number of years I have pointed out that the problem is the loss of US employment, consumer income, GDP, and tax base to offshoring. The solution is to reverse the outward flow of jobs and to bring them back to the US. This can be done, as Ralph Gomory has made clear, by taxing corporations according to where they add value to their product. If the value is added abroad, corporations would have a high tax rate. If they add value domestically with US labor, they would face a low tax rate. The difference in tax rates can be calculated to offset the benefit of the lower cost of foreign labor.

As all offshored production that is brought to the US to be marketed to Americans counts as imports, relocating the production in the US would decrease the trade deficit, thus strengthening belief in the dollar. The increase in US consumer incomes would raise tax revenues, thus lowering the budget deficit. It is a win-win solution.

The second part to the solution is to end the expensive unfunded wars that have ruined the federal budget for the past 11 years as well as future budgets due to the cost of veterans’ hospital care and benefits. According to ABC World News, “In the decade since the Sept. 11, 2001 terrorist attacks on the World Trade Center, 2,333,972 American military personnel have been deployed to Iraq, Afghanistan or both, as of Aug. 30, 2011 [more than a year ago].” These 2.3 million veterans have rights to various unfunded benefits including life-long health care. Already, according to ABC, 711,986 have used Veterans Administration health care between fiscal year 2002 and the third-quarter of fiscal year 2011. http://abcnews.go.com/Politics/us-veterans-numbers/story?id=14928136#1

The Republicans are determined to continue the gratuitous wars and to make the 99 percent pay for the neoconservatives’ Wars of Hegemony while protecting the 1 percent from tax increases.

The Democrats are little different.

No one in the White House and no more than one dozen members of the 535 member US Congress represents the American people. This is the reason that despite obvious remedies nothing can be done. America is going to crash big time.

And the rest of the world will be thankful. America along with Israel is the world’s most hated country. Don’t expect any foreign bailouts of the failed “superpower.”

Senate Votes to End Tax Breaks for Rich

Sen. Bernie Sanders, D-VT
July 25, 2012

The Senate on Wednesday voted 51 to 48 to extend tax cuts for most working Americans and end Bush-era tax breaks in 2013 for individuals making more than $200,000 a year and couples earning at least $250,000. "With a $16 trillion national debt and a $1 trillion deficit, we cannot continue to give tax breaks to millionaires and billionaires," Sen. Bernie Sanders said after the vote. "This is a step forward in ending the Bush-era tax breaks for the rich and asking the wealthiest Americans, who are doing phenomenally well, to do their fair share to bring down deficits. I hope our Republican friends in the House can overcome their support for tax breaks for the wealthy and support this common-sense approach to cutting deficits."

The proposal tax cuts that the Senate are worth $1,600 to the average family.

The bill also extends other tax provisions critical to the middle class - the American Opportunity Tax Credit, the expanded Child Tax Credit and Earned Income Tax Credit - that help families afford college, cover their bills and provide for their children.

The American Opportunity Tax Credit helps middle-class families afford college by covering up to $2,500 of the cost of tuition.

The Child Tax Credit provides hard-working families with $1,000 worth of tax relief for each child under age 17.

The Earned Income Tax Credit is a refundable credit that offers assistance to working individuals and families who earned less than $49,078 in 2011.

Three Fallacies the Super-Rich (through their media outlets) Continue to Sell

Being in the Highest Class Doesn't Mean You're a High Class Person

by PAUL BUCHHEIT

 

When it comes to the economy, too many Americans continue to be numbed by the soothing sounds of conservative spin in the media. Here are three of their more inventive claims:

1. Higher taxes on the rich will hurt small businesses and discourage job creators

A recent Treasury analysis found that only 2.5% of small businesses would face higher taxes from the expiration of the Bush tax cuts.

As for job creation, it’s not coming from the people with money. Over 90% of the assets owned by millionaires are held in a combination of low-risk investments (bonds and cash), the stock market, real estate, and personal business accounts. Angel investing (capital provided by affluent individuals for business start-ups) accounted for less than 1% of the investable assets of high net worth individuals in North America in 2011. The Mendelsohn Affluent Survey agreed that the very rich spend less than two percent of their money on new business startups.

The Wall Street Journal noted, in way of confirmation, that the extra wealth created by the Bush tax cuts led to the “worst track record for jobs in recorded history.”

2. Individual initiative is all you need for success.

President Obama was criticized for a speech which included these words: “If you’ve been successful, you didn’t get there on your own…when we succeed, we succeed because of our individual initiative, but also because we do things together.”

‘Together’ is the word that winner-take-all conservatives seem to forget. Even the richest and arguably most successful American, Bill Gates, owes most of his good fortune to the thousands of software and hardware designers who shaped the technological industry over a half-century or more. A careful analysis of his rise shows that he had luck, networking skills, and a timely sense of opportunism, even to the point of taking the work of competitors and adapting it as his own.

Gates was preceded by numerous illustrious Americans who are considered individual innovators when in fact they used their skills to build upon the work of others. On the day that Alexander Graham Bell filed for a patent for his telephone, electrical engineer Elisha Gray was filing an intent to patent a similar device. Both had built upon the work of Antonio Meucci, who didn’t have the fee to file for a patent. Thomas Edison’s incandescent light bulb was the culmination of almost 40 years of work by other fellow light bulb developers. Samuel Morse, Eli Whitney, the Wright brothers, and Edison had, as eloquently stated by Jared Diamond, “capable predecessors…and made their improvements at a time when society was capable of using their product.”

If anything, it’s harder than ever today to ascend through the ranks on one’s own. As summarized in the Pew research report ”Pursuing the American Dream,” only 4% of those starting out in the bottom quintile make it to the top quintile as adults, “confirming that the ‘rags-to-riches’ story is more often found in Hollywood than in reality.”

3. A booming stock market is good for all of us

The news reports would have us believe that happy days are here again when the stock market goes up. But as the market rises, most Americans are getting a smaller slice of the pie.

In a recent Newsweek article, author Daniel Gross gushed that “The stock market has doubled since March 2009, while corporate profits and exports have surged to records.”

But the richest 10% of Americans own over 80% of the stock market. What Mr. Gross referred to as the “democratization of the stock market” is actually, as demonstrated by economist Edward Wolff, a distribution of financial wealth among just the richest 5% of Americans, those earning an average of $500,000 per year.

Thanks in good part to a meager 15% capital gains tax, the richest 400 taxpayers DOUBLED their income and nearly HALVED their tax rates in just seven years (2001-2007). So dramatic is the effect that anyone making more than $34,500 a year in salary and wages is taxed at a higher rate than an individual with millions in capital gains.

There’s yet more to the madness. The stock market has grown much faster than the GDP over the past century, which means that this special tax rate is being given to people who already own most of the unearned income that keeps expanding faster than the productiveness of real workers.

And one fading illusion: People in the highest class are people of high class.

Scientific American and Psychological Science have both reported that wealthier people are more focused on self, and have less empathy for people unlike themselves.

This sense of self-interest, according to a study published in the Proceedings of the National Academy of Sciences and other sources, promotes wrongdoing and unethical behavior.

Can’t help but think about bankers and hedge fund managers.

The Selling of American Democracy: The Perfect Storm

Friday, July 13, 2012 by RobertReich.org

by Robert Reich

Who’s buying our democracy? Wall Street financiers, the Koch brothers, and casino magnates Sheldon Adelson and Steve Wynn. 

And they’re doing much of it in secret.

It’s a perfect storm:

The greatest concentration of wealth in more than a century — courtesy “trickle-down” economics, Reagan and Bush tax cuts, and the demise of organized labor.

Combined with…

Unlimited political contributions — courtesy of Republican-appointed Justices Roberts, Scalia, Alito, Thomas, and Kennedy, in one of the dumbest decisions in Supreme Court history, Citizens United vs. Federal Election Commission, along with lower-court rulings that have expanded it.

Combined with…

Complete secrecy about who’s contributing how much to whom — courtesy of a loophole in the tax laws that allows so-called non-profit “social welfare” organizations to accept the unlimited contributions for hard-hitting political ads.

Put them all together and our democracy is being sold down the drain.

With a more equitable and traditional distribution of wealth, far more Americans would have a fair chance of influencing politics. As the great jurist Louis Brandeis once said, “we can have a democracy or we can have great wealth in the hands of a comparative few, but we cannot have both.”

Alternatively, inequality wouldn’t be as much of a problem if we had strict laws limiting political spending or, at the very least, disclosing who was contributing what.

But we have an almost unprecedented concentration of wealth and unlimited political spending and secrecy. 

I’m not letting Democrats off the hook. Democratic candidates are still too dependent on Wall Street casino moguls and real casino magnates (Steve Wynn has been a major contributor to Harry Reid, for example). George Soros and a few others have poured big bucks into Democratic coffers. So have a handful of trade unions. 

But make no mistake. Compared to what the GOP is doing this year, Democrats are conducting a high-school bake sale. The mega-selling of American democracy is a Republican invention, and Romney and the GOP are its major beneficiaries.

And the losers aren’t just Democrats. They’re the American people. 

You need to make a ruckus. Don’t fall into the seductive trap of cynicism. That’s what the sellers of American democracy are counting on. If you give up on our system of government, they win everything.

This coming Monday, for example, the Senate has scheduled a cloture vote on the DISCLOSE ACT, which would at least require that outfits like the Chamber of Commerce and Karl Rove’s “Crossroads GPS” disclose who’s contributing what. Contact your senators, and have your friends and relatives in other states — especially those with Republican senators (who have been united in their opposition to disclosure) — contact theirs. If the DISCLOSE ACT is voted down, hold accountable those senators (and, when and if it gets to the House, those House members) who are selling out our democracy for the sake of their own personal ambitions.

The Fortunate 400

The Fortunate 400 - top 400 wealthiest Americans pay an average of 11.6% in taxes. The poorest class of Americans pay 25%. In a depressed economy, this doesn't work. I couldn't care any less if the wealthy get tax breaks during a strong economy. But as long as the economy is in the tank, the wealthy need to pony up and help pull us out of the mess they helped to get us into. Once the economy produces substantial growth from which it can gain momentum, give them their tax cuts back, who cares? but the whole philosophy with that should be:

No tax cuts:
A: during a bad economic slump, and/or
B: while funding multiple wars

The dumbest thing any president did (other than riding in an open convertible) is cut taxes while embroiled in two wars. Hello budget problems in a debt based economy!

The Rich Are Different Than You and Me

They Pay Fewer Taxes
by BILL MOYERS and MICHAEL WINSHIP

Benjamin Franklin, who used his many talents to become a wealthy man, famously said that the only things certain in life are death and taxes. But if you’re a corporate CEO in America today, even they can be put on the back burner – death held at bay by the best medical care money can buy and the latest in surgical and life extension techniques, taxes conveniently shunted aside courtesy of loopholes, overseas investment and governments that conveniently look the other way.

In a story headlined, “For Big Companies, Life Is Good,” The Wall Street Journal reports that big American companies have emerged from the deepest recession since World War II more profitable than ever: flush with cash, less burdened by debt, and with a greater share of the country’s income. But, the paper notes, “Most of the 1.1 million jobs the big companies added since 2007 were outside the U.S. So, too, was much of the $1.2 trillion added to corporate treasuries.”

To add to this embarrassment of riches, the consumer group Citizens for Tax Justice reports that more than two dozen major corporations – including GE, Boeing, Mattel and Verizon — paid no federal taxes between 2008 and 2011. They got a corporate tax break that was broadly supported by Republicans and Democrats alike.

Corporate taxes today are at a 40-year-low — even as the executive suites at big corporations have become throne rooms where the crown jewels wind up in the personal vault of the CEO.

Then look at this report in The New York Times: Last year, among the 100 best-paid CEOs, the median income was more than $14 million, compared with the average annual American salary of $45,230. Combined, this happy hundred executives pulled down more than two billion dollars.

What’s more, according to the Times “… these CEO’s might seem like pikers. Top hedge fund managers collectively earned $14.4 billion last year.” No wonder some of them are fighting to kill a provision in the recent Dodd-Frank reform law that would require disclosing the ratio of CEO pay to the median pay of their employees. One never wishes to upset the help, you know. It can lead to unrest.

That’s Wall Street — the metaphorical bestiary of the financial universe. But there’s nothing metaphorical about the earnings of hedge fund tigers, private equity lions, and the top dogs at those big banks that were bailed out by tax dollars after they helped chase our economy off a cliff.

So what do these big moneyed nabobs have to complain about? Why are they whining about reform? And why are they funneling cash to super PACs aimed at bringing down Barack Obama, who many of them supported four years ago?

Because, writes Alec MacGillis in The New Republic — the President wants to raise their taxes. That’s right — while ordinary Americans are taxed at a top rate of 35% on their income, Congress allows hedge fund and private equity tycoons to pay only pay 15% of their compensation. The President wants them to pay more; still at a rate below what you might pay, and for that he’s being accused of – hold onto your combat helmets — “class warfare.” One Wall Street Midas, once an Obama fan, now his foe, told MacGillis that by making the rich a primary target, Obama is “shitting on people who are successful.”

And can you believe this? Two years ago, when President Obama first tried to close that gaping loophole in our tax code, Stephen Schwarzman, who runs the Blackstone Group, the world’s largest private equity fund, compared the President’s action to Hitler’s invasion of Poland.

That’s the same Stephen Schwarzman whose agents in 2006 launched a predatory raid on a travel company in Colorado. His fund bought it, laid off 841 employees, and recouped its entire investment in just seven months – one of the quickest returns on capital ever for such a deal.

To celebrate his 60th birthday Mr. Schwarzman rented the Park Avenue Armory here in New York at a cost of $3 million, including a gospel choir led by Patti LaBelle that serenaded him with “He’s Got the Whole World in His Hands.” Does he ever — his net worth is estimated at nearly $5 billion. Last year alone Schwarzman took home over $213 million in pay and dividends, a third more than 2010. Now he’s fundraising for Mitt Romney, who, like him, made his bundle on leveraged buyouts that left many American workers up the creek.

To add insult to injury, average taxpayers even help subsidize the private jet travel of the rich. On the Times’ DealBook blog, mergers and acquisitions expert Steven Davidoff writes, “If an outside security consultant determines that executives need a private jet and other services for their safety, the Internal Revenue Service cuts corporate chieftains a break. In such cases, the chief executive will pay a reduced tax bill or sometimes no tax at all.”

Are the CEOs really in danger? No, says Davidoff, “It’s a common corporate tax trick.”

Talk about your friendly skies. No wonder the people with money and influence don’t feel connected to the rest of the population. It’s as if they live in a foreign country at the top of the world, like their own private Switzerland, at heights so rarified they can’t imagine life down below.

Voters Have Two Candidates, No Choice

Thursday, March 22, 2012 by TruthDig
by Robert Scheer

With Mitt Romney’s super-PAC limo now on cruise control to victory at the GOP convention, voters are left with only two reasons to vote against Barack Obama: Either they are desperate to return a white man to the White House or they feel strongly that it is time to break the glass ceiling denying Mormons the presidency.

Out of a sense of tolerance I could cotton to the latter—heck, why should the bizarre beliefs of Romney’s church be a deal breaker? I’m hoping for a strong Jewish contender someday and wouldn’t like her burdened with defending Old Testament claptrap.

The problem in this mind-numbing Republican primary season is that the campaign has exposed Romney as not just another white male Mormon like some of the fairly reasonable senators who have represented Utah. Or like Romney’s own father, George, at one time the governor of Michigan. No, this Romney is now widely regarded as the vulture capitalist he is, a politician who is a say-and-do-anything opportunist with no moral limits on his outsized ambitions.

Nothing is sacred to the former Massachusetts governor, not even his own signature health plan that he sold to that state’s voters as the standard for rational government decision-making as regards the deep problems faced by our economy. The weaknesses of what Romney and the GOP deride as Obamacare have been all too obvious in the plan Romney touted in Massachusetts—a mandate to sign up without the cost restraints that a single-payer government program would offer. Now, with a new national plan from Rep. Paul Ryan emerging from the U.S. House, Romney and the Republican Party generally seek to compound that error by undermining Medicare and Medicaid, two programs that offer at least a modicum of cost control. Instead, the candidate and his fellow Republicans would turn consumers over completely to the tender mercies of for-profit insurers.

The justification for gutting what little remains of enlightened government programs to aid the vulnerable is, of course, the dreaded federal deficit. (Lest we forget, seniors were foremost among the vulnerable until the arrival of the programs now under attack.) What is so outrageously hypocritical about the proposals from both Romney and Ryan is that they do not touch, and indeed would further open, the spending spigot that caused all of the red ink following President Bill Clinton’s budget-balancing act.

Both Romney and Ryan want to increase President George W. Bush’s tax breaks for the wealthy, which seriously cut revenues while treating as sacrosanct the Cold War levels in military spending that Bush put in place in a wildly irrational response to the 9/11 attacks. This week Ryan announced that defense spending is off-limits, and Romney has campaigned for an increase in what represents more than 40 percent of the non-mandated federal budget.

I can’t wait for the moment in a presidential debate when Romney talks about the need for even more advanced U.S. weaponry to counter the emerging military threat from Communist China and Obama ever so coolly points out that Bain Capital, the company that Romney co-founded, has been supplying those Red tyrants with surveillance equipment to better monitor their citizenry.

With Ron Paul’s fortunes as a presidential candidate declining, there is no pressure on GOP leaders to link a withdrawal from the imperial adventures in Iraq and Afghanistan with a reduced federal handout to the corporate military-industrial complex. Nor will the Republican leadership confront the party’s responsibility for the nation’s economic collapse, the subsequent loss in tax revenues, and the Fed and Treasury policies that bailed out the Wall Street charlatans who invented this meltdown.

Instead of reigning in Wall Street greed, the GOP is demanding a reversal of even the tepid efforts of the Obama administration to hold the financial industry accountable to honest business practices. And, at a time when the largest multinational companies have shifted jobs and profits abroad, the GOP stands for rewarding that betrayal of American workers by eliminating all taxes on overseas corporate profits.

The pity in all this is that a legitimate critique of the Obama record—present to some degree in the Ron Paul dissection of the president’s war policy and his continuation of the Bush Wall Street bailout strategy—will not be heard in the general election debate. Instead, on the one hand, we will have Obama offering clever-sounding arguments for establishment policies that fail to deal with high unemployment, a brutal level of housing foreclosures and sharpening income inequality. And on the other hand there will be a Republican Party so steeped in the ethos of greed, racism and war-mongering that it would leave even Ronald Reagan and Richard Nixon, were they alive, with no choice but to vote for Obama as the lesser evil.

The Best Reason for the Very Rich to be Paying A LOT MORE in Taxes

Monday, March 5, 2012 by Common Dreams
by Paul Buchheit

Before getting into the best reason, here are some of the usual -- and always good -- reasons. First of all, for every dollar the richest 1% earned in 1980, they've added three more dollars. The poorest 90% have added ONE CENT.

The richest million families have not worked three times (let alone 300 times) harder than the other 99 million families.

The richest 10% own 80% of the stock market, providing billions in "unearned income" that is taxed at less than half the rate of income earned through real work. The richest million families may have actually worked LESS than the other 99 million families.

A number of individuals have had one-year incomes over a billion dollars, enough to pay the salaries of 25,000 teachers or health care workers or emergency responders. It's questionable whether a guy who makes a billion betting on a mortgage collapse is worth even one teacher or health care worker or emergency responder.

Next is the woeful state of tax collections on the people making most of the money. Mitt Romney pays 15%, Warren Buffett 17.4%. The richest 400 Americans, 16.6%. The whole top 1% (a million families) paid less than 23% in 2006.

Average Americans pay more than that. Studies show that when state and local taxes, payroll taxes, property taxes, sales taxes, and excise taxes are tallied up, low-income people can be paying a higher percentage of taxes than the rich, perhaps up to 40% of their incomes.

Average Americans are also paying more than corporations. For every dollar of workers' payroll tax paid in the 1950s, corporations paid three dollars. Now it's 16 cents.

Whew. A lot of good reasons for the rich to be paying a lot more in taxes.

But here's the BEST REASON. The super-rich like to believe their own initiative and creativity have been the primary drivers of growth in technology and science and business and medicine. Some innovative business leaders deserve credit for putting the pieces together on specific initiatives. But the pieces themselves were put together over many years by thousands of less conspicuous people. As Elizabeth Warren said, "There is nobody in this country who got rich on his own. Nobody."

Consider just a simple communications device. The pieces were put together by a procession of chemists, physicists, chip designers, programmers, engineers, production-line workers, market analysts, testers, troubleshooters, etc., etc. They, in turn, couldn't have succeeded without another layer of people providing sustenance and medical support and security and administrative assistance and transportation and office maintenance for the technologists. ALL of them contributed to the final product.

You say a lot of them DID get paid? Well, then, something's wrong, because few of the profits over the last 30 years went to this "middle class" of people to keep them financially secure, and to keep them educated in all the new technologies that are replacing their jobs.

The long-term dependency on the supporting members of society is the best reason for the most fortunate among us to care about everyone else. Sadly, research suggests that wealthy people have less empathy for people unlike themselves, because they no longer have reason to associate with them.

This psychological gap between the rich and the rest of us naturally diminishes the incentive for the 1% to support anyone beneath their economic class. Thus less tax revenue and more cutbacks. Cuts in federal spending have been accompanied by an onslaught of social ills, including the highest poverty and homicide and incarceration and obesity and mental illness rates, an increasing child mortality rate, the highest health care costs, low global rankings in math and science scores. We continue to cut the programs that support a stable society.

The most fortunate among us have succeeded because all of America has supported them for 60 years. Yet they've somehow come to believe that they did it all on their own. Nothing could be further from the truth. They should be thanking all the people who contributed to their success.

Thanking them by paying taxes.

Daily Show Jim DeMint Extended Interview

The Daily Show with Jon Stewart

How the 1 Percent Could Do Its Share to Rebuild America

Monday, January 9, 2012 by Other Words
When Taxes Were Higher, This Nation Built a Vibrant Middle-class Life for Millions
by Susan Adelman

I'm a member of the 1 percent. I've watched my income tax rates fall over my lifetime, from a top rate of 91 percent under President Dwight Eisenhower to the current low rate of 35 percent.

When taxes were higher, this nation built a vibrant middle-class life for millions. Our schools, libraries, bridges, railways, and roads made the United States the envy of the world.

America has been good to my family. My grandfather was a Lithuanian immigrant who owned a general store in Waco, Texas. He helped my father start his business — the Tivoli Theatre in Fort Worth — during the Great Depression. Times were tough. Going to the movies was a way to escape and a ticket cost only a nickel. The business grew to a chain of eight independent theaters in Texas and Oklahoma. My dad invested the money he made wisely.

As tax rates have fallen, our schools, libraries, bridges, railways, and roads have begun to crumble. Millions of Americans have lost their jobs in this Great Recession. Congress continues to resist raising taxes on the wealthy, even though those higher taxes could create the jobs and rebuild the infrastructure that this country so desperately needs.

The 1 percent made billions of dollars during the boom years. Each time Congress reduced the tax rates, we made even more. When President George W. Bush took office, the top income tax rate was just under 40 percent. Congress cut it to 35 percent. Moreoever, many wealthy Americans make a lot of money earning interest on investments, buying and selling stocks, and banking the dividends those stocks produce. Most of those financial gains are taxed at just 15 percent.

A few years ago, Warren Buffett vowed to give a million bucks to any Fortune 500 CEO who could prove he paid a higher tax rate than his secretary. Not one came forward.

Our government taxes work much more than it taxes wealth. What does that say about our values?

Even if tax rates for the 1 percent had been maintained at year-2000 levels, the wealthiest of us would pay more than we do now, but not as much as we should. Still, there would be several trillion dollars more in the nation's treasury, and we 1-percenters would all still be rich.

Some of us get it. We've come together in groups like Patriotic Millionaires to make the case to Congress and the public that we should push those tax rates up to reasonable levels.

As long as Congress refuses to act, here's a simple proposal: I call on other members of the 1 percent to come together to set up a temporary fund to be run by someone with a commitment to rebuilding America, someone like Warren Buffett or Melinda Gates. Those who like the idea would pay in the amount of money they've saved from the lower tax rates. The fund would be used to support our country's long-term economic health, from infrastructure projects to making our schools energy-efficient. Other projects could help rebuild vibrant and green Main Streets.

This is properly the role of government, but government right now isn't doing its job. Just imagine how many jobs we could create if we taxed ourselves as we should be taxed in a decent and fair society.

I believe others would join me in this effort. As more joined in, we millionaires and hopefully some billionaires could challenge others to do the same thing. This would prove that many rich people are ready and willing to raise taxes on themselves.

I was raised to understand that I am part of a privileged minority. I'm getting tired of standing out here by myself yelling, "Tax me!"

Half of America in Poverty

(If you question the reason for the Occupy movement...if you think it's not worthy or worthwhile...then you aren't paying attention to the reality facing half of the citizens of the

US...--jef)

The Facts Say It's True

by PAUL BUCHHEIT

 

Recent reports suggest that almost 50% of Americans are in poverty or at a “low income” level. The claim is based on a new supplemental measure by the Census Bureau that includes health care, transportation, and other essential living expenses in the poverty calculation.

The concept of “low income” is controversial. It has been defined as earnings between 100 and 199 percent of the poverty level, a claim which, if true, would place every American family making $50,000 or less at a near-poverty level.

Conservative organizations believe the whole ‘poverty’ issue is overblown. The Cato Institute blames LBJ and Obama for reversing a declining poverty rate. Forbes blames the calculations. The Heritage Foundation argues, “The average poor person, as defined by the government, has a living standard far higher than the public imagines…In the kitchen, the household had a refrigerator, an oven and stove, and a microwave.” (pop the cork, let's celebrate our wealth in kitchen appliances!!!--jef) The case for a growing “consumption equality” is alternately defended and denied.

With emotions running high on both sides, we need to take a balanced look at the available data to determine how well the highest-earning family of the poorest 50% — a family with a $50,000 income — can survive. (The maximum individual income for the poorest 50% is about $30,000.)

Start with taxes. It is frequently noted by conservatives that the richest 1% pay most of the federal income taxes, and indeed they paid about 37 percent in 2009, more than the poorest 90% of Americans. But only the richest 5% of Americans have experienced income growth since 1980. And during that time, their tax rate has dropped from 34% to 23%. As for the 3 percent rate paid by the poorest 50%, the Tax Policy Center sums it up nicely: “The basic structure of the income tax simply exempts subsistence levels of income from tax.”

More relevant to the poverty issue is that federal income tax is only a small part of the tax expense for lower-income families. According to a study by The Institute on Taxation and Economic Policy, the poorest 50% paid about 10 percent of their incomes in state and local taxes (the richest 1% paid 5 percent). Congressional Budget Office (CBO) figures reveal that the bottom 50% pays about 9 percent of their incomes toward social security (the top 1% pays just under 2 percent). CBO also shows that the bottom 50% is paying about 2 percent of their incomes on excise taxes, a negligible expense for the people at the top.

Another year of Bush tax cuts will chop another 1-2 percent off the taxes of the very rich.
So total taxes for the poorest 50% are 24 percent of their incomes (3% + 10% + 9% + 2%), as compared to 29 percent for the richest 1% (23% + 5% + 2% – 1%).

Other significant expenses for low-income people, based on the most conservative estimates from the Bureau of Labor Statistics, the Census Bureau, the National Center for Children in Poverty, the Carsey Institute, and the Economic Policy Institute, include food (10%), housing (27%), transportation (6%), health care (5%), child care (8%), and household expenditures (5%). Expenses for insurance and savings and entertainment, although important to most households, are not being included here.

Energy costs hit low-income families especially hard, taking about 20% of their incomes. At the $50,000 income level the burden is closer to 12%, as generally agreed upon by the Bureau of Labor Statistics, the Coalition for Clean Coal Electricity, the Department of Housing and Urban Development, and the American Gas Association.

Total expenses for the richest family in the bottom half of America? – 24% taxes – 27% housing – 34% food, health care, child care, transportation, household needs – 12% energy.
That’s 97% of their income. The richest family among 70,000,000 households is left with just $1,500 for a car, appliances, a TV, a cell phone, a loan repayment, an occasional night out. It comes to $30 a week, barely enough to take the family out for a pizza.

Critics bemoan the amounts of aid being lavished on lower-income Americans, making dubious claims about $16,800 in government funds going to every poor family and families with $90,000 incomes being classified as “near poor.”

The fact is that only 4,375,000 families (out of 70,000,000 in the bottom half) received Temporary Assistance for Needy Families (TANF) in 2010, for a total expense of about $36 billion. Current federal budgets include about $350 billion for food, housing, and traditional ‘welfare’ programs for needy children, elderly care, and energy assistance. This averages out to about $400 per month per family.

Patriotic Millionaires: Tax the Wealthy

Socialism For the Rich Should End

11.18.11

by Abby Zimet - Common Dreams

Two dozen members of the Patriotic Millionaires for Fiscal Strength were in D.C. this week begging the deficit supercommittee and other members of Congress to kill the Bush tax cuts and raise their taxes dammit because that's obviously how to help the economy. Wow. How dysfunctional is Congress that these guys had to come to them with this eminently reasonable argument?

"It's a Las Vegas economy where regular Americans put their money on the table and the richest 1 percent own the house. And if the 1 percent happen to lose money, the 99 percent bails them out – covers their losses and then stands by watching while the house does it all over again." - Patriotic Millionaire Robert Johnson, former chief economist of the U.S. Senate banking committee.

Bush Tax Cuts Cost the Rest of Us $11.6 Million An Hour. Yes, An Hour.

10.15.11 -

A report from the National Priorities Project - slogan: Bringing the Federal Budget Home - finds that tax cuts to the wealthiest 5 percent of Americans continue to cost the U.S. Treasury - ie: us - $11.6 million every hour of every day. They've installed a rolling counter to see that the total is...well, it's gone up a few hundred thousand since you started reading this.
 

US Tax Policies Benefit Rich

Tuesday 4 October 2011
by: Paul Krugman, Krugman & Co. | Op-Ed

 

 

It seems as if a number of people in the media have decided that President Obama was fibbing when he said that some millionaires pay lower tax rates than their secretaries — because, as the usual suspects triumphantly declare, on average millionaires pay higher average taxes than middle-income Americans.

This is, of course, stupid: the operative word is “some.”

And we’re not talking about one or two exceptional guys, either. Look at the I.R.S. data on returns for the 400 highest incomes in America, available at irs.gov. If you look at the numbers since 2004, you’ll see that in a typical year between 30 and 40 percent of those super-high-income players paid an average tax rate of less than 15 percent; most of them paid less than 20 percent. Bear in mind that for the very wealthy, the payroll tax — the main burden on working-class Americans — is trivial because of the cap on Social Security taxes and the fact that it only applies to earned income. And what becomes clear is that Mr. Obama’s claim that Warren Buffett’s secretary pays a higher tax rate than Mr. Buffett does is absolutely, totally true.

So why the attack? Probably because it’s such an effective line. And we can’t have populism that actually strikes a chord with the public, can we?

The Consequences of Tax Cuts

With taxes on the wealthy on the political radar, we’re going to be drowning in a vast wave of double-talk and smothered by the fuzzy math. Still, one has to try. So, a couple of notes.

One is that you have to beware of the old trick of saying “taxes,” then slipping into “income taxes.” Most Americans pay more payroll taxes (for things like Medicare and Social Security) than income taxes, but the reverse is true at high incomes. So focusing only on income taxes makes it seem as if the rich bear much more of the burden than they really do.

Another, more subtle trick involves comparing percentage changes in taxes as opposed to tax changes as a percentage of income.

The starting point is that federal taxes are indeed progressive on average (although there are billionaires who pay a lower rate than their secretaries). And this in turn means that you have to be careful about the question when evaluating a change in taxes.

Suppose that it’s 1979, and individual A is a member of the working poor, paying 12 percent of his income in taxes — basically payroll tax and not much else. Meanwhile, individual B is very wealthy, and pays 40 percent of his income in taxes — as the very wealthy did on average 30 years ago.

Now suppose that 30 years of conservative governance lead to a fall of a quarter in both individuals’ average tax rates; A’s rate falls from 12 to 9, B’s from 40 to 30.

Would it make sense to say that they have gained equally from tax cuts?

Clearly not. A’s after-tax income has risen from 88 to 91 percent of pretax income, a gain of 3.4 percent. B’s after-tax income has risen from 60 to 70 percent of pretax income, a gain of 16.7 percent. The distribution of after-tax income has become substantially less equal.

Now, right-wingers come back and say that this is what has to happen when you cut taxes. 

No, it doesn’t.

And anyway, cutting taxes is itself a choice — a choice that then leads to demands that we cut programs for the poor and middle class to close the deficit those tax cuts created.

The point is that yes, tax policy these past 30 years has been very much tilted toward benefiting the rich.

A Billionaires' Coup in the US

Friday, September 23, 2011 by The Guardian/UK
The debt deal will hurt the poorest Americans, convinced by Fox and the Tea Party to act against their own welfare

by George Monbiot

There are two ways of cutting a deficit: raising taxes or reducing spending. Raising taxes means taking money from the rich. Cutting spending means taking money from the poor. Not in all cases of course: some taxation is regressive; some state spending takes money from ordinary citizens and gives it to banks, arms companies, oil barons and farmers. But in most cases the state transfers wealth from rich to poor, while tax cuts shift it from poor to rich.

So the rich, in a nominal democracy, have a struggle on their hands. Somehow they must persuade the other 99% to vote against their own interests: to shrink the state, supporting spending cuts rather than tax rises. In the US they appear to be succeeding.

Partly as a result of the Bush tax cuts of 2001, 2003 and 2005 (shamefully extended by Barack Obama), taxation of the wealthy, in Obama's words, "is at its lowest level in half a century". The consequence of such regressive policies is a level of inequality unknown in other developed nations. As the Nobel laureate Joseph Stiglitz points out, in the past 10 years the income of the top 1% has risen by 18%, while that of blue-collar male workers has fallen by 12%.

The deal being thrashed out in Congress as this article goes to press seeks only to cut state spending. As the former Republican senator Alan Simpson says: "The little guy is going to be cremated." That means more economic decline, which means a bigger deficit. It's insane. But how did it happen?

The immediate reason is that Republican members of Congress supported by the Tea Party movement won't budge. But this explains nothing. The Tea Party movement mostly consists of people who have been harmed by tax cuts for the rich and spending cuts for the poor and middle. Why would they mobilise against their own welfare? You can understand what is happening in Washington only if you remember what everyone seems to have forgotten: how this movement began.

On Sunday the Observer claimed that "the Tea Party rose out of anger over the scale of federal spending, and in particular in bailing out the banks". This is what its members claim. It's nonsense.

The movement started with Rick Santelli's call on CNBC for a tea party of city traders to dump securities in Lake Michigan, in protest at Obama's plan to "subsidise the losers". In other words, it was a demand for a financiers' mobilisation against the bailout of their victims: people losing their homes. On the same day, a group called Americans for Prosperity (AFP) set up a Tea Party Facebook page and started organising Tea Party events. The movement, whose programme is still lavishly supported by AFP, took off from there.

So who or what is Americans for Prosperity? It was founded and is funded by Charles and David Koch. They run what they call "the biggest company you've never heard of", and between them they are worth $43bn. Koch Industries is a massive oil, gas, minerals, timber and chemicals company. In the past 15 years the brothers have poured at least $85m into lobby groups arguing for lower taxes for the rich and weaker regulations for industry. The groups and politicians the Kochs fund also lobby to destroy collective bargaining, to stop laws reducing carbon emissions, to stymie healthcare reform and to hobble attempts to control the banks. During the 2010 election cycle, AFP spent $45m supporting its favoured candidates.

But the Kochs' greatest political triumph is the creation of the Tea Party movement. Taki Oldham's film (Astro)Turf Wars shows Tea Party organisers reporting back to David Koch at their 2009 Defending the Dream summit, explaining the events and protests they've started with AFP help. "Five years ago," he tells them, "my brother Charles and I provided the funds to start Americans for Prosperity. It's beyond my wildest dreams how AFP has grown into this enormous organisation."

AFP mobilised the anger of people who found their conditions of life declining, and channelled it into a campaign to make them worse. Tea Party campaigners take to the streets to demand less tax for billionaires and worse health, education and social insurance for themselves.

Are they stupid? No. They have been misled by another instrument of corporate power: the media. The movement has been relentlessly promoted by Fox News, which belongs to a more familiar billionaire. Like the Kochs, Rupert Murdoch aims to misrepresent the democratic choices we face, in order to persuade us to vote against our own interests and in favour of his.

What's taking place in Congress right now is a kind of political coup. A handful of billionaires have shoved a spanner into the legislative process. Through the candidates they have bought and the movement that supports them, they are now breaking and reshaping the system to serve their interests. We knew this once, but now we've forgotten. What hope do we have of resisting a force we won't even see?