by Robert Reich
John Coltrane: One Down, One Up
Monk and Coltrane: Thelonious Monk and John Coltrane at Carnegie Hall
Best album of 2005 (*****)
Should Billionaires Help to House the Homeless?
by John Lawrence
Wouldn't it be nice if capitalism were modified so that those who are super successful would have their earnings capped at, say, $100 million, and whatever exceeded that went to build affordable housing for the homeless? Is any invention worth a billion dollars? Can anyone spend more than a hundred million? The capitalist system is set up in such a way that successful entrepreneurs attract huge amounts of capital from investors. Are they rich because people buy their products? No, they are rich because rich people buy their stock.
A person's riches should be capped and the excess should be spent on society in general. Society is getting the short end of the stick while rich entrepreneurs get more money than they could possibly spend. A wealth tax would accomplish the same goal. The system as it exists today sucks because it is set up in such a way that the rich get richer, and the poor lose their jobs and their housing. Most of the successful companies today use the internet and automation to eliminate jobs. The more jobs they eliminate, the more Wall Street likes them and bids up their stock.
Then besides this, Trump and the Republicans give them huge tax breaks. The tax burden is borne by the middle class and the poor while the rich corporations buy back their own stock making them even richer.
Why are people like Bill Gates, Jeff Bezos and Mark Zuckerberg so incredibly rich? Sure, they’re great businesspeople, and they had the right ideas at the right time. But most importantly, when their businesses succeeded, they owned a large portion of the equity.
Equity, or stock, is the riskiest type of asset ownership. It’s the most volatile, and it’s the first to get wiped out when a company goes bankrupt. But it also has unlimited upside -- the gains can, in theory, be infinite. It’s the entire upper tail. So of course the largest fortunes that we see -- the richest individuals -- were made through equity ownership.
But the big payouts to other stockholders are also responsible for much of the vast increase in wealth inequality. In 1980, the richest 5 percent of Americans owned half of the country’s wealth. In 2012, it was almost two-thirds.
Stock represents nothing more than rich people, who have access to cheap interest free money spewed out by the Federal Reserve, spending that money to buy stock which bids up the price. Then they cash in and pay off the loan. Riches are generated not by a company selling goods and services to the general population, but by financial manipulation of stock values. Any sane society would limit these types of activities since they do not further the interests of society in general. The net result is money creation that goes immediately into the hands of the rich making them even richer and in a position to control the political system, setting up the laws so that they favor the rich even more.
Over the past year, Jeff Bezos and Mark Zuckerberg have together accumulated over $64 billion in new wealth. And the GOP want to cut food stamps?
How was their money made? Almost entirely by passively waiting for the stock market to go up. The data sources for this report are Forbes and Credit Suisse, both of which provide precise numbers for the worsening surge in America's wealth inequality.
U.S. wealth increased by $8.5 trillion in 2017, with the richest 2% getting about $1.15 trillion (details here), which is more than the total cost of Medicaid (federal AND state) and the complete safety net, both mandatory and discretionary, including the low-income programs that make up the social support package derisively referred to as 'welfare.'
While over 100 million (2 out of 5) American adults are among the world's richest 10%, up to 50 million (1 out of 5) American adults are among the world's poorest 10%.
Yet by some unfathomable measure of ignorance or malice, Republicans cheer on the millionaire-making stock market while telling the most vulnerable Americans that they're spending too much on food.
"We can have a world where everyone has a decent home, the chance for an education, and access to healthcare. Or we can have billionaires. We can't have both."
As the gap between the world's richest and poorest people has widened to an extreme not seen since the Gilded Age, the 500 wealthiest people have gotten $1 trillion richer in 2017, according to Bloomberg's Billionaires Index.
The richest people in the world have been able to amass huge wealth this year thanks to a booming stock market, as billions of poor and working people around the world have seen little if any benefit from strong markets. Even in the world's major economies, including Japan, the U.K., and the U.S., workers have seen their wages stagnate or decline in recent years.
Efforts by the very rich to contribute to the lower classes through charity, while commendable, have also done little to halt the growing wealth gap in a global economy in which the world's five richest people control $425 billion, or one-sixth of the U.K.'s gross domestic product.
More than 170 of the richest people have signed the Giving Pledge, created in 2010 by Bill and Melinda Gates and Warren Buffett to encourage the rich to give at least half of their wealth to charity. But since the pledge was established, according to Oxfam, the wealth of the poorest half of the world's population has fallen by a trillion dollars—suggesting that good intentions among the rich are no match for a worldwide economy with such an extreme consolidation of wealth.
The wealth gap has grown large enough to leave some advisers of the rich wary of a potential sea change in the coming years, as the degree of inequality becomes unsustainable and leaders take action to stop markets from favoring the wealthy few—similar to how monopolies were broken up in the U.S. in the early 20th century.
"We're at an inflection point," Josef Stadler, the lead author of a recent report by UBS/Pricewaterhouse Coopers on the world's billionaires, told the Guardian. "Wealth concentration is as high as in 1905, this is something billionaires are concerned about...The question is to what extent is that sustainable and at what point will society intervene and strike back?"
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The GOP tax plan would widen the already massive gap between the wealthiest Americans and everyone else
If any more evidence were needed to show that the wealthiest Americans really don't need a tax cut, here it is: Between 2007 and 2016, the average wealth of those in the top one percent grew by a whopping $4.9 million.
What about everyone else? In that same period, the average wealth of the bottom 99 percent declined by $4,500.
This is according to an analysis put out Wednesday by Matt Bruenig of the People's Policy Project, based on data from the Federal Reserve's Survey of Consumer Finances
Recent nonpartisan analyses have consistently found that the Republican tax plan, expected to hit the Senate floor for a vote as early as Thursday, would deliver even more wealth to the richest Americans. And contrary to GOP rhetoric, the plan would also hike taxes on millions of low-income and middle class families.
As tax analyst Hunter Blair of the Economic Policy Institute noted on Wednesday, the top one percent of households would on average see a $32,500 tax cut per year under the GOP plan. The bottom 20 percent of earners, by contrast, would pay $10 more annually.
Further undermining Republicans' "trickle down" selling points, numerous business leaders have already conceded that they are not planning to invest any of the extra cash they are set to receive into raising wages for workers, but will instead shower the windfall to their investors and stockholders.
The Most Overworked Word: Hardworking
by John Lawrence
I'm tired of hearing politicians pander to the citizenry by calling them "hardworking Americans." "Hardworking Americans should keep more of their money." And "They worked hard for their money." No they didn't. The richer they are, the less they worked hard for their money. They sat in an office somewhere and raked in billions. Did billionaires work hard for their money? If so, maybe they should have worked less hard and enjoyed life more. No one needs a billion dollars.
Most rich people simply sit back and collect rent or watch the stock market go up. Is that working hard? They call it passive or unearned income. That distinguishes it from income actually earned in the labor force from an actual job. That's how rich people don't work hard in a capitalist economy. They make money off of money. That's the whole purpose of capitalism: get rich by not working hard. So do these rich people deserve a tax break because they worked so hard? I don't think so.
Many people are one paycheck away from homelessness. They shouldn't be paying any taxes. The rich can afford to pay taxes on all that money they made from not working hard. Yet Republicans want to give these people (those who make their money off of capital gains and corporate profits) a tax break. They are only doing it because their rich donors, who are so greedy no amount of money suffices, demand it. If the rich don't get their tax break, they will stop donating to the Republican party.
After several tax breaks for the rich did not trickle down to the rest of us, they shouldn't have been able to sell this nonsense to the American people again. But they're still at it. They just don't care, really. Tax breaks for hardworking Americans is just propaganda, but a lot of people believe it even though it's never worked in the past.
So the Republicans are going to take money away from hardworking Americans so they can give it to the not hardworking Americans. Furthermore, they're going to cut the money going into health care for the poor. But that's not all, folks. They're going to run the country into another trillion and a half dollars of debt. Is this any way to run a country? I don't think so.
A more progressive tax code, says International Monetary Fund, would both significantly reduce inequality and help grow the economy
As President Donald Trump and the Republican Party move ahead with their attempt to deliver massive tax cuts to the wealthiest Americans, an analysis by the International Monetary Fund published Wednesday finds that the U.S. economy would be much better off if they did precisely the opposite.
Contrary to GOP talking points, the new report notes that "empirical evidence does not support" the argument that higher taxes for those in a nation's top income brackets would hinder economic growth.
The IMF's analysis comes as a growing number of wealthy Americans are joining the opposition to Trump's regressive tax plan—which would slash the top individual tax rate from 39.6 percent to 35 percent—and calling for higher taxes on those at the very top.
In a recent op-ed for the Los Angeles Times, environmentalist and billionaire president of NextGen America Tom Steyer declared that he is "strongly opposed to even one more penny in cuts for rich people and corporations" because such cuts "defund the critical public programs on which American families depend."
"Three decades of data prove that tax cuts for the wealthy do not 'trickle down' to working people or grow the overall economy," Steyer concluded. "Let's raise taxes on the rich and use the money to invest directly in the American people—by improving infrastructure, promoting clean energy, strengthening public education, and expanding healthcare. Let's boost wages to stimulate economic growth and job creation. It's the only way we will create broad prosperity, rebuild the middle class, and give working families a fair shake."
Oligarchs representing monopolistic Big Pharma, Big Banks, and Big Retail/Fast Food are devastating us.
A few years back, on my radio show, President Jimmy Carter said that America, in large part because of Supreme Court decisions like Citizens United, has become “just an oligarchy, with unlimited political bribery.”
He’s right. It’s the elephant in the room that everybody, particularly our corporate media, completely ignores.
While Republicans are doing the will of their oligarch owners, replacing real scientists with industry lobbyists and shills everywhere from the White House to congressional science committees to the EPA, the media stubbornly refuses to report in depth on it, preferring instead to following the Worldwide Wrestling moves of our tweeter-in-chief.
“Red-shift“ election fraud (called red because it helps only Republicans) has been flagrantly on display across the country since the privatization of our vote by GOP-leaning voter-machine companies in the 2000-2004 period. GOP voter suppression in nearly 30 states has now been institutionalized with Kris Kobach’s Interstate Crosscheck scam (now a presidential “commission”). Pre-poll and exit-poll results “flipped“ in Georgia’s 6th district in a way that caused us to decry similar vote-rigging in the Ukraine (the result, like in Georgia’s 6th, was measurably off from the exit polls).
Yet in the face of all this, enough to provoke revolution in countries like Egypt and Ukraine, our press instead focuses on the oligarchs’ unproven and well-debunked claim that “illegals” are voting to help Democrats.
While climate change is ravaging the world, the administration of billionaire oligarch Donald Trump has pulled the U.S. out of the Paris climate change agreement and is rolling back climate-protecting rules on behalf other oligarchs in the oil, coal and gas business so they can continue to use our atmosphere as a sewer.
While billionaire-owned Republicans frantically work to roll back the 3.8% tax on investment income (for families with over $250,000 in investment income/year) their oligarch owners so despise, cutting millions of Americans off any hope of affordable healthcare access, the television media usually plays this tax-cut story as if it were about healthcare.
From trying to destroy the Consumer Financial Protection Bureau (which has returned to consumers billions of dollars in ill-gotten gains from our country’s banksters), to gutting environmental laws, to preventing students from even declaring bankruptcy when their efforts to join the middle class by going to college don’t work out, the oligarchs who now largely run America are solidifying their power and their wealth.
This is rule by the rich. It’s here. It’s now.
After spending months selling a healthcare plan that proposed kicking millions off their insurance and gutting crucial safety net programs, House Speaker Paul Ryan (R-Wis.) has now shifted his focus to tax reform, where he hopes to provide significant tax relief to the wealthiest Americans.
"Middle-class Americans will see their basic standards of living reduced by Ryan's plans, just so that the rich and huge corporations can get a giant tax cut."
—Frank Clemente, Americans for Tax Fairness
On Tuesday, after weeks of failing to offer any details on his ambitious plan to permanently overhaul the tax code, Ryan made his first major pitch to the National Association of Manufacturers—a business advocacy group that has in the past received funding from the Koch brothers.
Those longing for concrete proposals were likely disappointed by the speech, however, as Ryan opted to focus on familiar GOP talking points—like the claim that massive tax cuts will have a positive effect on job growth—in the place of gritty details.
But the few specific details Ryan did offer, like his proposal to eliminate both the estate tax and the Alternative Minimum Tax, provided sufficient ammunition for critics who argue Ryan's rhetoric on jobs is little more than a smokescreen.
"Paul Ryan is not serious about tax reform. He's serious about tax giveaways—for millionaires, billionaires, and wealthy corporations," said Frank Clemente, executive director of Americans for Tax Fairness (AFT), in a statement.
He's going to pay for those deficit-exploding giveaways by cutting Medicaid, Medicare, Social Security, public education, and a whole lot more. Middle-class Americans will see their basic standards of living reduced by Ryan's plans, just so that the rich and huge corporations can get a giant tax cut.
AFT also pointed to a memo, released on Monday, in which it urges congressional Republicans to learn from the "incontestable failures" of Kansas's tax cut experiment, which came to an end earlier this month after lawmakers voted overwhelmingly in favor of hiking taxes.Morris Pearl, the chair of Patriotic Millionaires, disputed the claim at the heart of Ryan's pitch.
"Let me make this clear: lowering tax rates does not create jobs. Period," he said. "Lowering tax rates just makes the one percent even richer."
According to recent polling data, most Americans want to do the opposite of what Ryan is proposing.
In a survey conducted by the University of Maryland's Program for Public Consultation in March, most participants expressed support for raising taxes on the wealthy and corporations and opposed eliminating the estate tax. A Gallup poll from last year suggested 61 percent of Americans believe the rich pay too little in taxes.
But popular sentiment, as Paul Waldman notes in a piece for the Washington Post, will not be enough to deter a political party that has for decades sought to overhaul the tax code to benefit big business and the donor class.
"If we can't cut taxes on the wealthy, [Republicans] ask each other, then why are we here?" Waldman writes. "What's the point of having power if you don't use it for this?"
by John Lawrence
Classical economics divided income into two types: earned and unearned. Earned income came from productive labor combined with capital investment. Unearned income was considered parasitical and consisted of rent, interest and dividends. It was not considered as adding to GDP but as subtracting from it. It was money made by manipulating money much as feudal landlords made their money in what has been called a rentier economy.
Today most of the money earned by the 1% which is driving the income inequality gap is made in the financialized, rentier economy but is now considered earned income. New methods have been devised to make money not by productive labor and investment but by manipulating financial instruments. One such manipulation consists of stock buybacks.
Why would a company buy back its own stock, stock that was issued in the first place supposedly to give the company money it needed for productive investment to produce goods and services. The answer is very simple. When a corporation buys its own stock (often with borrowed money), the stock usually goes up at least temporarily. That gives the executives of the company and activist hedge funds time to cash in their stock grants, options and garden variety stocks and make a killing. The boost in stock value also impresses Wall Street which cares solely about the short term financial indicators for a company and not at all about what the company did to achieve those indicators.
When a company uses its profits or even borrowed money to buy back its own stock, that's money that is not being used for research and development or to expand production or to make a better product. The money that the executives and hedge funds make is strictly because of financial manipulation, but in a financialized economy it's considered to be additive to GDP. The measurement of GDP is no longer linked wholly or even mainly to production, but now consists to a large extent of income that is made in the rentier economy.
Carl Icahn, a big investor in Apple, is always trying to get them to buy back their stock so he can cash in. The billionaire activist investor lobbied Apple to buy back billions worth of its shares to boost value to shareholders. In April 2014 Apple boosted its buyback plans by $30 billion and even split its stock for the first time in nine years. Satisfied? Never. Icahn's taking another swing at getting Apple to buy back even more stock, saying the shares could double to more than $200 apiece.
Another way the parasites make money which makes the GDP figures look good is to not pay taxes. The tax code has been completely captured by the large corporations and their lobbyists which has shifted the burden away from corporations and onto the average working person - the 99%. Both Democrats and Republicans are complicit in this arrangement, one example of which is the tax giveaway they are getting ready to implement.
William Greider in an article entitled Democrats and Republicans Are Quietly Planning a Corporate Giveaway—to the Tune of $400 Billion writes the following:
The bad news is that key leaders of the Democratic Party—including the president—are getting on board with Republicans, despite some talk about confronting income inequality. Influential Democrats intend to negotiate with Republican counterparts on the size and terms of post-facto tax “forgiveness” for America’s globalized companies. This is real money they’re talking about—a giveaway of hundreds of billions
Why haven’t voters heard about this from candidates? Because Republicans and Democrats both know it would make angry voters even angrier.
The major multinationals complain about a tax problem that most citizens would love to have for themselves: Thanks to a loophole in the tax code, the companies do not have to pay US taxes on profits they have earned in foreign countries until they bring the money home to American shores. Altogether, the globalized US companies have accumulated $2.1 trillion in untaxed profits, most of it parked in overseas tax havens.
The multinationals are waiting for Congress to forgive them their debts.
Oh, but forgive the debts of the little guy? Never!! While corporations expect to have their debts forgiven, there is no such help for for the average American or average debtor nation like Argentina or Greece. For the rest of us the commandment is "Thou shalt PAY UP." Wall Street has adamantly stuck to this first Principal of Finance which is sancrosanct, so sancrosanct in fact that bankruptcy rules for the average American are being tightened while at the same time they are being loosened for corporations. You think student loan debtors can go bankrupt? Guess again.
After all part of the vulture capitalist's playbook is to buy a company with borrowed money, load it down with debt, strip its assets, raid its pension fund, then take it into bankruptcy in order to destroy its union. Having accomplished all that and by the way added to GDP while so doing, the company can then be taken out of bankruptcy, taken private and then taken public again in order to get another infusion of cash from an Initial Public Offering (IPO) which is immediately gobbled up by the hedge fund (another name for vulture capitalist) itself. All of these shenanigans make money off of money, do nothing for productive investment but do add to GDP.
Congress let these corporations have a "tax holiday" in 2004 on the hope and promise that these corporations would spend their largesse doing research, investing in America and creating jobs. What happened? The 15 companies that benefited the most from a 2004 tax break for the return of their overseas profits cut more than 20,000 net jobs and decreased the pace of their research spending. One of the beneficiaries was Qualcomm, a major whiner for another tax holiday. On his way out the door Paul Jacobs exhorted his employees and shareholders to “Send your Congress people your opinion that you’d like American companies to be able to bring offshore money back to the United States to either reinvest or return to shareholders.” Qualcomm had $21.6 billion in overseas profits in 2014. And those poor shareholders - most of them in the 1% - are having to make do without their money. Oh, Boo Hoo.
As a result GDP is no longer a measure of the health of an economy. If a tornado wipes out a town, the money spent to rebuild that town adds to GDP, but does not constitute a contribution to the economy that adds anything except to restore what was already there. In the same way hedge funds add nothing productive to the American economy, but they do increase GDP. So GDP as a measure of anything productive is passe. It is merely a measure of the cash that changes hands regardless if it changed hands as a result of winning a bet in a casino or in the casino of Wall Street or it changed hands because someone bought something that was actually useful.
And don't forget the second Principle of Finance - "If Wall Street fucks up, thou shalt bail us out" in which case taxpayers will restore their financial rectitude and well-being like we did in 2008. Or maybe this time it will be a bail-in in which case citizens will make Wall St whole again with money from their savings accounts which by the way are the property of the banks. The bank has merely issued you what amounts to an IOU, and, what's more, you're treated to practically zero interest rates on your savings. How's that you thrifty senior savers?
If GDP doesn't measure the exchange of productive goods and services or productive investment, why does every politician and pundit insist on "growing the economy" meaning increasing GDP? We would be better off in some ways if GDP were diminished and the emphasis was on a sustainable economy, an economy which valued the health and welfare of the average person instead of the 1%. All the money that is made from the oil and gas industries needs to diminish if we are to make any progress with global warming. All the money made by Wall Street on fees, interest and derivatives needs to diminish if the economy is to be placed on a more solid financial footing.
Consumers contribute 70% of GDP. If we start growing our own food and fixing our own cars and buying less junk, this will diminish GDP, but the average American will be better off. They would have less debt. If we stop going into debt, GDP would go down. But so would the inequality gap as corporations earned less profit and Americans took on less debt. How to make America great again? Pay down your debt, do more for yourself instead of buying goods and services in the cash economy, buy and work local and stop patronizing large corporations and Wall Street banks.
The only way that the central bank of the US, the Fed, knows to grow the economy is to lower interest rates and force more debt on American citizens. This is what monetary policy amounts to. Fiscal policy, in which the government would create jobs directly by providing money for infrastructure revitalization, is non-existant thanks to Republicans who won't approve expenditures by government that would actually create jobs and the military-industrial complex which gobbles up every available dollar.
If American citizens don't take on more debt, the economy goes to hell in a handbag. The only way around this is to start a public bank. Then the local economy can be served directly including creation of good jobs without reliance on Wall Street. By the way sports fans, the plan for the new San Diego "Convadium" would involve the City of San Diego issuing a billion dollars in bonds, a plan they are touting as requiring no taxpayer funding, but which will involve huge payments to Wall Street for fees and interest. These bonds will be backed by nothing except hotel taxes. Who's liable here if the plan goes south?
Michael Hudson writes in his book, Killing the Host - How Financial Parasites and Debt Destroy the Global Economy:
"Trying to rise into the middle class these days is a road to debt peonage. It involves taking on mortgage debt to buy a home of one's own, student loans to get the education needed to get a good job, an automobile loan to drive to work, and credit card debt just to maintain one's living standards as the debtor falls deeper and deeper into the hole. Many recent graduates find that they have to pay so much on their student loans that they must live at home with their parents and cannot afford to get married and start a family, much less qualify for a mortgage. That is why consumer spending has not risen since 2008. Even when income rises, many families find their paychecks eaten up by debt service."
Bernie Sanders is addressing the problem of debt peonage, which is gradually enslaving the American middle class, directly by calling for free public education and Medicare For All. He is also addressing the US tax code which has been rigged in favor of the wealthy and the corporations starting with Ronald Reagan's and Alan Greenspan's meddling. Republican Presidential candidates would only hasten the descent of the American middle class into debt peonage by giving further tax breaks to the rich while transferring even more of the tax burden onto the middle class and the poor.
The American dystopia that is becoming more likely is one in which a small percentage owns the means of production and rent producing assets while the vast majority eke out a living doing menial labor that can't be done by robots and automatons. Andrew F. Puzder, CEO of the parent company of Carl’s Jr., has announced he’s investing in machines because he doesn't want to pay employees $15 an hour or to pay for their health care. Puzder makes more in one day ($17,192) than one of his minimum-wage employees working full time makes in a year ($15,080), The Nation reported last year.
Work for nothing or be replaced by a robot - that's the choice for the 99%. But robots are taking middle class jobs now and will take more in the future, minimum wage or no minimum wage. So what's the solution? Start your own business, become self-employed, stay away from student loan debt or start or become a member of a cooperative enterprise. You have no future as a minimum wage employee regardless of the minimum wage. Take the bull by the horns instead of trying to convince the cow not to shit on you.
The American dystopian vision of the future is even more appalling than the feudal era in which human labor was actually needed to make the economy work. Sure the 1% controlled the wealth; it was a rentier economy but human labor was necessary. Now humans as well as their labor are expendable. The future could hold a life of abundance and leisure for everyone but that is not likely unless wealth is more evenly distributed. It won't be more evenly distributed unless consumers stop consuming, take matters into their own hands and start producing for themselves. The sad truth is you can make more money as a self-employed laborer than you can working a 40 hour week for MacDonald's even if you just do a couple of jobs per week! Why work for $10. an hour for someone else when you can make five times that much as a self-employed doing exactly the same work?
by John Lawrence from the San Diego Free Press
Income Inequality is Getting Worse
Income and wealth inequality is only getting worse. It's not hard to understand why. Certain corporations have a lock on economic activity throughout the world. Mom and Pop operations have been forced out of business or have merged with the Big Guys. Artificial intelligence, automation, robots and computers have taken over many menial but used-to-be-better-than-minimum-wage jobs like check-out clerks, bank tellers and customer service operators. Other jobs have been off shored to cheaper labor jurisdictions.
The rest of us, college graduates included, have been reduced to being expendable appendages of the large corporate machines to be sucked in and spit out at their pleasure. When our skill sets are outmoded, we will be laid off and fresh talent will be acquired. The job pool is shrinking because the number of necessary jobs is shrinking. Today, there are approximately 1.2 million fewer jobs in mid-and higher-wage industries than there were prior to the 2008 recession, while there are 2.3 million more jobs in lower-wage industries. According to the Bureau of Labor Statistics most jobs in the next decade won't even require a college education. They are jobs that can't be done by robots: care givers, nurses, house cleaners, gardeners, retail.
Another reason for income and wealth inequality is that the US Federal Reserve's quantitative easing policy screws savers who get zero interest on their life savings while injecting money into the largest Wall Street banks. This money is siphoned off by wealthy investors and hedge funds. It never enters the real economy. It only encourages the average Joes and Janes to take on more debt. Ninty percent of the money supply is created by private banks who loan money into the economy through their policy of fractional reserve banking. As the money supply increases, so does debt.
Wall Street Banking Giants Create Most of the US Money Supply
Fractional reserve banking is a simple concept that has become more complicated and convoluted as it has evolved over the years. In its simplest terms, if a bank takes in a deposit of $100 from 10 people or $1000 total, it loans out $900 of that keeping $100 back as a reserve in case someone wants their deposit back before the principal and interest on the loans start flowing in. Their premise is that not everyone will demand their deposit back at the same time. If, however, everyone does want their money back at the same time, there could be a run on the bank unless the bank can borrow the money from some other entity like another bank or the Federal Reserve
Thus money is created by the bank with a few keystrokes on a computer and is fed into the economy as debt. The banks are at the top of the food chain since they create the money and loan it out on interest. Thus the US economy is a debt based economy. Bad things happen when people all demand their money back at the same time or collective debt becomes so big and untenable that it can't be paid back. This is what happened in the 2008 financial crisis when mortgages were given to people who couldn't pay them back and hence defaulted. Eventually this whole financial structure, which was a house built upon sand instead of a rock, to use a Biblical metaphor, collapsed.
It is to be noted that when a bank creates money, it is not backed by gold. Nixon took us off the gold standard in 1971. Money not based on anything but the government's say so is called fiat money. Thus all money created by private banks is fiat money, and, although the government says it is all good, it is the private banks that actually create it, not the supposedly democratically elected government.
The Federal Reserve has also been involved in money creation recently with a process called quantitative easing (QE). When the government needs money beyond the revenues it takes in by means of taxes, it goes into debt by issuing bonds. Sometimes those bonds are bought by Joe and Jane Average Investor or sometimes by other countries like Japan. However, much of the time they are bought by Wall Street banks. Then the Federal Reserve turns around and pays cash for those bonds taking them off the hands of the big banks. The result is that the banks end up with more money and the loans disappear on the Federal Reserve's balance sheet which is sort of like a black hole. Effectively, the government never has to pay those loans back.
Quantitative Easing for the People
There is another way that money could be created and injected into the economy. It might be called quantitative easing for the people (PQE) as Britain's Leader of the Labor Party, Jeremy Corbyn has termed it. He proposes to give the Bank of England a new mandate to upgrade the economy to invest in new large scale housing, energy, transport and digital projects. The investments would be made through a National Investment Bank set up to invest in new infrastructure and in the hi-tech innovative industries of the future.
The money creation (or printing if you like) would entail the government issuing a bond that a National Investment Bank would buy. Then the central bank would take that loan on its balance sheet in return for cash that the bank would then use to pay for infrastructure. The end result is that the government would owe the central bank the amount of the loan, but because the central bank is a financial black hole, it would never have to pay.
In Addition to Pocketing the QE, Wall Street Bankrupts Cities
The City of Los Angeles is paying a Wall Street bank $200. million annually in fees just to manage its money. The Huffington Post revealed:
LOS ANGELES, CA- At a lively downtown rally in front of the Bank of NY Mellon in Los Angeles, the Fix LA Coalition unveiled a groundbreaking research report, entitled "No Small Fees: LA Spends More on Wall Street than Our Streets," revealing that Wall Street charges the City of Los Angeles more than $200 million in fees. Coalition members called for action to reduce the high fees and put that money back into neighborhood services. After the rally, Fix LA Coalition members delivered the report to elected officials in City Hall.
In addition LA like a lot of cities that have gone bankrupt (Birmingham, Alabama for instance) has been snookered into interest rate swaps that end up costing much more money than if they had kept the original loan at the original rate. Then to get out of these toxic deals, they have to pay a substantial "termination fee."
Lisa Cody, SEIU 721 Research Analyst and report co-author stated: "Based on what we know, there are some concrete steps we can take to save LA millions. For example, we can start with Mellon Bank to renegotiate a 'swap' deal that was supposed to save the city money, but is instead costing LA almost $5 million a year. To fix this toxic deal, the bank wants $24 million more in fees. In 2012, NY Mellon charged the city $26 million in termination fees for another swap they had sold us that turned out to be a terrible deal for LA."
LA is not the first and probably won't be the last to be tricked into engaging in a fancy derivative deal that was way over the heads of the city employees that were talked into it by Wall Street hit men. If they had formed their own Public Bank of Los Angeles, they could not only have avoided being ripped off, but they could have actually made money and then be in a position to fix all those potholes they've been screaming about. And they could have created their own money supply the way Wall Street does it: fractional reserve banking.
Los Angeles Becomes Largest U.S. City to Take Action on Toxic Bank Deals; Unanimous Vote Requires City to Renegotiate or Terminate Multi-Million Dollar Interest Rate Rip-Off on Behalf of Taxpayers
Unanimous City Council vote sends strong message to Bank of NY Mellon, Wall Street: LA is not your ATM
The Los Angeles City Council voted 14-0 Wednesday to renegotiate or terminate without penalty a toxic swap deal the City entered into with two Wall Street banks, Bank of New York Mellon and Dexia. The measure, advanced by Fix LA, a coalition of clergy, unions and community groups aligned to restore city services and expand middle class jobs in the public sector, could save the City as much as $138 million. The International Business Times, noting the significance, reported that Los Angeles is now the largest city in the nation "to challenge ballooning Wall Street levies that accompany similar interest rate swap deals throughout the nation."
The motion further calls on the banks to return unfair profits and fees paid since 2008, estimated at more than $65 million to date. The deal costs taxpayers $4.9 million annually.
Los Angeles is now spending $290 million a year in financial fees or more than the entire city budget for maintaining its vast array of streets and highways. LA isn't the only sucker to enter into an interest rate swap in 2007 which was essentially a bet that interest rates would not fall below 2%. Then when the Federal Reserve, with its policy of QE, lowered interest rates to zero, LA and many other jurisdictions found themselves on the wrong end of a bet and were forced to shell out much more than they would have if they had kept the interest rate on the original loan.
The next sucker: Puerto Rico. Puerto Rico ran itself into debt and then tried to make up for it with interest rate swaps. Recent credit downgrades allowed Wall Street to demand hundreds of millions more in short-term lending fees, credit-default-swap termination fees, and higher interest rates. Between 2012 and 2014, Puerto Rico paid nearly $640 billion to terminate swaps in addition to $12 million annual swap payments. As a result Puerto Rico is in the same situation as Greece - borrowing money in order to make debt payments which is the same as borrowing money on one credit card to make the payments on another.
The Chicago Public School Teachers' Pension and Retirement Fund has brought suit against 10 of Wall Street's biggest banks including Goldman Sachs, JPMorgan Chase, Citigroup and Bank of America for colluding to prevent the trading of interest rate swaps with the result that it cost the Fund more money.
If these jurisdictions - whether they be cities, counties or states - formed public banks as the state of North Dakota did, there would be no outflow of cash to Wall Street. Money would stay at the local level and could be used to support local businesses and create jobs repairing and building infrastructure.
An Infrastructure Bank Would Mean Good Jobs in a Much Needed Enterprise
If the government creates money and puts it in an infrastructure bank, that money would be spent into the economy by creating jobs to build and repair infrastructure. Thus good jobs would be created at the low and middle parts of the economic spectrum. This money would have a multiplier effect as the job holders would spend their paychecks on the necessities and luxuries of life. American GDP is based on 70% consumer spending so that would go up. Thus the democratically elected government - not private banks - would be in charge of creating the money supply and it would be to the advantage of average workers not high end financiers. Since the big banks are the current recipients of the QE largesse, that money goes into the pockets of billionaires in various ways and drives wealth and income inequality.
Or the government, instead of the private Wall Street banks, could create money itself directly and inject it into the economy in a variety of ways as Abraham Lincoln did when he had the American government create and spend greenbacks into the economy. This money, therefore, does not create debt as money created by private banks and loaned into the economy does. It's a bottom up rather than a trickle down method. Problem is that most money created today does not trickle down into the real economy.
Australian blogger Prof. Bill Mitchell agrees that PQE is economically sound. But he says it should not be called “quantitative easing.” QE is just an asset swap – cash for federal securities or mortgage-backed securities on bank balance sheets. What Corbyn is proposing is actually Overt Money Financing (OMF) – injecting money directly into the economy.
Mitchell acknowledges that OMF is a taboo concept in mainstream economics. Allegedly, this is because it would lead to hyperinflation. But the real reasons, he says, are that:
It cuts out the private sector bond traders from their dose of corporate welfare which unlike other forms of welfare like sickness and unemployment benefits etc. has made the recipients rich in the extreme. . . .
It takes away the ‘debt monkey’ that is used to clobber governments that seek to run larger fiscal deficits.
So the government could just create money and inject it into the economy in one of two ways: directly to the people in the form of a basic guaranteed income or through an infrastructure bank that creates jobs. In the first instance money would be transferred directly to people to bolster consumption. In the second case jobs would be created that would get needed work done. Or a combination of both could be used.
A third way of reducing income inequality would be to redistribute money from the 1% to the 99% through the tax code. This is the method that Bernie Sanders advocates. Taxes on wealth and financial transactions would provide additional monies which could be transferred to the 99% through social programs such as Medicare-For-All, or it could be given directly in terms of a deposit to checking accounts as was done in the Economic Stimulus Act of 2008. Money was deducted from tax liabilities or deposited directly to American citizens.
The Concept of a Basic Guaranteed Annual Income
The concept of a Basic Income in the U.S. goes back to Thomas Paine, one of the driving forces for independence and reducing inequality during the American Revolution. More recently, it’s been supported by very non-liberal individuals like Fredrick Hayek, Milton Friedman, and Richard Nixon. This would eliminate poverty in one fell swoop. All the anti-poverty programs could be rolled into one with much fewer administrative costs. Just as Medicare-For-All would simplify and reduce medical costs, a basic guaranteed income would amount to Social-Security-For-All. The state of Alaska already has such a program called the Alaska Permanent Fund which hands out money to each resident on an annual basis. In 2015 each man, woman and child received $2,072.00. For a family of four that was a nice basic income of approximately $8000. Sweet!
In the Netherlands a number of cities are experimenting with a basic income after the city of Utrecht announced that it would give no-strings-attached money to some of its residents. Tilburg, a city of 200,000 inhabitants close to the border with Belgium, will follow Utrecht’s initiative, and the cities of Groningen, Maastricht, Gouda, Enschede, Nijmegen and Wageningen are also considering it. A recent study conducted in 18 European countries concluded that generous welfare benefits make people likely to want to work more, not less.
In Switzerland, the necessary 100,000 signatures have been obtained for holding a referendum on whether Swiss citizens should receive an unconditional basic income of €2,500 per month, independently of whether they are employed or not. Other countries such as Finland and Catalonia are also moving in the direction of a no-strings-attached guaranteed income. This would do more to reduce inequality and poverty than perhaps any other measure.
If Tilburg’s basic income project gets the green light from Netherland’s state secretary of social affairs, the town will provide an extra paycheck to a pilot group of 250 people starting in January 2016, Tillburg officials said. The city has not confirmed the amount of the stipend, but in Utrecht checks will range from around €900 ($1,000) for one adult to €1,300 ($1,450).
Although the classic basic income theory proposes universal payments across the population, the two Dutch experiments will only focus on residents who are already recipients of social assistance. Those in the program will be exempt from the severe job-seeking requirements and penalties in Dutch law.
Authorities aim to test how citizens react without that sword of Damocles over their heads. Will the money encourage them to find a job or will they sit on their couches comfortably?
A guaranteed income could be means tested. Why not? Rich people don't need an extra $1000. a month. It would reduce poverty, increase consumption and bolster GDP. Rich corporations would probably increase the price of staples as people had more money to buy them causing inflation. That's why the behemoth world wide franchise operations need to be broken up so they don't collude to raise prices on staples thus defeating the purpose of the basic income. With fiat money entering the real economy instead of the billionaire economy, inflation could become a concern.
Hyperinflation is always a concern when fiat money is created. When that money is spent by consumers, it will still wind up in the hands of a few major corporations, and that would be a problem. They could just keep raising prices. That's why breaking up those large behemoths by using the Sherman Anti-Trust Act is important. Money can also be pulled back by the government by taxation if inflation threatens to get out of hand.
As Ellen Brown says: "Thus there are many ways to recycle an issue of new money back to the government. The same money could be spent and collected back year after year, without creating price inflation or hyperinflating the money supply."
However, when fiat money ends up in the pockets of billionaires as has been the case with QE, inflation is not a concern because it doesn't enter the real economy and prices don't rise. Income inequality though becomes a major concern as does the influence of big money on the political system. Billionaire money has bought and paid for the political system through lobbying and campaign donations with the result that the US is effectively no longer a democracy but a plutocracy.
Trickle Down Economics Trickles Up Instead
As the article The Case for Universal Basic Income states:
What’s really scary is the general acceptance of a status quo in which most people are getting poorer and poorer, even while recent studies demonstrate that so-called “trickle-down” economics actually means an upwards flow of income until it stagnates as hoarded wealth. This stymies wealth creation in the economy, as the Institute for Policy Studies concluded after using standard economic multiplier models to show that every extra dollar paid to low-wage workers adds about $1.21 to the US economy. If this dollar went to a high-wage worker it would add only 39 cents to GDP. In other words, if the $26.7 billion paid in bonuses to Wall Street punters in 2013 had gone to poor workers, GDP would have risen by some $32.3 billion. ...
One of the main advantages of a universal basic income is that it would free people from the tyranny of the job market in which they are mere commodities by guaranteeing the most basic human right of all, that of material existence.
With inequality increasing some way or ways must be found to redress the balance. The alternative is to wake up and find ourselves in a neo-feudal society controlled by a few behemoth corporations employing only a few high level people at good wages. The rest of the population would be employed in low level service type jobs and live in relative poverty. What money they had would be spent in the troughs of the giant corporations and end up in the pockets of the 1%. Even if the 99% were given money to spend, it would still end up there - in the pockets of a few. An infrastructure bank funded by government created fiat money would provide people with decent jobs in which workers could maintain a sense of dignity and improve the quality of the nation's infrastructure at the same time.
In addition recipients of a basic income should have to give something back in terms of creating a better life for poor people around the world. Instead of armies with guns and weapons which have cost trillions and produced mainly negative results, a Peace Army could help poor people around the globe attain at least a minimally acceptable lifestyle in terms of clean water and sanitation, adequate nutrition, energy and education.
Installing solar around the world will not only provide energy for people who don't have anything but the most primitive kind while cleaning up the environment at the same time. The commitment of rich nations to help poorer nations convert to renewable energy could be manifested by funding unemployed and underemployed Americans to help build such infrastructure around the world.
It's not good for people to be idle. If they have no other job, they should at least be required to perform community service. If they have another job so that the basic income is just a supplement, this would be the ideal situation.
Income inequality will only increase as long as Wall Street banks control the money creation process, and the rest of US citizens keep going into debt whether it be with mortgages, student loans, car loans or credit cards. Local jurisdictions should take back the money creation process from Wall Street by creating their own public banks. Then the people will have the say in who gets the QE.
by John Lawrence from the San Diego Free Press
In Bel Air One Household Used an Astonishing 11.8 Million Gallons
Hey, we're in a drought and people are being encouraged to take shorter showers and only wash their cars sparingly. But that doesn't apply to the rich. They are using millions of gallons of water and neither the state or local water districts are limiting them in any way. The water bill for this 11.8 million gallon user for the 12 months ending April 1 was $90,000. This guy was only charged 0.76 cents a gallon! No wonder he consumed water excessively; it was so cheap! California is in the fourth year of a water crisis, but the rich are using water as if there were no tomorrow.
Mother Jones nailed the zip code data on this although no water district would reveal their excessive users by name. Privacy trumps the public's right to know who these water gluttons are, but it's not hard to guess. They all come from exclusive neighborhoods. Take San Diego, for instance. There are 92 persons or families who have consumed more than a million gallons, mainly in La Jolla and Carmel Valley. The biggest single user in San Diego was someone who consumed 4.6 million gallons in a year. Anybody want to step forward and admit what a scofflaw you are and try to justify your excessive water usage?
The rest of us are encouraged to stop watering our lawns, even rip them out and put in desert plants. (Take a virtual tour of the water conservation garden at Cuyamaca College led by Ms. Smarty-Plants.) But there are two sets of rules, just like in everything else: one set for the rich and another set for the rest of us. While the water districts have mounted a campaign to get us to cut our water use, these big shots continue their wanton and profligate ways. Hey, after all, it's the drought of the century. But that's only as far as poor and middle class people are concerned. For the rich it's business as usual. Don't ask them to rip out their manicured lawns and private golf courses. When the rest of us are dying of thirst, their lawns will still be green.
While the water agencies have fined hundreds of Californians for watering down their driveways or not replacing broken sprinkler heads, the rich go their merry ways indulging their gargantuan appetites for a boundless supply of agua pura. David Wilson got fined $600 for watering his lawn on the wrong day of the week and letting runoff flow into the street.
But you can bet that the richies are spraying their private orchards with the good stuff, not gray water. Only the best for them. Money talks and the rest of us will be fined for disobeying the water agency's silly rules. Here's a rule for you. Limit their water intake and charge a premium for any water use over what the average household uses.
Angelenos can pump as much water as they want said Martin Adams, senior assistant general manager for the water system at the Department of Water and Power. "There's no ordinance on the books in Los Angeles to go after an individual customer strictly for their use," he said.
San Diego Has Some of the Biggest Water Guzzlers
When it comes to million gallon plus users, San Diego is no slouch. San Diego's biggest user weighing in at 4.6 million gallons lives in La Jolla where Mitt Romney and John McCain have homes. Is it one of them? Two other La Jolla residents consumed 4.5 million gallons. 29 La Jollans consumed more than a million gallons in a year, the third highest number of million gallon users in the state. That's a lot of grass kept green. Or maybe they have orchards and vineyards in their back yards. For sure swimming pools and fountains. Luxury knows no bounds. Just go ahead and gorge yourselves, richies. Us plebes will go on conserving water as best we can so you can enjoy your rich lifestyles.
Carmel Valley had 36 customers who used a million gallons or more. Must be growing tomatoes or avocados in their yards. Or maybe it's those half hour showers from 10 Rainfall shower heads. Even Rancho Bernardo weighed in as having the tenth largest number of million gallon users in the state: 12.
During the 1991 drought it was a matter of public record who the biggest water users were, and they could be identified by name. But guess what happened? Rich people got the law changed to protect themselves so their identities could not be revealed in the future. The law was pushed by the City of Palo Alto citing the privacy concerns of Silicon Valley executives. Think the deck is not stacked against you if you're not rich? This is only one small instance of how rich people are changing the nature of democracy to favor themselves. Magnify that small change in the law by a million and you get some sense of what has happened to turn this democracy into a plutocracy.
In The Divide Mat Taibbi details how America has turned into a nation that has one set of laws for the rich and quite another for the poor. Witness: rich people caught using drugs go to rehab. Poor people, especially poor black people, go to jail. Taibbi wrote this book to demonstrate that unequal wealth is producing grotesquely unequal outcomes in criminal justice. Taibbi shows that, just as income disparities are growing ever wider, so are disparities in who attracts the attention of cops and prosecutors and who doesn’t. Strangely enough, the Divide also applies to water usage.
Water Usage of the Rich and Famous
LA has 92 of the top water users in the state. On average LA's mega-users pumped 4.2 million gallons of water per year apiece. They live in the zip codes of the rich and famous: Hollywood actors and moguls, real estate executives, lawyers, plastic surgeons and such. What they pay for water is just a small blip in their portfolios. Maybe they should pay more, a lot more, just as they should pay a lot more in taxes, especially on the billions held offshore that go tax free.
Bel Air harbors not just the biggest water user in the state but four of California's top five with water usage ranging from 7.4 million gallons to 11.8 million gallons. Beverly Hills zip code, 90210, is not far behind. In the 90210 lives the third most gargantuan appetite for water. His or her consumption is enough for 60 normal families - 8 million gallons per year. This exorbitance and extravagance when it comes to water usage reflects the other aspects of their lives. Too much is never enough!
Reveal from the Center for Investigative Reporting sought information on the biggest users. At most they got information for zip codes. Here are some of the lame excuses they got: "City does not maintain records", "wanted $2100 for 'programming' to produce data", "by law, data is exempt from disclosure", "district does not have an existing list of big users."
So average Joe Schmoes, you better watch your butt if you wash your car on the wrong day or your sprinkler heads are not in good working order. And just jump in the shower, get wet and jump out again before you soap up. Then feel free to turn the water back on, jump back in and wash the soap off. The other guys behind those tall hedges and locked gates don't have to worry about a thing. They can shower at leisure, and who cares if they leave the water running while they take an important phone call. Their water districts are protecting their identities.
by John Lawrence
Add Pope Francis to the world's leaders who are calling for immediate action to combat climate change. In the Pope's own words the earth has become a pezzo di merda, a piece of you know what. He has also described unbridled capitalism as the "dung of the devil." Popes are not often given to scatological imagery to describe the predominant American economic system. However, the Pope's words are very important because he wields enormous moral authority. Would that the leading moral authorities from the world's other major religions had the gumption to stand up and add their voices in the fight against climate change.
The Pope blames human greed for exploitation of the environment and an economic system that is geared to profit making rather than to rational development of natural resources which would benefit all mankind rather than just those at the top. The Pope's 184 page encyclical is a radical statement: a condemnation of business as usual and a call for a restructuring on political and economic priorities.
VATICAN CITY — Pope Francis on Thursday called for a radical transformation of politics, economics and individual lifestyles to confront environmental degradation and climate change, blending a biting critique of consumerism and irresponsible development with a plea for swift and unified global action.
The vision that Francis outlined in a 184-page papal encyclical is sweeping in ambition and scope: He describes relentless exploitation and destruction of the environment and says apathy, the reckless pursuit of profits, excessive faith in technology and political shortsightedness are to blame.
The most vulnerable victims, he declares, are the world’s poorest people, who are being dislocated and disregarded.
The Pope places most of the blame on fossil fuels and human activity, while warning of an “unprecedented destruction of ecosystems, with serious consequences for all of us” if corrective action is not taken swiftly. Those mostly responsible, the developed, industrialized countries, are obligated to help poorer nations confront the crisis.
Some see the Pope's encyclical as an attack on capitalism. There is no doubt that it is exactly that. Unless there is a moral and spiritual impetus to renunciation of profit making enterprises that despoil the environment, there is no hope for a habitable earth for our children and grandchildren. Already, lives are being destroyed from extreme weather events. Thousands have died in India and Pakistan from extreme heat. Hurricanes and tornadoes have destroyed entire towns in the US. Flash floods have immiserated and inconvenienced thousands.
The Plight of the Poor Should Be Considered First, Not as an Afterthought
Catholic teachings (full disclosure: I am not a Catholic) are not afraid to take on the economic system we live in and point out its moral and spiritual inadequacies. They teach that economic development, to be morally good and just, must take into account people’s need for things like freedom, education and meaningful work. And they don't just mean the upper 1%. The "preferential option for the poor" means that the intersts of poor people must be taken into account first and not just as an afterthought. Isn't this what Jesus taught? The Pope is merely interpreting Jesus' words in a literal manner. If Christianity has any meaning at all, it means that society must help the poor and vulnerable not as an afterthought but as part and parcel of that society's bedrock philosophy.
By the same token the interest of sustaining a planet Earth that nurtures life must be given top priority. Technology is not something that can fix the planet after it's been raped and exploited by profit seeking corporations who dump their waste into the environment and don't bother to clean it up. For instance all kinds of animal excrement is stored in "ponds" where it leaks into rivers and ground water. "Pork is cheap and cheap to produce in large factories because they don't pay for cleaning up the Des Moines water supply and they don't pay for the asthma neighbors get, they don't pay for polluting downstream water that used to be potable and they don't pay for the loss of property values," said Steve Wing, a University of North Carolina at Chapel Hill epidemiologist.
Citing the scientific consensus that global warming is disturbingly real, Francis left little doubt about who's to blame. To name a few: "big businesses, energy companies, short-sighted politicians, scurrilous scientists, laissez faire economists, indifferent individuals, callous Christians and myopic media professionals." Scarcely any area of society escaped his withering criticism.
The Pope's encyclical recycles some of the now-familiar themes of his papacy: an abiding concern for the poor, a scorching critique of the idolatry of money and a facility for using evocative language to describe complex conundrums. The problem is that capitalism extolls the value of money above all else. Wall Street demands that the bottom line is the sine qua non of business activity. Nothing else counts for anything. In Christian terms that pretty much makes Wall Street the devil.
As the first Pope from the developing world, Francis brings a moral vision shaped not in the seminaries of Europe but in the slums of Buenos Aires, Argentina. Francis calls for a drastic change in "lifestyle, production and consumption" from unsustainable habits to more mindful means of caring for "our common home."
What Kind of World Do We Want to Leave to Our Children
"What kind of world do we want to leave to those who come after us, to children who are now growing up?" Francis asks. "The question not only concerns the environment in isolation; the issue cannot be approached piecemeal." Nothing short of a "bold cultural revolution" can save humanity from spiraling into self-destruction. Our care for the environment is intimately connected to our care for each other, he argues, and we are failing miserably at both.
"We are not faced with two separate crises, one environmental and the other social," Francis writes, "but rather one complex crisis which is both social and environmental." The rich and powerful shut themselves up within self-enclosed enclaves, Francis argues, compulsively consuming the latest goods to feed the emptiness within their hearts, while ignoring the plight of the poor.
The problem is "aggravated," the Pope said, "by a model of development based on the intensive use of fossil fuels." If present trends continue, Francis argued, the changing climate will have grave implications for poor communities who lack the resources to adapt or protect themselves from natural disasters.
His most stinging rebuke is a broad critique of profit-seeking and the undue influence of technology on society. He praises achievements in medicine, science and engineering, but says that “our immense technological development has not been accompanied by a development in human responsibility, values and conscience.”
Many will be forced to leave their homes, while the economically and politically powerful "mask" the problems or respond with indifference, the Pope said. The poor may get a passing mention at global economic conferences, Francis says, but their problems seem to be merely added to agendas as an afterthought. "Indeed, when all is said and done," the Pope said of the poor, "they frequently remain on the bottom of the pile."
"We need to reject a magical conception of the market, which would suggest that the problems can be solved simply by an increase in the profits of companies or individuals," he said. What's more, the Pope called the idea that the "invisible forces of the market" can adequately regulate the economy the "same kind of thinking" that leads to the "exploitation of children and abandonment of the elderly who no longer serve our interests."
In one particularly searing section, Francis compared laissez faire economists to mobsters, drug lords, illegal organ harvesters and human traffickers. All are part of a "throwaway culture," the Pope argues, that treats human beings as just another commodity to exploit. The Pope's attack on the "myth of progress" is more surprising. But he connected his critique to a "worshipping of earthly powers," where humans have usurped the role of God, imposing our own laws and interests on reality with little thought to the long-term consequences.
Pope Francis has criticised capitalism as a system that sacrifices "human lives on the altar of money and profit." It was the second time during his trip to South America that Francis used a major speech to excoriate unbridled capitalism and champion the rights of the poor. In Paraguay, the Pope called on world youth to rise up against global capitalism. The address marked the end of Pope Francis' week-long pilgrimage to Latin America, during which he also assailed the prevailing economic system as the "dung of the devil," saying that the systemic "greed for money" is a "subtle dictatorship" that "condemns and enslaves men and women."
California Governor Jerry Brown met with the Pope on July 21 at a Vatican conference on climate change. He blasted climate change deniers, called them "troglodytes." Brown threw his weight behind Pope Francis’s encyclical in which the pope linked poverty to creeping climate change and urged action to alleviate both. He said he had no faith in Congress and urged Mayors to take action to cut greenhouse gas emissions. Brown and the other local leaders signed a declaration stating that ”human-induced climate change is a scientific reality, and its effective control is a moral imperative for humanity."
The Dalai Lama Speaks Out on Climate Change
The Dalai Lama has also added his voice to the need for taking action to combat climate change. On July 6, in a celebration of his 80th birthday, he joined prominent climate change scientists and activists in a panel discussion at UC Irvine's Bren Events Center on "The Effects of Climate Change and Taking Action to Resolve this Global Issue."
This is from the Buddhist Climate Project:
The Dalai Lama told US diplomats last year that the international community should focus on climate change rather than politics in Tibet because environmental problems were more urgent, secret American cables have revealed through Wikileaks.
The exiled Tibetan Buddhist spiritual leader told Timothy Roemer, the US ambassador to India, that the "political agenda should be sidelined for five to 10 years and the international community should shift its focus to climate change on the Tibetan plateau" during a meeting in Delhi last August.
"Melting glaciers, deforestation and increasingly polluted water from mining projects were problems that 'cannot wait', but the Tibetans could wait five to 10 years for a political solution," he was reported as saying.
Though the Dalai Lama has frequently raised environmental issues, he has never publicly suggested that political questions take second place, nor spoken of any timescale with such precision.
Roemer speculated, in his cable to Washington reporting the meeting, that "the Dalai Lama's message may signal a broader shift in strategy to reframe the Tibet issue as an environmental concern".
The Dalai Lama has endorsed Pope Francis' speaking out on climate change and said more religious leaders ought to do so.
Several Republican politicians have criticized the Pope for speaking out about environmental and economic issues, including Jeb Bush, Rick Santorum and James Inhofe. But at the Glastonbury panel on climate change, the Dalai Lama said Pope Francis was “very right,” and he appreciated him releasing the papal document. The Dalai Lama called on fellow religious leaders to “speak out about current affairs which affect the future of mankind.” He also called for increased pressure on governments around the world to stop burning fossil fuels, end deforestation and transition to renewable energy sources, reports The Guardian.
The Dalai Lama has also proclaimed himself a Marxist:
The Dalai Lama called himself a Marxist in an interview with the German newspaper Die Welt in 2009, asserting:
I still believe I am a Marxist monk. I don’t see a contradiction here either. In the Marxist theory the focus lies on the just allocation of wealth. From a moral perspective this is a correct claim. Capitalism, on the other hand, values the accruement of wealth – the allocation of it doesn’t matter here initially. In a worst case scenario the rich will keep getting richer while the poor keep getting poorer.
He reiterated his claim that he is a Marxist in 2015, stating, “As far as socioeconomic theory, I am Marxist … In capitalist countries, there is an increasing gap between the rich and poor. In Marxism, there is emphasis on equal distribution.”
Now that the Pope and the Dalai Lama have chimed in, it is time for other religious and moral leaders to do the same. In particular religious leaders should emphasize not only the need to stop extracting fossil fuels and speed up the conversion to renewables but also they need to condemn a political/economic system that produces great wealth for some and poverty and misery for most. Great minds must come up with alternatives to capitalism, systems that distribute the world's wealth in a much more equitable measure and at least do everything possible to alleviate the suffering of the majority of the world's population including the 50 million refugees who barely have a life worth living.
by John Lawrence
Since 1997, San Diego County has required all families applying for California's version of welfare called CalWORKs to submit to warrantless, suspicionless, unannounced home searches and interrogations by District Attorney investigators. As of June 2013 about 150,000 families, or about 9,300 families each year, have been subject to these searches. This policy, called Project 100% or P100, diverts money away from the poor and has not been shown to be effective at detecting or preventing fraud. San Diego is the only place in the whole nation which has such an intrusive, untargeted policy making it America's finest city - NOT - for the poor and vulnerable. These searches are a violation of the Fourth Amendment to the Constitution which forbids "unreasonable searches" of peoples' homes.
Money to fund the DA office's P100 search program is money taken away from the CalWORKs program which could have gone to help needy families. In fact almost $2 million per year could instead be used to hire 42 new welfare-to-work employment counselors. Not only are blanket home searches ineffective, they are harmful to children and parents in crisis. Simply for requesting government aid for which they are potentially eligible, families are forced to endure the frightening and degrading intrusion into the private spaces of their homes by law enforcement officials.
People signing up for welfare have to agree to these unscheduled searches, and make themselves available at all times during the day since, if they're not home when the inspector arrives at the door, they get turned down for welfare benefits. When the inspector comes, she must invite him in or forego benefits. Investigators for the program - not social workers mind you, but accusatory and sometimes rude investigators from the DA's office - pay over two thousand unannounced visits a month, taking note if they find a man's name on a prescription bottle in the medicine cabinet or boxer shorts in a sock drawer. If the inspector finds a pair of work boots in her closet, he will accuse her of harboring a man in her home and she will lose benefits. If there are two toothbrushes in her toothbrush holder, she will lose benefits. Investigators have even threatened to take the applicant's children away if they find any evidence of welfare fraud. These situations have actually happened to real people.
One inspector picked up a Victoria's Secrets bra with the erasure tip of a pencil and waved it in her face claiming that, if she were really poor, she wouldn't have such an expensive bra in her dresser. Who was she trying to impress - a boyfriend perhaps? The same technique was used on a pair of her sexy panties. If she didn't have a boyfriend, what would she have needed those for? Anything that would tip off the inspector that she may have lied on her application is grounds for denying her a few hundred measly dollars a month. Authorities are looking for evidence that the applicant has a secret job or a boyfriend who could pay bills.
The general idea is that being really poor means you should naturally give up any ideas you might have about privacy or dignity. If you are poor, you should have to give up your Constitutional rights such as the Fourth Amendment. You are not afforded the benefit of being protected from unreasonable searches. Welfare fraud is subject to harsh penalties while bankster fraud goes unpunished. No bankster would have to undergo a peremptory search of his premises despite the massive frauds involving billions of dollars that some of them have committed.
And what about the Balboa Park Centennial Inc (BPCI) that spent almost $3 million of taxpayer money with no results whatsoever. Are they being investigated for fraud? Hell, no. They are part of San Diego's white collar, white faced elite. They can waste any amount of money whatsoever and the DA's office will look the other way. Only City Councilman David Alvarez is questioning where millions of taxpayer dollars meant for the Balboa Park Centennial Celebration have gone. The insiders on the BPCI paid themselves handsomely, and they have taken the money with impunity, with no obligation to pay it back despite their pathetic results. No one is accusing them of fraud. No one is carrying out unreasonable searches and seizures at any of their homes. There are two standards of justice - one for the rich who steal millions and one for the poor who may, if they're lucky, get a few measly bucks to pay their electric and water bills.
In Matt Taibbi's book, The Divide, he chronicles the experiences of Maria Espinosa, Karen Bjorland, Markisha and the couple, Diego and Anna [more about them next time], as they were hassled by the P100 program in San Diego:
Maria Espinosa was a pioneer. The sifting-through-the-dresser-drawer search she experienced in the early years of the George H. W. Bush presidency was an informal precursor to a [program that] would become formalized in her new home county of San Diego. In San Diego County ... the state preemptively searches for evidence of fraud in the homes of the tens of thousands of people who have applied and are applying for cash assistance via CalWORKs, the California version of Temporary Assistance for Needy Families or TANF - what we used to call welfare.
Today, every single person who applies for aid and is accepted has to be preemptively searched. These people are almost all non-white. And while in L.A. in the late 1980s the person visiting the home of someone like Maria Espinosa was just a social worker from the local welfare office, the state has since upgraded. In San Diego now it's a law enforcement official, a representative of the district attorney's office, who comes in to look through your underwear drawer. The city has a team of investigators whose sole purpose is to conduct the searches for this program ... .
One hundred percent compliance, that's the idea. No outliers, no excuses. Fraud must not be tolerated, not even the smallest kind. So the program must be large, and appropriate resources must naturally be devoted to crime detection. In just one year, 2011, the county conducted an astonishing 26,000 home searches.
P100 generates, by the thousand, stories that sound like testimonials culled from refugees of some distant, low-rent, third-world despotate. The stories are terrible, humiliating, abusive.
On the other hand, Taibbi continues:
... while the San Diego District Attorney's Office spent more than a decade sifting through thousands of dresser drawers and bringing felony cases all the way to court for frauds as small as four hundred dollars, executives in the same general area of Southern California, at companies like Countrywide and Long Beach Mortgage, were pioneering the mass fraud scheme that involved the sales of toxic mortgage-backed securities.
... Not one home was searched. No banker ever had someone pick up his underwear by a pencil and wave it in his face.
Twenty-six billion dollars of fraud: no felony cases. But when the stakes are in the hundreds of dollars, we kick in 26,000 doors a year in just [San Diego] county.
Finally, six women who had experienced these travesties got together and with the help of the ACLU filed a lawsuit. In Sanchez v, the County of San Diego, they argued before the United States Court of Appeals, Ninth Circuit, that these intrusive home searches were a violation of their Fourth Amendmant rights. They lost. The argument that prevailed was basically that, by virtue of their applying for taxpayer supported aid, the state's interest took precedence over their right not to have their homes peremptorily searched, that they had forfeited that portion of their Constituional rights.
However the minority opinion of the Court was quite striking. They wrote the following:
[A visit from a social worker] is a far cry from the program carried out by the County of San Diego, whose Project 100% home visits entail a law enforcement agent - trained not to give advice to welfare applicants - walking through the applicant's home in search of physical evidence of ineligibility that could lead to criminal prosecution either for welfare fraud or other crimes unrelated to the welfare application. In light of the significant differences in scope and implementation between the home visits at issue in Wyman [a precedent case] and those challenged here, I disagree with the majority's conclusion that the home visits do not rise to the level of a Fourth Amendment search. Nor do I agree with the majority's improper discounting of the Appellants' heightened privacy interest in their home. In the majority's view, even if the home visit is a search, it is reasonable because the Appellants' relationship with the state as potential welfare recipients “reduce[s] the expectation of privacy even within the sanctity of the home.” ... By suggesting that welfare applicants may be treated the same as convicted criminals, the majority ignores the limits - implicit and explicit - in [another precedent case].
Courts have been chipping away at the Constitutional rights of the poor and people of color for many years while giving a free pass to rich, white collar and white faced criminals. The County of San Diego with its P100 program is the worst offender along these lines in the entire US. If you're black or brown and live in the ghetto, you don't get protection against illegal searches and seizures. Whether it's possession of microscopic amounts of drugs or accusations of welfare fraud, that's just the way it is.
NEXT TIME: How P100 Screwed Diego and Anna.
by Robert Reich
In a new Pew poll, more than three quarters of self-described conservatives believe “poor people have it easy because they can get government benefits without doing anything.”
In reality, most of America’s poor work hard, often in two or more jobs.
The real non-workers are the wealthy who inherit their fortunes. And their ranks are growing.
In fact, we’re on the cusp of the largest inter-generational wealth transfer in history.
The wealth is coming from those who over the last three decades earned huge amounts on Wall Street, in corporate boardrooms, or as high-tech entrepreneurs.
It’s going to their children, who did nothing except be born into the right family.
The “self-made” man or woman, the symbol of American meritocracy, is disappearing. Six of today’s ten wealthiest Americans are heirs to prominent fortunes. Just six Walmart heirs have more wealth than the bottom 42 percent of Americans combined (up from 30 percent in 2007).
The U.S. Trust bank just released a poll of Americans with more than $3 million of investable assets.
Nearly three-quarters of those over age 69, and 61 per cent of boomers (between the ages of 50 and 68), were the first in their generation to accumulate significant wealth.
But the bank found inherited wealth far more common among rich millennials under age 35.
This is the dynastic form of wealth French economist Thomas Piketty warns about. It’s been the major source of wealth in Europe for centuries. It’s about to become the major source in America – unless, that is, we do something about it.
As income from work has become more concentrated in America, the super rich have invested in businesses, real estate, art, and other assets. The income from these assets is now concentrating even faster than income from work.
In 1979, the richest 1 percent of households accounted for 17 percent of business income. By 2007 they were getting 43 percent. They were also taking in 75 percent of capital gains. Today, with the stock market significantly higher than where it was before the crash, the top is raking even more from their investments.
Both political parties have encouraged this great wealth transfer, as beneficiaries provide a growing share of campaign contributions.
But Republicans have been even more ardent than Democrats.
For example, family trusts used to be limited to about 90 years. Legal changes implemented under Ronald Reagan extended them in perpetuity. So-called “dynasty trusts” now allow super-rich families to pass on to their heirs money and property largely free from taxes, and to do so for generations.
George W. Bush’s biggest tax breaks helped high earners but they provided even more help to people living off accumulated wealth. While the top tax rate on income from work dropped from 39.6% to 35 percent, the top rate on dividends went from 39.6% (taxed as ordinary income) to 15 percent, and the estate tax was completely eliminated. (Conservatives called it the “death tax” even though it only applied to the richest two-tenths of one percent.)
Barack Obama rolled back some of these cuts, but many remain.
Before George W. Bush, the estate tax kicked in at $2 million of assets per couple, and then applied a 55 percent rate. Now it kicks in at $10 million per couple, with a 40 percent rate.
House Republicans want to go even further than Bush did.
Rep. Paul Ryan’s “road map,” which continues to be the bible of Republican economic policy, eliminates all taxes on interest, dividends, capital gains, and estates.
Yet the specter of an entire generation who do nothing for their money other than speed-dial their wealth management advisors isn’t particularly attractive.
It’s also dangerous to our democracy, as dynastic wealth inevitably accumulates political influence.
What to do? First, restore the estate tax in full.
Second, eliminate the “stepped-up-basis on death” rule. This obscure tax provision allows heirs to avoid paying capital gains taxes on the increased value of assets accumulated during the life of the deceased. Such untaxed gains account for more than half of the value of estates worth more than $100 million, according to the Center on Budget and Policy Priorities.
Third, institute a wealth tax. We already have an annual wealth tax on homes, the major asset of the middle class. It’s called the property tax. Why not a small annual tax on the value of stocks and bonds, the major assets of the wealthy?
We don’t have to sit by and watch our meritocracy be replaced by a permanent aristocracy, and our democracy be undermined by dynastic wealth. We can and must take action — before it’s too late.
There was once a time in America when the super-rich needed you, and me, and working-class Americans to be successful.
They needed us for their roads, for their businesses, for their communications, for their transportation, as their customers, and for their overall success.
The super-rich rode on the same trains as us, and flew in the same planes as us. They went to our hospitals and learned at our schools.
Their success directly depended on us, and on the well-being of the nation, and they knew it.
But times have changed, and the super-rich of the 21st century no longer think that you and I are needed for their continued success.
And in some ways, they have given up on America, period.
As Paul Buchheit brilliantly points out over at AlterNet, "As they accumulate more and more wealth, the very rich have less need for society. At the same time, they've convinced themselves that they made it on their own, and that contributing to societal needs is unfair to them. There is ample evidence that this small group of takers is giving up on the country that made it possible for them to build huge fortune."
Buchheit goes on to say that, "The rich have always needed the middle class to work in their factories and buy their products. With globalization this is no longer true... They don't need our infrastructure for their yachts and helicopters and submarines. They pay for private schools for their kids, private security for their homes. They have private emergency rooms to avoid the health care hassle. All they need is an assortment of servants, who might be guest workers coming to America on H2B visas, willing to work for less than a middle-class American can afford"
Unfortunately, these millionaires and billionaires who have given up on America and on the working class are in control of the political process in this country.
They have brainwashed Republicans into thinking that the success of working-class Americans no longer matters for the future of this nation.
As a result, Republicans are no longer investing in things that have traditionally made America - and the working-class - successful.
Take America's infrastructure for example - or lack thereof.
According to the American Society of Civil Engineers annual report card on America's infrastructure, America's infrastructure is a mess.
Our roads are falling apart, our transportations systems are in turmoil, and our energy and electrical systems are stuck back in the 1900's.
A new graph released by investment research firm BCA shows why.
Non-defense related infrastructure spending was around $325 billion per year when George W. Bush stepped foot inside of the White House.
Today, it's around $235 billion per year, a $90 billion drop in funding from when Bush took office.
Republicans, brainwashed by America's super-rich, have repeatedly refused to fund comprehensive infrastructure spending bills, all in the name of austerity.
But cutting funding to the nation's infrastructure isn't the right way to address American's debt or spending problems. And it certainly isn't the right way to rebuild this nation.
As Cardiff Garcia over at The Financial Times points out, "It's also likely that much of the investment that has been forgone in the name of fiscal consolidation will have to be made eventually anyways - only it will be made when rates are higher, exacerbating the long-term fiscal outlook rather than improving it. And as Think Progress points out, "continued underfunding in this arena over the coming years will cost businesses a trillion dollars in lost sales and cost the economy 3.5 million jobs."
The Society of Civil Engineers says that it will take a staggering $3.6 trillion investment by 2020 - or $450 billion per year - to bring the American infrastructure into the 21st century, and to avoid risking a complete infrastructure collapse.
But the super-rich don't care about how much funding is needed to save this country, as long as they have their private schools, private hospitals, private airports and private places.
The super-rich in this country are bleeding working-class Americans dry, while destroying the infrastructure of the nation that has done so much for their success.
No matter what Jamie Dimon, Charles Koch, or Shelly Adelson will tell you, America's wealthy elite did not make their fortunes on their own.
Without a strong economy and infrastructure, America's millionaires and billionaires would not be where they are today. It's that simple.
So what can we do right now to rebuild America's infrastructure and give a boost to the American economy?
First, it's time to bring an end to globalization.
We need to be protecting American jobs, instead of letting the super-rich ship them overseas and build factories in China and third-world countries.
But more importantly, we need to roll-back the Reagan tax cuts, and make sure that America's wealthy elite are paying their fair share to support our economy and infrastructure.
Right now, the burden for rebuilding America is on the backs of working-class Americans, and that's just wrong.
It's ridiculous that working-class Americans struggling to survive day-to-day are paying more in taxes than billionaire banksters and oil tycoons.
A lot has changed in America over the past 100 years or so but one thing remains the same: The success of the super-rich still depends on the success of you and me.
The super-rich still need us for their roads, for their businesses, for their communications, and for their transportation.
Our infrastructure may be crumbling, but there's still time to get America back on the road to success.
We're all in this together.
by Pat Garofalo
from Alternet March 1, 2013
For corporations and the 1 percent, tax season offers plenty of ways to dodge Uncle Sam
With the national tax filing deadline fast approaching, Americans are once again plopping down with pen, paper and potentially Turbotax to determine just how much they owe their state and federal governments. But while the popular refrain posits that nothing in life is certain but death and taxes, for many corporations and wealthy individuals, having to pay a tax bill is anything but a certainty.
Due to the proliferation of loopholes, deductions, credits, and the growing use of offshore tax evasion, many rich Americans and corporations are able to dodge the bulk of, if not all, their taxes. Between 2008 and 2011, 26 major American corporations paid nothing in federal corporate income tax, despite making $205 billion in pretax profits. In 2011 (the last year in which data is available), corporations paid just a 12.1 percent effective tax rate, the lowest in four decades. Many wealthy individuals, meanwhile, are able to drive their tax rates down below the rate paid by middle-class families. Some drive it all the way down to zero.
There are certainly large, systemic reasons for these disparities. But part of the problem is that the rich and the biggest companies have access to a slew of tax breaks from which the average household or small business derives very little benefit. Here are 10 of the most ridiculous.
1.CEO “private security.” A “common corporate tax trick,” according to the New York Times, is corporate boards paying for private jets and other perks for their CEOs under the guise of security. As Steven Davidoff reported, typically CEOs would have to pay taxes on these benefits, but if the benefit is classified as necessary for security purposes, “the chief executive will pay a reduced tax bill or sometimes no tax at all.”
2.Florida cow scam.In Florida, wealthy developers, lawmakers and even some corporations game the tax code by placing cows on their land for a limited amount of time each year, thereby qualifying for agricultural tax breaks. Sen. Ben Nelson (D-FL) has benefited from this absurd loophole for years, as has Disney World. But Florida isn’t the only offender. From rock stars in New Jersey to movie stars in Colorado, tax breaks meant for farmers get gamed by the most privileged, using everything from sheep to beehives.
3.Facebook stock options.The social media giant Facebook made more than $1 billion in profits last year, but paid no corporate tax thanks to a huge write-off after its initial public offering. In fact, the company received a refund of $451 million. As Citizens for Tax Justice, explained, “Facebook’s income tax refunds stem from the company’s use of a single tax break, the tax deductibility of executive stock options.” This loophole will also allow Facebook to avoid more than $2 billion in taxes in future years. LinkedIn used the same gimmick to pay no federal taxes for the last three years.
4.Bluegrass boondoggle. This tax break, created by Senate Minority Leader Mitch McConnell (R-Kentucky) in 2008, gives wealthy horse owners a break worth $126 million over 10 years by allowing faster depreciation (quicker tax write-offs) of race horses. McConnell has defended the break by claiming it helps Kentucky’s “farm economy.”
5.Sheryl Crow loophole.Low tax rates on investment income are one of the main reasons the wealthy are able to pay lower taxes than those in the middle-class (and are also a prime driver of income inequality). Lawmakers from America’s heartland felt it was necessary to let super-wealthy musicians get in on the action, and so “passed a law allowing songwriters to avoid income taxes and sell their publishing catalogs at capital gains rates.” As San Francisco Weekly’s Chris Parker noted, “Three years later, Sheryl Crow sold her publishing rights to one of Australia's largest banks for nearly $10 million. Her estimated savings courtesy of this congressional giveaway: $2 million.”
6.NASCAR tax break.Thanks to a provision in the 2008 bank bailout, owners of NASCAR tracks are able to write off the costs of their facilities over seven years, rather than “over the 39 years that the government estimates it will take for the tracks to depreciate.” This particular loophole costs the government $40 million per year, but Congress reauthorizes it over and over again.
7.John Edwards/Newt Gingrich loophole. Both the former presidential candidate and the former Speaker of the House have taken advantage of a provision allowing them to dodge payroll taxes. By forming “S corporations,” Edwards and Gingrich are able to classify the money they receive from various ventures as “business profits,” rather than payments for services rendered, which exempts that money from the payroll tax. This loophole is regularly abused by lawyers, doctors and accountants, who can count the work they do every day as part of operating a “small business” that consists only of themselves. As tax expert Seth Hanlon noted, “Regular wage-earners can’t do this, and neither can the owners of other kinds of small businesses.”
8.Tax breaks for vacation homes and yachts.The mortgage interest deduction, which is supposed to boost homeownership, can be used on second homes, or even yachts, so long as they are large enough to accommodate a bathroom, along with a cooking and sleeping space. Limiting the deduction to primary residences would raise $1 billion per year in revenue.
9.“Double Irish” and “Dutch Sandwich.” Many companies, from Google to Amazon to Starbucks, use offshore tax havens to drive down their corporate tax rates, sometimes down into the single digits. Some of the inventive strategies they’ve used include routing profits through Ireland, the Netherlands, Bermuda, or Luxembourg, using tax tricks with cheeky names like the “Double Irish” and the “Dutch sandwich.” European countries have recently attempted to crack down on some of the more flagrant abuses.
10.Large SUV’s.We’ve already discussed the yacht tax break, but going out and purchasing a large SUV will get a member of the 1 percent another write-off. As Bloomberg News noted, the tax code’s restrictions on write-offs for luxury vehicles don’t apply to those “rated at 6,000 pounds unloaded gross vehicle weight or more.” This means that “purchasing a large SUV often provides faster writeoffs than similar but smaller vehicles.”
Closing these loopholes would certainly not fix the tax code’s much larger problems or put a huge dent in the federal deficit. But they would at least get rid of some of the more egregious giveaways that plague the American tax system, while raising some money that can go to providing the critical services upon which many Americans depend.
Pat Garofalo is economic policy editor for ThinkProgress.org. His writing has also appeared in the Nation, the Atlantic, U.S. News & World Report, and other publications. Follow him on Twitter at @Pat_Garofalo.
by Robert Reich
But first you need to understand that the game of chicken isn’t about how much or when we cut the budget deficit. Or even whether the upcoming “fiscal cliff” poses a danger to the economy.
The non-partisan Congressional Budget Office on Thursday warned that the automatic tax increases and spending cuts scheduled to start in January amount to too much deficit reduction, too soon. They’d put the economy back into recession, and push unemployment to about 9 percent. But the CBO also warned of an economic crisis ahead if the United States doesn’t stem the growth of the nation’s exploding deficit.
Get it? Reduce the budget deficit too quickly, and we’re in trouble. But fail to address the deficit, and we’re also in trouble. It’s really a matter of timing. That’s why I think any deal should include a trigger mechanism that begins to cut spending and raise taxes when the economy has two consecutive quarters of 6 percent unemployment or less, and 3 percent annualized growth or more.
In reality, though, the upcoming game of chicken isn’t about any of this. It’s over the clearest issue President Obama and Mitt Romney fought over: whether taxes should be raised on the rich.
Democrats and Republicans are now maneuvering to maximize their bargaining leverage when they sit down next year to decide this.
On Friday the President called on called on Congress to immediately make permanent the tax cuts for Americans who make less than $250,000 a year, while at the same time allowing tax rates to rise for wealthy Americans — and then making those rates part of a broader deal next year.
The President knows congressional Republicans won’t agree, but he needed to set out his central demand because it’s the one thing that can fairly be interpreted as a mandate from the election.
So what’s going to happen? Bear with me, because this gets interesting.
Some Democrats (and some White House strategists) figure they’ll have most bargaining leverage in next year’s deal if they do nothing now – allowing tax rates to rise automatically on everyone after the first of the year. Then they plan to offer Republicans a deal that reduces taxes on people earning less than $250,000 – which would be retroactive to January 1st.
Republicans would have to choose between a tax cut on the middle class or no tax cut at all. Democrats believe Republicans would have to take the deal. Even Grover Norquist would be hard-pressed to come up with an argument against it.
Some Republicans, meanwhile, figure they’ll have more bargaining leverage if they keep things as they are until late January or February.
What’s magical about late January and February? That’s when the debt ceiling has to be raised again, which means that’s when Republicans can once again threaten to vote against raising it. (In theory, we’ll hit the ceiling at the start of January, but the government can juggle payments and take various “extraordinary measures” for another month or two beyond that – maybe even until March – before it could no longer be able to borrow enough money to pay its bills.)
This is the thinking behind House Speaker John Boehner’s proposal earlier Friday that all the tax cuts — including those for the rich — should be extended until next year, until there’s a deal. “I’m proposing that we avert the fiscal cliff together in a manner that ensures that 2013 is finally the year that our government comes to grips with the major problems that are facing us,’’ Boehner said.
So who blinks first? Democrats who don’t mind going over the cliff because they’ll get a better final deal – and the deal will be retroactive to January 1st so it’s not really a cliff at all but more like a little hill? Or Republicans who want to extend the Bush tax cuts beyond January 1st, until we get sufficiently close to the debt ceiling that they can once again threaten the full faith and credit of America?
As I said before, I had naively assumed the election would put an end to these games, but obviously not. Yet Obama and the Democrats are holding most of the cards now. Let’s hope they use them.
Brace yourself for one of the most aggressive corporate lobbying campaigns of all time. And one of the most hypocritical.
“Fix the Debt ” is a coalition of more than 80 CEOs who claim they know best how to deal with our nation’s fiscal challenges. The group boasts a $60 million budget just for the initial phase of a massive media and lobbying campaign.
The irony is that CEOs in the coalition’s leadership have been major contributors to the national debt they now claim to know how to fix. These are guys who’ve mastered every tax-dodging trick in the book. And now that they’ve boosted their corporate profits by draining the public treasury, how do they propose we put our fiscal house back in order? By squeezing programs for the poor and elderly, including Social Security, Medicare, and Medicaid.
Fix the Debt claims their agenda is not just about spending cuts. But when it comes to their tax proposals, they use the slippery term “pro-growth reform” to push for cuts in deductions that are likely to include credits for working families and — you guessed it — more corporate tax breaks. Chief among these is a proposal to switch to a territorial system under which corporate foreign earnings would be permanently exempted (instead of being taxed when they are returned to America).
This idea, also supported by the Bowles-Simpson deficit commission, would make it even more profitable for big corporations to use accounting tricks to disguise U.S. profits as income earned in tax havens. Citizens for Tax Justice estimates that such tax haven abuse will cost the Treasury more than $1 trillion over the next decade.
So who are the CEOs who are telling the rest of us to be responsible and tighten our belts after they’ve spent decades stiffing the U.S. Treasury? Of the 80 members of Fix the Debt’s CEO Fiscal Leadership Council, here are 10 that stand out as the biggest hypocrites:
1. Jeffrey Immelt, General Electric
Perhaps no tax-dodging U.S. corporation has done more to drain the U.S. Treasury than General Electric. Over the last 10 years GE reported more than $80 billion in U.S. pre-tax profits and yet paid a federal corporate income tax rate of just 2.3% .
One of GE’s favorite tricks is the “Active Financing Exception.” U.S. corporations are supposed to pay U.S. taxes on interest income earned anywhere in the world. But GE enjoys this special exception for companies that have “captive” foreign finance subsidiaries, such as their credit card arm. The measure was repealed as part of fair taxation reforms in 1986, but GE led a successful lobbying effort to bring it back in 1997. Although the exception was supposed to be temporary, Congress has renewed it six times. And, despite all the public hand-wringing over the deficit, lawmakers are seriously considering extending this and other corporate loopholes before the end of the year.
2. Jim McNerney, Boeing
Last year, Boeing was one of 25 major U.S. firms that paid their CEO more than they paid Uncle Sam in corporate income taxes, according to an Institute for Policy Studies report . The aerospace giant enjoyed a $605 million tax refund in 2011, despite reporting more than $5 billion in U.S. pre-tax profits. CEO Jim McNerney made $18.4 million in personal compensation. In fact, Boeing is a serial tax dodger , having paid federal corporate income taxes in only two of the last 10 years.
One of the ways Boeing avoids paying taxes is by taking advantage of the Research and Experimentation Tax Credit, which saved the $137 million last year alone. Government investment in basic research is not a bad idea, but current R&D credits are structured in a way that primarily benefits large, well-resourced high-tech firms like Boeing that would probably do the research anyway. CEO McNerney also chairs the Business Roundtable, which aggressively lobbies for more corporate tax breaks.
3. Lloyd Blankfein, Goldman Sachs
Few corporations have been as dependent on U.S. taxpayers for their very existence as Goldman Sachs. The 2008 bailout of American International Group and the steady stream of low- and non-interest loans for the financial sector have kept the company alive.
CEO Blankfein says he’d accept a small increase in individual taxes for the wealthy in exchange for a comprehensive budget deal. But his corporate tax proposals would wipe out the revenue gains from rolling back the Bush tax cuts for top earners. Blankfein is a big supporter of the territorial tax system explained above. This is hardly a surprise, since Goldman Sachs already operates 37 subsidiaries in tax havens .
Blankfein has also used his position at the helm of the Financial Services Forum, a club for the CEOs of 20 top banks, to oppose financial transaction taxes -- small levies on trades of stock, derivatives, and other financial instruments. Goldman Sachs has made as much as $300 million per year from the volatile high-frequency trading strategies that would be hardest hit by such a transaction tax. In early October, 11 European governments announced a plan to implement such taxes, with expected revenues in the neighborhood of $ 75 billion per year . But Goldman Sachs and other Wall Street firms have blocked U.S. progress on this major revenue-raiser.
4. Brian T. Moynihan, Bank of America
After a decade of risky and reckless mortgage lending, Bank of America survived the 2008 financial crash with the help of a $45 billion bailout. Today, Bank of America sits on $128 billion in cash — $18 billion of it is overseas —and much of that is sitting in the company’s 115 tax haven subsidiaries .
Last year, after investors saw their stock price decline 58 percent and 30,000 Bank of America employees lost their jobs to layoffs, CEO Brian Moynihan saw his compensation quadruple to more than $8 million. His predecessor, Ken Lewis, raked in more than $50 million in the two years before the housing bubble that Bank of America had help inflate burst in 2008.
5. David Cote, Honeywell Corporation
Over the last three years, Honeywell received more than $2.7 billion in federal defense contracts and reported more than $2.5 billion in U.S. pre-tax profits. And yet thanks to corporate deductions, tax subsidies, and loopholes, Honeywell has claimed $377 million in federal tax refunds during this period.
Honeywell CEO David Cote has been a fixture at Congressional hearings calling for a territorial tax system for corporations. He is also Vice-Chair of the Business Roundtable, a club for big business CEOs that has called for an extension of all the Bush tax cuts, including those for millionaires and billionaires, as well as the tax cuts on unearned income from capital gains and dividends. These combined measures would add $1.5 trillion to the debt over the next ten years.
6. Randall Stephenson, AT&T
AT&T is another firm that paid its CEO more last year than they paid in federal corporate income taxes. CEO Randall Stephenson made $18.7 million , while the firm enjoyed a $420 million refund from Uncle Sam.
AT&T is a major beneficiary of “accelerated depreciation” rules that allow companies to turbo-charge tax deductions in the early years of the life of an asset. A 2009 accelerated depreciation rule saved the company $5.2 billion on their 2011 taxes, according to the firm’s 10-K report. Although touted as a way to jumpstart spending in a downturn, such tax breaks often result in taxpayers bearing a substantial portion of the cost of investments firms would’ve made anyway.
7. Arne Sorenson, Marriott International
In 2009, the U.S. Department of Justice prosecuted Marriott International for using an illegal tax shelter swindle dubbed “ Son of Boss .” The scam involved setting up a series of complex paper transactions between company subsidiaries to create $70 million in fake losses that could be offset against Marriott’s real profits. Presidential candidate Mitt Romney, a long-time friend of the Marriott family and named after Marriott’s patriarch J. Willard Marriott, was the head of the hotel giant’s audit committee in 1994 at the time the board first approved the Son of Boss transaction. According to Bloomberg, Marriott has also shifted profits to a Luxembourg shell company and avoided hundreds of millions of dollars in taxes through one federal tax credit for so-called synthetic fuel that Senator John McCain dubbed an “expensive hoax.”
8. Alexander Cutler, Eaton Corporation
Less than two years after accepting $90 million in taxpayer-financed subsidies to locate a new world headquarters in the suburbs of Cleveland, Eaton Corporation announced that it would be moving its headquarters and reincorporating as an Irish company. The move is part of a merger deal with Cooper Industries, another Fix the Debt coalition member. The two companies boast that Eaton’s departure after 100 years in Cleveland will cut their tax bill by $160 million . Meanwhile, Eaton is fighting a $75 million bill from the IRS for back taxes and penalties related to alleged violations of transfer pricing agreements.
9. Lowell McAdam, Verizon
Verizon is one of 30 companies identified by Citizens for Tax Justice as having paid “less than nothing” in federal income taxes over the entire 2008-10 period. Despite earning $32.5 billion in profits during these three years, the firm got so much in tax subsidies that they wound up with a net tax refund of $951 million. That works out to a tax rate of negative 2.9%. In effect, every Verizon phone customer paid more in federal telephone excise taxes than Verizon paid in federal income taxes.
10. Steve Ballmer, Microsoft
A recent Senate investigation exposed how Microsoft has used Olympic class accounting acrobatics to avoid paying taxes. Specifically, the Senate Permanent Subcommittee on Investigations charged that the software giant had devised a complicated transfer pricing agreement with a subsidiary in Puerto Rico to lower its tax bill on goods sold in the U.S. market by as much as $4.5 billion from 2009 to 2011. The investigation also accused Microsoft of avoiding billions in U.S. corporate income taxes by shifting royalty revenue to low-tax jurisdictions. Subcommittee Chair Carl Levin described Microsoft’s strategies as “tax alchemy, featuring structures and transactions that require a suspension of disbelief to be accepted.” Such alchemy, while not illegal, is a major contributor to the national debt.
Sanders to CEOs: Look in the Mirror
When Fix the Debt launched their 80 CEO-strong coalition on October 25, Senator Bernie Sanders responded by stating, “Before telling us why we should cut Social Security, Medicare and other vitally important programs, these CEOs might want to take a hard look at their responsibility for causing the deficit and this terrible recession.”
Instead, the Fix the Debt coalition members are portraying themselves as the honorable ones who are brave enough to push the tough austerity medicine that is the only remedy for our fiscal ills. Nonsense. We are the richest nation in the history of the world. Our problem is that too much of our wealth is going into the coffers of rich individuals and corporations and to pay for misguided wars.
There are numerous budget plans by Senator Sanders, the Congressional Progressive Caucus, and others that would get us on the right track. At the Institute for Policy Studies , we’ve identified a dozen policies that would collectively raise trillions of dollars to in ways that would not only address the fiscal challenge but help make our economy more equitable, green, and secure. The report also points out that until we recover from the current unemployment crisis, we should not be contemplating any spending cuts that could deepen the crisis.
The Fix the Debt coalition is using the so-called “fiscal cliff” as an opportunity to push the same old corporate agenda of more tax breaks while shifting the burden on to the middle class and the poor. If America’s CEOs really want to Fix the Debt, they should first commit to eliminating the loopholes that have allowed them to avoid paying their fair share of the cost of government, including investments necessary to keep our families and our communities strong and secure.
This article originally appeared on AlterNet
France unveiled on Friday what it describes as its toughest budget ever, which includes a 75% tax on millionaires in an attempt to tackle its deficit.
France unveiled on Friday a new budget that includes a 75% tax on millionaires. (photo: badlyricpolice via Flickr) "It's a combat budget to fight against a debt that only continues to increase and that rests on the shoulders of French taxpayers and generations to come," Prime Minister Jean-Marc Ayrault said Friday morning.
The Guardian notes that the new "suptertax," a two-year 75% tax rate on earned income for people earning more than €1m a year, "is expected to hit only 2,000 taxpayers. A new 45% income tax band is to be introduced for those earning more than €150,000 a year."
"We're asking the wealthiest taxpayers to make an effort," Ayrault added after a cabinet meeting. "As for companies, we're bringing back justice. CAC-40 firms pay less taxes than small companies…now we're asking them to contribute."
But the budget also includes austerity measures for France's middle class. CNN reports that "A third of the savings will come from cuts to public spending." The BBC notes that the cuts to public spending are set to increase: "While the cuts in 2013 will be two-thirds comprised of tax increases and one-third from spending cuts, the government said that from 2014 it would be divided equally."
The Guardian adds that the budget also "commits the government to an austerity program that will be unpopular with leftwingers in the party, at a time when unemployment is rising and the economy teeters on the brink of recession." Economist Nouriel Roubini remarked that President "Hollande was not elected by his base to pursue austerity and reforms, but rather to boost growth and hiring in the public sector."
The government's goal to cut the annual deficit to the eurozone limit of 3% of GDP next year won't come without growth, Pierre Laurent, national secretary of the French Communist party, says, and adds that "the budget will rather worsen the situation, because we know that the current austerity recipe is pushing the economy into a recession."
* * *
by Karen Dolan
Sadly, those who "occupied" Wall Street and city squares across the country in 2011, were right: All of the income gains have concentrated at the top, while the rest of us saw a deterioration or stagnation in our wages and income.Food is distributed by a food bank in Deposit, New York. The converted beverage truck delivers fresh produce, dairy products and other grocery items to people in need. (Photograph: Spencer Platt/Getty Images)
We can’t seem to stop having record numbers of people living in poverty in the United States. The richest continue to get richer and the rest of us continue to see our incomes get lower and lower.
New Census Bureau figures released Wednesday, show that 15 percent of the U.S. population lived in poverty in 2011. Over 46 million Americans lived at or below the poverty threshold of a household income of $23,201 per year for a family of four. One in five of our children live in poverty and over one-third of black and Latino children are struggling through impoverishment.
In 2011, we saw the first one-year increase in income inequality [L1] since 1993. The top 5% gained 5.3% in income in 2011 over 2010. The lowest quintile saw little change, but the second-lowest, middle, and fourth-lowest quintiles all experienced a decline in income over the year. Sadly, those who “occupied” Wall Street and city squares across the country in 2011, were right: All of the income gains have concentrated at the top, while the rest of us saw a deterioration or stagnation in our wages and income.
This data also confirms that safety programs work. According to the Census Bureau, unemployment benefits kept 2.3 million of us out of poverty in 2011, Social Security benefits kept over 21 million people out of poverty and, if we count the nutrition aid of the Food Stamps program as income, it would show that 3.9 million people were lifted above the poverty line in 2011.
Increasingly, all of the boost in wealth is concentrated at the top and record numbers of poverty persist, while the middle and lower-economic classes are losing ground. Now is not the time to lower taxes on the wealthiest by cutting proven, effective anti-poverty measures such as Unemployment Insurance, Supplemental Nutrition Assistance, the Earned Income Tax Credit, Social Security, and new coverage benefits gained from the health care reform law.
The rich shouldn’t be rewarded while the rest of struggle.© 2012 Institute for Policy Studies
Conservatives force the deficit issue, ignoring job creation, and insisting that tax increases on the rich wouldn't generate enough revenue to balance the budget. They're way off. But it takes a little arithmetic to put it all together. In the following analysis, data has been taken from a variety of sources, some of which may overlap or slightly disagree, but all of which lead to the conclusion that withheld revenue, not excessive spending, is the problem.
1. Individual and small business tax avoidance costs us $450 billion.
The IRS estimates that 17 percent of taxes owed were not paid, leaving an underpayment of $450 billion. In way of confirmation, an independent review of IRS data reveals that the richest 10 percent of Americans paid less than 19% on $3.8 trillion of income in 2006, nearly $450 billion short of a more legitimate 30% tax rate. It has also been estimated that two-thirds of the annual $1.3 trillion in "tax expenditures" (tax subsidies from special deductions, exemptions, exclusions, credits, capital gains, and loopholes) goes to the top quintile of taxpayers. Based on IRS apportionments, this calculates out to more than $450 billion for the richest 10 percent of Americans.
2. Corporate tax avoidance is between $250 billion and $500 billion.
There are numerous examples of tax avoidance by the big companies, but the most outrageous fact may be that corporations decided to drastically cut their tax rates after the start of the recession. After paying an average of 22.5% from 1987 to 2008, they've paid an annual rate of 10% since. This represents a sudden $250 billion annual loss in taxes. Worse yet, it's a $500 billion shortfall from the 35% statutory corporate tax rate.
3. Tax haven losses range from $337 billion to $500 billion.
The Tax Justice Network estimated in 2011 that $337 billion is lost to the U.S. every year in tax haven abuse. It's probably more. A recent report placed total hidden offshore assets at somewhere between $21 trillion and $32 trillion. Using the lesser $21 trillion figure, and considering that about 40% of the world's Ultra High Net Worth Individuals are Americans, and factoring in an annual 6% stock market gain based on historical records, the tax loss comes to $500 billion.
4. That's enough to pay off a trillion dollar deficit. Reasonable tax changes could pay it off a second time:
(a) A non-regressive payroll tax could produce $150 billion in revenue.
Get ready for some math. The richest 10% made about $3.84 trillion in 2006. A $110,000 salary, which is roughly the cutoff point for payroll tax deductions, is also the approximate minimum income for the richest 10%. A 6.2% tax paid on $1.43 trillion ($110,000 times 13 million payees) is about $90 billion. The lost taxes on the remaining $2.41 trillion come to about $150 billion.
(b) A minimal estate tax brings in another $100 billion.
The 2009 estate tax, designed to impact only the tiny percentage of Americans with multi-million dollar estates that have never been taxed, returns about $100 billion per year.
(c) A financial transaction tax (FTT): up to $500 billion.
The Bank for International Settlements reported in 2008 that annual trading in derivatives had surpassed $1.14 quadrillion (a thousand trillion dollars!). The Chicago Mercantile Exchange handles about 3 billion annual contracts worth well over 1 quadrillion dollars. One-tenth of one percent of a quadrillion dollars could pay off the deficit on its own.
Add it all up, and we've paid off the deficit, almost twice. More importantly, the avoided taxes and a few other sensible taxes could provide sufficient revenue for job stimulus without cutting the hard-earned benefits of middle-class Americans.
Published on Thursday, August 16, 2012 by Common Dreams
While austerity hits everyday Americans, seemingly scarce tax dollars are being squeezed from their pockets to fund exorbitant CEO pay, according to a report released Thursday from the Institute for Policy Studies (IPS).
For example, the report states that "26 U.S. corporations last year gave their CEO more than they paid in taxes to Uncle Sam." The CEOs at those corporations received a staggering $20.4 million in average total compensation -- a 23% increase above the previous year.
Among the CEOs detailed in IPS's report are these five who received more in compensation than their corporations paid in federal income tax:
|Name of CEO||Corporation||2011 CEO Compensation||2011 Federal Income Tax Bottom Line for Corporation|
|Vikram Pandit||Citigroup||$14.9 million||$144 million refund|
|Miles D. White||Abbott Laboratories||$19.0 million||$586 million refund|
|Randall Stephenson||AT&T||$18.7 million||$420 million refund|
|James McNerney||Boeing||$18.4 million||$605 million refund|
|Robert Benmosche||American International Group||$13.9 million||$208 million refund|
|Aubrey McClendon||Chesapeake Energy||$17.9 million||$13 million payment|
Corporations are also dodging taxes through the use of tax havens such as Cayman Islands and Bermuda through which "corporations can shift around profits, avoid accountability, and reduce tax obligations." The report found 537 tax-haven subsidiaries operating last year from the 26 corporations paying more in CEO compensation than in federal income taxes.
In addition to gaming the system to allow excessive CEO compensation, tax loopholes and the Bush tax cuts are allowing these corporations to save millions. The report states that the Bush tax cuts allowed 57 CEOs to save more than $1 million on their personal income tax bills. And the top five 2011 beneficiaries of the loophole that allows no limit on how much “performance-based" compensation corporations can deduct from their taxes "had a combined $232 million in deductible 'performance-based' pay. Absent this loophole, the tax bills for these companies would have jumped $81 million, or an average of more than $16 million per CEO." With the loophole, however, corporations are essentially incentivized to give CEOs high "performance-based" pay.
The chart from the report lists some of the CEOs making millions from the Bush tax cuts:
The four most direct tax subsidies for excessive executive pay is costing taxpayers $14.4 billion per year, the report states -- an amount that could be used to reinvigorate the public sector by providing services such as health care for 7,370,673 low-income children for one year, or VA medical care for 1,843,510 veterans for one year or 241,593 clean-energy jobs for one year.
June 29, 2012 | This week, David Segal at the New York Times broke the news to America that not only was Apple — the computer and gadget manufacturer formerly seen as a symbol of good old American ingenuity — making its profits on the backs of abused factory workers in China, but also on poorly paid store employees here in the US.
Apple store workers, he wrote, make up a large majority of Apple’s US workforce—30,000 out of 43,000 employees in this country—and they make about $25,000 a year, or about $12 an hour.
Lawrence Mishel at the Economic Policy Institute notes that that’s just a dollar above the federal poverty level. This for a company that paid nine of its top executives a total of $441 million in 2011.
“The discrepancy between Apple’s profits/executive pay and its compensation to its workers is a particularly glaring example of what is occurring in the wider economy,” Mishel writes.
And he’s right. Also this week, Henry Blodget at Business Insider posted three charts that show just how out of whack our economic system really is. Corporate profits are now at an all-time high, while wages as a percent of the economy are at an all-time low, and fewer Americans are employed than at any time in the previous three decades.
Companies like Apple are squeezing their workers, leaving them to live on less, while lavishing pay and benefits on their executives. The death of lionized Apple chief Steve Jobs seems to have opened a floodgate of reporting and criticism of the company’s labor practices, but all this really proves is that Jobs and his empire are no better than, and no different from the rest of the US business elite. Just like everyone else, they’re taking their profits directly out of workers’ pockets.
“One reason companies are so profitable is that they’re paying employees less than they ever have as a share ofGDP. And that, in turn, is one reason the economy is so weak: Those ‘wages’ are other companies’ revenue,” Blodget points out. And high unemployment makes workers willing to accept those poverty wages. When you’re desperate for a job, any job is better than nothing.
Right-wingers from Michele Bachmann to Ron Paul have used high unemployment as an opportunity to call for eliminating the minimum wage entirely, letting companies decide just how little they think their workers are worth. Companies love to claim that if they’re forced to pay more, they’ll have to eliminate jobs, but these numbers show that actually, they’re able to keep wages low and refuse to hire; available cheap labor supposedly leads to more job creation, but it’s the hollow, gnawing fear created by ongoing high unemployment that keeps wages low and workers passive. And the rich are getting ever richer.
The “recession” is over—officially it ended in 2009, but for most people the pain was just beginning. Real incomes have continued to fall, governments continue to slash budgets while corporate profits just keep going up. This is the new normal.
And it’s only going to get worse.
The rhetoric of austerity, sounded loudest from Republicans but often echoed by far too many Democrats, is a language of belt-tightening, of shared sacrifice, of somber speeches by pompous politicians who proclaim that they feel your pain while announcing budget cuts that freeze salaries, lay off workers and force more work onto those who remain. And CEOs use that same language when sorrowfully explaining why they simply can’t create jobs. Morgan Stanley’s CEO, James Gorman, beset by New Yorkers at his bank’s shareholder meeting, blamed the lousy economy when asked why he hadn’t created the jobs his company had promised the city in exchange for massive tax breaks.
Because that’s what rich corporations are able to buy with their record profits; politicians who turn around and hand them even more money, often in the form of tax breaks that hollow out city and state budgets and force even more austerity, even more social service cuts that fall on the backs of the same underpaid workers. (Remember FreshDirect, handed $129 million in tax subsidies to create $8-an-hour jobs?)
Corporate taxes, too—at least the ones corporations actually pay—are at a 40-year low, with an effective tax rate paid of 12.1 percent. They’ve fallen from about 6 percent of GDP to less than 2 percent, according to ThinkProgress’s Pat Garofalo. Once again, that’s what you can buy when you’d rather pay politicians than your workers.
Chris Hayes, in his new book Twilight of the Elites, notes that the ultra-wealthy have spawned a whole “income defense” industry dedicated to preserving their wealth and power, an industry that works tirelessly to push policies that favor the rich. He writes:
Over the last decade, the political arm of the income defense industry has been wildly successful. The tax cuts passed by Bush and extended by Obama represent a total of $81.5 billion transferred from the state into the hands of the richest 1 percent. Meanwhile, hedge fund managers and their surrogates have deployed millions of dollars to lobbyists to maintain the so-called carried interest loophole, a provision of tax law that allows fund managers to classify much of their income drawn from investing gains as “carried interest” so that it is taxed at the low capital gains rate of 15 percent, rather than the marginal income rate, which would in most cases be more than twice that. It was this wrinkle in the law that helped Mitt Romney, a man worth an estimated quarter of a billion dollars, pay an effective tax rate of just under 14 percent in 2010. In 2008, 2009, and 2010, the House of Representatives passed a bill closing the loophole, only to see it beaten back by an intense wave of lobbying in the Senate.
With Citizens United, the Supreme Court gave the ultra-rich yet another weapon in the class war, another tool by which to control our politics. MIT economist Daren Acemoglu told ThinkProgress, “We already had a very serious problem. Instead of trying to stem that tide [of money in politics], we’ve done the opposite and we’ve now opened the sluice gate and said you can use that money with no restrictions whatsoever.”
It’s bad enough when the rich use their money to buy themselves tax breaks that help them get even richer. But millionaires and billionaires from Bill Gates toBetsy DeVos to Mark Zuckerberg are also putting money into pet political ideas; on education, for example, where their money buys them outsized influence over policy. Politics has become a playground for the ultra-rich, where they get to test their pet theories on the rest of us and we’re expected to smile and thank them for their charity.
It’s not just tax breaks and subsidies that have created massive inequality—it’s also full-on war on the only means of organized power that working people ever had: unions. Private-sector union density hovers around 7 percent right now, after years of concerted attacks, and for the last couple of years public sector unions have been in the 1 percent’s crosshairs.
From the Supreme Court, where Samuel Alito wrote a majority decision attacking unions’ ability to collect money from workers they represent for political activity, to the reelection of Scott Walker in Wisconsin, public-sector unions are under pressure. Politicians keep slashing public-sector jobs, keeping unemployment high and tax revenues low, and stalling the recovery, but they’re also part of the attack on the one part of the economy that still has a strong union culture.
As unions declined, so have wages for most people. The Center for American Progress found in a study that as union membership decreases, so does the so-called middle class’s share of national income. The middle class long served as a buffer between those at the top and those at the bottom. As long as the majority of Americans were comfortable, had decent jobs and pensions, and could send their kids to school, the wealthy could stay wealthy and the poor were pretty much just ignored. And that middle class was built through decades of union agitation, not just for higher wages and healthcare benefits, but for the eight-hour day, for the weekend, for safety in the workplace and some job security.
But now the middle class has been hollowed out. Increasingly, there are the super-super-rich, and there are the rest of us.
As Hayes writes, we’re ruled by an ever-smaller group of elites who not only control all the resources, but all the power. The same people who are pushing wages downward are the ones paying for politicians’ campaigns, and they’re the same people on the boards of directors and trustees of our universities, our institutions—like JP Morgan Chase’s Jamie Dimon, who serves on the Board of Directors of the Federal Reserve Bank of New York, the National Center on Addiction and Substance Abuse, the Harvard Business School, Catalyst, as well as on the Board of Trustees of New York University School of Medicine.
Meanwhile, for the vast majority of us, the recession that supposedly ended in 2009 looks more like a depression each day, and as long as low wages and high unemployment remain the order of the day, there’s no recovery in sight.
This story originally appeared in AlterNet. Sarah Jaffe is an associate editor at AlterNet, a rabblerouser and frequent Twitterer. You can follow her at @sarahljaffe.
by Robert Reich, June 6, 2012
I was on CNBC Tuesday when Bill Clinton gave an interview saying that, given the deadlock between Republicans and Democrats on Capitol Hill, it seemed likely the Bush tax cuts would be extended in 2013 along with all spending. When asked to comment, I said Clinton was probably correct. But, of course, Republicans have twisted Clinton’s words into a pretzel. They say the former president came out in favor of extending the Bush tax cuts to the wealthy – in sharp contrast to President Obama’s position that they should not be. It’s typical election-year politics, except for the fact that the Republican megaphone is larger this time around due to all the Super PAC and secret “social welfare” organization bribes, er, donations that are filling Republican coffers. Here’s the truth. America has a huge budget deficit hanging over our heads. If the rich don’t pay their fair share, the rest of us have to pay higher taxes — or do without vital public services like Medicare, Medicaid, Pell grants, food stamps, child nutrition, federal aid to education, and more. Republicans say we shouldn’t raise taxes on the rich when the economy is still in the dumps. This is a variation on their old discredited trickle-down economic theories. The fact is, the rich already spend as much as they’re going to spend. Raising their taxes a bit won’t deter them from buying, and therefore won’t hurt the economy. In reality, Romney and the GOP are pushing an agenda that has nothing whatever to do with reducing the budget deficit. If they were serious about deficit reduction they wouldn’t demand tax cuts for the very wealthy. We should have learned by now. The Bush tax cuts of 2001 and 2003 were supposed to be temporary. Even so, they blew a huge hole in the budget deficit. Millionaires received a tax cut that’s averaged $123,000 a year, while the median-wage worker’s tax cut has amounted to no more than a few hundreds dollars a year. Bush promised the tax cuts would more than pay for themselves in terms of their alleged positive impact on the economy. The record shows they didn’t. Job growth after the Bush tax cuts was a fraction of the growth under Bill Clinton – even before the economy crashed in late 2008. And the median wage dropped, adjusted for inflation. Let’s be clear. Romney and the Republicans are pushing a reverse-Robin Hood plan that takes from the middle class and the poor while rewarding the rich. According to the nonpartisan Tax Policy Center, Romney’s tax plan would boost the incomes of people earning more than $1 million a year by an average of $295,874 annually. Meanwhile, according to the Center on Budget and Policy Priorities, Romney’s plan would throw ten million low-income people off the benefits rolls for food stamps or cut benefits by thousands of dollars a year, or both. “These cuts would primarily affect very low-income families with children, seniors and people with disabilities,” the Center concludes. The rich have to pay their fair share. Period. Take a look at this video, in which I provide the three key reasons. (And pass it on.)
Published on Monday, April 16, 2012 by Common Dreams
The wealthiest Americans believe they've earned their money through hard work and innovation, and that they're the most productive members of society. For the most part they're wrong. As the facts below will show, they're not nearly as productive as middle-class workers. Yet they've taken almost all the new income over the past 30 years.
Published on Friday, April 13, 2012 by Common Dreams
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, “Many 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 “[expletive deleted] 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.
"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."
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.
by Robert Reich
Imagine a country in which the very richest people get all the economic gains. They eventually accumulate so much of the nation’s total income and wealth that the middle class no longer has the purchasing power to keep the economy going full speed. Most of the middle class’s wages keep falling and their major asset – their home – keeps shrinking in value.
Imagine that the richest people in this country use some of their vast wealth to routinely bribe politicians. They get the politicians to cut their taxes so low there’s no money to finance important public investments that the middle class depends on – such as schools and roads, or safety nets such as health care for the elderly and poor.
Imagine further that among the richest of these rich are financiers. These financiers have so much power over the rest of the economy they get average taxpayers to bail them out when their bets in the casino called the stock market go bad. They have so much power they even shred regulations intended to limit their power.
These financiers have so much power they force businesses to lay off millions of workers and to reduce the wages and benefits of millions of others, in order to maximize profits and raise share prices – all of which make the financiers even richer, because they own so many of shares of stock and run the casino.
Now, imagine that among the richest of these financiers are people called private-equity managers who buy up companies in order to squeeze even more money out of them by loading them up with debt and firing even more of their employees, and then selling the companies for a fat profit.
Although these private-equity managers don’t even risk their own money – they round up investors to buy the target companies – they nonetheless pocket 20 percent of those fat profits.
And because of a loophole in the tax laws, which they created with their political bribes, these private equity managers are allowed to treat their whopping earnings as capital gains, taxed at only 15 percent – even though they themselves made no investment and didn’t risk a dime.
Finally, imagine there is a presidential election. One party, called the Republican Party, nominates as its candidate a private-equity manager who has raked in more than $20 million a year and paid only 13.9 percent in taxes – a lower tax rate than many in the middle class.
Yes, I know it sounds far-fetched. But bear with me because the fable gets even wilder. Imagine this candidate and his party come up with a plan to cut the taxes of the rich even more – so millionaires save another $150,000 a year. And their plan cuts everything else the middle class and the poor depend on – Medicare, Medicaid, education, job-training, food stamps, Pell grants, child nutrition, even law enforcement.
What happens next?
There are two endings to this fable. You have to decide which it’s to be.
In one ending the private-equity manager candidate gets all his friends and everyone in the Wall Street casino and everyone in every executive suite of big corporations to contribute the largest wad of campaign money ever assembled – beyond your imagination.
The candidate uses the money to run continuous advertisements telling the same big lies over and over, such as “don’t tax the wealthy because they create the jobs” and “don’t tax corporations or they’ll go abroad” and “government is your enemy” and “the other party wants to turn America into a socialist state.”
And because big lies told repeatedly start sounding like the truth, the citizens of the country begin to believe them, and they elect the private equity manager president. Then he and his friends turn the country into a plutocracy (which it was starting to become anyway).
But there’s another ending. In this one, the candidacy of the private equity manager (and all the money he and his friends use to try to sell their lies) has the opposite effect. It awakens the citizens of the country to what is happening to their economy and their democracy. It ignites a movement among the citizens to take it all back.
The citizens repudiate the private equity manager and everything he stands for, and the party that nominated him. And they begin to recreate an economy that works for everyone and a democracy that’s responsive to everyone.
Just a fable, of course. But the ending is up to you.
Part 1 of this series covering the Reagan years can be found here. This post relies on data from the following sources: Federal Income Tax Rates History, Social Security and MedicareTax Rates, Historical Capital Gains and Taxes and Party Control of Congress and the Presidency. In the first part we pointed out that Reagan under the tutelage of Ayn Rand lover Alan Greenspan flattened the tax code to just two rates: 15% for anyone making less than $56,427. and 28% for anyone making more than that amount. This effectively raised taxes on the poor and lowered them on the rich compared to the day Reagan entered office when the tax rate was zero on the poor and 70% on the rich. Reagan and Greenspan also drastically raised Medicare and Social Security (payroll) taxes which affect mainly the poor and middle class. Bush Sr served from 1989 till 1992 when Clinton took over. In 1991 under a Democratic Congress, Bush Sr raised taxes despite his pledge not to. Remember his campaign promise: "Read my lips. No new taxes." However, despite the big brou ha ha, Bush did not raise income taxes on the poor and middle class; he only raised them on the rich. You would think that, if the middle class and poor were paying attention, they would have been satisfied with this development and reelected Bush in 1992. But the Republicans and right wing media talking heads raised such a hue and cry, convincing voters that Bush Sr had raised taxes on all people and not just the top few percent, that Bush was defeated and Clinton elected. What Bush did was to add a third tax bracket of 31% for incomes over $135,336 while leaving unchanged the two lower tax brackets. Bush "unflattened" the tax code slightly which should have raised a cheer among the middle class, but it didn't due to the fact that they were convinced by the right wing punditry that Bush raised taxes period, end of story. They didn't distinguish whom Bush raised taxes on. They only paid attention long enough to understand that Bush raised taxes.
Bush Sr also raised FICA and SECA (Social Security and Medicare) taxes. These went from 7.150% for employees and employers in 1987 to 7.51 in 1988 and 1999. The corresponding rates for the self-employed went from 14.3% in 1987 to 15.02% in 1988 and 1989. So what Bush gave with one hand to the poor and middle class in the form of not raising their income taxes, he took away with the other by raising FICA and SECA taxes which affect mainly the poor and middle class. The net effect was to make the total tax burden on the middle class as great or greater than the tax burden on the rich since the rich pay little FICA and SECA tax compared to their total income. Bush Sr and the Republicans were at it again in 1990, a year in which they raised FICA and SECA taxes to 7.65% for employees and employers and 15.3% for self-employed where they have remained to this day. So Bush Sr was not such a traitor to his class as one might think from just considering the income tax structure alone. The net effect was that he raised taxes on the poor and middle class much more than he raised them on the rich.
Bush Sr had a Democrat controlled Congress during his four year term and they managed to raise the capital gains tax from 28% to 28.93% in 1991, a piddling amount compared to the huge decreases which were to come later during the Bush Jr administration. So the rich had their capital gains taxes raised for the last year of the Bush Sr administration through no fault of Bush's own. It was the Democrats who pushed this tax increase through.
Clinton took over in 1993 and with a Democratic Congress unflattened the tax code even more adding two tax brackets at the high end. The following is the tax table for married couples filing jointly, inflation adjusted.
Table 1 - 1993 - Married Filing Jointly
Marginal Tax Brackets
Tax Rate Over But Not Over
15.0% $0 $57,298
28.0% $57,298 $138,432
31.0% $138,432 $217,392
36.0% $217,392 $388,200
39.6% $388,200 -
Despite the fact that Clinton raised only taxes on the rich and kept them the same on the poor and middle class, a fact that the vast majority of voters should have been happy with, Republicans managed to tag Clinton and the Democrats with the "tax and spend" and "big government" labels. FICA and SECA taxes remained the same under Clinton.
In 1994, half way into Clinton's first term, Republicans took over control of Congress. Despite that fact the income tax code remained substantially unchanged for the rest of Clinton's Presidency with the result that, by the time Clinton left office in 2000, there was a budget surplus and the nation was on track to eliminate the national debt entirely.
Capital gains taxes were a different story. They went from 28.93% in 1991 to 29.19% in 1993. The poor and middle class swallowed the Republican hogwash about Clinton raising their taxes and elected a Republican Congress in 1994. The Republican Congress slashed the capital gains tax all the way back to 21.19% in 1997 where it stayed for the remainder of the Clinton Presidency. So despite the fact that during the Clinton years income taxes were raised on the rich, capital gains taxes which affect primarily the rich were substantially reduced. The net result was that taxes on the rich were effectively lowered and despite that fact Clinton was able to run budget surpluses during his last few years in office. Go figure!
George W Bush was elected in 2000. Then the tax cutting which led to huge deficits began - with a vengeance. "You know how to spend your own money better than the government does." The Republicans were great at formulating slogans and defining the situation. What were the Democrats supposed to say to that: "The government knows better how to spend your money than you do"? Consequently, in 2001 the top tax rate was lowered by .5% from 39.6% to 39.1%. The middle three tax rates were lowered .1%, and the tax rate for the poor, the lowest tax bracket was not lowered at all. The net effect was to give the rich a big tax cut, the middle class a modest tax cut and the poor no tax cut. Here is the tax table:
Table 2 - 2001 - Married Filing Jointly
Marginal Tax Brackets
Tax Rate Over But Not Over
15.0% $0 $57,267
27.5% $57,267 $138,416
30.5% $138,416 $210,950
35.5% $210,950 $376,732
In 2002 another half a percent was cut for the four highest tax brackets and in addition a new bracket was added at the bottom thus reducing taxes on the poor to 10% up till an income of $14,967. The 15% tax bracket was the only one not cut thus making a mockery out of tax cuts for the middle class. Here is the tax table for 2002:
Table 3 - 2002 - Married Filing Jointly
Marginal Tax Brackets
Tax Rate Over But Not Over
10.0% $0 $14,967
15.0% $14,967 $58,246
27.0% $58,246 $140,752
30.0% $140,752 $214,464
35.0% $214,464 $382,967
In 2003 there was another tax cut ... of course ... but only for the rich and upper middle class, not for the middle class or the poor!! 3.6% was cut off the top tax rate! 2% was cut from the next three tax rates leaving the bottom two tax rates all the way up to an income of $69,265 virtually untouched!! All the while the right wing propaganda machine was out to convince everyone that Bush Jr was cutting taxes for E..V..E..R..Y..B..O..D..Y. Here are the sad results:
Table 4 - 2003 - Married Filing Jointly
Marginal Tax Brackets
Tax Rate Over But Not Over
10.0% $0 $17,072
15.0% $17,072 $69,265
25.0% $69,265 $139,810
28.0% $139,810 $213,039
33.0% $213,039 $380,409
After 2003 the income tax cutting frenzy for the rich was over at least for the remaining years of the Bush Jr administration. The 2003 tax table was for all intents and purposes the tax structure that President Obama inherited when he became President in 2009. The same tax structure remains in effect till this day, Obama having failed to end the Bush tax cuts due to Republican intransigence and obstructionism and to raise the top rate back to the 39.5% that it was in the last years of the Clinton administration. As a consequence structural budget deficits continue to add immense sums to the national debt, and there is Republican pressure to cut spending on social programs like Social Security, Medicaid and Medicare but, of course, they don't want to reduce spending on the military. Obama may force their hand by ending the wars in Iraq and Afghanistan and talking up his desire on the campaign stump to spend half the savings on deficit reduction and half on rebuilding infrastructure, but he will need a Democrat controlled Congress to do anything of the sort.
In addition to the Bush Jr income tax cuts for the rich, he also cut capital gains taxes substantially during his term in office, an even greater boon to the rich than the income tax cuts. Capital gains taxes went from 21.19% in 2000 to 21.17% in 2001 and 21.16% in 2002. Then in 2003 they went all the way down to 16.05%. That was followed by a drop to 15.07% in 2006 and further down to 15.35% in 2008 where they remain today. The combined income and capital gains tax cuts which benefitted primarily the rich produced disastrous budget deficits, and, since structurally the Bush tax cuts remain in effect, the Obama administration is forced to run huge budget deficits which Republicans disingenuously blame him for although they refuse to raise taxes on the rich or let the Bush tax cuts expire which would ameliorate the situation.
Raising the top income tax rate back to 39.5% and the capital gains tax back to 28.93% (an almost doubling of capital gains tax) where they were under the Clinton administration would do a huge amount to eliminate the budget deficits that Obama is unfairly being tagged with. Adding more tax brackets for incomes above $382,967 where the highest rate now kicks in would also provide even more desperately needed revenue. Today when the Fortune 400 is composed exclusively of billionaires, tax brackets in the millions and billions of dollars are appropriate and only fair. Obama has presented this rather cleverly as the Buffet rule: a boss shouldn't be effectively taxed less than his secretary. Today most billionaires pay an effective tax rate around 15% since most of their income is composed of capital gains. The only way to implement the Buffet rule is to raise the capital gains tax since the income tax no matter how high it becomes for millionaires and billionaires will hardly affect them. In addition a financial transaction tax could raise as much as $100-$200 billion a year.
by Robert Reich
The rest of us ought to be having a serious discussion about a wealth tax. Because if you really want to know what’s happening to the American economy you need to look at household wealth — not just incomes.
The Fed just reported that household wealth increased from October through December. That’s the first gain in three quarters.
Good news? Take closer look. The entire gain came from increases in stock prices. Those increases in stock values more than made up for continued losses in home values.
But the vast majority of Americans don’t have their wealth in the stock market. Over 90 percent of the nation’s financial assets – including stocks and pension-fund holdings – are owned by the richest 10 percent of Americans. The top 1 percent owns 38 percent.
Most Americans have their wealth in their homes – whose prices continue to drop. Housing prices are down by a third from their 2006 peak.
So as the value of financial assets held by American households increased by $1.46 trillion in the fourth quarter, the wealthiest 10 percent of Americans became $1.3 trillion richer, and the wealthiest 1 percent became $554.8 billion richer.
But at the same time, as the value of household real estate fell by $367.4 billion in the fourth quarter, homeowners – mostly middle class – lost over $141 billion (owners’ equity is 38.4 percent of total household real estate).
Presto. America’s wealth gap – already wider than the nation’s income gap – has become even wider. The 400 richest Americans have more wealth than the bottom 150 million Americans put together.
Given this unprecedented concentration of wealth – and considering what the nation needs to do to rebuild our schools and infrastructure while at the same time saving Medicare and reducing the long-term budget deficit – shouldn’t we be aiming higher than a “Buffet tax” on the incomes of millionaires?
There should also be a surtax on the super rich.
Yale Professor Bruce Ackerman and Anne Alstott have proposed a 2 percent surtax on the wealth of the richest one-half of 1 percent of Americans owning more than $7.2 million of assets. They figure it would generate $70 billion a year, or $750 billion over the decade. That’s half the savings Congress’s now defunct Supercommittee was aiming for.
Instead of standing empty-handed while Santorum and Romney dominate the airwaves with their regressive Social Darwinism, Democrats need to be reminding Americans of what’s happening in the real economy – and what needs to happen.
The wealth gap is widening into a chasm. A surtax on the super rich is fair — and it’s necessary.
When I was a graduate student at UCSD in the midst of the anti-war movement, protesting the war in Vietnam, I went to the library and pondered what would make the world a better place, what could I do to contribute something that might make war less likely and peace time activity more likely. I concluded that more cooperation was needed. More ways to resolve conflicts big and small. For example, democratic voting systems resolve conflicts in such a way that solutions are found that are acceptable to all parties for the most part. I took it for granted that institutions that provided for more cooperation and less competition were more desirable. I thought that this was what the Enlightenment was all about. My heroes were the Enlightenment superstars: Jeremy Bentham, John Stuart Mill, Rousseau, Diderot, Voltaire, John Locke.
As I sat there and went through the stacks, I discovered another field and another set of superstars. Social choice has a long history going back to the French Enlightenment philosophers, the Marquis de Condorcet and Jean-Charles de Borda, and even further back than that. One of the 19th century superstars in this field was none other than the Rev. C. L. Dodgson otherwise known as Lewis Carroll, the author of Alice in Wonderland. These guys came up with voting systems which are essential to democracy and are essential to the whole notion of cooperation and conflict resolution. The most recent work in this field was by Kenneth Arrow who published a book Social Choice and Individual Values in the 1950s which attempted to generalize conflict resolution in society in both the political and economic spheres. Arrow concluded that this was impossible and came up with his famous Impossibility Theorem which was a generalization using sophisticated mathematics of the paradox of voting that was known to Condorcet hundreds of years ago. Therefore, Arrow concluded democracy was impossible and any economic system other than capitalism was impossible too. Hmmm, I thought, this is obviously a cop-out because some political and economic systems are more desirable than others and Arrow has done nothing except to throw cold water on any framework that could consider these. I took it as my self-assigned task to prove that Arrow was wrong, that social choice is possible. My work can be found on the website Social Choice and Beyond.
My latest work is "Politonomics: A Meta-Theory Encompassing Political and Economic Decision Making." This is from the Abstract:
In “Social Choice and Individual Values,” Kenneth Arrow said , “In a capitalist democracy there are essentially two methods by which social choices can be made: voting, typically used to make ‘political’ decisions, and the market mechanism, typically used to make ‘economic’ decisions.” This paper resolves that dichotomy by developing a meta-theory from which can be derived methods for both political and economic decision making. This theory overcomes Arrow’s Impossibility Theorem in which he postulates that social choice is impossible and compensates for strategic voting, an undesirable aspect of decision making according to Gibbard and Satterthwaite. Thus the politonomics meta-theory spawns both political and economic systems which are indeed possible and which cannot be gamed. In a typical voting system the outcome of an election among several candidates results in one realized outcome – the winner of the election - which applies to all voters. In a typical economic system, a consumer may choose among a variety of possible baskets of consumer items and work programs with the result that multiple realized outcomes are possible with a unique or quasi-unique outcome for each worker/consumer. As the number of possible realized outcomes of a political-economic decision making process increases, the process becomes more economic and less political in nature and vice versa. We show that as the number of possible realized outcomes increases, voter/consumer/worker satisfaction or utility increases both individually and collectively.
I never considered, as I sat there pondering, that there would be people who would argue that what the world needed was not more cooperation but more competition, but, as I sit here today, I realize that the whole conservative right wing is in favor of just that. They want not more cooperation in either the political or economic realm but more competition believing that only winners should prevail and human progress is only possible when you give free reign to those among us who are the most talented, intelligent and ambitious. They believe that competition will result in the strongest among us winning just as Nietzsche believed that a good war hallows every cause. Their ethic is that the naturally gifted elite should prevail, and they are not concerned about what happens to the rest of us or of who is trampled in the process. This is also the philosophy of Ayn Rand as espoused in her novels Atlas Shrugged and The Fountainhead.
The debate today about increasing inequality in the world has to do with the prevalent conservative belief that only the strong should survive and be promoted and that freedom should preclude equality as a value. The rich should get more tax breaks because they are the true instigators of human progress and should be catered to at every turn. Perhaps a few crumbs will trickle down to the rest of us. This kind of thinking is counter to the Enlightenment and is fast returning us to a neo-Dark Age. No more is human progress to be measured in reduction of poverty and extension of basic services like health care to everyone. It is to be measured in terms of the great advances to human civilization like iPads, iPods and iPhones. People who are capable of coming up with these advances should be cut every break and none of the billions of dollars they make should be transferred by government to the least of these among us like the homeless, the poverty-stricken and the destitute because, well, they are the least among us, not the best among us who should be given every break.
Nevertheless, I remain in the camp of those who think that more cooperation in the political and economic spheres will do more for human progress than more competititon. I also have spent about 40 years in my spare time trying to prove that Arrow was wrong, that social choice is not impossible and that democracy in both the political and economic spheres is not only possible but desirable. This has a lot to do with voting systems, democratic institutions and constitutions but also with cooperative economic systems in which freedom is seen not as the freedom to make money at other people's expense (the losers in the competitive struggle) but the freedom to work as much or as little as one chooses and in accordance with one's preferences as much as possible. Freedom from work is for many people just as desirable a goal as the freedom to make billions of dollars, and wealthy people who don't have to work would be the first to tell you that. Economic democracy in my view is more desirable than cutthroat capitalism, and can be practiced not only at the national level, but at the enterprise level in the form of co-ops like the Mondragon Corporation.
Marx's famous definition of the "good society" was "from each according to his ability, to each according to his needs." This of course was perverted in defining communism as a society where all the wealth created by those who had a lot of talent and ability as well as a strong work ethic combined with those who had not so much in those categories would be thrown into a pot and then divided up in equal portions and handed out by the government. Such need not be the case in achieving the "good society." The "needs" part is pretty basic and could probably be accomplished with abouit 10% of the wealth that exists in the world today. Most people can provide for their own needs - no transfer necessary. There are some who cannot and to transfer a small part of the wealth of the wealthy to provide for their basic needs seems to me to be no more than humane. That still leaves the vast amount of wealth in the hands of the wealthy. In other words if you total up how much it would cost to provide for all the basic needs of everyone in the world and tote up how much wealth there exists in the world, it would take a fraction of all that wealth to provide the basic needs for everyone who cannot provide for their basic needs themselves who turn out to be mainly children, seniors and handicapped (whether physically or mentally) people.
A recent documentary by German TV station Deutsche Welle pointed out that half the world's production of food is wasted because super markets only want perfect vegetables and ones with slight blemishes are thrown out even though they are perfectly edible. Shelves need to be fully stocked with bread right up till closing hours even though any bread left over at the end of day will be thrown out as "day old." All the food that is thrown out by advanced nations is enough to feed all the world's hungry three times over although no governments or other institutions, much less the supermarkets themselves, seem to be interested in organizing that effort. This is what I mean by the fact that the basic needs of all the world's people could be satisfied without subtracting much if anything from the world's wealthy although a lot of them would admit they do not need incomes of millions of dollars a day like the Fortune 400 billionaires have.
Another documentary noted that Finnish school children have the highest test scores in the world despite the fact that they have one of the world's shortest school days with 15 minutes intermissions between classes during which time they are encouraged to go outdoors and play. All grades have large amounts of music, art and self-defined projects. They don't teach to the test. They are concerned with the development of each student as an overall human being not just as some super competitive cog in a nationally competitive machine. The Chinese on the other hand have the opposite approach demanding that children learn by rote methods and extra hours in school and at study. The Finnish schools are all public and everyone is accepted into every class. There are no advanced classes or tracking of students into lesser classes if they are not among the elite intellectually. Everyone is thrown in together; yet they have the best outcomes of any country in the world on standardized international tests. Egalitariansim seems to gain the best results.
An egalitarian ethic in which the concern is for the development of the whole human being rather than a promotion of just those who have superior abilities in accordance with a competitive ethic seems to me to be the most humanitarian way to treat both children and adults. The 1948 Universal Declaration of Human Rights already provides for most of the "from each according to their abilities, to each according to their needs" ethic. It calls for free health care which most advanced socierties, with the exception of the United States, already provide. It calls for free education and other public institutions and covers most basic human needs including food and shelter.
Here are Articles 25 and 26:
All the basic needs of everyone on the planet could be provided for without subtracting much of the wealth of the rich since most people can provide for at least their basic needs without any transfer of wealth whatsover being necessary. Interestingly, the US among other nations does provide food security for the poor through its food stamps program. And of course seniors are provided for through Medicare, Medicaid and Social Security, programs which conservative free marketers are anxious to change or eliminate.
I am with the Enlightenment thinkers especially the English utilitarians like Jeremy Bentham and John Stuart Mill who thought about the happiness of society as a whole and concluded that everyone counted, not only the ones with exceptional talent, ability and other admirable qualities. A society should be judged by how it treats "the least of these my brethren" which is the core and essence of Jesus' teachings but, sad to say, not the core and essence of Christianity as it exists in the world today. Perhaps we should start thinking about an alternative constitution for the US which has the world's oldest constitution (236 years old!) while being the world's youngest advanced nation. Other societies including most European societies while being older than the US have newer constitutions. As far-sighted as the Founding Fathers were, a new and updated constitution incorporating not only political but also economic rights along the lines of the UN Declaration of Human Rights would do much to right the wrongs and shortcomings of present day America and the world.
Posted at 03:34 PM in John Lawrence, Conservatives, Cooperatives, Corporations, Democracy, Economic Democracy, Economics, Education, Careers, Jobs, Employment, Equality, Ethics, Morality, Human Rights, Inequality, Laissez Faire Capitalism, Medicaid, Medicare, Politics, Poverty, Preferensism, Republican War on the Poor, Right Wing, Social Choice, Social Security, Survival of the Fittest, The Economy, The Rich, The Role of Government, Values, Voting Methods, War, Waste, Wealth, Welfare | Permalink | Comments (0) | TrackBack (0)
By Nick Hanauer
from Businessweek, December 7, 2011
Dec. 1 (Bloomberg) -- It is a tenet of American economic beliefs, and an article of faith for Republicans that is seldom contested by Democrats: If taxes are raised on the rich, job creation will stop.
Trouble is, sometimes the things that we know to be true are dead wrong. For the larger part of human history, for example, people were sure that the sun circles the Earth and that we are at the center of the universe. It doesn’t, and we aren’t. The conventional wisdom that the rich and businesses are our nation’s “job creators” is every bit as false.
I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc.
Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.
That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.
Theory of Evolution
When businesspeople take credit for creating jobs, it is like squirrels taking credit for creating evolution. In fact, it’s the other way around.
It is unquestionably true that without entrepreneurs and investors, you can’t have a dynamic and growing capitalist economy. But it’s equally true that without consumers, you can’t have entrepreneurs and investors. And the more we have happy customers with lots of disposable income, the better our businesses will do.
That’s why our current policies are so upside down. When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.
And that’s what has been happening in the U.S. for the last 30 years.
Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.
One reason this policy is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.
It’s true that we do spend a lot more than the average family. Yet the one truly expensive line item in our budget is our airplane (which, by the way, was manufactured in France by Dassault Aviation SA), and those annual costs are mostly for fuel (from the Middle East). It’s just crazy to believe that any of this is more beneficial to our economy than hiring more teachers or police officers or investing in our infrastructure.
More Shoppers Needed
I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.
If the average American family still got the same share of income they earned in 1980, they would have an astounding $13,000 more in their pockets a year. It’s worth pausing to consider what our economy would be like today if middle-class consumers had that additional income to spend.
It is mathematically impossible to invest enough in our economy and our country to sustain the middle class (our customers) without taxing the top 1 percent at reasonable levels again. Shifting the burden from the 99 percent to the 1 percent is the surest and best way to get our consumer-based economy rolling again.
Significant tax increases on the about $1.5 trillion in collective income of those of us in the top 1 percent could create hundreds of billions of dollars to invest in our economy, rather than letting it pile up in a few bank accounts like a huge clot in our nation’s economic circulatory system.
Consider, for example, that a puny 3 percent surtax on incomes above $1 million would be enough to maintain and expand the current payroll tax cut beyond December, preventing a $1,000 increase on the average worker’s taxes at the worst possible time for the economy. With a few more pennies on the dollar, we could invest in rebuilding schools and infrastructure. And even if we imposed a millionaires’ surtax and rolled back the Bush- era tax cuts for those at the top, the taxes on the richest Americans would still be historically low, and their incomes would still be astronomically high.
We’ve had it backward for the last 30 years. Rich businesspeople like me don’t create jobs. Middle-class consumers do, and when they thrive, U.S. businesses grow and profit. That’s why taxing the rich to pay for investments that benefit all is a great deal for both the middle class and the rich.
So let’s give a break to the true job creators. Let’s tax the rich like we once did and use that money to spur growth by putting purchasing power back in the hands of the middle class. And let’s remember that capitalists without customers are out of business.
(Nick Hanauer is a founder of Second Avenue Partners, a venture capital company in Seattle specializing in early state startups and emerging technology. He has helped launch more than 20 companies, including aQuantive Inc. and Amazon.com, and is the co-author of two books, “The True Patriot” and “The Gardens of Democracy.” The opinions expressed are his own.)
Greenspan's Fraud is the title of a book by Dr. Ravi Batra. In light of what's currently happening in Washington regarding the extension of the payroll tax cut, it is prescient. Greenspan engineered an increase in the payroll or FICA or Social Security tax in the 1980s at the behest of then President Ronald Reagan which effectively raised taxes on the poor while Reagan cut the income tax and effectively lowered taxes on the wealthy. The ostensible reason for this increase in payroll tax was a crisis in funding Social Security 35 years out (sound familiar). Republicans worked themselves and the American public up into a lather over a non-existent Social Security crisis. The real purpose of this supposed crisis was to shift the tax burden from the rich to the poor just as it is with Republicans today who don't really want to extend the payroll tax cut engineered by President Obama. Instead, they have pledged Grover Norquist not to raise taxes except ... they might make an exception for the payroll tax. In other words their pledge is to not raise taxes on the rich while they have no problem with raising them on the poor. They are showing their true colors ... again: protect the finances of the rich while exploiting those of the poor and middle class. Such was the brilliance of Greenspan's plan in the early eighties that hardly any Americans knew or realized what he was actually up to including the Democrats who went along with it. Personally, I've been self-employed since 1976, and I never realized that Greenspan had doubled my FICA taxes in 1983 so that I ended up paying higher payroll taxes than rich people paid in capital gains tax. Such is the reality of Republican subterfuge.
From Greenspan's Fraud, the book:
|Greenspan's economics has extracted trillions of dollars in taxes from the American middle class and sharply enriched the rich, who are essentially people like himself and his friends - multimillionaires, politicians, and businessmen. ... His policies have led to the pooring of America as well as the world, while a tiny minority has raked in millions, even billions, in profit. He may be a legendary figure in the eyes of many, but when you carefully explore what he has wrought, the aura of public reverence around him can evaporate quickly.
This book will show that because of Greenspan's beliefs or support for certain policies, family income and real wages have declined for a broad swath of Americans, while CEOs have earned millions in stock options and capital gains; US manufacturing has been decimated and the country is saddled with more than half a trillion dollars of trade deficit per year; nearly two million lucrative jobs have vanished since 2000, and millions of people have been downsized.
In December 1981 President Reagan selected Greenspan to chair a blue ribbon commission to "save" social security. When it became obvious that the Federal budget deficit was ballooning due to Reagan's 1981 tax cuts, Greenspan ginned up the Social Security crisis which allowed the payroll tax to be increased, and, since Social Security and the general fund had been part of the unified budget since 1969, the increase in revenues from the increased payroll taxes masked the Federal budget deficits due to Reagan's tax cuts. In simple terms the excess revenues from social security taxes offset the deficit in the general fund due to Reagan's tax cuts. But rather than raise the income tax, which would have increased taxes disproportionally on the wealthy, Greenspan's plan was to raise the payroll tax which is a tax primarily on the poor and middle class. In addition Greenspan also later proposed cutting benefits for social security beneficiaries.
|The Reagan-Greenspan theology required that the income [taxes] remain small even if it became necessary to coax money out of the destitute because this is essentially what the commission proposed in 1983. Instead of the general budget that actually faced a massive deficit, the commission insisted that the Social Security Trust Fund faced a giant shortfall, some 30 to 75 years in the future, when baby boomers would retire in large numbers. Never mind that in 1983 itself, the Trust Fund's receipts began to rise because of increasing employment, while the general budget suffered an even larger deficit of $208 billion.
In fact, by the end of the year, the Fund earned a small surplus. But the Greenspan commission relied on "forecasts" that showed a gargantuan deficit looming in the Fund, not five to ten years hence, but more than half a century later. It proposed eliminating the Social Security deficit expected from 1983 all the way to 2056 by overtaxing workers in advance, and generating an adequate surplus in the process.
So the money taken in in payroll taxes which was not used to actually make payments to social security recipients was transferred to the general fund and used to defray the budget deficits brought about by Reagan's tax cuts on the wealthy. In place of the money so used non-marketable Treasury bonds of an equivalent amount were placed in the Social Security Trust Fund (SSTF). Today they amount to $2.5 trillion. This is the amount owed to the SSTF by the general fund. Every year the surplus payroll tax revenues were spent in the general fund and IOUs of a similar amount were placed in the SSTF. The surplus dwindled over the years until today more money is actually being paid out to Social Security recipients than is being taken in in payroll taxes. That means that those non-marketable Treasury bonds in the SSTF must be cashed in and money taken from the general fund to make up the difference. Hence the general fund must accumulate an even larger deficit or it must raise taxes to make up the difference. This is why Republicans are again insisting that Social Security is in crisis. Pay-go demands that the amount paid out from the general fund to make up the difference between what is received in payroll taxes and what is paid out be paid for. Republicans want to make up the difference, as Greenspan wanted to do years ago, by cutting benefits. What they don't want to do is to raise income taxes on the wealthy to do so. Instead of honoring the special non-marketable Treasury bonds in the SSTF which would require either higher deficits or raising the income tax, Republicans want to cut benefits either by raising the retirement age or cutting the cost of living allowance. More extreme right wing Republicans, such as Paul Ryan, want to privatize social security so that the IOUs in the SSTF never will have to be honored. Both Paul Ryan and Alan Greenspan are devotees of Ayn Rand whose philosophy consisted mainly of unadulterated greed and to hell with the poor and middle class.
But Greenspan reserved his most draconian tax increase for the self-employed.
|The Greenspan proposal would prove to be a crippling burden for the poor and the self-employed, because it sought to lift rates over and above those provided by a 1977 law. Today,  a full-time minimum-wage earner, working for 2000 hours annually at a wage of $5.15 per hour, earns about $10,000 annually On that she has to pay a Social Security and Medicare tax of 7.65 per cent, or $765. which leaves her with $9,235. Add to this a state and local sales tax averaging 8% in big cities, and she forks over another $739 to meet her minimum consumption.
This sum of over $1500 in taxes can make a difference between homelessness and living in an apartment, between three meals a day and malnourishment, between a doctor visit and living with illness.This is why the commission's tax propopsals amounted to coaxing money out of the destitute, i.e., the millions who subsist on the minimum wage.
A worse outcome awaited for those working for themselves. Today , a self-employed individual earning $30,000 a year, has to pay nearly 15% in Social Security taxes. Once $4500 is deducted in self-employment contributions, an individual is left with little to support a family, especially when his income is subject to the sales and income tax as well.
The Social Security or FICA tax is regressive; there are no deductions or exemptions. It's a flat tax that everyone, rich or poor, pays at the same rate. And it is only paid on the first $106,000. of income. All income over that amount is tax free as far as FICA taxes are concerned. This is why it's essentially a tax on the poor and middle class while the income tax which has higher tax rates for higher income earners is progressive and hits the rich more than the poor although today the highest tax bracket is 35% for income over about $380,000. That means that millionaires and billionaires pay income tax at the same rate as someone earning $380,000. There are no higher tax brackets for the truly rich.
Greenspan convinced his fellow commissioners and Congress to go along with his scheme and his proposals were enacted as Social Security Amendments in 1983. Greenspan's proposals also guaranteed that the maximum taxable wage base (which today is $106,000) would increase year after year so that Social Security taxes would increase on an annual basis. The reality of the situation is that the payroll tax increases of 1983 have been used primarily to fund the tax cuts of wealthy individuals and corporations. They don't want to give up the financial benefits they gained by having payroll taxes reduce their income taxes for 38 years. So they are in the process of reducing social security benefits by a combination of raising the retirement age, scaling back cost of living adjustments or possibly raising the payroll tax rates. The point is that there is no Social Security crisis if the non-marketable Treasury bonds in the SSTF are honored which is essentially the social contract entered into in 1983 by Greenspan and Reagan. If in fact these Treasuries were marketable instead of unmarketable bonds, they could be redeemed on the open market by the SSTF. In that case they would simply be rolled over by the Treasury Department and effectively become part of the ever increasing deficit and national debt. Alternatively, revenues could be sought from other sources most likely the income tax which has been kept low for decades due to the pilfering of the SSTF by the general fund.
Since Congress controls the rules regarding Social Security, they can change them at any time without any recourse by the American people. This means that they can bypass the implied contract to reimburse the IOUs in the SSTF with impunity effectively finessing the whole situation. A better way to place more money in the SSTF would be to lift the $106,000 cap on income subject to the Social Security tax meaning effectively that the rich would pay Social Security tax on all of their income, the same way the poor do.
Other posts on Social Security are the following:
A hedge fund manager who makes $5 billion in a year is making enough money to pay the starting salaries of 100,000 firefighters. On a one-year monetary basis, a financial expert is worth 100,000 times more than the man or woman racing to the scene of a medical emergency.
This is an extreme case, but there are a million other examples of Americans who, on the average, have tripled their share of the American income pie in just 30 years (after taxes). The richest 1% didn't work three times harder than the other 99 million American families. They benefited from the social and capitalist structures to which they often object paying taxes.
The very rich have made their fortunes in good part because of taxpayer-funded research at the Defense Advanced Research Projects Agency (the Internet), the National Institute of Health, and the National Science Foundation. They benefit disproportionately from national security and a business-enhancing infrastructure. They have taken advantage of tax cuts, de-regulation, and a financial system fine-tuned for the making of money at diminishing risk. The richest 10%, with 80% of the stock market and a 15% capital gains tax, have settled back to watch their assets grow. According to a study by the University of California, in 2008 only 19% of the income reported by the 13,480 individuals or families making over $10 million came from wages and salaries.
The standard argument against this is that everyone has an equal opportunity to benefit from past accomplishments. But it isn't true. An American born in 1970 in the bottom economic quintile had only a 17% chance of making it into the top two quintiles. Reports from Brookings, Pew, and the OECD show that much of Europe has more economic mobility than the United States.
Even for those who headed up the newest computer-based technologies, their successes have depended on the input of thousands of physicists and chemists and chip designers and software engineers and market analysts over many years to lay the groundwork for the infrastructure and protocols needed for success.
At the time of the American Revolution Thomas Paine noted that everything "beyond what a man's own hands produce" came to him from society, and therefore "he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came."
But instead we face a destructive form of class warfare in which a small percentage of people are taking almost all the new income. The middle class has been under siege for 30 years. Based on Internal Revenue Service figures, if the average middle-income family had just maintained its share of America's productivity held in 1980, it would be making $10,000 more per year ($45,000 instead of $35,000). An astounding 90% of American workers have seen their inflation-adjusted incomes go down since 1999.
Everyone who contributed to American productivity deserves to benefit from it. Extreme disparities in the system need to be fixed. That means taxed.
Nov 14, 2011 12:00 AM EST from Newsweek
by Daniel Stone and Laura Colarusso
Class warfare is a politically charged term these days, from the Wall Street protests to the Capitol Hill negotiations over curtailing the nation’s debt. But a new congressional analysis, obtained by Newsweek, may fuel populist outrage by showing the extent of government subsidies that go to the wealthiest people in America.
From unemployment payments to subsidies and tax breaks on luxury items like vacation homes and yachts, Americans earning more than $1 million collect more than $30 billion in government largesse each year, according to the report assembled by Sen. Tom Coburn, a Republican from Oklahoma, who is so often at odds with members of both parties that colleagues call him “Dr. No.” The Internal Revenue Service provided the data showing how much money was going to the much-referenced top 1 percent.In all, millionaires receive hefty help from Uncle Sam. The $30 billion in handouts, to put it in perspective, amounts to twice as much as the government spends on NASA, and three times the budget of the Environmental Protection Agency. On the other hand, it would only cover the cost of fighting about three months in Iraq and Afghanistan. Still, eliminating them would help make a small dent in the $1.5 trillion congressional leaders are trying to find by Thanksgiving.
Jon Bon Jovi, the millionaire rock star cited in the report, took federal dollars to raise honeybees on his property. Together billionaire moguls David Rockefeller and Ted Turner have also accepted more than half a million dollars in farm payments. Basketball legend Scottie Pippen took $210,520 in agriculture subsidies while making his fortune playing for the Chicago Bulls. To make matters worse, the government disclosed to Coburn that some recipients of farm subsidies got it by mistake. Tax records show that more than three fourths of high earners collecting farming money list their primary residence in a city—land unsuitable for farming.
Top earners, surprisingly, also get significant amounts of unemployment insurance and disaster payments. Since 2004, people with seven-figure salaries have accepted more than $9 billion in Social Security. A small band of GOP senators, led by Sen. Lindsey Graham, the South Carolina Republican, have proposed “means testing” to shrink Social Security payments for people who probably don’t need them.
The biggest money comes—or goes, rather—through unpaid taxes. More than 1,500 millionaires paid no income tax last year, according to federal records, mainly due to tax loopholes and savvy accountants. Tax breaks taken by millionaires on things like mortgage interest ($27.7 billion), rental expenses ($64.2 billion) and electric vehicles ($12.5 million) keep cash from entering the federal coffers.
Part-time actor Dave Glennon dressed as a corporate executive at Occupy L.A. , Robyn Beck / AFP-Getty Images
“The country is sucking wind right now,” Coburn says. “We end up subsidizing the very wealthy and not helping the ones who really need the help.” The Oklahoman is one of few Republicans who support tax increases as part of a plan to reduce the deficit. Meanwhile, antitax activist Grover Norquist, a frequent nemesis for Coburn, says the whole system is too complex, and too unfair, and that lawmakers need to get rid of loopholes and to lower rates across the board.
But Coburn’s report is certain to generate arguments on the other side about tax fairness. Why, some might wonder, shouldn’t people who feed the government get to reap its benefits? Millionaires “pay a lot into the system,” says Joseph Thorndike, head of the Tax History Project, a Washington analysis group. “The government comes to the rescue of people in bad moments, and it should do that blindly.”
Yet the crux of the argument—that millionaires are using the social safety net as a luxury hammock—fuels an ongoing campaign by the White House to raise some taxes on top earners. “Republicans need to stop supporting tax breaks for the richest Americans so we can use some of that money to create jobs and reduce the deficit,” says White House spokesperson Amy Brundage. Or as Obama likes to put it, folks like him can afford to give more and take less.
Daniel Stone is Newsweek's White House correspondent. He also covers national energy and environmental policy.
Laura Colarusso is a reporter at The Daily Beast. She previously worked as a senior news editor at Talking Points Memo. She has also written for The Boston Globe, The Star-Ledger (Newark), AOL, and New Jersey Monthly Magazine.
For inquiries, please contact The Daily Beast at firstname.lastname@example.org.
WASHINGTON — Lobbyists for a day, a band of millionaires stormed Capitol Hill on Wednesday to urge Congress to tax them more.
But once inside, their message was embraced by liberals and tolerated by some conservatives — including the ideological leader of anti-tax lawmakers, who had some advice for them, too.
"If you think the federal government can spend your money better than you can, then by all means" pay more in taxes than you owe, said Grover Norquist, of Americans for Tax Reform, a group that has gotten almost all congressional Republicans to pledge to vote against tax hikes. The IRS should have a little line on the form where people can donate money to the government, he suggested, "just like the tip line on a restaurant receipt."
One of the millionaires suggested that if Norquist wanted low taxes and less government, "Renounce your American citizenship and move to Somalia where they don't collect any tax."
In the silence left by the private efforts of the "supercommittee" to find $1.2 trillion or more in deficit cuts by Thanksgiving, free advice flowed in public.
And not just any advice: pie-in-the-sky suggestions from those not connected to the talks, mostly to reopen debates that have led nowhere. The millionaires want the panel to raise taxes on people who earn more than $1 million, even though most Republicans are committed against the idea. And 150 House member and senators urged a much bigger debt-and-deficit deal, even as a small-scope agreement is proving elusive.
While they were at it, the lawmakers insisted that bipartisanship was not, in fact, dead.
This group of House members and senators shared a stage and some jokes and signed a letter urging the supercommittee of Republicans and Democrats to find the required $1.2 trillion in cuts — plus about $2.8 trillion more. They all want the panel to avoid triggering automatic cuts as a penalty for failing.
So this uneasy alliance of 150 Republicans and Democrats will vote for whatever deal the supercommittee strikes?
"No," said House Democratic Whip Steny Hoyer. "Nobody's going to commit to the deal until they see the deal."
What deal? There is no evidence that one is near, so the millionaires tried to meet with anyone who would meet with them.
The progressive caucus did, eagerly and on-camera. The rest wasn't so easy.
At a basement entrance to the Capitol, a police officer pointed to the name badges that identified each wearer as "Patriotic Millionaire."
"That is not a visitor's badge," the officer said. "Go to the visitors desk and get a visitor's badge."
Off they trudged, a group mostly of men in business-casual clothing toting laptops and umbrellas, to a desk visited by tourists and lobbyists. Badges secured, they headed in.
Lawrence Benenson, vice president of Benenson Capitol Co., ran into freshman Rep. Kristi Noem, R-S.D., in an elevator.
"I'm with the Patriotic Millionaires and we want to pay more in taxes," he told her.
"How much more?" she asked.
Then it was off to meet, not with senators but their staffs — and not in the Capitol but in offices across the street.
Progress was not made, by all accounts.
A meeting with an aide to Sen. Jon Kyl, R-Ariz., opened with his aide announcing that the senator believes the wealthy pay more taxes than their fair share, according to one of the millionaires, Matthew Palevsky, a consultant and founder of the Council on Crime Prevention.
"We defined it as not paying our fair share," Palevsky said of the 20-minute chat. "It was clear we were coming from different points of view."
In a meeting with Rep. Ralph Hall, R-Texas, the congressman faux-proposed — apparently — to an aide to the millionaires. She declined.
Then it was off, on a bus not a limo, across town to see Norquist.
Why were they bothering with him?
"That's what I asked this morning," said one of the millionaires, Frank Jernigan, a former senior software engineer for Google.
"It's a media hook," offered another, Guy Saperstein, a retired lawyer and former president of the Sierra Club Foundation.
Such candor is not the norm in these parts.
For his part, Norquist said he was ready for the group with a tongue-in-cheek Torah lesson: Maimonides and his "eight degrees of charity." That's what Norquist says the millionaires are essentially proposing with their tax-me-more pitch. Perhaps there should be a ninth, Norquist suggested.
"Nobody's holding them back" from donating money to the federal government, he said as he prepared for the group's arrival. "They're saying, 'Gee, I'd sure like to write a big check to the federal government, if someone would just stop stopping me.'"
President Obama can get on the stump and promise action to create more jobs, tax the rich, defend the middle class, have the government provide more Pell grants, take care of children in poverty, whatever... But he need not say all that because, even if he's reelected, he can provide none of it unless the Democrats have a majority in the House and a filibuster proof majority in the Senate which translates to 60 Senators. If the statistics in Congress don't align, Mr. Obama will accomplish exactly nothing even if he gets four more years. Therefore, the most honest campaign speech he can make is "If you elect a majority of Democrats in the House and 60 Democrats in the Senate, I will give you x number of jobs on Day 1 of my second term. Otherwise, you will get nothing but gridlock for the entirety of my second term because the Republicans in Congress will block everything I propose." All this emphasis on what Mr. Obama can or cannot do is ridiculous if he doesn't have the power to do it, and the only way he will have the power to do anything is if he has a Democratic Congress and a filibuster proof Democratic Senate. Mr. Obama has shown that he is not bold enough to defy convention, and the conventional wisdom is that the executive branch in and of itself can do nothing except fight wars and plead with Congress.
Sure now it seems Obama has gotten over his predilection for appeasing the Republicans in Congress realizing that it's absolutely futile to believe in "compromise" with that bunch of jive turkeys. Today he's talking tough, but he's resigned to doing nothing. Might as well start campaigning now for 2012 because nothing will be getting done by government until after the election a year from now. But nothing will get done even then if Mr. Obama doesn't have an agreeable Congress to go along with him, and, reading the tea leaves, it doesn't seem that Democrats will be elected in large numbers unless Democrats including Mr. Obama start making that clear now. Congress has a low approval rating, 12%, which tells the American people "throw the bums out," the good ones along with the bad. In other words the American people will throw out the baby with the bath water unless they start to discriminate between Republicans and Democrats in Congress and start to realize that the blame for nothing getting done lies with the REPUBLICANS IN CONGRESS and not just with some kind of generic CONGRESS. Americans are simple minded. You have to spell it out for them. The campaign of 2012 is not just for the Presidency as if that were the all important thing. No, it's for the Presidency AND Congress combined, and, if the right balance isn't achieved, that is to say a Democrat in the White House and a Democratic controlled House and Democratic controlled filibuster proof Senate, then the American people might as well say bye-bye to solving the deficit problem by taxing the rich and solving the jobs problem by government direct creation of jobs.
The fact of the matter is that corporations and the wealthy are sitting on $2 trillion in cash. They could hire more workers if they wanted to without any additional tax breaks or loans from Wall Street, but they obviously don't just want to hire workers for the sake of hiring workers. They will only hire workers if it adds to their bottom line. A lot of Democratic oreiented economists like Reich and Krugman are saying they will only hire workers if there is more demand so, therefore, we need to use Keynesian economics to pump money into the economy to create demand. However, why would corporations hire more workers even if there were more demand when instead they could make more capital investment in automated and computerized machines? If they are given economic incentives, they will preferably use the money to invest in robots and other computer driven equipment to increase output like they've been doing for the last 20 years. They have driven up productivity not by hiring more workers but by investing in intelligent machines and laying off workers. There is no reason to believe they will do anything different even if demand suddenly increases. Therefore, Obama's economic advisers are full of you know what. Nothing the government can do in the way of giving incentives to corporations to hire more workers will actually work because it makes more sense to them to invest in capital equipment which can work 24 hours a day and doesn't require expensive health insurance.
So where does that leave the government's role in creating jobs even if, come 2012, there should happen to be elected by some miracle a Democratic President and a Democratoc Congress. As I see it, it only leaves one alternative: direct job creation by the Federal government as was used during the Great Depression when FDR created jobs with the Civilian Conservation Corps and the Work Projects Administration. And money has to be funneled off of the most profitable upper few percent of the population who have obtained the lion's share of the national income over the last 30 years in order to make this possible so that the nation doesn't go even more deeply into debt. Class war, anyone? It comes down to taking from the rich in order to dole out welfare benefits or taking from the rich in order to put the poor and lower middle class to work in CCC and WPA type jobs. Lord knows, there's tons of work both in conservation (think environmental rehabilitation) and infrastructure repair and development so that direct government job creation in those areas would be anything but make work. Jobs in those areas are much needed and vital to the overall economy not to mention the general welfare of the people. And private enterprise will never create those jobs unless it is given contracts to do so by the government which would entail much more money in order to build in large profits to the private sector which are not necessary if government provides the jobs directly. Think about all the money that has been wasted by lavishing it on private contractors in Iraq and Afghanistan.
Obama's economic team including Fed Chairman Bernanke seems to think that the key to getting the economy moving is to make interest rates so low that loans will be easy to get as if the only thing holding the private sector back from expanding and hiring workers is the ease with which they can get a loan. But this is belied by the fact that the corporations don't need loans to expand: THEY ARE ALREADY SITTING ON $2 TRILLION IN CASH. Why do they need to borrow money? Duhhh! How stupid are these people? They are deluded to think that the only way things get done in this economy is to create more debt. Why would I borrow money to do something if I am sitting on all the cash I would ever need to do it and more? Obama made the mistake of taking advice from Larry Summers and Tim Geithner, Wall Street types who think the only way to get the economy moving is to cater to Wall Street and appease the rich by giving them even more favors: deregulation and lower taxes. This top down approach hasn't worked. That should be obvious by now! Instead the rich are richer than ever, more and more money has been funneled to the top 2% and middle class interests have been neglected. People have lost their homes who shouldn't have had to if the government had acted in their interests. Now investors are sueing the big banks because they were screwed. But what about the people who lost their homes to foreclosure? Little if anything is being done in their behalf.
All in all, it's not all about Obama. If he's not elected in 2012 and Republicans run the table, God help us. The US will become a nation of serfs and a small class of economically powerful and dominant aristocrats. The safety net will be eliminated and more and more people will become homeless and die on the streets for lack of health care. Children's growth will be stunted and they will become increasingly ignorant and uneducated. The country will be by, for and of the rich and powerful. Better to have Obama reelected and a Republican Congress which will mean nothing will get done for four more years, but even that is better than sliding back into another Dark Age. The best scenario, however, would be that Democrats control the Presiency and Congress. This would also guarantee that a liberal would be appointed to the Supreme Court when a vacancy occurs which is very likely in the next 5 years and which would tilt the balance there from the conservative oriented majority which now obtains. If such were the case, then America might well be back on the path towards being a sane and progressive nation again instead of the repudiation of Enlightenment values it was founded on which it is now in danger of becoming.
Americans favor raising taxes on the wealthy to pay for President Barack Obama’s proposed jobs plan by a margin of two-to-one, a new Gallup poll Wednesday says.
Sixty-six percent of respondents said that they backed increasing income taxes on individuals earning over $200,000 and families earning at least $250,000, while only 32 percent were opposed.
An even greater majority thought that taxes should be raised on corporations, with 70 percent of respondents favoring hiking taxes on corporations by eliminating tax deductions and 26 percent were opposed.
In fact, even a majority of Republicans and Republican-leaning independents - 53 percent - thought that corporations should have their tax deductions eliminated. Eighty-six percent of Democrats and Democratic-leaning independents agreed with this sentiment.
On the issue of raising taxes on higher-income individuals, the partisan split became more pronounced. Only 41 percent of Republicans and Republican-leaning independents believed that income taxes should be raised on those earning more than $200,000 and families earning more than $250,000, while 85 percent of Democrats and Democratic-leaning independents agreed.
Meanwhile, the Gallup poll also showed significant support for Obama’s jobs plan, which he outlined in a speech to a joint session of Congress on Sept. 8.
A majority of said that they favored tax cuts for small businesses (85 percent favor), funds to hire public workers (75 percent) , giving tax companies to companies who have been employed for over six months (73 percent), money for infrastructure projects (72 percent) and extending unemployment insurance benefits (56 percent).
Americans were optimistic that the jobs plan - if enacted - would help the economy and create jobs. 65 percent of respondents said that they thought the jobs package would help “a little” or “a lot” in creating new jobs, while 60 percent that it would help “a little” or “a lot” in helping improve the economy.