California Free Press

Off the Top of My Head

Bidenomics: The US Finally Gets an Industrial Policy

by John Lawrence

The Republican policy that the government should be hands off regarding the economy is out the window. Trickle down is a failed policy. Bidenomics gets the government involved in crucial areas of the economy. The export of jobs to parts of the world where labor is cheapest is replaced with a policy of creating jobs within the US. Deregulation is replaced with regulations to protect the environment and combat climate change. The traditional Democratic alliance with unions is back in vogue. Bidenomics is all about building the economy from the middle out and the bottom up instead of from the top down. Bidenomics is about shaping the economy in a way that is propitious for the middle class and the environment. Infrastructure building is more important than accelerating the consumer economy. Putting our house in order is more important than giving away fattening goodies to consumers. People are being put to work doing jobs which actually make US society a better place instead of encouraging jobs in frivolous pursuits. This is not necessarily what the American consumer wants.The American consumer wants more money in their pockets so they can buy more gadgets and aspire to making millions as a pro athlete or an entertainer. They don't actually want to work at the good jobs Biden is creating building infrastructure or making semiconductors. CNN reported:

Trickle-down economics, which was at the heart of President Ronald Reagan’s policies and continues to be the guiding light of Republican lawmakers, typically revolves around tax cuts for the wealthy and large companies. Supporters say the benefits flow down to middle-class and working Americans, boosting economic growth more broadly. But many experts dispute the effectiveness of this practice at lifting all boats.

Biden argues that supply-side, trickle-down economics has cost jobs and hollowed out the middle class. He has long focused on that group of Americans, serving as chair of the Middle Class Task Force when he was vice president in the Obama administration.

“Folks, let me say it as clearly as I can: (The) trickle-down approach failed the middle class and failed America,” said Biden.

To fund Bidenomics, the president once again calls for ensuring the wealthy and large corporations pay their fair share of taxes.

The problem is that now that the American people have had  a good taste of Democratic programs, they want more: Republican tax cuts. They want their cake and eat it too. They know that Republicans will have no problem with the national deficits and debts as long as they come in the form of tax cuts. So from the American consumer's point of view they have got about all they can expect to get out of Bidenomics. Now they want a tax break to boot.

The Biden administration has focused on infrastructure, clean energy and semiconductors, Lael Brainard, director of the National Economic Council, said. The Infrastructure Investment and Jobs Act, Inflation Reduction Act, and CHIPS Act each include direct funding and tax incentives for public and private manufacturing construction. Biden outlined how states will receive more than $42 billion in federal funding for high-speed internet service, which was part of the 2021 infrastructure law. It is aimed at bringing connectivity to more Americans and closing the digital divide. The administration is comparing it to President Franklin Delano Roosevelt’s Rural Electrification Act, which brought electricity to homes throughout the country. And 35,000 new projects – including roads, bridges and ports – have received funding through the bipartisan infrastructure law, the White House said.

E.J. Dionne Jr. said in the Washington Post:

Bidenomics has also gone global. One indicator is the exceptional and ongoing debate Sullivan’s speech provoked in proposing a “new consensus” to replace “a set of ideas that championed tax cutting and deregulation, privatization over public action and trade liberalization as an end in itself.” The old formulas, Sullivan argued, not only failed to address new problems; they didn’t work on their own terms.

“In the name of oversimplified market efficiency,” he said, “entire supply chains of strategic goods, along with the industries and jobs that made them, moved overseas.” The idea that freer trade “would help America export goods, not jobs and capacity, was a promise made but not kept.” He stressed the need for “a modern American industrial strategy” and the benefits of “moving beyond traditional trade deals to innovative new international economic partnerships.”

Can the dumbed down and self seeking American people even understand much less appreciate the great things that Bidenomics has brought forth? Biden has changed the narrative on taxes by repeating ad nauseum that he wouldn't raise taxes on anyone making less than $400,000 a year. Big idea: raising taxes doesn't mean raising taxes on everyone and a tax break does nor mean lowering taxes on everyone. The meme about raising taxes which Republicans have endeavored to attribute to Democrats ("tax and spend") and tax breaks which Republicans have endeavored to attribute to themselves has been change by Biden. "Tax the rich" has become the Democrats' motto thanks to Bernie Sanders and AOC.The immense inequality that Reaganomics has resulted in is being addressed by Bidenomics. The American people say "Ho Hum". They are more interested in spectator sports which is exemplified by the fact that news programs on TV are routinely bounced in favor of sports events. In short the American people don't appreciate Biden because they don't take the time to understand Bidenomics.

Biden has done much good for America and Americans. He is the least appreciated great President in American history. It's a reflection on the American people themselves that all they're interested in is their own personal situation. If they are well off, they could care less about social programs that help the poor. If they have a good job, they could care less about the unemployed. American have been taught to be totally selfish and not to care about the wider world or about the improvement of society in general. Corporations by law are only supposed to consider the financial well being of their share holders and nothing else. These attitudes in and of themselves preclude the concerns of minorities, whether racial or economic, because the US is a majoritarian society. In politics the majority rules. Concern about the welfare of minorities and of the world in general and in particular the environment is not a consideration. Meanwhile, global warming is taking out individual families who are victims of tornadoes or other particular manifestations of global warming on a daily basis. It has yet to sink in that perhaps concerns for larger interests than just ourselves might be a paradigm change we might have to make.

For the American people, it's not abut how much Biden has done, it's about how much have you done for me lately, Mr Biden, and, more importantly, how much more are you going to do? If there are many more carrots, then maybe I'll vote for you. Otherwise, I'll take the tax break Republicans are offering. The American national character is selfishness personified. Ayn Rand would be proud.

Washington's $849 Million Capital Gains Windfall Shows 'Taxing the Rich Is a Really Good Idea'

 

Activists demand higher taxes on the rich during a demonstration on May 17, 2021 in Tampa, Florida.

(Photo: Gerardo Mora/Getty Images for MoveOn)

"Hey, hey! What we knew would happen: Make the wealthiest pay their fair share and it finances investments in education, transportation, and more," said Rep. Pramila Jayapal.

by Brett Wilkins

from Common Dreams, May 26, 2023

Proponents of progressive taxation on Friday pointed to data showing Washington state stands poised to reap $849 million in revenue during the first year of its capital gains tax as proof that taxing the rich works—and could serve as a template for federal legislation.

The Seattle Timesreports that when Washington state lawmakers passed this fiscal year's budget, they anticipated collecting $248 million in revenue from the 7% tax on the sale or exchange of stocks, bonds, and certain other assets above $250,000.

However, the legislators were pleasantly surprised when figures showed the state has collected over $600 million more than that.

While the amount collected could change after around 2,500 taxpayers who applied for extensions file their returns, progressives welcomed the windfall that will fund public schools, early childhood education, and building and repairing schools across the state.

"Hey, hey! What we knew would happen: Make the wealthiest pay their fair share and it finances investments in education, transportation, and more," tweeted Congressional Progressive Caucus Chair Pramila Jayapal (D-Wash.).

Jayapal touted federal legislation she introduced with Sen. Elizabeth Warren (D-Mass.) in 2021—the Ultra-Millionaire Tax Act—that would levy a 2% annual tax on the net worth of households and trusts above $50 million, plus a 1% annual surtax on billionaires.

An analysis by University of California, Berkeley economists Emmanuel Saez and Gabriel Zucman found that the legislation would bring in at least $3 trillion in revenue over 10 years without raising taxes on 99.95% of American households worth less than $50 million.

Last month, Warren, Sen. Bernie Sanders (I-Vt.), and Rep. Jimmy Gomez (D-Calif.) introduced the For the 99.5% Act, which would impose a 45% tax on estates worth between $3.5 million and $10 million, a 50% tax on estates worth between $10 million and $50 million, a 55% tax on estates worth between $50 million and $1 billion, and a 65% tax on estates valued at over $1 billion.

Meanwhile, congressional Republicans are trying to repeal the estate tax entirely—and pass other tax policies to serve the rich.

Back at the state level, California, New York, Illinois, Maryland, Connecticut, and Hawaii have also introduced wealth tax bills this year, while Washington's law was upheld by that state's Supreme Court in March.

"If the federal government won't act," California Assemblymember Alex Lee (D-24) said while introducing a wealth tax bill in January, "we the states will."

---

Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.

---

Brett Wilkins

Brett Wilkins is a staff writer for Common Dreams.

Full Bio >

Another Look at the Financial Transactions Tax That Could Eliminate Need for All Others

A small financial transactions tax could correct a number of maladies in our economic system, from the federal debt crisis to the widening wealth divide to the rampant financialization of the economy, while eliminating taxes on income and sales.

From Web of Debt Blog

Posted on June 2, 2023 by Ellen Brown

The debt ceiling crisis has again brought into focus the perennial gap between what the government spends and what it accumulates in taxes, and the virtual impossibility of closing that gap by increasing taxes or negotiating cuts in the budget. 

In a 2023 book titled A Tale of Two Economies: A New Financial Operating System for the American Economy, Wall Street veteran Scott Smith shows that we would need to tax everyone at a rate of 40%, without deductions, to balance the budgets of our federal and local governments – an obvious nonstarter. The problem, he argues, is that we are taxing the wrong things – income and physical sales. In fact, we have two economies – the material economy in which goods and services are bought and sold, and the monetary economy involving the trading of financial assets (stocks, bonds, currencies, etc.) – basically “money making money” without producing new goods or services. 

Drawing on data from the Bank for International Settlements and the Federal Reserve, Smith shows that the monetary economy is hundreds of times larger than the physical economy. The budget gap could be closed by imposing a tax of a mere 0.1% on financial transactions, while eliminating not just income taxes but every other tax we pay today. For a financial transactions tax (FTT) of 0.25%, we could fund benefits we cannot afford today that would stimulate growth in the real economy, including not just infrastructure and development but free college, a universal basic income, and free healthcare for all. Smith contends we could even pay off the national debt in ten years or less with a 0.25% FTT.  

A radical change in the tax structure may seem unlikely any time soon, due to the inertia of Congress and the overweening power of the financial industry. But as economist Michael Hudson and other commentators observe, the U.S. has reached its limits to growth without some sort of debt write down. Federal interest expense as a percent of tax revenues spiked to 32.9% in the first quarter of 2023, and it will spike further as old securities at lower interest rates mature and are replaced with new ones at much higher interest. A financial reset is not only necessary but may be imminent. Promising proposals like Smith’s can lead the way to a much-needed shift from serving “capital” to serving productivity and the broader public interest.

Off the Top of My Head

Biden: The Least Appreciated Great President in American History

by John Lawrence

President Biden has gotten more real work done for the American people than any President with the exception of Franklin D. Roosevelt. So why is his job approval rating so low - just 39%? Chalk it up to the fickleness of the American people. They don't know a great President when they see one. Biden has been able to do so much with much narrower margins in Congress than FDR had in all his terms as President. In fact Roosevelt had Democratic majorities in both the House of Representatives and the Senate from 1933 until his death in 1945, and in those days the filibuster was a speaking filibuster that delayed but didn't terminate legislation and so was of little consequence compared to the fact that today 60 Senators are required to pass any bill.

So what are some of Biden's accomplishments? The Inflation Reduction Act is a historic legislative achievement that lowers costs for families, combats the climate crisis, reduces the deficit, and finally makes the largest corporations pay their fair share. For the first time, Medicare is able to negotiate the price of certain high-cost drugs, a month’s supply of insulin for seniors is capped at $35, Medicare beneficiaries pay $0 out of pocket for recommended adult vaccines, and seniors’ out of pocket expenses at the pharmacy will be capped at $2,000 a year. Historically low unemployment at 3.5%. A manufacturing boom is occurring. Companies have announced nearly $300 billion in manufacturing investments in the United States. These investments are ensuring the technologies of the future are made in America, and bringing back supply chains from overseas. And they are creating good-paying jobs, including union jobs and jobs that don’t require a four-year degree. As part of the bipartisan CHIPS and Science Act, the Department of Commerce is overseeing $50 billion to revitalize the U.S. semiconductor industry, including $39 billion in semiconductor incentives. The first funding opportunity seeks applications for projects to construct, expand, or modernize commercial facilities for the production of leading-edge, current-generation, and mature-node semiconductors. This includes both front-end wafer fabrication and back-end packaging. The Department will also be releasing a funding opportunity for semiconductor materials and equipment facilities in the late spring, and one for research and development facilities in the fall.

President Biden signed the American Rescue Plan to change the course of the pandemic and jump start our economic recovery. The American Rescue Plan funded our successful vaccination campaign, safely re-opened schools for in-person learning, helped 200,000 child care providers keep their doors open, and delivered relief to American families. Biden forged a consensus and got the Bipartisan Infrastructure Law passed – a once-in-a-generation investment in our nation’s infrastructure. We are rebuilding our roads, bridges, ports, and airports, upgrading public transit and rail systems, replacing lead pipes to provide clean water, cleaning up pollution, providing affordable high-speed internet to every family in America, delivering cheaper and cleaner energy to households and businesses, and creating good-paying jobs – including union jobs, and jobs that don’t require a four-year degree.

President Biden signed into law the PACT Act – the most significant expansion of benefits and services for toxic exposed veterans in more than 30 years. This law also enables the Department of Veterans Affairs to move more quickly in the future to determine if illnesses are related to military service, and it offers critical support to survivors who were harmed by exposures. And, the law authorized 31 new clinical sites and provides VA several tools and resources to ensure effective implementation of the law. The Biden Administration announced debt relief of up to $20,000 for Americans earning less than $125,000 per year who had Pell Grants in college, and up to $10,000 for all other borrowers below that income threshold. More than 40 million borrowers stand to benefit from this action, and about 20 million would see their debt entirely wiped out - and nearly 90% of this relief will go to borrowers earning less than $75,000 per year. In early 2023, the Biden-Harris Administration announced a plan to provide millions of borrowers with more affordable monthly student loan payments through changes to income-driven repayment plans.

The U.S. is positioned to achieve our ambitious climate goals of cutting our emissions in half by 2030 and net-zero emissions by 2050. The President has taken executive action and signed legislation to develop clean energy at home, accelerate the adoption of electric vehicles, and reduce pollution that endangers overburdened communities. And, the President is lowering energy costs for families, creating good paying jobs, and ensuring America leads the global clean energy economy. The President also protected more lands and waters in his first year than any President since John F. Kennedy. President Biden took action to lower the cost of health care for millions of Americans. Right now, four out of five people who sign up for health insurance through the Affordable Care Act can find health care coverage for $10 a month or less and millions of Americans on Obamacare are saving an average of $800 a year. Since he took office, there has been a combined 50 percent increase in enrollment in states that use HealthCare.gov and the nation’s uninsured rate is historically low at 8 percent. Over 16 million Americans signed up for quality, affordable health coverage, the highest number ever produced in an open enrollment period.

So what are Biden's most significant achievements? In my opinion infrastructure and climate action lead the way. These areas have been neglected too long, and the Biden initiatives will just barely make amends. In and of themselves, they are probably insufficient, but they are a good start, a start that has been delayed too long. Changing the narrative on taxation, I think, is a major accomplishment. Making it clear that a tax bill does not have to apply to everyone. By not raising taxes on anyone making less than $400,000, an oft repeated phrase, the narrative has been changed from "tax and spend" to "tax the rich and spend on helping the poor and middle class". Deficit reduction doesn't mean necessarily to stop spending on social programs as it means getting more money into government coffers by taxing the rich. Inequality is out of control; taxing the rich ameliorates this situation. What Biden did to get us through the COVID crisis is remarkable. It could have been an economic disaster for everyone; it wasn't. Student debt relief was a great achievement although it is still not clear how that will play out in the courts.

The American people by and large don't appreciate all that Biden has done compared to what any Republican administration would have done. Clearly, Democrats are on the side of rationality and helping the American people. Republicans are on the side of winning at all costs and helping the rich. They don't give a damn about helping the American people especially the middle class and the poor. The Republican mantra of reducing the deficit and the debt would have you believe that it can only be done in one way, that is by reducing spending. No, it can also be done by taxing the rich which would also reduce inequality. But this is all the Republicans have, that and the discredited policy of tax breaks for the rich that have done little to "trickle down" and have greatly contributed to the national debt. Enhancement of Obama's landmark health care legislation is another major achievement although Obama deserves much of the credit. It's a testimony of what the Democratic party is able to achieve for the country. The fact that Biden accomplished so much in a bipartisan way is something few other politicians could have hoped to accomplish especially in the political environment that exists today.

My criticism of Biden has to do with the Ukraine war. On the one hand he has prevented it from becoming a world war as of yet. However, in the negotiations preceding the war, I believe more could have been done to prevent the war in the first place. By not acknowledging or being sensitive to Russia's concerns about the encroachment of NATO on its borders which started during the Clinton administration and was hastened by Secretary of State Madeleine Albright, Biden and other diplomats missed an opportunity to defuse the crisis. Their policy was a de facto attempt to bully Russia into accepting the fact that Ukraine would also become part of NATO. Now the US is entrenched in a policy of Ukraine "winning" and Russia "losing" instead of a policy of a negotiated settlement to end the war, a negotiated settlement which could have been had before the war even started IMHO, for instance, by delaying Ukraine's admission to NATO for a period of time during which Russia's security concerns might have been addressed. In effect Ukraine has become a vassal state of the US instead of its historic situation of being a vassal state of Russia.

Off the Top of My Head

Republican Presidents Have Been Mainly Responsible for Increases in the National Debt

by John Lawrence

The Reagan, George W Bush and Trump tax cuts are responsible for most of the US national debt. During the Trump administration, the debt increased by roughly $7.8 trillion, and The George W. Bush administration  enacted sweeping tax cuts that will have cost more than $8 trillion by the end of fiscal year 2023. The nation’s fiscal pictured changed in 1981 when President Ronald Reagan enacted the largest tax cut in U.S. history, reducing revenues by the equivalent of $19 trillion over a decade in today’s terms. Although Congress raised taxes in many of the subsequent years of the Reagan administration to claw back close to half the revenue loss, the equivalent of $10 trillion of the president’s 1981 tax cut remained. Donald Trump Built a National Debt So Big (Even Before the Pandemic) that it’ll weigh down the economy for years.

A series of massive, permanent tax cuts have created large federal budget primary shortfalls and continue to exert upward pressure on the debt ratio. In other words, the current fiscal gap—the growing debt as a percentage of the economy—stems from legislation that cut taxes, disproportionately for the very rich. While it is true that the Great Recession and legislation to fight it, along with the costs of responding to the health and economic effects of COVID-19, pushed the level of debt higher, these costs were temporary and did not change the trajectory of the debt ratio. If Congress wants to decrease deficits, it should look first toward reversing tax cuts that largely benefited the wealthy, which were responsible for the United States’ current fiscal outlook.

Therefore, taxes on the rich should increase while spending on the poor and middle class should also increase. Americans want both: social programs and reduced taxes. However, the gross inequality that exists between rich and poor begs the question: why raise taxes on everyone? Shouldn't the rich have their taxes increased while the poor and lower middle class have their taxes reduced? Of course, that 's the ideal solution. However, Republicans represent the interests of the rich so they would never agree to this proposal. They will continue to argue for increasing taxes on the poor while cutting spending that mostly benefits the poor and lower middle class. That's the American situation, writ large, folks. That's all you need to know to understand American politics. It's a struggle between rich and poor. The rich think they deserve all their money even if it runs to billions of dollars while the poor are only trying to get a foothold in the American Dream. The rich think the poor deserve their lot in life because they didn't work hard enough to overcome their poverty. The rich also believe in a meritocracy where they themselves are the winners who made all the right moves and worked the hardest. What's wrong with this picture?

Read "The Tyranny of Merit" by Michael Sandel.

Off the Top of My Head

Why the Republican Congress Will Drive the US into Default

by John Lawrence

Simply put it's in their interests to do so. They themselves will profit politically and financially. They will blame Biden for the default, and they will sell short their stock portfolios so that, when the stock market crashes, they will make money. Default doesn't mean that the US will not pay its debts. It means that going forward seniors on social security will not get their monthly checks. Neither will Federal workers or active duty military. However, since the US Treasury still has some money and money coming in from taxes, it will prioritize paying interest on Treasury bonds. So rich people that hold financial obligations of the US government will be paid while everyday average slobs will be left to suffer. This is exactly the type of solution Republicans have always sought. It fits in nicely with their modus operandi: cater to the rich and starve the poor and working class. Millionaires and billionaores will not suffer. Smart people who sell stocks short will not suffer. They will prosper. Financial wizards and private equity corporations will snap up distressed properties like a shark snapping up a school of fish.

The financial obligations of the US, money that has supposedly already been spent, is a misnomer. They represent money that has already been allocated by the previous Democratic controlled Congress. If Republicans had controlled the previous Congress instead, the money would never have been allocated. So it's not money that's already been spent, it's money that's already been allocated. The spending is in the future. The allocation was in the past. If Democrats controlled the present Congress, there would be no problem. Since it's up to the Congress both to allocate spending and to raise the debt limit, there is a whiplash if one party allocates the money and the other party is supposed to preside over the spending of the money. In a sense the Republican Congress is rebelling over the fact that, although they didn't allocate the money, they are supposed to preside over the spending of it.

Now Joe Biden could preempt the Congressional decision not to raise the debt limit by using unconventional but completely legal means, something that has never been done before. The Federal Reserve Act gives the power to print money to the Fed, However, the Coinage Act grants the Secretary of the Treasury rather broad coin seigniorage authority. The debt ceiling could be side stepped by ordering the West Point Mint to coin a 1 oz. $ 1 trillion coin. Treasury can then present the jumbo coin at the NY Fed to buy back $1 trillion in Fed-held debt (the Fed has to accept it, a creditor can’t refuse legal tender paid in to settle a debt). Or I see no reason why the Treasury couldn't simply deposit it in its account at the Fed thereby giving the US government the wherewithal to pay its bills. Esteemed economist Paul Krugman is all for the minting of the trillion dollar coin: "So go ahead, Democrats, and do whatever it takes to get through this. Gimmickry in the defense of sanity — and, in an important sense, democracy — is no vice."

Republicans would have you believe that spending is out of control. No, undertaxation is out of control especially undertaxing the rich. Economic inequality has soared reaching unprecedented new heights not seen even in the Gilded Age. As Joe Biden has proposed, the budget could easily be balanced and the debt paid down by taxing the rich. Republicans would have you believe that raising taxes is a policy that would have to be enforced on everyone including the poor and the middle class, but that, unfortunately for them, is not the case. It is not written in stone that raising taxes would have to apply to everyone. As Bernie Sanders, Elizabeth Warren, AOC and others have pointed out, raising taxes on the rich could not only balance the budget, but could solve the problem of social security shortfalls. Republicans are in the unenviable position of wanting to screw the working class while catering to the rich while holding on to their MAGA supporters, a large portion of whom are the working class.

So given the fact that Republicans don't care about social security or Medicare recipients, there is a good chance that they will not vote to raise the archaic debt ceiling and force the US into default not on its debt but on its ongoing payments to Federal workers, who they hate anyway, social security recipients, who they will cheerfully throw under the bus and active duty military who as MAGA supporters will cheer them on at their own expense. Meanwhile, Congressional Republicans, private equity corporations and billionaires will short the market and salivate over the cheap assets they will be able to snap up. In other words they will profit from a default.

Off the Top of My Head

The Solution to the Debt Crisis: Tax the Rich

by John Lawrence

Republicans want Biden to cut back spending. Democrats should want to increase taxation on the rich. The debt can be ameliorated either by reducing spending or increasing taxation. The debt is a result both of overspending and undertaxing. For all those who care about the size of the debt, they should be as concerned about undertaxing to the same extent they are concerned about overspending. Since the three wealthiest people in the United States — Bill Gates, Jeff Bezos, and Warren Buffett —now own more wealth than the entire bottom half of the American population combined, a total of 160 million people or 63 million households, the obvious culprit here is not overspending, it's under taxation of the rich. In addition to taxing the incomes of the rich, there needs to be instituted a wealth tax. Whoa, you say, this would discourage entrepreneurs who are responsible for inventing the next big thing which is what contributes the most to the American economy. We don't need another gadget; we need all hands on deck to fight global warming. This is being done by Joe Biden's infrastructure bill which is a government, not a private, solution. Private entrepreneurship is less important in a period of global warming than large scale government solutions. Therefore, discouraging entrepreneurship, except that which supports a solution to global warming, is actually a positive development.

America’s top 25 billionaires — a group the size of a major league baseball team’s active roster —together hold $1 trillion in wealth. These 25 have as much wealth as 56 percent of the population, a total 178 million people or 70 million households. The solution to government debt is to go where the money is and tap that. When asked why he robbed banks, Willie Sutton simply replied, “Because that's where the money is.” By the same token, the solution to the national debt is for the government to go where the money is: billionaires and Forbes 400 corporations. Americans don't need any new gadgets to spend their money on. In the World War II era consumption was both voluntarily and manditorily reduced in order to put more resources into the war effort. The war on global warming is even more important than World War II because, if we lose this war, the survival of the whole human species is at risk. Put simply we need to reduce consumption of the gadgets and entertainment provided by the private sector and increase expenditures on large scale projects which can ameliorate global warming. Of necessity those projects and that spending has to be initiated by government in cooperation with the private sector, but government has to lead the way and provide the money.

Income inequality is a major problem of American society. This problem can be resolved and the resources to prevent global warming provided for by taxing the rich. The problem is to reduce American consumption which is 70% of the US economy and increase government spending as long as that increased spending is spent on the solutions to global warming. At the same time the national debt can be reduced. The national debt in and of itself is not a problem, but interest on the national debt is. There are other solutions to decreasing the interest such as having the Fed create the money by quantitative easing. Instead of the Fed's depositing this money in the accounts of the big banks, it would deposit the money in the Treasury's account. "The whole idea of Modern Monetary Theory is that since a sovereign entity can borrow in its own currency, it can print more money when it needs to pay off all its debt. The central bank just needs to keep interest rates low," says Robert R. Johnson, professor of finance at the Heider College of Business at Creighton University. But there's the rub. As the Fed raises interest rates to control inflation, interest on the national debt also increases. That's why a mechanism needs to be found by which the Fed creates the money to run the government instead of the Treasury borrowing the money.

So in the meantime taxing the rich seems to be the best policy in order to bring the national debt down, to reduce economic inequality and to provide the money for government programs to combat global warming.

Off the Top of My Head

The Sword of Damocles Which is the Debt Ceiling

by John Lawrence

The Federal Reserve can just create the money like they did with quantitative easing. They created the money and gave it to the banks. Now their balance sheet is $8.5 trillion. This is not a debt, but it is similar to the national debt which is $31 trillion. You could say that this $31 trillion is on the US' balance sheet or, similarly, the Federal Reserve has an $8.5 trillion debt. See if the Fed creates money, it's not a debt, but if the US Treasury needs money, it has to borrow it. What if no one wants to buy Treasury bonds? Well then, the Fed would buy them itself and just create the money to buy them and add it to its balance sheet. The debt ceiling is such a useless and bogus aspect of American democracy and has the potential of causing the US to default on its debts with disastrous consequences. The Fed never has to pay down its balance sheet nor does the US ever have to have its taxpayers pay off the national debt. The national debt is just an accounting mechanism as is the number on the Fed's balance sheet. As a sovereign fiat currency, the US can just create money. That's not to say that it should do this hap hazardly or willy nilly. But there was a lot of willy nillyness in the years after the Great Recession in 2008 when the Fed kept on quantitatively easing and creating money and giving it to the banks. However, the Fed is prohibited by law from creating money and giving it to poor people. Of course.

So why is the national debt so high? The simple answer is tax cuts for the rich. Americanprogress.org reported:

Tax cuts initially enacted during Republican trifectas in the past 25 years slashed taxes disproportionately for the wealthy and profitable corporations, severely reducing federal revenues. In fact, relative to earlier projections, spending is down, not up. But revenues are down significantly more. If not for the Bush tax cuts and their extensions—as well as the Trump tax cuts—revenues would be on track to keep pace with spending indefinitely, and the debt ratio (debt as a percentage of the economy) would be declining. Instead, these tax cuts have added $10 trillion to the debt since their enactment and are responsible for 57 percent of the increase in the debt ratio since 2001, and more than 90 percent of the increase in the debt ratio if the one-time costs of bills responding to COVID-19 and the Great Recession are excluded. Eventually, the tax cuts are projected to grow to more than 100 percent of the increase.

So why not tax the hell out of the rich, flood the coffers of the Treasury with cash and pay down the national debt? Or at least tax the rich as Biden has proposed doing? Biden famously changed the narrative from "tax and spend" to "no one making less than $400,000 will get a tax increase." So Republicans always want to reduce taxes on the rich and reduce or eliminate social programs which benefit mostly the poor and middle class. The alternative, which Democrats should loudly state, is to raise taxes on the rich and enact programs which benefit the poor and middle class. Voila, the budget is balanced. Raise taxes a little more on the rich and the national debt is paid down. Actually it doesn't matter what the figure of the national debt is. Foreign holders of US Treasury debt could be paid off tomorrow by virtue of the fact that the Fed could just with a few keystrokes on a computer create the money and take it on their balance sheet. This money would then be added, again with a few keystrokes on a computer, to China's or Japan's account at the Fed thus zeroing out the debt. Instead the US government goes on paying interest on its debt which could turn into a problem as it crowds out other budgetary items. Clearly, this is no way for the US government to conduct its business.

Off the Top of My Head

Biden Has Changed the Narrative on Taxes

by John Lawrence

One of the great things that Biden has done is to take the tax issue away from Republicans. Remember when George H R Bush said, "Read my lips. No new taxes." The conventional wisdom at that time was that if taxes were raised, they would be raised on everyone from Joe Six Pack to Warren Buffet. It was also conventional wisdom that tax cuts would apply to everyone from the very rich to the very poor. The American public was not sophisticated enough to know that Republican tax cuts, although they would apply to everyone, were much more favorable to the rich than they were to the poor. Now Joe Biden has completely altered that narrative. In Joe Biden's world tax increases apply only to the rich and tax cuts apply only to the poor. What a major paradigm shift! Biden has repeated his mantra so many times that he wouldn't raise taxes on anyone making less than $400,000 that now that scenario is starting to take hold in the American mind.

It's about time. The American public is starting to wake up to the reality that the very rich pay taxes at a lower rate than a nurse or a teacher or a fireman. If you're a hedge fund manager, you can take advantage of the 'carried interest' loophole to pay less than your fair share. As economic inequality has soared in the era of easy money, the very rich could take advantage of all sorts of games to make themselves even richer while most working people are living paycheck to paycheck. One way to restore some measure of equality is to increase taxes on the rich while cutting them on the poor. This idea was unheard of even a few years ago. Republicans rue the day when it was heard of thanks to Joe Biden, Elizabeth Warren and Bernie Sanders among others. Another way to restore some semblance of equality would be to tax wealth in addition to taxing income. People with assets, say, more than $50 million should pay a tax on their wealth while middle class and poor should be given help to start creating wealth for themselves. That would probably be something to do with home ownership since this is the way most middle class people have been able to create wealth for themselves.

However, it is becoming increasingly difficult for people of modest means to create wealth through home ownership because real estate prices have gone through the roof. It has become increasingly difficult for young people to come up with a down payment for a house, much less to make their monthly mortgage payments. The net result is that more and more people are forced into the situation of never owning property and being life time renters. This is the plan as private equity and hedge fund managers have accessed easy low interest money to buy up real estate and then rent it out so that the typical middle income young family is now renting a home from a hedge fund. NBC News reports: "The lack of supply of single-family homes has pushed up housing prices in many markets across the country — but would-be homebuyers find they are being outbid not just by other home seekers, but also by hedge funds." Hedge funds like the Blackstone group come in with all cash offers which are more attractive to sellers than the terms that average Joes and Janes can come up with. The Real Deal reports:

"Blackstone Group is planning to buy about 5,800 apartment units in San Diego for more than $1 billion.

"The New York-based private equity and investment firm has agreed to purchase 66 complexes across the city from the Conrad Prebys Foundation, according to the San Diego Union-Tribune. It also plans to make $100 million in improvements to the properties.

"With the deal, Blackstone will own 6,700 units in the Southern California city. It already owns $4.5 billion of assets in the city, including the Legoland theme park and the historic Hotel del Coronado.

"“We look forward to ensuring that these properties continue to provide the community with a high-quality rental option at a good value,” Blackstone Real Estate’s global co-head, Kathleen McCarthy told the Union-Tribune.""

According to the San Diego Union, "The deal makes Blackstone one of the biggest real estate holders in San Diego County." The writing on the wall is that, if you want to own a home, you have to move out of San Diego where the median home price is $855,000. For instance the median home price in Indianapolis is $229,900.

The Pitchforks Aren't Coming

For the last two years, Joe Biden has been talking about raising taxes on large corporations and wealthy Americans. It's not happening.

Stephanie Kelton

 

Nearly a decade ago, tech entrepreneur Nick Hanauer warned his fellow billionaires that “the pitchforks are coming.” The economy was still reeling from the financial crisis, and for the vast majority of Americans the policy response had been a near total failure. There were too few jobs, too many foreclosures, and way too much inequality. Eventually, Hanauer wrote, the masses would rise up.

If we don’t do something to fix the glaring inequities in this economy, the pitchforks are going to come for us. No society can sustain this kind of rising inequality. In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.

Instead of fixing the glaring inequities, Republicans used their majorities to deliver huge tax cuts that overwhelmingly benefited people like Hanauer.

It was on the heels of the Trump tax cuts that billionaire hedge fund investor, Ray Dalio, started to worry that the pitchforks were coming. Capitalism, he argued, “was not working for the majority of Americans.” Unless policies were put in place to generate better economic outcomes—including a better distribution of wealth and income—a “revolution” was coming.

Around the same time, fellow billionaire Jamie Dimon wrote in his annual letter to shareholders that “far too many people were living on the edge.” He described a system in crisis and urged “a call to action.” Like Dalio, Dimon stressed the urgent need to build a more “inclusive economy.” Keeping the pitchforks at bay meant improving life—if only modestly—for those who might otherwise take to the streets.

Instead of taking to the streets, COVID kept many of us home. And while the pandemic caused immeasurable harm, the policy response was so much better that life did improve—at least financially—for millions of ordinary people.

The financial lifeline that started with the $2.2 trillion CARES Act in March 2020 culminated with the $1.9 trillion American Rescue Plan (ARP) Act in March 2021. The ARP was intended to put a punctuation mark on the economic recovery, not to permanently tackle the sort of inequities Hanauer described in his “memo to fellow zillionaires.”

To deal with the more structural problems, President Biden offered his Build Back Better agenda, explaining that “for too long, the economy has worked great for those at the top, while working families get squeezed.” No more tax breaks for billionaires. Instead, Biden wanted to tax them. In addition to a slew of other taxes, Biden proposed a “billionaire’s tax” on the top 0.0001, those with annual incomes over $100,000,000. The pitchforks were coming, and the rich were in the crosshairs.

It was time to rebuild the economy from “the bottom up and the middle out,” the president said in his State of Union address. To wring some of the inequality out of the system, he offered a plan that would have raised taxes on those at the top while investing trillions in child care, elder care, housing, education, climate, and more. For a while, Congress seemed poised to act on a $3.5 trillion package.

And then this happened.

Senator Manchin (D-WV) refused to vote for a package that wasn’t “fully paid for,” while Senator Sinema (D-AZ) refused to vote for the sweeping tax hikes that Biden insisted were necessary to “pay for” the spending. I wrote about the whole saga at length last year.

Anyway, the media teased us (again) last week, reporting that constructive negotiations with Senator Manchin were underway and democrats might yet pass portions of what was once part of the Build Back Better agenda. And then Lucy yanked the football once again.

As Washington Post columnist Greg Sargent reported on Friday:

This will surprise only people who haven’t paid even cursory attention to the last year of Democratic politics, but Sen. Joe Manchin III may have just killed any hopes for a resuscitated version of the Democratic agenda.

The West Virginia Democrat reportedly told party leaders late Thursday that he won’t support any new incentives to combat climate change or any new tax hikes on corporations or the wealthy.

So there you have it. The pitchforks aren’t coming. At least not the way some had expected. The top marginal tax rate isn’t going back up to 39.6 percent. We are not going to tax capital gains at the same rate as ordinary income. The corporate income tax rate isn’t going up. We’re not ending the step-up-in-basis or closing the carried-interest loophole. There will be no “billionaire’s tax.” None of it is happening.

President Obama once told a room full of bankers that his administration was “the only thing standing between [them] and the pitchforks.” Today, there’s a tendency to paint Senator Manchin as the lone obstacle. But for that single missing vote, action on climate, prescription drugs, and more would sail through Congress with higher taxes to “pay for” it all. I doubt it.

I think Jonathan Chait is probably right about this:

A key faction of Democrats in the House, along with Senator Kyrsten Sinema, blanched at the tax hikes. Moderates have been privately coordinating their opposition, and it seems very likely that Manchin’s sudden opposition to raising taxes on the rich comes not from him, but from them — he sometimes takes the heat for fellow Democratic moderates. In this case, he is likely channeling their concerns and passing them off as his own.

Whether it’s Manchin or Manchin & Co., it’s looking bad for millions of Americans, the future of the democratic party, our democracy, and life on earth.

There’s a lot we can’t predict in life. But one thing is for sure. Climate change is an accelerant on inequality. Within a few decades, billions of people will be forced to migrate due to extreme weather, rising sea levels, and damaged ecosystems. Fires will continue to ravage communities, rivers will swallow more homes, heat-related deaths will mount, and food shortages will lead to mass starvation. That is not a world in which the pitchforks can be kept at bay.

We need to act now!

Off the Top of My Head

US Weapons Manufacturers Profiting From War in Ukraine

by John Lawrence

So far the US has spent $13.6 billion on the war in Ukraine. The money includes weapons, military supplies and one of the largest infusions of U.S. foreign aid in the last decade. But it also covers the deployment of U.S. troops to Europe and money for domestic agencies to enforce sanctions. Stock prices for Lockheed-Martin, Northrop Grumman and Raytheon are up. They are making money from all the Javelins and Stinger missiles they are selling to the US government which is giving them to Ukraine free of charge. Raytheon Technologies and Lockheed Martin Corp jointly produce Javelins, while Raytheon makes Stingers. EU countries are buying even more US weaponry from the US military-industrial complex. Germany even wants F-35 aircraft from Lockheed Martin. U.S. weapons exports rose 2.8% to $175 billion in fiscal 2020. The Ukraine war is a field day for the weapons industry. As far as they're concerned, the more arms shipments to Ukraine the better. They are bullish. CEOs will probably get a substantial increase in pay, and the weapons contractors will be able to buy back more of their own stock boosting stock values even more. The US policy so far is no boots on the ground, but plenty of taxpayer money going up in smoke, money that could have been spent on bettering the lot of the American people.

The is always money available for war, but when it comes to Biden's Build Back Better package, Congress gets very stingy. So a localized war is more important than the fate of the whole planet due to global warming. Or it's more important than affordable health care. Or it's more important than imposing a tax on multi-billionaires who, by the way, are not paying for the war because they pay no taxes. If they have defense contractors in their portfolio, they are profiting from the war. Politico reported:

More than 25 nations have joined in purchasing and delivering weapons to support Ukraine’s war effort. The U.S. has sent billions of dollars in missiles, ammunition and other items to the front. The EU signed off on a €500 million ($551 million USD) package — a first for the 27-country European bloc — to help arm Ukraine. And both Finland and Germany have rewritten long-standing policy that barred exporting weapons into war zones.

At the same time, there are tens of thousands of troops being activated and deployed by NATO countries in Eastern Europe.

Using a resource guide retrieved from the Forum on the Arms Trade that mostly relies on official government statements and reports in the media — and backfilled with our own independent research — POLITICO has worked to track and compile weapons and materials that have been announced or directed to Ukraine by various countries since January.

This non-exhaustive list focuses on lethal weapons and some non-lethal material. It does not count humanitarian and developmental aid that has been sent to Ukraine in the same period. Arms trade research organizations have noted the timeline and official receipt of equipment is hard to confirm due to security concerns. In some cases, such as with France and Turkey, an official tally has not been made public.

While US taxpayers are paying for the war in Ukraine and for the delivery of weapons to Europe, Saudi Arabia and other places in the world, billionaires are paying nothing. Congress will not even pass a tax on billionaires so that they would be forced to pay, as Biden says, "their fair share." Their fair share is zero, zip according to Congress which is basically on the side of the billionaires. So planet earth diminishes in importance, as far as global warming is concerned, because fighting and paying for war is so much more important. In fact not only is war more important than peace, which doesn't move the stock market, it's more important than renewable energy. All of a sudden there is a need for more oil, more fossil fuel, all of which produces more greenhouse gasses. The attitude is if we need to destroy planet earth in order to win this war, then that is the price we'll have to pay.

'Stain on Democracy': Tax Day Study Shows US Billionaires Now Own $4.7 Trillion

Amazon founder Jeff Bezos talks about his Blue Origin Space Program during a keynote session in Las Vegas, Nevada on June 6, 2019. (Photo: Mark Ralston/AFP via Getty Images)

 

"We reject the narrative that this country cannot afford to invest in a better world."

 

Jake Johnson

April 18, 2022

An analysis released Monday to mark Tax Day in the United States shows that the country's 735 billionaires have seen their collective wealth soar by 62% over the past two years while worker earnings have grown just 10%, modest gains eaten away by the rising costs of food, housing, and other necessities.

"We reject the narrative that this country cannot afford to invest in a better world."According to new calculations by Oxfam America, U.S. billionaires now own a combined $4.7 trillion in wealth, much of which goes completely untaxed. As ProPublica recently found in an examination of data from the Internal Revenue Service—an agency that disproportionately targets the poor—the 25 richest people in the U.S. paid a true tax rate of just 3.4% from 2014 to 2018.

"The billionaire wealth explosion in this country comes at a time of historic inflation hitting working families, compounded by the expiration of critical social safety nets put in place at the start of the pandemic to protect America's most vulnerable," said Gina Cummings, vice president of advocacy alliances and policy at Oxfam America.

"The impact on real people is devastating, leading countless families to slip into poverty," Cummings added. "The ongoing failure of our nation's leaders to implement a more equitable tax system is a stain on democracy."

Oxfam's new analysis estimates that a series of tax proposals that have been introduced in Congress but have yet to pass would bring in $252 billion in additional federal revenue each year. The version of President Joe Biden's Build Back Better agenda that the House passed in November would cost just $175 billion per year over the next decade.

That legislation, which includes clean energy investments and an extension of the poverty-slashing child tax credit boost, is effectively dead in the Senate due to the opposition of every Republican as well as Sens. Kyrsten Sinema (D-Ariz.) and Joe Manchin (D-W.Va.). Both Manchin and Sinema have pushed back on Democrats' efforts to hike taxes on the wealthiest Americans.

Oxfam notes that Sen. Elizabeth Warren's (D-Mass.) wealth tax proposal would yield $113 billion in federal revenue just from billionaires in 2022, enough to fund an extension of the lapsed child tax credit boost, affordable child care, and soon-to-expire free school lunch waivers.

Sen. Ron Wyden's (D-Ore.) plan to tax billionaires' unrealized capital gains, meanwhile, would raise $56 billion a year on average. That new revenue, according to Oxfam, "would more than cover paid sick leave ($10 billion), family medical leave ($20 billion) as well as affordable child care to allow more mothers and caregivers to return to work by absorbing the crushing cost of care for young families ($24 billion)."

"Taxes on the rich remain shamefully low and billionaires have seen their wealth skyrocket."

"While the pandemic grinds on, it is shocking to realize, and accept, that three-quarters of low-wage workers do not have access to paid sick leave," said Cummings. “It needs to be said that a vastly disproportionate share of these workers are women and people of color, making this a civil rights issue. This is not just morally unacceptable, it's dangerous for everyone. We can fix this with a small tax on those who have billions to spare."

The aid group noted that another $63 billion could be raised by implementing a global minimum tax on multinational corporations, a proposal that the Biden administration and the leaders of more than 130 other countries have backed. But huge obstacles remain in the way of final approval of the tax, given that the legislatures of individual nations have to approve it.

Oxfam found that "the $63 billion a year in corporate tax revenue could allow the U.S. to invest in climate finance, including tax credits for clean energy ($11.4 billion) and cutting carbon emissions with tax credits for consumers and companies ($32 billion); and fund critical public health needs, including funding global Covid health needs ($5 billion), covering the uninsured for Covid vaccines and testing ($1.5 billion), expanding Medicare for hearing ($8.9 billion), and closing the Medicaid gap ($6 billion)."

"We reject the narrative that this country cannot afford to invest in a better world: protect the planet, feed hungry children, ensure child care costs do not wipe out a family's earnings, guarantee that hourly workers receive paid leave for illness or the birth of a child," Cummings said Monday.

"The American people have been told a lie," Cummings continued. "They are paying their fair share to keep this country running. It's time for our nation's billionaires and giant corporations to contribute their fair share of taxes to support the very people who have provided the labor that has allowed them to enjoy record profits and excess wealth."

Later on Monday, Oxfam America is planning to join activists from Americans for Tax Fairness, MoveOn, and Daily Kos in delivering petition signatures from more than 500,000 U.S. taxpayers expressing opposition to the glaring inequities of the country's tax system.

"As everyday Americans continue to struggle during the ongoing pandemic, taxes on the rich remain shamefully low and billionaires have seen their wealth skyrocket," Carolyn Fiddler, communications director for Daily Kos, said in a statement. "We call on Congress and President Biden to hold billionaires and the wealthy accountable."

---

Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.

Off the Top of My Head

Problems of American Democracy - Part 4: The Easter Bunny Approach to Good Citizenship

by John Lawrence

Voters usually turn against the party in power in the mid term elections. Why? Because the party in power has promised voters all kinds of Easter goodies, and they haven't delivered on all of them. They haven't delivered all of them because the job of the party out of power is to prevent the party in power from doing so. Meanwhile, the party out of power promises voters a different bag of goodies if only they elect them. After all the party in power hasn't delivered all of the goodies promised. The result is the voters vote for the party out of power in the mid term elections. They've gotten all the goodies they're likely to get from the party in power, and their vote is cast in such a way that they are expecting a new bag of Easter goodies that has been promised by the party out of power if only the voters will vote for them which they willingly do. Why? Because voters don't vote for the party most likely to provide the country with good government. They don't vote for the party that is most likely to provide them with intelligent government. They vote for the party that has promised them a new and different bag of Easter goodies than the party in power which hasn't fulfilled all its promised goodies.

So the mid term elections are coming up. Republicans have done their job of obstructing many of Biden's campaign pledges. He did get an infrastructure package passed and got enormous COVID economic relief for citizens, but his hallmark campaign platform pledge, the Build Back Better plan has gone unfulfilled, thanks largely to the Republicans and two Republican wolves in Democratic sheep's clothing. The fickle voters do not assess how Biden has handled the chores of government, whether or not he's handled them in an intelligent and proficient manner. Their fickleness only assesses whether or not they've gotten all the Easter goodies Biden and the Democrats had promised. They have not. Therefore, it has been decreed by pundits, one and all, that Democrats don't have a snowball's chances in Hell of getting reelected in the Halls of Congress come this November.

Voters would rather elect a nincompoop like Trump who knew nothing about government except for the fact that it made him the most powerful man in the Free World, and, therefore, he could do and say most anything he wanted. He also promised voters the Republican bag of goodies - lowered taxes. Thoughtfully, Biden has carefully changed the Democratic meme from raising taxes on everyone to raising taxes only on the rich thus depriving Republicans of their main accusation towards Democrats: "They will raise your taxes." However, Biden doesn't seem to be getting very far in fighting inflation by raising taxes on the rich. Why? Because most Congress persons and Senators are the rich, and they've been lobbied very thoroughly by the rich. Of course this is all very legitimate. It's the American way of doing government unlike the Russian way where a rich businessman just offers cash to a member of parliament if they'll vote a certain way. In America the rich lobby and make generous campaign contributions in order to get Congress persons to vote a certain way. There's also an implied, though not explicit, wink, wink, nod, nod that the Congress person will get a lucrative job on a Fortune 400 Board when they retire from Congress in order to spend more time with their family. Of course this is not considered corruption, but the result is the same. In Russia politicians and government officials do the bidding of the rich; in America politicians and government officials do the bidding of the rich. What else is new?

How Wealth Inequality Spiraled Out of Control

by Robert Reich

Wednesday, November 3, 2021

Elon Musk’s wealth has surpassed $200 billion. It would take the median U.S. worker over 4 million years to make that much.

Wealth inequality is eating this country alive. We’re now in America’s second Gilded Age, just like the late 19th century when a handful of robber barons monopolized the economy, kept wages down, and bribed lawmakers. 

While today’s robber barons take joy rides into space, the distance between their gargantuan wealth and the financial struggles of working Americans has never been clearer. During the first 19 months of the pandemic, U.S. billionaires added $2.1 trillion dollars to their collective wealth and that number continues to rise. 

And the rich have enough political power to cut their taxes to almost nothing — sometimes literally nothing. In fact, Jeff Bezos paid no federal income taxes in 2007 or in 2011. By 2018, the 400 richest Americans paid a lower overall tax rate than almost anyone else.  

But we can not solve this problem unless we know how it was created in the first place.

Let’s start with the basics.

I. The Basics

Wealth inequality in America is far larger than income inequality. 

Income is what you earn each week or month or year. Wealth refers to the sum total of your assets — your car, your stocks and bonds, your home, art — anything else you own that’s valuable.Valuable not only because there’s a market for it — a price other people are willing to pay to buy it — but because wealth itself grows. 

As the population expands and the nation becomes more productive, the overall economy continues to expand. This expansion pushes up the values of stocks, bonds, rental property, homes, and most other assets. Of course recessions and occasional depressions can reduce the value of such assets. But over the long haul, the value of almost all wealth increases.

Lesson: Wealth compounds over time.

Next: personal wealth comes from two sources.The first source is the income you earn but don’t spend. That’s your savings. When you invest those savings in stocks, bonds, or real property or other assets, you create your personal wealth —  which, as we’ve seen, grows over time. 

The second source of personal wealth is whatever is handed down to you from your parents, grandparents, and maybe even generations before them — in other words, what you inherit. 

Lesson: Personal wealth comes from your savings and/or your inheritance.

II. Why the wealth gap is exploding

The wealth gap between the richest Americans and everyone else is staggering.
In the 1970s, the wealthiest 1 percent owned about 20 percent of the nation’s total household wealth. Now, they own over 35 percent. 

Much of their gains over the last 40 years have come from a dramatic increase in the value of shares of stock. 

For example, if someone invested $1,000 in 1978 in a broad index of stocks — say, the S&P 500 — they would have $31,823 today, adjusted for inflation. 

Who has benefited from this surge? The richest 1 percent, who now own half of the entire stock market. But the typical worker’s wages have barely grown. 

Most Americans haven’t earned enough to save anything. Before the pandemic, when the economy appeared to be doing well, almost 80 percent were living paycheck to paycheck.

Lesson: Most Americans don’t make enough to save money and build wealth.

So as income inequality has widened, the amount that the few high-earning households save — their wealth — has continued to grow. Their growing wealth has allowed them to pass on more and more wealth to their heirs. 

Take, for example, the Waltons — the family behind the Walmart empire — which has seven heirs on the Forbes billionaires list. Their children, and other rich millennials, will soon consolidate even more of the nation’s wealth. America is now on the cusp of the largest intergenerational transfer of wealth in history. As wealthy boomers pass on, somewhere between $30 to $70 trillion will go to their children over the next three decades. 

These children will be able to live off of this wealth, and then leave the bulk of it — which will continue growing — to their own children … tax-free. After a few generations of this, almost all of America’s wealth could be in the hands of a few thousand families.  

Lesson: Dynastic wealth continues to grow.

III. Why wealth concentration is a problem

Concentrated wealth is already endangering our democracy. Wealth doesn’t just beget more wealth — it begets more power. 

Dynastic wealth concentrates power into the hands of fewer and fewer people, who can choose what nonprofits and charities to support and which politicians to bankroll. This gives an unelected elite enormous sway over both our economy and our democracy.

If this keeps up, we’ll come to resemble the kind of dynasties common to European aristocracies in the seventeenth, eighteenth, and nineteenth centuries.

Dynastic wealth makes a mockery of the idea that America is a meritocracy, where anyone can make it on the basis of their own efforts. It also runs counter to the basic economic ideas that people earn what they’re worth in the market, and that economic gains should go to those who deserve them.

Finally, wealth concentration magnifies gender and race disparities because women and people of color tend to make  less, save less, and inherit less.
The typical single woman owns only 32 cents of wealth for every dollar of wealth owned by a man. The pandemic likely increased this gap. 

The racial wealth gap is even starker. The typical Black household owns just 13 cents of wealth for every dollar of wealth owned by the typical white household. The pandemic likely increased this gap, too. 

In all these ways, dynastic wealth creates a self-perpetuating aristocracy that runs counter to the ideals we claim to live by.

Lesson: Dynastic wealth creates a self-perpetuating aristocracy.

IV. How America dealt with wealth inequality during the First Gilded Age

The last time America faced anything comparable to the concentration of wealth we face today was at the turn of the 20th century. That was when President Teddy Roosevelt warned that “a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power” could destroy American democracy.

Roosevelt’s answer was to tax wealth. Congress enacted two kinds of wealth taxes. The first, in 1916, was the estate tax — a tax on the wealth someone has accumulated during their lifetime, paid by the heirs who inherit that wealth. 

The second tax on wealth, enacted in 1922, was a capital gains tax — a tax on the increased value of assets, paid when those assets are sold.

Lesson: The estate tax and the capital gains tax were created to curb wealth concentration.

But both of these wealth taxes have shrunk since then, or become so riddled with loopholes that they haven’t been able to prevent a new American aristocracy from emerging.

The Trump Republican tax cut enabled individuals to exclude $11.18 million from their estate taxes. That means one couple can pass on more than $22 million to their kids tax-free. Not to mention the very rich often find ways around this tax entirely. As Trump’s former White House National Economic Council director Gary Cohn put it, “only morons pay the estate tax.”

What about capital gains on the soaring values of wealthy people’s stocks, bonds, mansions, and works of art? Here, the biggest loophole is something called the “stepped-up basis.” If the wealthy hold on to these assets until they die, their heirs inherit them without paying any capital gains taxes whatsoever. All the increased value of those assets is simply erased, for tax purposes. This loophole saves heirs an estimated $40 billion a year.

This means that huge accumulations of wealth in the hands of a relatively few households can be passed from generation to generation untaxed — growing along the way — generating comfortable incomes for rich descendants who will never have to work a day of their lives. That’s the dynastic class we’re creating right now.

Lesson: The estate tax and the capital gains tax have been gutted.

Why have these two wealth taxes eroded? Because, as America’s wealth has concentrated in fewer and fewer hands, the wealthy have more capacity to donate to political campaigns and public relations — and they’ve used that political power to reduce their taxes. It’s exactly what Teddy Roosevelt feared so many years ago.

V. How to reduce the wealth gap

So what do we do? Follow the wisdom of Teddy Roosevelt and tax great accumulations of wealth. 

The ultra-rich have benefited from the American system — from laws that protect their wealth, and our economy that enabled them to build their fortunes in the first place. They should pay their fair share. 

The majority of Americans, both Democrats and Republicans, believe the ultra rich should pay higher taxes. There are many ways to make them do so: closing the stepped up basis loophole, raising the capital gains tax, and fully funding the Internal Revenue Service so it can properly audit the wealthiest taxpayers, for starters. 

Beyond those fixes, we need a new wealth tax: a tax of just 2 percent a year on wealth in excess of $1 million. That’s hardly a drop in the bucket for centi-billionaires like Jeff Bezos and Elon Musk, but would generate plenty of revenue to invest in healthcare and education so that millions of Americans have a fair shot at making it. 

One of the most important things you as an individual can do is take the time to understand the realities of wealth inequality in America and how the system has become rigged in favor of those at the top — and demand your political representatives take action to unrig it. 

Wealth inequality is worse than it has been in a century – and it has contributed to a vicious political-economic cycle in which taxes are cut on the top, resulting in even more concentration of wealth there – while everyone else lives under the cruelest form of capitalism in the world. 

We must stop this vicious cycle — and demand an economy that works for the many, not one that concentrates more and more wealth in the hands of a privileged few. 

Off the Top of My Head

The US Debt Ceiling is Totally Artificial and Unnecessary

by John Lawrence

Fact: the US has a sovereign fiat currency and can create and spend as many dollars as it wants. Fiat means that the US dollar has value only because the government says it does. It is not redeemable for gold or any other precious metal. Sovereign means that is not pegged to any other currency. It can't be exchanged at a fixed rate for any other currency or anything else. The exchange rate for other currencies is floating. Fact: the US creates its own money and can spend it as it pleases. Fact: "deficit" spending adds money to the real economy which creates and enhances economic activity and adds to GDP. Fact: most recessions occur when the US tries to balance its budget. Long story short: the debt ceiling allows the US to hoist itself on its own pitard!

The Federal Reserve prints the money. That's why the dollars your are carrying around in your pocket say "Federal Reserve Note" on them. It can print as many dollars as are authorized by the US Congress. The US government budget is not dependent on having tax dollars to spend. When the US "deficit spends" it creates Treasury bonds which it sells to the public. However, the Federal Reserve and other central banks are buying back a lot of these Treasury bonds so, effectively, US debt just becomes a number on the Fed's balance sheet which is of no consequence. The Federal Reserve can create with a few keystrokes on a computer as much money as it wants and deposit it in the US Treasury's account. The moral of the story is that the national debt can not and should not ever be paid off. To do so would ruin the economy since it would extract money from the real economy which would lower GDP. The correct assessment of the national debt is that it is just a number on the Fed's balance sheet!

The conversation.com reports:

"There is no limit to the quantity of money that can be created by a central bank such as the Bank of England. It was different in the days of the gold standard, when central banks were restrained by a promise to redeem their money for gold on demand. But countries moved away from this system in the early part of the 20th century, and central banks nowadays can issue as much money as they like.

"This observation is the root of modern monetary theory (MMT), which has attracted new attention during the pandemic, as governments around the world increase spending and public debts become all the more burdensome.

"MMT proponents argue that governments can spend as necessary on all desirable causes – reducing unemployment, green energy, better healthcare and education – without worrying about paying for it with higher taxes or increased borrowing. Instead, they can pay using new money from their central bank. The only limit, according to this view, is if inflation starts to rise, in which case the solution is to increase taxes."

The addition of too much money by government to the real economy can cause inflation. Taxes extract money from the real economy. Joe Biden's Build Back Better human infrastructure bill is totally paid for so it will not cause inflation. It does this by extracting as much money from the real economy as the government is spending into the real economy, and it does this by taxing the rich which has the added salubrious effect of reducing economic inequality. This is one of the goals of the Biden administration: to reduce economic inequality which is what the human infrastructure reconciliation bill actually does. This is why a higher amount spent on this bill is better. The more spent on human infrastructure, the more money is transferred from the rich to the poor and middle class. Progressives know this. Republicans do their best to obfuscate this. Recognition of this fact will help to move the US and other countries with sovereign currencies into a post-capitalist world, and allow for more resources to be dedicated to fighting climate change.

Off the Top of My Head

So What's Wrong With Means Testing Biden's Human Infrastructure Plan?

by John Lawrence

Progressive Democrats want universal free Pre-K. Joe Manchin wants to means test it. That means that rich Americans would still pay and poor Americas would not. Not a big problem, I say. In fact I think social security should be means tested. Why should billionaires or people with retirement pensions of over $100,000 a year get social security? Spend the money on the poor and middle class. I'm with progressives on most things, and I certainly want Joe's Build Back Better program implemented. But if you can bring the cost down by means testing and this would lead to its passage, let's get on with it. Furthermore, the military budget can be cut because we are no longer spending $300 million a day in Afghanistan. Manchin is actually for most of Biden's Build Back Better plan. He just wants it in a different form so that it's not universal meaning a giveaway to all concerned, rich and poor alike. Progressives want rich families and poor families to enjoy free pre-K and free community college.

Manchin is not against taxing the rich or a modest effort towards climate change either. His objections seem to be more about fiscal prudence than any of the elements of Biden's plan. Sinema, on the other hand, is the more sinister of the two when it comes to tanking Biden's plan. She doesn't want taxes raised on the rich, for example, and she doesn't want Medicare to be able to negotiate with pharmaceutical companies in order to bring the cost of drugs down. Manchin wants the Hyde amendment included in the bill which prohibits Federal funding for abortions. Big deal. That's the way it is now. Progressives should be able to live with the Hyde amendment. Nothing is changed. Manchin is an old line fiscal hawk when it comes to deficit spending, but as Modern Monetary Theory has made clear Deficits Don't Matter. Inflation, however does, but taxing the rich removes money from the economy and reduces inflation while paying for everything in Biden's reconciliation bill is inflation neutral.

When all is said and done, the proposed money to be spent on social infrastructure pales in comparison with the money spent on the military budget over the next 10 years. A conservative estimate is that the US spends $725 billion a year on defense. It's actually closer to a trillion when you factor in other costs not usually counted like the cost of nuclear weapons and intelligence services. For instance, future medical and disability costs for Iraq and Afghanistan veterans will total between $2.2 trillion and $2.5 trillion. So over a ten year period, military related costs will approach $10 trillion. Progressives want $3.5 trillion for social infrastructure over a ten year period, a pittance compared to military related costs. However, progressives and moderates will haggle over the cost until, eventually some compromise will be come up with, probably around $2 trillion or $200 billion per year. Reducing the defense budget will also calm fears over inflation as will the Fed's backing off from quantitative easing. Manchin is a reasonable person, but Sinema is the wild card who singlehandedly could tank both bills.They need to get the reconciliation bill fully fleshed out and negotiated on and ready to go so that both the bi-partisan and reconciliation bills can be voted on simultaneously in both Houses of Congress.

‘We couldn’t be more inconsistent’: discordant Democrats imperil Biden’s agenda

Divisions between progressives and moderates in Congress are threatening to scuttle a $3.5tn social spending program and a $1tn infrastructure bill

Alexandria Ocasio-Cortez is one of two faces of a 193-year-old Democratic party confronting fundamental questions about what it stands for and what it wants to be. Photograph: Stephen Lovekin/REX/Shutterstock

 

David Smith in Washington

 

@smithinamerica

 

Sat 25 Sep 2021 02.00 EDT, from the Guardian

Last modified on Sat 25 Sep 2021 02.02 EDT

 

Alexandria Ocasio-Cortez cannot have been surprised that wearing a “Tax the Rich” dress to New York’s Met gala would trigger performative outrage from the right. But it also earned blowback from closer to home.

Eric Adams, a Black police veteran who won the party’s mayoral primary by appealing to its centre, argued that “when you talk about just blanketly saying ‘tax the rich’ in this city”, it would potentially drive away firefighters, teachers and other taxpayers on whom the city depends. He advocated cutting wasteful spending instead.

The pro-business Adams and the democratic socialist congresswoman are two faces of a 193-year-old Democratic party confronting fundamental questions about what it stands for and what it wants to be. While Democrats have moved left on both economic and social issues since the 1990s, this remains a broad and unwieldy coalition by global standards.

Now its diverse and at times discordant voices in Washington are imperiling the agenda of Joe Biden, a longtime centrist who has nevertheless embraced some of the radically transformative ambitions of past Democratic giants such as Franklin Roosevelt and Lyndon Johnson.

Divisions between progressives and moderates in Congress are threatening to scuttle a $3.5tn social spending program, which includes childcare, education and green energy measures, and a $1tn bipartisan infrastructure bill that has passed the Senate and is pending in the House of Representatives.

“Unfortunately for us, at a time when it’s so very important for Democrats to make it clear to the people that we serve where we stand, we couldn’t be more inconsistent with our values right now,” said Yvette Simpson, chief executive of the progressive group Democracy for America. “We can’t get all on the same page to get this done.”

For four years of the Republican Donald Trump’s presidency, Democrats of all stripes united against a common political foe. Since January, however, they have controlled all the levers of power – with House and Senate majorities so razor-thin that every disagreement is thrown into sharp relief against staunch Republican opposition.

Democrats cannot afford to lose more than three votes in the House, and none in the Senate, if they are to pass the social package that has earned comparisons with Roosevelt’s “New Deal” and Johnson’s “Great Society” in its reassertion of government’s power to improve lives.

There is added pressure from the expectation that Republicans are likely to win back the House and possibly the Senate in midterm elections in November of next year. The clock is ticking.

Moderate Democrats back a vote on the $1tn bill for roads, bridges, ports and broadband connections scheduled for the House on Monday. But they have also raised objections to the size of the $3.5tn social spending package, warning against government overreach that will drive up the national debt.

Senator Joe Manchin, who represents heavily Republican West Virginia, has said he will not vote for $3.5trn, preferring instead a total of $1tn to $1.5tn. His Senate colleague, Kyrsten Sinema of Arizona, also wants to trim the cost.

But progressives have vowed to defend the price tag of $3.5tn over 10 years, having already come down from $6tn. They have also said they will not vote for the infrastructure plan without first passing the social spending program, using a manoeuver called “reconciliation,” which avoids the Senate requirement for a supermajority.

Progressives argue that opinion polls show broad bipartisan support for the plan and accuse the moderates of being beholden to corporate interests. Manchin, for example, owns a big stake in a private coal brokerage and his election campaigns have received donations from lobbyists for the oil giant Exxon.

Simpson said: “If we have certain members of our caucus who want to take money from Big Pharma, Big Oil, Big ‘insert name here’, then we’re never going to have a Democratic majority that’s willing to actually serve real people first.”

She added: “It’s really not Democrat versus Republican. It’s the ultra wealthy and the corporations versus all the rest of us because a bill like this in the midst of a pandemic should be very easy to pass. This is a part of Biden’s agenda. It’s actually already a compromise position because progressives wanted way more.”

The scale of ambition is a marker of how far the party has journeyed since, from the ashes of a third consecutive election defeat in 1988, it turned to Arkansas governor Bill Clinton to lead the “New Democrats” (later an inspiration for Tony Blair’s New Labour) to the political centre ground and back to the White House.

Al From, who founded the Democratic Leadership Council in 1985 and handpicked Clinton for the job, is still putting the case for centrism. He points out that Biden comfortably beat Senator Bernie Sanders, a democratic socialist, in last year’s primary and contends that the significance of progressives is “exaggerated” by cable news networks and Twitter.

From also notes that the six progressives who comprise “the squad” in the House are from safe Democratic strongholds, whereas the moderates are from competitive swing districts. “The voters that are going to decide who’s controlling the Congress are probably going to be suburban voters and college graduates, and women are going to be key to that also,” he said. “The suburban voters tend to be more fiscally moderate.

“The vote on the $3.5trn bill is automatic for the progressive caucus because they want to spend all the money in the world. But for the moderates, it may be an election deciding vote because the constituencies that they need to win often vote Republican and tend to be more conservative on economic issues. Part of what this fight is about goes back to who you represent and whose votes you need to get elected.”

From cautioned against viewing the debate as evidence a Democratic identity crisis, however. “We’ve always been a coalition party,” he added. “We’ve always been a very broad tent stretched all across the spectrum. It’s probably less now, in terms of the breadth of a party, that it has been historically. Thirty or 40 years ago it was even a lot more divided.”

The current impasse has led to some terse exchanges on Capitol Hill and forced Biden, a 36-year veteran of the Senate, to step in this week by hosting both moderates and progressives for talks at the White House. Much also depends on Nancy Pelosi, the House speaker, and Chuck Schumer, the Senate majority leader, displaying their political chess-playing skills.

It is a sign of progressive gains in recent years that Pelosi and Schumer have expressed support for their goals and that Sanders is now chairman of the influential Senate budget committee (he has warned plainly: “No infrastructure bill without the $3.5tn reconciliation bill.”) Biden, a surprise radical at 78, appears to have set the tone for the party.

Matt Bennett, executive vice-president for public affairs at the Third Way thinktank and a former official in the Clinton White House, said: “When your party has the White House, you have an identity and the identity is personified by the president for good or bad.

“Republicans for a time were having an identity crisis under Trump because you saw people exiting the party in large numbers, particularly their intelligentsia. The core of the Bush administration announced they were opposed to a Republican president. That’s an identity crisis. What we’re having is a debate.”

It is a debate set to rage on, further complicated by Republicans reasserting their vow not to help Democrats raise the federal government’s debt limit before a mid-October deadline. The various moving parts look set to make or break Biden’s presidency and prove a defining chapter in the Democratic party’s long history.

Leah Greenberg, co-founder and co-executive director of the Indivisible Project, a progressive nonprofit organisation, said: “There’s a cohesive identity of a big faction of the Democratic party, ranging from the president to progressives; it really shows the total ideological and political incoherence of the conservative Democratic bloc.

“They just have random feelings about the price tag, various preferences around not taxing the rich, not actually limiting corporate power, et cetera. The fight here is not even between moderates and progressives. It’s between people who are trying to deliver on the full Democratic agenda and people who are trying to take bites out of it for complicated, incoherent reasons, usually involving delivering for corporate donors.”

And while Manchin and Ocasio-Cortez belonging to the same party might seem a recipe for political dysfunction, it is still in a different league from events across the aisle over the past decade.

Greenberg added: “The dominant story in American politics is not necessarily the changes in the Democratic party. It is the fact that the Republican party has just been completely unmoored from political reality, from any commitment to democracy, and is hell bent on using the tools it has in order to maintain and exert power.”

Why Are House Democrats So Reluctant to Tax Wealth?

 

Tuesday, September 21, 2021

by Robert Reich

I have to get this off my chest. Last week, the House Ways and Means Committee released its proposed tax increases to fund President Biden’s $3.5 trillion social policy plan.

Here’s the big thing that hit me: Democrats didn’t go after the huge accumulations of wealth at the top – representing the largest share of the economy in more than a century.

You might have thought they’d be eager to tax America’s 660 billionaires whose fortunes have increased $1.8 trillion since the start of the pandemic – an amount that could fund half of Biden’s plan and still leave the billionaires as rich as they were before the pandemic began.

I mean, Elon Musk’s $138 billion in pandemic gains could cover the cost of tuition for 5.5 million community college students and feed 29 million low-income public-school kids, while still leaving Musk $4 billion richer than he was before Covid.

But House Democrats on Ways and Means decided to raise revenue the traditional way, taxing annual income rather than immense wealth. They aim to raise the highest income tax rate and apply a 3 percent surtax to incomes over $5 million.

So what’s the dirty little secret? Come visit the full post to find out: https://robertreich.substack.com/p/why-are-house-democrats-so-reluctant

The $3.5 Trillion Bill Corporate America is Terrified Of

by Robert Reich

Monday, September 13, 2021

Right now, Democrats are working to pass a $3.5 trillion package that will provide long overdue help for working Americans.

The final bill hasn’t yet been determined, so we don’t know the exact dollar amounts for all its policies. We’ll probably find that out in late September or early October. For now, the Democrats’ budget resolution frames what’s in the bill.  

First, on families:

The bill would make permanent key benefits for working families, including the expanded child tax credit in the pandemic relief plan that sends families up to $300 per child each month but is now set to expire in December, and is estimated to cut child poverty by half. 

It would also establish universal child care, for which low- and middle-income households would pay no more than 7 percent of their incomes. 

And provide a national program of paid leave — worth up to $4,000 a month — for workers who take time off because they are ill or caring for a relative.

Next, on education:

The bill would reduce educational inequality by establishing universal pre-K for all 3- and 4-year-olds, benefiting an estimated 5 million children, and providing tuition-free community college – essentially expanding free public education from 12 years to 16 years. 

It will also invest in historically Black colleges and universities and increase the maximum amount of Pell grants for students from lower-income families. 

On health care:

The bill expands Medicare to include dental, vision, and hearing benefits and lowers the eligibility age. It also expands Medicaid to cover people living in the 12 states that have not yet expanded Medicaid, and makes critical investments to improve healthcare for people of color. 

The big question is how far it will go to reduce prescription drug prices by, for example, allowing Medicare to negotiate prices with pharmaceutical companies. That could reduce Medicare and Medicaid spending, and free up more money for other parts of the bill. But Big Pharma is dead-set against this.

Big corporations and the rich picking up the tab:

In another step toward fairness, all of these are to be financed by higher taxes on the rich and big corporations. 

The bill would also increase the Internal Revenue Service’s funding so the agency can properly audit wealthy tax cheats, who fail to report about a fifth of their income every year, thereby costing the government $105 billion annually. 

In addition, the bill tackles the climate crisis, which also especially burdens lower-income Americans: 

There are a range of solutions – subsidizing the use of solar, wind, nuclear and other forms of clean energy while financially penalizing the use of dirty energy like coal; helping families pay for electric cars and energy-efficient homes. 

The bill might include something known as a carbon border adjustment tax — a tax on imports whose production was carbon-intensive, like many from China.

The bill would also establish a Civilian Climate Corps, and invest in communities that bear the brunt of the climate crisis.

And the bill helps American workers:

It will hopefully contain much of the PRO Act, the toughest labor law reform in a generation. 

Finally, the bill includes a pathway to citizenship for undocumented immigrants.
This is all about making America fairer. 

Remember: we won’t know the exact details of the bill for at least a month, but these are the main areas that it will focus on. The big challenge will be ensuring Senate Democrats remain united to get it passed. All of us will need to fight like hell.

Don’t listen to spending hawks who claim it’s too expensive or too radical. For far too long, our government has ignored the needs of everyday Americans, catering instead to the demands of corporations and the super-rich. No more. 

It’s time to get this landmark bill passed and build a fairer America.

Off the Top of My Head

The Infrastructure Bill and How to Pay for It Are Two Separate and Distinct Issues That Have Nothing to Do With Each Other

by John Lawrence

We know that the US government does not have to tax in order to spend since the US has a sovereign currency (See Modern Monetary Theory), and the Federal Reserve can just place the requisite amount of money for the infrastructure bill in the Treasury's account at the Fed. The problem is that, according to US law, if there is not enough money in the Treasury's account to pay for stuff, it must issue and sell Treasury bonds to make up the difference. These bonds then contribute to the deficit which is added to the national debt. We also know that the national debt never needs to be paid off, but Treasury bonds do need to be paid when the holder asks for the money when they come due. In addition interest does need to be paid on them. If the Fed keeps the interest rate for Treasuries at zero, this is not a problem. So why would anyone purchase Treasury bonds if they get zero interest? Well, countries that peg their currencies to the dollar (like China) need dollars in order to conduct business. Besides if someone comes to them with a basket full of renminbi and asks for US dollars, they have to be able to pay them the dollars and accept the renminbi. So there is always a market for US Treasury bonds. Even if there wasn't, the Fed would end up purchasing them and taking them onto its balance sheet where they would essentially disappear into a black hole never having to be paid back.

So what is the problem with just having the Fed create the money and place it in the Treasury's account without "paying for" it with taxes. No problem really. Joe Biden just wants to kill two birds with one stone. The first bird is the money for infrastructure. The second bird is doing something about the widening economic inequality by taxing the rich. There is no actual need to issue Treasuries in the first place except that US law requires it. The money could just go directly on the Fed's balance sheet without the intermediate step of selling Treasuries. There are however some good reasons for not taking too much advantage of this possibility. One is inflation. As more money floods into the economy through deficit spending, inflation could heat up whether or not the money comes from taxes. The other issue is that as other countries accumulate more and more Treasury bonds with or without interest being paid on them, they start to have the ability to use those dollars to purchase US assets. It's not inconceivable that a particular country - let's say China - couldn't accumulate enough Treasuries to buy up cities.

New York City has the most valuable real estate in the U.S. at $2.8 trillion — slightly more than the entire GDP of the United Kingdom for 2019. In fact, this is greater than the GDP of all but just five countries — India, Germany, Japan, China and the United States. The value of New York is comparable to the combined market value of tech giants Apple and Microsoft. China owns about $1.1 trillion in US Treasuries. If they demanded it all tomorrow, the Fed would have no problem paying them, but then they could buy up more than a third of New York City or almost all of San Francisco valued at $1.3 trillion. This could eventually become a problem so it would be better not to even make up the difference by issuing Treasuries in the first place. The alternative is for the Fed just to create the money and place it in the Treasury's account as authorized by Congress without the Treasury having to sell bonds to make up the difference between the amount of taxes and the amount of the authorization.

Then the issue becomes inflation. There is already wage inflation as employers are forced to pay more for employees, for a number of reasons, thus raising the price of products and services. This is "good" inflation since wage earners have not seen an increase in their income for 40 years. There is also "bad" inflation in that the increasing wealth of the upper 10% , and especially the upper 1%, is causing asset inflation in terms of the increasing cost of real estate and rent. Asset inflation is also happening in the stock market although it's hard to see how this is a bad thing except for the fact that about 50% of the people don't own stocks so that gap between rich and poor is only increasing. The third form of inflation occurs when there is too much money chasing too few goods and services. This could be caused by too much deficit spending. The fourth kind is the "super bad" inflation known as hyperinflation. This is the kind of inflation that affected the Weimar republic in Germany before the Second World War and also affects poor countries. It also recently affected Greece because Greece gave up its sovereign currency when it adopted the euro. Hyperinflation occurs when a country needs to borrow money from the capital markets subject to increasing interest rates. As their economy declines interest rates go up until finally they are paying more in interest than their economies can keep up with. The US can never be put in this position since it never has to go to the capital markets to borrow money. The Federal Reserve can just issue whatever money is needed and can set its own interest rate since the US dollar is a sovereign currency.

So while there are limits to the amount of prudent deficit spending, one of them is not paying for it through taxes. The US Federal government never has to tax in order to spend. It can pass a bill to build infrastructure with the only limitation being the physical and material resources that are available to do it.

https://www.cnbc.com/video/2019/03/01/stephanie-kelton-explains-modern-monetary-theory.html

 

Off the Top of My Head

How to Pay For Infrastructure

by John Lawrence

Modern Monetary Theory (MMT) points out that neither social programs nor tax cuts need to be "paid for." A government such as the US with a sovereign currency can issue the money without having to tax first. Taxes are only necessary to control inflation. The biggest amount of inflation in the economy right now is the inflation of billionaires' wealth assets because their increases in wealth are not taxable. The IRS only taxes workers' incomes, not billionaires increasing asset wealth. That's why economic inequality is growing by leaps and bounds, and we need a wealth tax. But as for infrastructure, the Fed can just create the money in the Treasury's account at the Fed with a few keystrokes on a computer like it did when it bailed out Wall Street in 2008.

In The Deficit Myth, Stephanie Kelton writes (circa 2015):

"No one [on Capitol Hill] questioned the significant need for infrastructure investment. A trillion dollars, while ambitious, would have only taken a bite out of the problem. No one blanched at the price tag, but there was considerable debate about whether (and how) to pay for it.

"Before I tell you about that debate, it's important to understand what those words mean to lawmakers and their staffers on Capitol Hill. In truth, there is only one way to pay for anything. All federal spending is carried out in exactly the same way - that is, the Federal Reserve credits the appropriate bank account(s). But in Washington speak, you "pay for" your spending by showing that you can "find" enough money to cover the cost of whatever it is you're proposing to spend. It's all a game, really, and it's rooted in the flawed mental model [that the government needs to tax and/or borrow before it spends] that holds back so much of our potential. To avoid adding to the deficit, lawmakers look for ways to cover the costs of their proposed spending without borrowing. That means they usually go looking for new tax revenue."

As Kelton points out, the US doesn't need to tax before it can spend. Biden's wanting to pay for infrastructure by taxing the rich is not necessary to pay for infrastructure per se, but it is necessary to get unbounded economic inequality under control.

Kelton continues:

"So back to the debate over the trillion-dollar infrastructure ill. The conversation began with staffers being asked whether we thought a so-called pay-for should be attached to the bill. It was my first week on the job, so I was relieved when another staffer spoke up first. "No," this person began, "I think we should just do it as a clean bill." A clean bill meant writing a spending bill that didn't include any language abut how to pay for it. Another staffer agreed, and soon I echoed their sentiments. Our country desperately needed to make these investments. There was clearly enough fiscal space to do it, and infrastructure is one of the things that has traditionally enjoyed bipartisan support. Since the GOP was in control of the Senate, we reasoned, the bill would need at least some support from Republicans to pass. [Ha. Ha] Proposing a tax increase would guarantee defeat. Not everyone agreed. Another staffer objected that the press wouldn't take the legislation seriously unless it specified exactly how it would be paid for. In the end, the bill included a proposal to raise revenue by closing a variety of tax loopholes that overwhelmingly benefit the rich. Needless to say, the legislation did not pass. Meanwhile, the latest ASCE [American Society of Civil Engineers] report card shows how deferred maintenance is catching up with us, as the cost of our needed improvements has climbed to a whopping $4.59 trillion."

Is it deja vu all over again? Is it gridlock or spinning our wheels as infinitum? Is it Republicans thinking it is more important to defeat Obama's and now Biden's agendas than it is to prevent bridge collapses?

Kelton's point is that the US doesn't really need to "pay for" anything by taxing first or finding the money first. "In 2017, a 1215-page bill, known as the National Defense Authorization Act, sailed through the Senate with a vote of 89-9. The White House had requested $700 billion, but the Senate had authorized $737 billion, kicking in another $37 billion without hint of concern about where to "find" the money. They simply voted in an overwhelmingly bipartisan way to increase the Pentagon's discretionary budget."

Yet the Pentagon budget has not protected us from international ransomware attacks nor domestic terrorists. May I submit that the money is misspent and misdirected? Instead of going where the money is really needed it goes to the vested interests in the military-industrial complex who continue to justify war in order to line their own pockets.

Kelton continues: "That might seem like a double standard. As Congresswoman Alexandria Ocasio-Cortez put it, "We write unlimited blank checks for war. We just wrote a $2 trillion check for the GOP tax cut, and nobody asked those folks, 'How are they going to pay for it?' She's right. Somehow, there's always money for war and tax cuts. For just about everything else, however, lawmakers are expected to show that they can "pay for" their spending."

As MMT has shown, the US government does not need to tax or borrow in order to spend. Taxation is necessary to control inflation, to extract money from the economy if there is too much of it out there chasing too few goods or services. Right now there is too much money out there in the hands of billionaires that should be extracted in order to prevent runaway financial inequality. But it is not necessary to tax before money can be spent on infrastructure or anything else. There are limits, and the limits are the material and human resources that are available to soak up that money by providing constructive economic activity like building infrastructure. Hyperinflation like what happened in the Weimar Republic or even Greece cannot happen in the US because the US never has to go to the capital markets to borrow money at prevailng interest rates. The US central bank, the Fed, issues whatever money is necessary to pay US bills and that includes any money appropriated by Congress whether for war, tax cuts or building infrastructure.

https://www.youtube.com/watch?v=a9pAPIUYXxQ

 

Off the Top of My Head

The Caring Component of Biden's Infrastructure Plan

by John Lawrence, April 6, 2021

It's about time that the need for a caring infrastructure is addressed. Caring used to be supplied almost entirely by wives when wives didn't work outside the house. However, they did considerable work inside the house caring for children, sick relatives and elders in addition to taking care of their husband's needs. Now that most wives are required by economic necessity to work outside the home, there is a need for child care for young children not old enough to attend school. There is a need for pre-K education plus babysitting services. Older family members have special needs for care giving as well. Who is to provide for this if wives are in the work force? Rich people can pay tuition for pre-K and child care as well as hiring caregivers for older relatives or paying for senior living facilities. For poorer people, wives have to do all this themselves in addition to working to provide income for the family.

That's why Biden's initiatives provides for a caring infrastructure. However, it is insufficient. The Guardian reported:

Just as our physical infrastructure is crumbling and requires substantial reinvestment in a 21st-century economy, our care infrastructure is fundamentally broken. As the only industrialized country in the world without a national paid family and medical leave program, only 17% of our people have paid family leave through their employers. Hundreds of thousands face daunting waitlists for essential home care. Childcare is the highest household expense for families in much of the United States. And the median annual pay of childcare and home care workers is $25,510 and $17,200, respectively, leading to high turnover and reliance on public assistance.

In the past most elderly people on Medicaid that needed care giving were forced into institutional care like nursing homes. There was no comparable funding level that provided care givers for people to stay in their own homes. Biden's care infrastructure corrects this anomaly by providing money for care givers to provide care outside of nursing homes and other institutions. However, the limitation is that people who qualify for either nursing homes or home care must be on Medicaid. Basically, this means that they have no assets. They could stay in their own home only if they don't own it. If they owned it, that would be considered an asset that would disqualify them from being on Medicaid. So older people on Medicare, but not Medicaid would not qualify under Biden's "care infrastructure" initiative. People with assets like home ownership usually want to pass those assets on to their children. It represents the intergenerational transfer of wealth. That's how white people have built wealth over the generations whereas black people, who were by and large prevented from owning their own homes after WW II, are by and large renters.

Elderly renters are mainly poor people who live off of social security which hardly provides for a decent living much less the intergenerational transfer of assets once the person dies. Biden's pre-election agenda called for an uping of social security payments so that people could have a decent existence just based on social security alone. It also called for an increased amount of social security for people who had been on social security for 20 years, in other words, the really old. The Boston Globe reported:

A critical part of Biden’s campaign plan was not only raising funds for Social Security but also expanding the benefits to reduce poverty among elderly Americans. It would, for example, ensure that benefits for workers who were in the labor force for 30 years or more would be at least 125 percent of the federal poverty line. The oldest beneficiaries would also receive a bump to offset dwindling retirement savings, and widows and widowers would receive a 20 percent increase so that their Social Security benefits don’t get cut in half when their partner dies.

The reason that Biden didn't include this in his "caring infrastructure" initiative is that the cap on wages subject to the payroll tax would (in the minds of politicians) have to be raised to "pay for" it, and Biden has promised not raising taxes on anyone making less than $400,000 annually. Right now, payroll taxes that go toward funding Social Security are capped at the first $142,800 of a taxpayer’s income. First of all the social security trust fund is basically a hoax. Money is available for social security in the same way that money is available for COVID relief, infrastructure and even tax cuts. As Modern Monetary Theory points out, the Federal Reserve creates the money without the need of taxes to pay for it. The same is true for social security. But Biden did not want to complicate the discussion around his infrastructure plan so he left his plan for social security increases behind presumably to be brought up at a later date.

There is much talk about enlisting the help of Republicans for Biden's infrastructure initiative, but it is a not a secret that Republicans will help with nothing Democrats want to do. The working across the aisle thing is a loosely held fiction. Democrats know that they must pass all Biden's bills just with the slim Democratic majority. That gives Joe Manchin of West Virginia, the most conservative Democrat, enormous power. You can bet your booty that West Virginia will get more than their fair share of roads and bridges. He wants to not raise the corporate tax rate to 28% as Biden as suggested. Big deal! Again tax money is not required for government spending. The Federal Reserve just issues the money, and then the Treasury Department sells the bonds. What bonds can't be sold to individuals or foreign governments end up on the Fed's balance sheet. The deficit between money spent and tax money collected is irrelevant. Taxes are only relevant to reduce income inequality as long as they are targeted on the rich. The Fed controls the interest rate, and as long as it keeps it at about zero, the Federal government can keep the amount of money it spends on interest under control.

What if We Actually Taxed the Rich?

by Robert Reich

Thursday, April 1, 2021

Income and wealth are now more concentrated at the top than at any time over the last 80 years, and our unjust tax system is a big reason why. The tax code is rigged for the rich, enabling a handful of wealthy individuals to exert undue influence over our economy and democracy. 

Conservatives fret about budget deficits. Well, then, to pay for what the nation needs – ending poverty, universal health care, infrastructure, reversing climate change, investing in communities, and so much more – the super-wealthy have to pay their fair share. 

Here are seven necessary ways to tax the rich.

First: Repeal the Trump tax cuts.

It’s no secret Trump’s giant tax cut was a giant giveaway to the rich. 65 percent of its benefits go to the richest fifth, 83 percent to the richest 1 percent over a decade. In 2018, for the first time on record, the 400 richest Americans paid a lower effective tax rate than the bottom half. Repealing the Trump tax cut’s benefits to the wealthy and big corporations, as Joe Biden has proposed, will raise an estimated $500 billion over a decade.

Second: Raise the tax rate on those at the top. 

In the 1950s, the highest tax rate on the richest Americans was over 90 percent. Even after tax deductions and credits, they still paid over 40 percent. But since then, tax rates have dropped dramatically. Today, after Trump’s tax cut, the richest Americans pay less than 26 percent, including deductions and credits. And this rate applies only to dollars earned in excess of $523,601. Raising the marginal tax rate by just one percent on the richest Americans would bring in an estimated $123 billion over 10 years. 

Third: A wealth tax on the super-wealthy.

Wealth is even more unequal than income. The richest 0.1% of Americans have almost as much wealth as the bottom 90 percent put together. Just during the pandemic, America’s billionaires added $1.3 trillion to their collective wealth. Elizabeth Warren’s proposed wealth tax would charge 2 percent on wealth over $50 million and 3 percent on wealth over $1 billion. It would only apply to about 75,000 U.S. households, fewer than 0.1% of taxpayers. Under it, Jeff Bezos would owe $5.7 billion out of his $185 billion fortune – less than half what he made in one day last year. The wealth tax would raise $2.75 trillion over a decade, enough to pay for universal childcare and free public college with plenty left over.

Fourth: A transactions tax on trades of stock.

The richest 1 percent owns 50 percent of the stock market. A tiny 0.1 percent tax on financial transactions – just $1 per $1,000 traded – would raise $777 billion over a decade.That’s enough to provide housing vouchers to all homeless people in America more than 12 times over.

Fifth: End the “stepped-up cost basis” loophole.

The heirs of the super-rich pay zero capital gains taxes on huge increases in the value of what they inherit because of a loophole called the stepped-up basis. At the time of death, the value of assets is “stepped up” to their current market value – so a stock that was originally valued at, say, one dollar when purchased but that’s worth $1,000 when heirs receive it, escapes $999 of capital gains taxes. This loophole enables huge and growing concentrations of wealth to be passed from generation to generation without ever being taxed. Eliminating this loophole would raise $105 billion over a decade.

Six: Close other loopholes for the super-rich.

For example, one way the managers of real estate, venture capital, private equity and hedge funds reduce their taxes is the carried interest loophole, which allows them to treat their income as capital gains rather than ordinary wage income. That means they get taxed at the lower capital gains rate rather than the higher tax rate on incomes. Closing this loophole is estimated to raise $14 billion over a decade.

Seven: Increase the IRS’s funding so it can audit rich taxpayers.

Because the IRS has been so underfunded, millionaires are far less likely to be audited than they used to be. As a result, the IRS fails to collect a huge amount of taxes from wealthy taxpayers. Collecting all unpaid federal income taxes from the richest 1 percent would generate at least $1.75 trillion over the decade. So fully fund the IRS.

Together, these 7 ways of taxing the rich would generate more than $6 trillion over 10 years – enough to tackle the great needs of the nation. As inequality has exploded, our unjust tax system has allowed the richest Americans to cheat their way out of paying their fair share. 

It’s not radical to rein in this irresponsibility. It’s radical to let it continue.

Off the Top of My Head

Unlike Trump, Biden's New Deal Will Actually Make America Great Again

by John Lawrence, April 4, 2021

GDP is the measure of national economic activity and is composed of 4 components: private consumer consumption, business investment, government investment and net of imports and exports. America's economy is 70% consumption compared to about 50% for most of our western allies. Government spending is about 17% compared to 40-50% for most of our allies. In fact for Norway, Belgium, Finland and France it's over 50%. Joe Biden's infrastructure plan will change all that bringing government spending on infrastructure both material and human more in line with the rest of the developed world. While most of our allies spend around 50% on consumption, America is primarily a consumer economy at 70%. That's about to change under Biden's New Deal. Government consumption and employment will increase while private consumption and employment will decrease. This is a good thing, but Republicans and states' rights advocates disagree. American infrastructure is falling to Third World status while Americans entertain themselves to death. Nothing has been invested and everything has been consumed. Biden's attempted change in these dynamics, which Mitch McConnell has vowed to fight "every step of the way" is a bid to preserve first world status for the US which is rapidly diminishing.

The one thing the US has going for itself right now is the fact that the US dollar is the world's reserve currency. As such the US can spend large sums - trillions of dollars in fact - without fear of the dollar losing its value. So it might as well "go big" on spending because the dollar may not always retain that status. China is becoming the world's largest economy with major spending on infrastructure not only in China, but, with its Belt and Road Initiative, around the world. Meanwhile, what the US has to offer in that regard is using its bloated military to police the world. So if you were President of your country, which would you rather have - policing or investment. The answer seems clear to many, even to many US allies. China is consistent and values stability and unanimity of its citizens. The US government is subject to radical change every 2 or 4 years with deep divides among its populace, and more and more can't be counted upon by its allies even to the extent that a sizable number of US citizens invaded its Capitol! Autocratic countries may be brutal towards political dissidents, but they would never tolerate a threat to their very existence.

Some Americans will have to be brought kicking and screaming into the Biden economy. Just as they were cavalier about wearing masks, they could care less about good jobs at good wages. They just want good beer and football games. Cruises, spectator sports and abundant entertainment is what Americans have come to expect, and they prefer that to safer roads and rebuilt bridges. They are viscerally opposed to doing anything to prevent climate change or global warming. They don't want to work hard to make America great again. They want it all given to them on a silver platter preferably by an entertaining and charismatic President rather than a plodder who has their welfare at heart. There is a looming war between states rights Republicans who want the US to remain a private consumption economy and Democratic neo-New Dealers who want government to play a larger role in investing in American infrastructure, both material and human.There will be more and better paying jobs working in government infrastructure projects than there will be working in the entertainment industry. This infuriates some people.

Taxing the rich also brings Republicans out of the woodwork to proclaim that Biden will end up taxing the middle class as well "to pay for it" even though he has said that everyone making under $400,000 a year will not pay one penny more in taxes. Republican lawmakers will chomp at the bit to naysay that bit of profundity by saying over and over on their media outlets that it is not true. The truth is that Biden wants to construct a stronger safety net while rebuilding and extending American infrastructure, and a lot of Trump supporters just don't care about any of those things. They just want to be entertained and to eat out while watching spectator sports.

Off the Top of My Head

The Stock Market is Too Big to Fail

by John Lawrence, April 2, 2021

Just as the big Wall Street banks are too big to fail, so now is the stock market. The stock market will never take another radical dive downward because the Federal Reserve won't let it. The way the economy is shaping up Treasury bonds, which hardly pay any interest, are just a safe place to store your money and also for foreign nations which need the world's reserve currency (the US dollar) to have a savings account because they need dollars to conduct business. There is no worry that the US will have to pay off the trillion dollars in Treasuries that China owns because they need those dollars to do business with the US and other nations. If they did want to dump all their Treasuries for some reason the Fed could just create the money to pay them and effectively take the Treasuries on its own balance sheet.

So the stock market is the only game in town for those who want to actually "invest" their money. There is so much 401(k) money in the stock market that that is reason enough to never let it fail. Instead it will continue on its merry way upward while the Fed keeps interest rates at approximately zero so that not much in the way of interest will have to be paid on US debt. There is no reason to fear that Joe Biden's $2 trillion infrastructure plan will bankrupt the US. Since the US dollar is a sovereign currency, the Fed can print as much money as it wants. If international investors don't want to buy this debt, it ends up on the Fed's balance sheet which is an effective black hole from which it never has to emerge.

Then why is there all this kibuki theater about "how to pay for it," the $2 trillion infrastructure plan I mean. It's just that most Americans including most Congressmen are under the illusion that a country with a sovereign currency like the US faces any constraints in paying for anything. Well, there is one constraint - inflation. This is probably of little concern as long as the money is targeted at the lower middle class an the poor which haven't seen wages rise in 40 years. The real inflation in the economy is the asset inflation that the rich are mostly responsible for. That includes the stock market and real estate. Inflation in the stock market will be carefully controlled by the Fed. We've seen that the stock market moved up even during the pandemic. The real problem is inflation in the real estate market which has made housing unaffordable for many. It continues to get worse as the extra dollars the wealthy have to invest are driving up prices. That's why it makes sense to tax the rich ostensibly to pay for the infrastructure bill. The real reason, however, is that inequality is getting out of hand in the American and the world economy. Taxing the rich is the only effective means to reduce inequality to a reasonable level. It will also help to bring inflation in the real estate market under control.

The real problem that Biden's infrastructure bill will have to deal with is changing the nature of the US economy. When the economy was in full employment under Trump, there were still 4% unemployed. 5% unemployment is considered "full employment," but that still leaves about 15 million people out of work. Biden's infrastructure plan will put those 5% back to work. It had been considered by conservative neoliberal economists that 5% unemployment was necessary to ward off inflation, but that theory has been debunked by Modern Monetary Theory. While inflation will still be a concern with all of Biden's stimulus spending, the main concern is restructuring the US economy from an entertainment economy to a constructive labor economy. Trump's economy was arguably a full employment economy (except for the 4% unemployed), but it was an economy the jobs of which were mainly in the entertainment and military industries. In other words, in my opinion, it was an economy based on false unbeneficial values. An economy based on labor participation rebuilding American infrastructure will be an economy based on necessary and fundamentally beneficial values. This might mean that some of those presently employed in frivolous industries might be incentivized to change jobs. Reducing the entertainment and military sectors while increasing those employed rebuilding infrastructure would be, in my opinion, be a good thing.

 

Off the Top of My Head

Biden's Infrastructure Initiative: Don't Worry About How To Pay For It

by John Lawrence, March 30, 2021

Even Republicans agree that there is a need to upgrade the infrastructure of the US. But they don't want to raise taxes to pay for it. Good news! You don't need to pay for it with tax money. The US dollar is a sovereign currency. That means that the central bank, in this case the Fed, can just create the money. In fact this is how it's always been done. The deficit is just an accounting regime. Money created by the Fed need never be paid back. It just goes on the Fed's balance sheet. This is a fact known and agreed to by most economists but many politicians and the American public are totally ignorant of this basic fact about how the economy works. Modern Monetary Theory has attempted to explain it in books like "The Deficit Myth" by Stephanie Kelton. So why does Biden also propose tax increases on the rich to pay for it? These are really two separate issues. Taxes need to be raised on the rich to try to bring into balance the skyrocketing financial inequality that has been occurring, not to pay for the infrastructure bill. Why do politicians including President Biden continue to perpetuate the myth that appropriations bills need to be "paid for." Why don't they just come out and say the truth - that a nation with a sovereign currency can never run out of money?

When just a few people own most of the wealth, we're back in a neo-feudal society where the rich control the political process, and the rest of the people are merely peons who don't really have a stake in the society at all. The Republican attempts to change the voting laws to suppress the minority vote is a way to cement that fact in American society. That's why it's so important to liberalize the voting laws so that every American citizen is encouraged to vote, not discouraged from it. So the infrastructure initiative is really two or even three pronged: rebuild infrastructure such as roads, bridges, ports, rail lines, airports and broadband thus putting millions back to work in good paying jobs. Secondly, to build back better in the sense that, insofar as possible, address the problem of global warming, and, thirdly, to make a first step in addressing economic inequality. All these things are important.

The only thing to watch out for while spending all this money is inflation, and some economists like Larry Summers are already sounding alarm bells over that. By taxing the rich and corporations money will be sucked out of the economy thus tending to reduce inflation. If sucking money out of the economy reduces inflation, then the sucking must be addressed to those areas where excess money really exists: namely, the rich and corporations who have been getting away with murder for years under both Republic and Democratic administrations. Forbes reported that "The 3 Richest Americans Hold More Wealth Than Bottom 50% Of The Country." Forbes ought to know. Perhaps with Biden's plan to tax the rich, it'll take 10 of the richest to equal the bottom 50%'s share. As for inflation, so much money in so few hands has already produced asset inflation in the form of rising housing and rent prices making it problematic for the young and the poor to support themselves especially at a minimum wage that hasn't increased in 50 years. What Summers doesn't understand is that the inflation that has occurred has been in the money that has been made by the rich which is actually wealth inflation, not in the form of wage inflation of the poor and middle class. Therefore, in turning this process around Biden's infrastructure bill is actually pointing the American economy in the correct direction.

Off the Top of My Head

How to Throw Republicans for a Loop: Biden Should Propose Tax Breaks for the Middle Class and Tax Increases for the Rich

by John Lawrence, February 25, 2021

The proper use of taxation is to reduce income and wealth inequality. Instead Republicans use tax breaks to primarily benefit the rich. Democrats should modify this playbook. The increasing income and wealth inequality among American citizens cries out for redress. Robin Hood needs to come out and play. There's no law that says tax breaks have to go primarily to the wealthy or be based on some proportionate percentage over all incomes. Democrats should get into the tax break game too. We know that taxes aren't necessary to fund the government. Sure they're part of it, but the government can spend whatever Congress authorizes regardless of whether or not there is money from taxes to pay for it. The shortfall is made up with Treasury bonds most of which end up on the balance sheet of the Federal Reserve just like the Fed used Quantitative Easing (QE), a fancy name that signified that the Fed issued trillions of dollars to bail out the Wall Street banks in 2008. In that case the Fed took MBSs (Mortgage Backed Securities), most of which were worthless onto its balance sheet as "collateral." The Fed can lend money to any entity it likes as long as it takes collateral onto its balance sheet. Much of this collateral is worthless such as defunct MBSs and even old bicycles!

In the article, "Modern Monetary Theory and the Changing Role of Tax in Society," by Andrew Baker and Richard Murphy, published online by Cambridge University Press we find the following:

"Tax is traditionally viewed as the main funding mechanism for government spending. Consequently, social policy is often seen as something determined and constrained by tax revenue. Modern Monetary Theory (‘MMT’) presents a reversal of the tax-spend cycle, by identifying a spend-tax cycle. Using the UK as an example, we highlight that one of MMT’s most important, but under-explored, contributions is its potential to re-frame the role of tax from both a macroeconomic and social policy perspective. We use insights on the money removal, or cancellation function of taxes, derived from MMT, to demonstrate how this also creates possibilities for using tax to achieve social objectives such as mitigating income and wealth inequality, increasing access to housing, or funding a Green New Deal. For social policy researchers the challenge arising is to use these insights to re-engineer tax systems and redesign social tax expenditures (STEs) for creative social policy purposes."

MMT is a game changer. Conventional thinking is that government can only spend money collected from taxes. But that is not how the system really works. As a sovereign currency, the Fed can just create US dollars with a few keystrokes on a computer. The budget deficit and national debt just become accounting entries on the Fed's balance sheet. We are not mortgaging our children's and grandchildren's future. This is money that never needs to be paid back, that our children never need to pay back. China is not holding this debt over our heads; China could be paid back tomorrow if need be. The US government operates on a different set of principles than the US states, European countries in the Euro zone, and households. All these entities do need to pay back loans. The US government does not because it can just create or issue the money which is how the Fed operates on a daily basis. Even local banks create money when a loan is taken out without the need for deposits. They just have to have collateral - usually 10% of deposits - in their reserve account at the Fed. So money can just be created by the Federal Reserve, but, obviously, it does not do so willy nilly. Like alcohol, this facility must be used responsibly. So that is what the debate should be about, not the size of the deficit or the national debt.

The national debt was a problem when the US dollar was on a gold standard. The US promised to redeem dollars - paper currency - for gold up until 1971. Obviously, there was not enough gold if, all of a sudden, China, let's say, wanted to take all its US dollars and demand gold at $35 an ounce. But in 1971 President Nixon took the US off the gold standard. He said the US would forevermore not redeem US currency for gold. At that point the US dollar became a "fiat" currency. That means that a dollar was worth a dollar just because the US government said it was. The US dollar did not become immediately worthless. People continued to use it, and it continued to retain its value vis a vis other currencies. In fact it's the world's reserve currency as Nixon made a deal with the Saudis only to accept payment for oil in US dollars. That alone meant that the other countries of the world needed US dollars if for no other reason than to buy oil. As a matter of fact today most business dealings of foreign countries are settled in US dollars. So the US dollar has a bright future at least for now.

The conclusion is that US households, businesses, US states and European nations that use the Euro need to pay back loans when they borrow money. A nation with a sovereign currency such as the US, the UK, Japan, China and others creates its money when its central bank issues it by means of keystrokes. No one can demand repayment or exchange of dollars for gold or anything else. If China wants to be paid back for the Treasury bonds it holds, the money in its Treasuries (savings) account at the Fed will be debited and credited to its checking account at the Fed. It's as simple as that. That money can be exchanged for Chinese currency on the open market at the prevailing exchange rate. But probably the Chinese would want to keep much of their financial assets in dollars rather than renminbi since their currency is pegged to the dollar and many of their business dealings are settled in dollars.

Off the Top of My Head

Contrary to Larry Summers Biden's Relief Bill Will Not Cause Increased Inflation

by John Lawrence, February 8, 2021

Joe Biden's almost $2 trillion pandemic relief deal will not be inflationary despite Larry Summers' opinion. Inflation occurs when there is too much money sloshing around in the economy chasing too few goods, services and human resources. That is not the case here. First of all it will reemploy the unemployed. This is a presently unused resource. Secondly, it will suck up unused or unsold goods and services funding things that are currently unfunded like child care, and thirdly, it will serve to pay off debt and replenish savings. Any money going into savings or paying off debt is not inflationary. It's deflationary in the sense that the banks will lose money due to interest they won't collect if loans are paid off. The middle class that did have savings or credit in many cases has had to use those to survive the pandemic. That's why giving money to higher earning, but not wealthy, families is a good thing. To hear some people talk only money should be given to those who are desperate and living from paycheck to paycheck. Yes, those are the families most in need who should be given money first, but higher earning families who have depleted their savings or gone into debt need to be resuscitated also.

So here is what Larry Summers says about inflation:

"First, while there are enormous uncertainties, there is a chance that macroeconomic stimulus on a scale closer to World War II levels than normal recession levels will set off inflationary pressures of a kind we have not seen in a generation, with consequences for the value of the dollar and financial stability. This will be manageable if monetary and fiscal policy can be rapidly adjusted to address the problem. But given the commitments the Fed has made, administration officials’ dismissal of even the possibility of inflation, and the difficulties in mobilizing congressional support for tax increases or spending cuts, there is the risk of inflation expectations rising sharply."

Summers fails to take into account the deflationary effects of the relief bill. Money going to states and municipalities will actually be deflationary because much of it will be used to pay down debts and loans. Many state budgets are in horrible shape and employees such as police, librarians and firemen have been laid off. People paying back rents and mortgages will have a deflationary effect on the economy. People on the lower end of the economic spectrum who are living paycheck to paycheck will be able to get a little ahead and also save. This will not add a lot to inflation. Also money can always be withdrawn from the economy by taxing the rich, those who actually added to their wealth and income during the pandemic. This is the only reason that taxes might need to be raised because the US government has the ability to spend without raising taxes. The only reason to tax would be to fight inflation and those taxes can be targeted towards wealthier families and individuals. The Federal Reserve has not been able to achieve its target rate of 2% inflation recently despite maintaining almost zero percent interest rates. It wants more money sloshing around in the economy.

There are other ways to suck money out of the economy to offset inflation. Modern Monetary Theory (MMT) recommends Medicare for All which would result in much less money spent on health care while providing better health outcomes. This would be deflationary which would counteract any inflationary propensities of government deficit spending. Conventional economic thinking is that there is a tradeoff between unemployment and inflation. The more people unemployed there are, the more inflation is diminished. Therefore, full employment as defined by economists is not really employment where everyone is employed. It is that level of unemployment which just keeps inflation in check. However, according to "The Trade-off between Inflation and Unemployment in an MMT World: An Open Economy Perspective" by Emilio Carnevali and Matteo Deleidi, MMT it is contended that inflation "occurs when the system reaches the point of full utilization of its productive capacity, both in terms of capital utilization and in terms of availability of workers. At this point, the government should curb inflation forces cooling down the effective demand. This is another fundamental task of taxes." As long as there is unused capacity in human or production terms, increased employment will not be inflationary. So Larry summers need not worry that putting all those unemployed people back to work will lead to inflation.

Biden's putting a $15.00 an hour minimum wage in the relief bill is also what MMT advocates in relation to a Federal job guarantee. Real full employment at a minimum wage of $15.00 an hour does not need to be inflationary especially if it is in areas that don't compete with already employed workers. Biden's relief bill will have the effect of putting almost everyone to work with at least an hourly pay of $15.00 an hour. People who are living paycheck to paycheck and employed at $15.00 an hour are not going to contribute to inflation since their demands on the economy are those that can be easily accommodated by existing production and easily increased production. Deficit spending is not a problem. Former Chair of the Federal Reserve Alan Greenspan said, "The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default." So the real limit on government spending is inflation which can be controlled by taxes on those sectors of the economy which are not easily upscaled to provide more supply.

There is much unused capacity in the current US economy both in human and material or physical terms. People should be put back to work with a minimum wage of $15.00 per hour. A follow-on bill that would address infrastructure rebuilding and a Green New Deal also needs to be done. Resources may have to be managed by government to control inflation, but the important thing is that work needs to be done in these areas and people need to be put back to work. Inflation can also be offset by the deflationary effect of withdrawing funds form a bloated defense sector.

Off the Top of My Head

Taxing the Rich Will Lessen the Need for Deficit Spending

by John Lawrence, January 29, 2021

Billionaires are upset because their hedge fund ploys in the Wall Street casino went awry when a group of average Joes countered their short sales of GameStop. Oh the tears that were shed. Billionaires losing millions gambling? Outrageous! Bernie Sanders tweeted: "Oh look, another billionaire is mad that he might have to pay more taxes while children in America go hungry and veterans sleep on the street. Cry me a river," Joe Biden's $1.9 trillion COVID relief bill will mean a lot of deficit spending which can be offset, however, by taxing these billionaires. A financial transaction tax would raise $2.4 trillion over the next decade—"enough to make public colleges tuition free and cancel student debt."

Casino Capitalism Lesson 1: Selling short. Here's how billionaire hedge fund managers planned to make a killing. They knew that GameStop was losing money and probably going out of business. GameStop closed 321 stores in 2019 alone and planned on closing even more stores by the end of 2020. So knowing that GameStop's stock was going down (it didn't take a big brain to figure that out), they sold its stock short. What that means is that they "borrowed" the stock from people that already owned it. Then they sold the stock at its value at that time. Some time later when they would have to "return" the stock to those they borrowed it from, they planned to buy it back at a lower price (it having gone down in the meantime) and pocket the difference. One might ask why the original owners of the stock would loan it in the first place since they must have known that the stock would be worth less when it was returned to them.

However, a group of "amateur" investors foiled the plans of the billionaires by buying GameStop stock thereby bidding up the price making it worth more when the short sellers had to return it, not less. That would mean that the short sellers would lose money instead of making money. That's when the billionaires cried, "Ouch!" Then the "amateurs" who bid up the stock could sell it at the higher price and make money. Woo Haa! Leon Cooperman, whose net worth is estimated to be around $3 billion, sniffed that "the reason the market is doing what it's doing is, people are sitting at home, getting their checks from the government, basically trading for no commissions and no interest rates." In other words average people trading stocks are making the money that billionaires like him should have made. Boo Hoo!

Modern Monetary Theory maintains that all the money for the COVID relief bill could be raised from deficit spending because deficits don't matter without any need for increased taxation. Yet it would be prudent to raise taxes on the mega rich in order to decrease economic inequality which represents an enormous chasm between the billionaire class and everyone else. A new report found that the world’s 2,153 billionaires have more wealth than 4.6 billion people, underscoring the degree of global inequality. This would also offset any decrease in the value of the dollar that large deficit spending might bring about. In The Deficit Myth by Stephanie Kelton, she points out that the Federal Reserve which creates US dollars can never run out of money since the US dollar is a sovereign currency, but there is a concern about inflation if too much money is created which doesn't have a productive purpose in the economy. Since so many are unemployed and since there is a huge infrastructure deficit, this is not in danger of happening any time soon. There is no lack of money for government programs since they don't depend on tax flows, and money created by the Federal Reserve that ends up on the Fed's balance sheet never has to be paid back.

While the Fed can create as much money as it likes to bail out the banks without Congressional approval, which it did during the 2008 banking crisis, money created for government spending, such as the $1.9 trillion COVID relief bill, must have Congressional authorization. Fortunately, there is a process known as budget reconciliation which only requires a majority vote and the Democrats have the majority in the Senate. Therefore, the COVID relief bill cannot be filibustered by Republicans which they surely would do if they were in the majority. So it's clear that Republicans only represent the interests of the rich who will contribute to their campaigns and enrich them in return as long as they vote to nullify everything that might help the average person or raise taxes on them.

'Cry Me a River': Sanders Hits Back as Billionaire Investor Whines About Potential Tax Hikes Amid GameStop Fiasco

Published on Friday, January 29, 2021

by Common Dreams

"Oh look, another billionaire is mad that he might have to pay more taxes while children in America go hungry and veterans sleep on the street."

by Jake Johnson, staff writer

 

22 Comments

Billionaire investor Leon Cooperman speaks during an interview on CNBC on January 28, 2021. (Photo: CNBC/YouTube Screengrab)

As the ongoing GameStop saga sparked renewed calls for a financial transactions tax and other commonsense redistributive measures to tackle soaring inequality and Wall Street abuses, billionaire investor Leon Cooperman took to the airwaves Thursday to fume that the idea of compelling the mega-rich to pay their fair share is a "bullshit concept" and merely "a way of attacking wealthy people."

Sen. Bernie Sanders (I-Vt.), a longtime proponent of raising taxes on billionaires like Cooperman, was not impressed.

"Yes. We will make Wall Street billionaires pay their fair share of taxes and create an economy that works for all of us."
—Sen. Bernie Sanders

"Oh look, another billionaire is mad that he might have to pay more taxes while children in America go hungry and veterans sleep on the street. Cry me a river," the Vermont senator tweeted late Thursday. "Yes. We will make Wall Street billionaires pay their fair share of taxes and create an economy that works for all of us."

A hedge fund manager who was charged with insider trading by the Securities and Exchange Commission in 2016, Cooperman is one of several industry big-wigs who has appeared on financial networks like CNBC in recent days to complain about the retail investors who banded together to send GameStop shares into the stratosphere, blowing up a ploy by short-selling hedge funds to cash in on the company's seemingly imminent demise.

Cooperman, whose net worth is estimated to be around $3 billion, sniffed that "the reason the market is doing what it's doing is, people are sitting at home, getting their checks from the government, basically trading for no commissions and no interest rates."

"I'm not damning them. I'm just saying from my experience, this will end in tears," Cooperman said as the investing app Robinhood abruptly restricted trading on GameStock and other shares, prompting members of Congress such as Reps. Alexandria Ocasio-Cortez (D-N.Y.) and Rashida Tlaib (D-Mich.) to demand hearings and an investigation.

During the 2020 presidential campaign, Sanders proposed a Wall Street transaction tax aimed at both curbing reckless financial speculation and raising revenue that could be used to fund progressive agenda items, including tuition-free public colleges and universities.

Warren Gunnels, Sanders' staff director, noted in a tweet Thursday that Sanders' transaction tax would raise $2.4 trillion over the next decade—"enough to make public colleges tuition free and cancel student debt."

"If the working class could bail out Wall Street," Gunnels said, "Wall Street can bail out working families in America during a damn pandemic."

HuffPost's Zach Carter argued Wednesday that a financial transactions tax would be the "simplest solution" to an untenable status quo in which Wall Street titans are handsomely rewarded for engaging in "what is a mostly economically wasteful activity."

"We have plenty of roads and bridges to repair and a vastly outdated transportation system," Carter wrote. "Redistributing money from hedge funders in the Hamptons to a high-speed rail network or a national public housing program would do more for growth and productivity than all the shorts and put options in New York."

---

Our work is licensed under a Creative Commons Attribution-Share Alike 3.0 License. Feel free to republish and share widely.

Off the Top of My Head

How Joe Biden and the Democrats Can Attract Trump's Base to Their Side

by John Lawrence, November28, 2020

Aside from the entertainment value of the Trump Presidency, his main appeal and the main appeal of Republicans in general is that they stand for reducing taxes. Democrats can co-opt this issue. Here's how: before the next election, they announce that, if elected, they will reduce taxes on everyone making less than $400,000. Joe said he wouldn't raise taxes on that group, but he didn't go far enough. He needs to reduce taxes on everyone making less than $400,000 while raising them on everyone making more than $400,000. Trump's base, I assume, are people making less than $400,000. They are attached party wise to the wealthy Republicans who make up the top 1% with whom they have nothing in common economically. How will Joe pay for this? Simple: the money raised by raising taxes on the rich, making corporations pay their fair share, closing loopholes like the "carried interest" loophole and a financial transactions tax (FTT). And it wouldn't have to balance out equally. In other words the money raised in increased taxes on the rich would not have to equal the money spent on tax breaks for everyone making less than $400,000. It would represent the destruction of the Republican meme: "Democrats will raise your taxes."

The Federal budget need not balance out exactly. It hasn't done that since President Clinton balanced the budget in 2001. He had budget surpluses for fiscal years 1998-2001, the only such years from 1970-2020. Clinton's final four budgets were balanced budgets with surpluses, beginning with the 1997 budget. Since then Republicans, supposedly the guarantors of fiscal conservatism, have deficit spent by means of tax cuts going mainly to the rich. Even before Clinton, Reagan deficit spent with tax cuts in the 1980s. This meme that Republicans represent tax cuts and fiscal conservatism needs to come to an end and be exposed by Democrats for what it is. Evidently, the middle class Republican voters are satisfied with a meager tax cut and don't mind that the rich are getting a more hefty one. That's why Democrats have to take over this meme by giving tax cuts to the middle class and tax raises to the rich. This is the only way finally to get economic inequality under control.

Modern Monetary Theory and the Federal Reserve's own history prove that Deficits Don't Matter. The US dollar is a sovereign currency. The Federal Reserve can just print money and spend it into the economic system without adding it to the national debt. This is exactly what Abraham Lincoln did during the Civil War when he printed greenbacks instead of borrowing the money at interest which would have created huge debts for the United States. So there are two ways that money can be created by the Fed. 1) They can buy US Treasury bonds which would require Congress to deficit spend. 2) They can just print the money and pour it into Federal coffers. This does not add to the national debt but goes on the Fed's balance sheet. The bottom line is what is the money to be used for? If it's for a good cause like building green infrastructure and creating jobs in the process if the economy is less than fully employed, it probably won't create inflation. If it's just a gift to people in an already fully employed economy, it will most definitely create inflation or even hyper inflation.

So in the long run deficits do matter in the sense that, if the money is spent frivolously, inflation and potentially a loss in the value of the dollar on international markets could occur. However, if the money is spent constructively on building and repairing of infrastructure and other useful purposes, deficits won't matter. It boils down to prudent and responsible spending by government. Is Congress up to this task? Is the Fed? At this point a deal between the Executive branch and the Fed would seem more appropriate than running the whole thing through Congress where political ambitions of one party or the other can get in the way. The problem is that there is no consensus in Congress unless one party holds control over both Houses and the Presidency. Barring that, each party will try to limit the other party's spending goals which are tax breaks for the rich (Republicans) or government spending on social programs (Democrats). One way to break this stalemate is for Democrats to be the party of tax breaks for the 99% and tax increases for the 1% while maintaining their commitments to the social safety net.

Off the Top of My Head

Raising Taxes on Those Making More Than $400,000 While Lowering Them on Everybody Else - What a Novel Concept!

by John Lawrence, October 28, 2020

Politicians have been stuck for centuries in the mind set that you either have to raise taxes on everyone or lower them on everyone. Republicans have taken advantage of this by lowering taxes significantly more on the rich while giving the middle class a pittance of a tax break. Let's face it: this is the only arrow in Republicans' quiver! Now Democrats are finally getting smart. Joe Biden will raise taxes on the rich while keeping them the same on everybody else. This means that whatever break everyone making less than $400,000 got from the Trump tax breaks will remain in effect. Joe should have gone even further and lowered taxes on everyone making less than $400,000 while raising them on everyone making more than $400,000. Trump added a trillion dollars to the deficit with his tax cuts. Since then trillions more have been added to the deficit with coronavirus relief packages. But as we know from Modern Monetary Theory and from the Federal Reserve's own recent examples of Quantitative Easing, Deficits Don't Matter. They don't matter because the US dollar is a sovereign currency. The Fed can print money any time it wants. It's not a good idea to use this facility frivolously, but money is always available which should only be used for a good cause.

This makes the old antagonisms between "tax and spenders" and "deficit hawks" moot. There is no need to tax in order to spend. The need to tax at this point is only the need to address income and wealth inequality. Spending is not dependent on taxation and there is an almost limitless amount of money available. The old concepts of Left and Right, of Liberal and Conservative can be relegated to the scrapheap of history. The only political spectrum that makes any sense at this point is the one between progressives and regressives. For instance, there are those (like Trump) who want to preserve the fossil fuel industry even though we know the fossil fuel industry is destroying the planet. These guys I would call regressives. Then there are those (like Joe Biden) who want to phase out the fossil fuel industry while replacing it with renewable energy. These guys I would call progressives. Regressives want to preserve the status quo because their financial interests are with the status quo. Progressives want to replace jobs in the fossil fuel industry with jobs in the renewable energy industry.

Financial interests wedded to the fossil fuel industry will lose money, no doubt. However, investors are already divesting from fossil fuels and investing in renewables. The smart money is getting ahead of the inevitable curve in the knowledge that the fossil fuel industry is already on the way out due to the fact that renewables are already cheaper than fossil fuels. Progressives would hurry this process along in the knowledge that planet earth is not waiting for humans to sort this process out. Mother Earth has its own timeline, and will bring about change in the planet's ecosystem in a destructive way if humans cannot get their act together and stop emitting greenhouse gasses into the atmosphere. We don't want to become another planet Venus where greenhouse gasses elevate the surface temperature to 900 degrees F.

Hopefully, in a few days the Trump era will be over, and we can get down to work rebuilding infrastructure, which Trump promised to do and then never did, while at the same time creating green infrastructure while at the same time creating good paying jobs. This is essentially what Joe Biden has promised to do. In order to do it, they need a Democratic Senate as well as a Democratic House. They also need to get rid of the filibuster rule as, if there is even one Republican in the Senate, he or she will torpedo every progressive act of legislation using the filibuster. I think this time Democrats will go for broke as Republicans have done for years using every bit of power available to them. Democrats should do the same and not let what happened to Obama, who was essentially neutered by the Republican filibuster, happen to them. Republicans will try to throw every roadblock in the way of Democrats' progressive legislation so those potential roadblocks have to be systematically removed or a Democratic administration will get nothing done.

Of course Republicans will take every legislative act to the Supreme Court in the hopes that a conservative court will squelch it there. That's why a Democratic administration should consider packing the court. Joe Biden would have been within his rights to say he wouldn't do it and then to go ahead and do it since Republicans swore up and down that in an election year the next President should fill a Supreme Court vacancy, and then totally did the opposite when it was in their interests to do so. But Joe is a more honorable man than Lindsay Graham and the other Republicans who put Amy Coney Barrett on the court at the last minute while saying they would never do such a thing. Instead Joe finally came up with a reasonable answer to the question demand "Would you pack the Court?". A bipartisan panel. Hmmm.

Off the Top of My Head

Increase Taxes on the Rich. Reduce Taxes on the Middle Class

by John Lawrence, October22, 2020

Finally, the Democrats are getting smart. Republicans have won on one issue: reducing your taxes. Unfortunately, they reduce them a lot more on the rich than they do on the middle class. So now Joe Biden has introduced some nuance. Can the American people comprehend it? Reducing taxes on everyone making less than $400,00 per year and raising them on everyone making more than $400,000. What a great idea! What took them so long? It's absolutely necessary if we want to decrease economic inequality which is out of control. So Joe Biden would increase taxes only on the upper 1%. To be among the upper 1%, a family needs an income of $421,926. In terms of wealth the upper 1% owns 38.5% of the nation's wealth. The upper 1% owns more wealth than the bottom 90%. The bottom 80% of Americans are net debtors. Debt is negative wealth; that should be obvious, but many Americans are financially illiterate. Financial literacy should be a course in high school. Wealth and income are two separate but related issues. Middles class Americans who own homes pay a wealth tax: property taxes. Rich people don't pay wealth taxes on most of their assets which are in stocks and bonds.

Wealthier Americans don't spend all their income on consumption. A portion of it just goes to add to their wealth. Middle class and poor Americans spend all their income on consumption, even going into debt to consume. So the wealthy extract rent and interest from the middle class and the poor who devote a huge share of their incomes to rent and interest. Now more than ever, Americans are drowning in debt. Prior to the Great Recession of 2008, many Americans were struggling to keep their heads above water. When the bubble burst, those with the most debt were left drowning in a sea of financial insolvency. While the country has since recovered financially, the COVID-19 pandemic is threatening to derail the economy once more. In order to diminish not only income inequality but wealth inequality, policies should be undertaken to tax both the wealth and income of the wealthy while encouraging the middle class and poor to build wealth and get out of debt. A small financial transactions tax would tax the wealth of the rich which is mostly comprised of stocks and bonds and real estate. If every stock trade were taxed, this would create a huge pool of money which could be spent in more constructive ways than simply adding to the wealth of the rich.

While the rich can go bankrupt and bail themselves out with golden parachutes, most struggling student loan debtors have no such option. The laws preclude them from going bankrupt. They cannot discharge their debts in bankruptcy. In addition to student loan debt, most middle class people who own a home have a lot of mortgage debt. So they don't really own the home; the bank does. They have the privilege of making payments on a home which include a lot of interest. If they are successful in paying off their mortgage, they will have an asset which represents wealth. This is the main way the middle class creates wealth for itself. Unfortunately, this wealth takes a life time to create so is unavailable to most middle class people until it's too late to enjoy it. The good thing though is that their children can inherit it. This represents an intergenerational transfer of wealth so that their children or grandchildren start out not from zero, where most children of the poor start out, but from a positive accumulation of wealth no matter how small.

Since most Americans overconsume and under save in many cases by necessity but in some just by predilection, they have nothing to fall back on when there is a disruption in the economic system like a pandemic. Since American GDP is predicated on 70% consumption, the American economy cannot stay out of recession if people stop consuming. That's why the Republican controlled government, understanding this, came up with the CARES Act. It was not so much out of a concern for the middle class and the poor as it was a consideration to keep up consumption which is essential to maintaining GDP and hence a necessary economic statistic. A Joe Biden administration will get the economy back on the right track which will increase the income and wealth of the poor and middle class while diminishing that of the wealthy. Financial literacy should make clear the importance of not going into debt but of creating wealth no matter what your income statistics are at the beginning of this process.

'The American People Should Be Pissed Off': Critics Say Trump Tax Dodging Exposes System Rotten to the Core

Published on Monday, September 28, 2020

by Common Dreams

"The American people should be angry about President Trump's tax evasion, but that's not all. They should be much more angry about how much of what Trump did is legal."

by Jake Johnson, staff writer

 

8 Comments

People take part in a protest against the Republican tax bill in Los Angeles, California on December 4, 2017. (Photo: Ronen Tivony/NurPhoto via Getty Images)

While President Donald Trump's long-running effort to game the U.S. tax code for his own financial benefit was the central focus of explosive new reporting on the billionaire's tax returns by the New York Times, progressive observers and lawmakers were quick to note that the behaviors revealed by the documents are commonplace among America's wealthy elite—a fact they said is cause for widespread outrage and a renewed push in Congress for transformational change to a system that is fundamentally rotten.

"Donald Trump is a liar, a cheater, and a crooked businessman, yes. But he's also taking advantage of a broken, corrupt, and unequal system that's built for people like him to do what he did."
—Sen. Elizabeth Warren

"The American people should be angry about President Trump's tax evasion, but that's not all. They should be much more angry about how much of what Trump did is legal," Morris Pearl, the chair of advocacy group Patriotic Millionaires, said in a statement Monday. "The American people should be more angry about how many other millionaires and billionaires are able to avoid supporting the country that made them rich in the first place."

"Most of all," Pearl added, "the American people should be pissed off about the fact that instead of offering them healthcare, or affordable childcare, or financial support during a pandemic, their government instead prioritizes protecting the wealth of the rich, powerful, and selfish."

Frank Clemente, executive director of Americans for Tax Fairness, said he hopes the new reporting provides "a wake-up call to Congress."

"If we are going to create an economy that works for all of us, not just those at the top," said Clemente, "we need to create a fair share tax system that closes loopholes, cracks down on tax cheats, and prevents any unscrupulous tycoon—sadly, including the president of the United States—from dodging their tax obligations for decades on end."

Based on more than two decades of tax records the president has long fought to conceal from the public and Congress, the Times report details how Trump has repeatedly exploited gaping loopholes and business-friendly provisions in the U.S. tax code to massively reduce his federal income tax bill. The result of Trump's maneuvering, according to the Times, was that the billionaire paid just $750 in federal income taxes in both 2016 and 2017 and not a dime in 10 of the 15 years before his White House victory.

"Trump's tax returns tell us that he's either a very bad businessman or a tax cheat—likely both," tweeted Sen. Bernie Sanders (I-Vt.), alluding to Trump's use of major business losses to dodge income taxes.

"But more importantly," Sanders added, "it shows how the wealthy, unlike most Americans, are able to avoid paying taxes. The top 1% is responsible for 70% of unpaid taxes. It's time to tax the rich."

Sen. Elizabeth Warren (D-Mass.) echoed Sanders, arguing that the revelations in the Times reporting are "about more than one man's personal tax scams."

"Donald Trump is a liar, a cheater, and a crooked businessman, yes," said Warren. "But he's also taking advantage of a broken, corrupt, and unequal system that's built for people like him to do what he did."

Since taking office in 2017, Trump has worked with his Republican allies in Congress to make the U.S. tax system even friendlier to the wealthy and large corporations while leaving working- and middle-class families in the dust.

Steve Wamhoff, federal policy director at the Institute on Taxation and Economic Policy, noted in a statement that the Times reporting does "not include Trump's tax returns for 2018 and 2019, the first two years after the 2017 Tax Cuts and Jobs Act went into effect. The law opened new tax avoidance opportunities for wealthy business owners."

"There are two tax systems: one that most of us follow and another far more generous one for the very rich. While it is common for the wealthy to use the tax code this way, Trump is in a league of his own."
—Steve Wamhoff, Institute on Taxation and Economic Policy

"There are two tax systems: one that most of us follow and another far more generous one for the very rich," said Wamhoff. "While it is common for the wealthy to use the tax code this way, Trump is in a league of his own. His losses seem to be, in many cases, more than just paper losses. Anything he is personally involved in tends to lose money. And it is possible that his various maneuvers do, in fact, exceed what is allowed by the law."

In addition to hiking income taxes on the rich and imposing a wealth tax, analysts said in response to the Times reporting that congressional Democrats must also prioritize enforcement of the nation's tax laws by adequately funding the IRS, which has been crippled in recent years by Republican budget cuts.

"Right now the IRS is fighting with paper swords," tweeted Binyamin Appelbaum, economics writer for the Times Editorial Board. "Making rich people follow the law is a matter of justice and oh, by the way, it would also be hugely profitable for the government. Every time a billionaire cheats on their taxes, that's less money for roads, schools, etc."

Pearl of the Patriotic Millionaires said that "it seems obvious that Trump has committed some amount of criminal tax evasion, but that's not the biggest issue here."

"The real problem is a system that provides such absurd loopholes to the ultra-wealthy in the first place, and a deliberately underfunded IRS that lacks the capacity to properly prosecute rich people's criminal tax evasion," said Pearl. "Trump's case may be particularly egregious, but he's far from unique."

In July, as Common Dreams reported, the Congressional Budget Office estimated that the amount of unpaid taxes between 2011 to 2013 averaged just over $380 billion per year—a figure Sanders decried at the time as "an absolute outrage."

"Congress is leaving hundreds of billions of dollars in taxes uncollected from the wealthy," Sanders added. "Make no mistake: the primary beneficiaries of IRS funding cuts are wealthy tax cheats and large corporations. Do not think for one second that the wealthiest country on Earth is unable to make critical investments to meet people's basic needs in terms of healthcare, food security, education, and unemployment."

Writing for the Discourse Blog on Monday, journalist Paul Blest argued that the U.S. tax system in its present form "invites manipulation by anyone rich enough to do it." But, Blest added, the tax code's current construction is the result of deliberate policy decisions and thus—with adequate political will—reversable.

"It really doesn't have to be like this; the government can act to heavily tax the rich and powerful and use the money to fund public services and has in the past," wrote Blest. "And if people want to reduce the power, influence, and mythos surrounding obscenely wealthy people like Donald Trump, there are far worse places they could start than the U.S. tax code."

---

Our work is licensed under a Creative Commons Attribution-Share Alike 3.0 License. Feel free to republish and share widely.

Off the Top of My Head

Culture Wars: Neither Here Nor There

by John Lawrence, July 4, 2020

So they change a name of  a military base: is one black family any better off? Conservatives love it when the debate is confined to cultural stuff. It doesn't threaten their bank accounts one tiny little bit. But when you get down to anything substantive, anything concrete, like defunding the military-industrial complex and using the money for free public education from pre-school to college, well, wait a minute that's socialism. They already consider public education K-8th socialism. Well what about health care? When you start talking about free health care, or even reasonably priced health care, well that's socialism. Hey let's confine the discussion to whether or not we should allow confederate statues to exist. Taking one down does not make one black family any better off and doesn't threaten the white elite one bit. It doesn't cost them one dollar and it doesn't add one dollar to any black family's income.

So let's talk about concrete issues, ones that could really benefit the hoi polloi and take a few dollars out of wealthy peoples' pockets:

    1. Medicare for All

    2. A Financial Transactions Tax

    3. Forgiveness of student loan debt

    4. A Green New Deal that would create good paying jobs for millions of black, Native American and     Latinx people

    5. Raising the minimum wage to a living wage

    6. A wealth tax

    7. Defunding the military which is the police force of the world and increasing the budget of the Center for Disease Control and the World Health Organization

Instead of debating these concrete issues conservatives want to argue over symbols. That's where their mentality is at. Don't trample on my flag. Don't trample on my history. Don't burn my flag. None of these symbolic and cultural issues improve the life of any American. They just preserve the status quo and the economic inequality that is only getting worse and which will get worse at a faster rate due to the pandemic. In short the ones mired in these issues know that nothing really will change as long as they can keep the discussion at this level. And those who could profit by changing the system are too often persuaded by those who wouldn't just to argue about symbols. Eliminating all the statues of slaveholders will not change American history one bit and will not make one black person better off.

As long as they don't eliminate the military bases and reduce the inflow of money to the military, the big wigs would be happy to entertain changing the name of Fort Bragg to Fort Rosecrans. General Rosecrans whipped Bragg's ass in Tennesee. As Commander of the Army of the Cumberland, he fought against Confederate General Braxton Bragg at Stones River, and later outmaneuvered him in the brilliant Tullahoma Campaign, driving the Confederates from Middle Tennessee. So it's a logical change of name. But it won't do anything to improve the lives of blacks, native Americans or Latinx. All the government help given to whites like the GI bill after WW II effectively excluded blacks as did all the land given to whites by the Homestead Act. First slavery, then Jim Crow laws served to keep black wealth at a minimum even negative in many cases. Instead of gaining wealth as whites did, they were targeted to be debtors and kept there by PayDay loan operators charging exorbitant rates of interest. Native Americans were gypped out of their lands by Americans not honoring treaties and by outright theft. They were also killed by a pandemic the white man brought with him from Europe. Thus Montezuma's revenge and now maybe COBID will do the same thing to Trump's non-mask wearing base.

So Trump is getting his base excited about cultural issues. It's a total sideshow designed to keep the status quo intact and to let the rich keep on getting richer. The poor, especially blacks, need to be kept in their place. All the progressive legislation designed by Cory Booker to reform the police nationwide will never see the light of day as long as the Senate is controlled by Republicans. He might as well not waste his breath. It's meaningless and never has a chance in hell of passing the Senate and being enacted into law. So why don't the Democrats do something more productive instead of spinning their wheels with great ideas that will never see the light of day.

Off the Top of My Head

The Power Structure Wants the Discussion Circumscribed to Systemic Racism, Not Systemic Inequality

by John Lawrence, June 17, 2020

Let's just talk about systemic racism and not about an economic system in which a few people control all the wealth and the rest get crumbs from the table. The power structure does not want the discussion extended into that area. Let's just integrate black people into the system so that they are not disproportionately poor, only poor proportionally to their percentage of the population. Blacks compose 12% of the American population. 27% of black people are in poverty so the good old American way is to reduce the percentage in poverty to 12%. Then blacks would be proportionately and not disproportionately poor. That's the American way. Don't question systemic poverty and inequality; Confine the discussion to systemic racism.

The American way is to have a few rich people among every ethnic group and then to use this as an example that anyone can get rich in America. So what if the majority are poor. It's more important that you have examples of huge wealth among black people, and that is certainly the case today. American black billionaires on the 2019 Forbes list included American investor Robert Smith with $5 billion, businessman David Steward with $3 billion, media mogul Oprah Winfrey with a net worth of $2.5 billion and American sports executive Michael Jordan with $2.1. There are 615 billionaires in the US; only 6 are black so to be proportionate we'd need about 74 more black billionaires.

Blacks comprised 13.6 percent of the U.S. population according to the 2010 Census, but account for only 1.4 percent of the top 1 percent of households by income. Whites are the overwhelming majority of the top 1 percent of households by income, comprising 96.2 percent. There are 18.6 million total millionaires in the US, but only an estimated 35,000 are black. That may sound like a lot, but the U.S. population of millionaires is 76 percent White. Blacks, Hispanics and Asians make up about 8 percent each. So problem solved if we add another 4% to the black millionaires list. Then they would be proportionately rich at least at the million dollar level.

Many black athletes and entertainers are millionaires or multi-millionaires. Take the NBA, for example, in which 80% of the players are black. The total annual revenue of the NBA is $8.7 billion of which about 50% goes to the players. Since there are 30 franchises with 15 players per franchise, there are 450 active players. That means that the share of NBA revenues going to black NBA athletes is ($8.7 billion)x(1/2)x(.8) = $3.48 billion or an average of $7.7 million per black player. Bingo! The NBA has created way more black millionaires than it has created white ones. That's for sure.

This is the thinking of the power structure, mainly the Republican power structure which is not threatened by having a few more black millionaires and billionaires. However, they are threatened when you talk about everyone, black or white, having a living wage, everyone, black or white having decent housing, medical care and free public education from pre-school through college. They are threatened by talk of taxing the wealthy, taking from the rich and giving to the poor, as it were. That would be socialism much like the People's Republic of France or the People's Republic of Germany or even the People's Republic of Sweden. The power structure can't tolerate that kind of debate. Let's just make black people equal in the number of millionaires, but not change anything else. Then all the poor blacks and whites, for that matter, can aspire to pull themselves up by their own bootstraps as many of their counterparts have done.

Whatever happens we can't change the system to make it inherently more equal, inherently more naturally producing of equal outcomes. Instead, it must produce inherently unequal outcomes so that those who make it in the system will feel like they have really accomplished something and can serve as role models for others to strive harder. Republicans recoiled at all the hippies in the 60s who were having too much fun and not working hard enough. They were even getting free tuition in the California University system and elsewhere. On August 23, 1971, prior to accepting Nixon's nomination to the Supreme Court, Lewis Powell wrote a memo to the US Chamber of Commerce entitled "Attack on the American Free Enterprise System," an anti-Communist and anti-New Deal blueprint for conservative business interests to retake America from the hippies and left wingers. It was based in part on Powell's reaction to the work of activist Ralph Nader, whose 1965 exposé on General Motors, Unsafe at Any Speed, put a focus on the auto industry putting profit ahead of safety, which triggered the American consumer movement. Powell saw it as an undermining of the power of private business and an ostensible step towards socialism.

So they changed the system to criminalize all sorts of behaviors mainly involving drugs so they could incarcerate mainly black people and so they could saddle mainly white people with a ton of student loan debt. Then they would have to work hard paying off their debt instead of partying, surfing, having free love and doing drugs. Well, it certainly has worked. In 2014, African Americans constituted 2.3 million, or 34%, of the total 6.8 million correctional population. About 1 in 3 black boys will have served some time in the penal system during their lifetimes. Profits are up for the private penitentiary corporations and American millenials are buckling at the knees from the weight of $1.5 trillion in student loan debt. So if the percentage of black people in prison gets down to 12%, then this should make the American system non-racist? Wouldn't it be better to eliminate the root causes of incarceration which have to do with poverty and get the incarceration rate down to zero for everyone?

Off the Top of My Head

Racist Economics

by John Lawrence, June 8, 2020

Is it racism when the schools in predominantly black neighborhoods are worse than schools in predominantly white neighborhoods? Schools in many parts of the country are funded with local property taxes. It stands to reason that property values in poor neighborhoods are less than property values in rich neighborhoods, and, therefore, property tax revenues and hence school funding is less. So the worse schools are found in poor "predominantly black" neighborhoods. A word you hear often these days is "predominantly". Nothing is totally black and white, but, when black people are affected in a way that is greater than their percentage of the population, one could say it is a "predominantly black" situation. When police arrest black people at a greater rate than they do white people, we could say that the police are a racist institution.

It has been said that the only mistake that the looters at the current protests made was that they didn't form a hedge fund first before they started looting. Martin Luther King said, “The black revolution is much more than a struggle for the rights of Negroes. It is forcing America to face all its interrelated flaws—racism, poverty, militarism, and materialism. It is exposing the evils that are rooted deeply in the whole structure of our society. It reveals systemic rather than superficial flaws and suggests that radical reconstruction of society itself is the real issue to be faced.” Republicans have breathed a sigh of relief that so far the Black Lives Matter movement has had little to say about poverty, economic inequality, militarism and materialism. Some though are getting to the heart of the problems in our society that affect us all but affect black people "disproportionately."

Writing in the New Yorker Keeanga-Yamahtta Taylor said:

The [1992] uprising in L.A. shared with the rebellions of the nineteen-sixties an igniting spark of police abuse, widespread violence, and the fury of the rebels. But, in the nineteen-sixties, the flush economy and the still-intact notion of the social contract meant that President Lyndon B. Johnson could attempt to drown the civil-rights movement and the Black Power radicalization with enormous social spending and government-program expansion, including the passage of the Housing and Urban Development Act of 1968, which produced the first government-backed, low-income homeownership opportunities directed at African-Americans.

By the late nineteen-eighties and early nineties, the economy was in recession and the social contract had been ripped to shreds. The rebellions of the nineteen-sixties and the enormous social spending intended to bring them under control were wielded by the right to generate a backlash against the expanded welfare state. Political conservatives argued that the market, not government intervention, could create efficiencies and innovation in the delivery of public services. This rhetoric was coupled with virulent racist characterizations of African-Americans, who relied disproportionately on welfare programs. Ronald Reagan mastered the art of color-blind racism in the post-civil-rights era with his invocations of “welfare queens.” Not only did these distortions pave the way for undermining the welfare state, they reinforced racist delusions about the state of black America that legitimized deprivation and marginalization.

The 1990s saw Democrats agreeing with Republicans that problems in the black community were largely caused by overly generous social programs. President Bill Clinton promised to "end welfare as we know it." Senator Joe Biden jumped right on board the push to reduce welfare programs by saying, "“the culture of welfare must be replaced with the culture of work. The culture of dependence must be replaced with the culture of self-sufficiency and personal responsibility. And the culture of permanence must no longer be a way of life.” Biden championed the 1994 “crime bill” that pledged to put a hundred thousand more police on the street, called for mandatory prison sentences for certain crimes, increased funding for policing and prisons, and expanded the use of the death penalty. By the 1980s Ronald Reagan decried "welfare queens."

Taylor continues:

So, though Biden desperately wants us to believe that he is a harbinger of change, his long record of public service says otherwise. He has claimed that Barack Obama’s selection of him as his running mate was a kind of absolution for Biden’s dealings in the Democrats’ race-baiting politics of the nineteen-nineties. But, from the excesses of the criminal-justice system and the absence of a welfare state to the inequality rooted in an unbridled, rapacious market economy, Biden has shaped much of the world that this generation has inherited and is revolting against.

More important, the ideas honed in the nineteen-eighties and nineties continue to beat at the center of Biden’s political agenda. His campaign advisers include Larry Summers, who, as Clinton’s Treasury Secretary, was an enthusiastic supporter of deregulation, and, as Obama’s chief economic adviser during the recession, endorsed the Wall Street bailout while allowing millions of Americans to default on their mortgages.

Biden was chiefly responsible for the 2005 bill that took away bankruptcy protection from student load debtors (presumably disproportionately black). Credit card companies, many of whom are headquartered in Biden's state of Delaware, have been major Biden campaign contributors. Biden was known as the Senator from MBNA. Biden should just turn over the Democratic nomination to Bernie Sanders who has been on the right side of issues which are now coming to the forefront in American life.

Taylor continues:

In 1968, King, in the weeks before he was assassinated, said, “In a sense, I guess you could say, we are engaged in the class struggle.” He was speaking to the costs of the programs that would be necessary to lift black people out of poverty and inequality, which were, in and of themselves, emblems of racist subjugation. Ending segregation in the South, then, was cheap compared with the huge costs necessary to end the kinds of discrimination that kept blacks locked out of the advantages of U.S. society, from well-paying jobs to well-resourced schools, good housing, and a comfortable retirement. The price of the ticket is quite steep, but, if we are to have a real conversation about how we change America, it must begin with an honest assessment of the scope of the deprivation involved. Racist and corrupt policing is the tip of the iceberg.

We have to make space for new politics, new ideas, new formations, and new people. The election of Biden may stop the misery of another Trump term, but it won’t stop the underlying issues that have brought about more than a hundred thousand COVID-19 deaths or continuous protests against police abuse and violence. Will the federal government intervene to stop the looming crisis of evictions that will disproportionately impact black women? Will it use its power and authority to punish police, and to empty prisons and jails, which not only bring about social death but are now also sites of rampant COVID-19 infection? Will it end the war on food stamps and allow African-Americans and other residents of this country to eat in the midst of the worst economic crisis since the Great Depression? Will it finance the health-care needs of tens of millions of African-Americans who have become susceptible to the worst effects of the coronavirus, and are dying as a result? Will it provide the resources to depleted public schools, allowing black children the opportunity to learn in peace? Will it redistribute the hundreds of billions of dollars necessary to rebuild devastated working-class communities? Will there be free day care and transportation?

In short we need good paying union jobs (Green New Deal) that will deal with the issue of climate change (Green New Deal), forgiveness of student loan debt (the least Biden can do since he was largely responsible for creating the situation), Medicare for All (since hospitals in black neighborhoods compare unfavorably with those in white neighborhoods), public housing (to end homelessness and guarantee everyone the right to have a roof over their head). If we want to solve the problem of institutional racism in this country, we need to address the fundamental problems of economic inequality. Where do we get the money? Not only by defunding the police which claim the lion's share of local budgets, but by demilitarizing the bloated military-industrial complex and taxing the rich at 1955 levels (91%). The Federal Reserve can always take a few more trillion on its balance sheet; it has taken trillions on its balance sheet already and given the money to the big banks. How about Quantitative Easing for the people? Economic inequality is a problem which affects black people disproportionately (there's that word again), but the solution of which will contribute to the benefit of white people as well.

Alternatives to Killing People for the Economy

Published on Saturday, May 16, 2020

by Common Dreams

In order to pay for those programs and help the country get back on its feet, we need to tax the wealthy and invest in our common good.

by Cynthia Kaufman

 

8 Comments

A sign warns residents to take steps to contol the coronavirus outbreak at the entrance to the Manhattan Bridge in Brooklyn on March 19, 2020 in New York City. (Photo: Victor J. Blue/Getty Images)

As the U.S. begins to reopen after being shut down to protect us from spreading Covid-19, many people are beginning to talk about a choice between what is good for the economy and what will keep us healthy. Much pain and suffering has come as people have lost their livelihoods and their homes, and so we need to move quickly to put into place the things that will ensure that people have what they need to live. But rather than sacrificing people for the economy, we need to rethink what we mean by "the economy." No one needs to be killed for us to have a healthy economy. 

We live in a world where there is enough of everything we need for us all to live well, and to do so within the ecological limits of the planet. And yet, as the Covid-19 crisis has laid bare, the social systems we live in lead to grotesque wealth for some, extreme devastation for many, dangerous underinvestment in the public infrastructure we need to be safe, and political systems controlled by those who profit from destruction of our environment and shared social fabric.   

As we work to keep people safe from Covid-19, while protecting their livelihoods, we can shift our economies to build a world where we all have enough. If we keep ourselves focused on tackling our inequality crisis, even as we build toward environmental sustainability, we can develop an economic system that meets our human needs, without anyone needing to die for it. 

Economic policies to get people living well  

There are many things that governments can do to make sure that people have what they need. As I write this, there is a proposal in the California legislature to allow people ten years to pay the rent they cannot afford to pay now. Several European governments gave money to companies in the Covid-19 crisis on the condition that they use the money to keep people on payrolls. We can give everyone a universal basic income (UBI) and health care. There are many policies that can be enacted right now that will protect people's livelihoods in the short term and which will build a better future for us all. 

In order to pay for those programs and help the country get back on its feet, we need to tax the wealthy and invest in our common good. We need steep increases in wealth taxes, progressive property taxes, and progressive income taxes. We need to take the profit motive out of basic housing and healthcare. We need to invest in public education. We need to make sure that there are processes in place to ensure that everyone has access to the things they need to live a decent life. Some of these are things that the US did with great success at the beginning of the twentieth century. 

In Capitalism and Ideology, Thomas Piketty argues that after WWI and WWII, as people in the U.S. and Europe emerged from devastated economies, and where people had sacrificed a lot for the common good, there was a powerful public support for challenging the forms of  inequality that had existed in the prior period. In Britain, the levels of taxation imposed on the wealthy were so huge that they led to a virtual end to the aristocracy. In the same period, the US developed deeply progressive income, wealth, and inheritance taxes.  

After World War I, many industrial assets were taken over by the U.S. government and run for the public good. In America Beyond Capitalism Gar Alperovitz offers evidence to show that many of those nationalized industries have been more efficient, and effective at providing for social goods, than private businesses. Mike Davis has argued that we need to nationalize some of the basic industries and companies we depend on. He argues for a nationalization of Amazon and of wifi service. 

If those sounds like things we shouldn't do because they are "bad for the economy," it is important to note that, as Piketty documents, the years of decreasing inequality in many countries of the world, roughly 1950-1980, were years of increased economic growth in those same countries. Since that time, our economy in the U.S. has gone from one based on progressive taxation, to one where the wealthy actually pay less in taxes than the rest of us. In a New York Times op-ed David Leonhardt writes, "The overall tax rate on the richest 400 households [in 2018] was only 23 percent, meaning that their combined tax payments equaled less than one quarter of their total income. This overall rate was 70 percent in 1950 and 47 percent in 1980." Because of that lack of progressive taxation, Jeff Bezos is about to become the world's first trillionaire. Just getting back to where we were in terms of taxation in 1950 would generate much of the income needed to provide for everyone's needs to be met. Very few people know that history, or the success, of those early twentieth century approaches to taxation and nationalization. As long as we have systems of accountability in place, we can make our economies more democratic without that leading to tyranny, corruption, a lack of innovation, or inefficiency.

So why does that all seem so impossible right now? Much of it has to do with a deep shift in how we think about how wealth is generated and what is good for the economy. That shift in beliefs was the result of a few different forces. In the 1980s Ronald Reagan and Margaret Thatcher were the public faces of a concerted political and intellectual assault on the idea that taxes and investment in our shared social fabric were paths to prosperity for all. They helped propagate the belief that those things lead to tyranny. Their work has been followed by decades of deep pocket investment by the Koch brothers, and others, in the intellectual work of very effective right wing think tanks. 

Another factor are the very real failures in the experiments in nationalization led by the countries that ended up with authoritarian communism. We now know that it is not a good idea for governments to have too much power over our economic decisions when those governments are not accountable to their people. The failure of those experiments casts a long shadow over our imaginations, and there are many lessons we need to learn from those failures. And yet, our experience in the US in the mid twentieth century, and the experiences of many countries, has shown that nationalization under conditions of accountability, as well as deeply progressive taxes, actually make an economy work better. 

"The Economy"

The third reason these ideas of progressive taxation, nationalization, and investment in public goods, seem so hard to imagine right now, is related to how we understand what is good for an economy. As we hear horrific statements from people in power about how we need to allow some people to die in order to save "the economy," it is worth pausing and asking what that precious beast "the economy" is, which is more valuable than human lives. 

There is a view of what an economy is, and what is healthy for it, that is shared by the mainstream media, by liberal politicians, by right wing economists in Koch funded think tanks, such as the American Enterprise Institute and the Heritage Foundation, as well as by mainstream economists. It is the view that is taught in almost every economics department in the country. That view defines the economy as the set of things bought and sold for money. It assumes that the more things we buy and sell the better off "the economy" is. It assumes that the more markets are allowed to make social decisions the better off we all are. It assumes that more growth, measured in GDP, is good for "the economy." And many people who accept these assumptions also argue that inequality doesn't really matter because doing things that lead to growth will increase the size of the pie, so we don't need to worry about how that pie is divided.

While supporters of mainstream economics often say they are in favor of "free markets" and against government intervention in the economy, the notion of "the economy" they propagate, requires governments to protect ownership of land, contracts, and intellectual property. Some of those same people advocate for subsidies to the fossil fuel industry and huge investments in the military. They tend to argue that the economy is hurt when governments do things to make it less monopolistic, or force it to serve more than a small number of people. They argue against rent control because it distorts markets, but they don't argue against bailouts for banks. Far from wanting markets to be free from government interference, proponents of mainstream approaches to economics generally argue for as much freedom for capital as possible. 

Increased freedom for capital means that capital is allowed to shop the globe to find places to hide from taxation. And freedom of capital has led to a huge expansion of the size and power of the finance sector. Only 15% of money invested by large banks today is invested in actual production. The changes that have come from allowing more freedom for capital have led to extreme increases in inequality all around the world, even as they have actually undermined economic growth. 

As people in the U.S. government talk about the need to sacrifice human lives for the economy, it is good to remember that "the economy" is not what we care about. We care about how we are all doing. What is good for a company's stockholders and owners is not always the same as what is good for employees. While it might be good for economic growth to have the Tesla factory in Fremont California open up without a safety plan, that would not be good for the workers. And there are other ways to make sure the workers in that factory have enough to pay their rent and buy food. We could tax Musk's wealth and provide a safety net for the workers. 

When he defied the shut down and opened the factory in defiance of the county health officials, Elon Musk claimed to want to be free from the tyranny of the government. And yet his businesses have received $5 billion in government subsidies. Wealth and productivity are the results of many complex social processes, including subsidies. The wealth generated by factories, such as Tesla, are not mostly, or even primarily, the results of the actions of the owners and stockholders. The success of businesses is always part of a complex social process. As Piketty writes, "all wealth creation depends on the social division of labor and on the intellectual capital accumulated over the entire course of human history, which no living person can be said to own or claim as his or her own personal accomplishment." To develop health and resilience in the material world we depend on, we need to use the resources that belong to society to do the things needed so that we can all live well within the ecological limits of the planet. 

Alternative economic approaches

There are many economic theorists, working outside the mainstream paradigm, who question its most fundamental assumptions. Some of the best of these are Ha-Joon Chang, Clair Brown, Kate Raworth, and Amartya Sen. In Latin America an alternative is developing based on the idea of buen vivir, living well in our relations with each other and with the rest of nature. We need to think of the economy as the material substrate of our common lives, rather than as a self-contained thing which has its own needs. From that perspective, the things we need to do to improve our economic well-being are vastly different ways from what mainstream economists are arguing we need to do as we come out of the shutdown. We don't need to open factories while they are unsafe. We don't need to bail out the cruise ship industry or the fossil fuel industry. Instead we need to make sure that there are systems in place to protect people's livelihoods. 

Those alternative economists argue that we shouldn't measure the success of an economy based on how much is bought and sold, but rather on how much it is meeting our needs The most commonly used measure of the health of an economy in the world right now is GDP, which, roughly, measures how much is bought and sold. The Genuine Progress Indicator (GPI) and the Human Development Index (HDI) do a much better job at measuring the ways an economy serves our human and ecological needs. And they argue that markets are not the best ways to decide where social resources should go. For example, the labor market does not need to be the main way we decide who has money and who doesn't. Giving everyone a universal basic income (UBI) increases well-being and stimulates economic activity without relying on a market in labor. 

Conclusion

Lurking behind the Covid-19 crisis, are the inequality and climate crises. Dealing with them was urgent before Covid-19 hit us, and the actions we take in the next 6 months will have huge implications for the world we create as we come out of it. There is plenty of money and wealth in our society to meet all of our needs while staying within the ecological limits of the planet. There is a fairly clear and well proven path to building that economy.  The hard part is developing the political will to get us there. Part of building that political will is shifting how we understand what is good for the economy. Rather than being driven to do what is good for capital, we need to focus on doing the things that will help us share our social wealth and use it to solve the crises we face and to build a resilient, just, sustainable common future. The economy exists to serve our needs, it isn't a god which requires sacrificial victims. 

Cynthia Kaufman is the author of Challenging Power: Democracy and Accountability in a Fractured World, Getting Past Capitalism: History, Vision, Hope and Ideas for Action: Relevant Theory for Radical Change. She is the director of the Vasconcellos Institute for Democracy in Action at De Anza College. She blogs at cynthiakaufman.wordpress.com.

---

Our work is licensed under a Creative Commons Attribution-Share Alike 3.0 License. Feel free to republish and share widely.

Off the Top of My Head

How the World Could Change When the Current Crisis is Over

by John Lawrence, April 26, 2020

Perhaps we will rethink what is essential and what is inessential. Here's my list of what is essential: 1) Health care; 2) Food; 3) Water; 4) Sanitation (Waste water and trash collection); 5) Education; 6) Transportation; 7) Electricity; 8) The Internet; 9) Grocery stores. 10) Elder care.11) Police, Fire and Paramedic services. Here are some things that are considered inessential now: 1) Spectator sports; 2) Spectator music events; 3) Parades; 4) Conventions; 5) Bars; 6) Restaurants; 7) Barber and beauty parlors; 8) Tattoo parlors; 9) Political campaign events; 10) Large parties like wedding receptions.

Everyone can come up with their own list of what they consider to be essential and what they consider to be inessential. In my opinion the least essential of inessential services are tattoo artists. There are a lot of products and services in our mass consumer culture which are also frivolous and have nothing to do with what is essential or beneficial to human well being.. It seems that the most essential workers are the least paid while the least essential are well paid indeed. Is advertising really essential? You can look up everything you might want or need online using google or amazon. Why do you have to have some irrelevant product or service pounded into you by TV advertising? It's a historical relic. I record most programs so that I can fast forward through the commercials. If I watch a live program, I put it on pause while I do something else for awhile, and then I fast forward through the commercials. In my opinion everything advertised on TV, especially pharmaceuticals, is inessential. They should be prescribed by a doctor. It's the doctor's business to know which pharmaceuticals you need, not yours.

Are hedge funds essential? Is jewelry essential? Are the products of the wedding-industrial complex essential? Many people are having weddings during the pandemic without paying the tens of thousands of dollars that current weddings fashioned by the wedding-industrial complex demand. There are many frivolous consumer items which advertising insists that people need that they don't really need, that are completely inessential. Some are nice to have, but inessential, and some are downright destructive to peoples' health and welfare.

The most essential activity at this time in history is saving the planet from global warming. Production of renewable energy alternatives is absolutely essential. The provision of green infrastructure is absolutely essential. Fossil fuels need to be left in the ground. Getting rid of plastics which pollute the oceans and other waste products that aren't biodegradable is absolutely essential. Rethinking payscales for essential workers like agricultural workers and grocery store workers is essential. If these are the most essential workers, they should be paid more. The same goes for doctors, nurses, certified nursing assistants, the CNAs who do most of the caregiving at nursing homes. CNAs make little more than minimum wage and yet they are exposed to the coronavirus. What this means is that so much that is really essential now is either being ignored or very little money is being allocated to it while huge amounts of money are being allocated to fruitless and frivolous activities.

The most fruitless activity is war and the provoking of war. The trillion dollar annual budget of the military-industrial complex has been shown to be fruitless and meaningless when the real war is against a virus. Unhealthy conditions in poverty stricken areas of the world including refugee camps can breed disease which affects the whole world including "privileged" people in the more advanced nations. Poverty and disease need to be eradicated in all parts of the world. The military cannot do that. Oh, they can be repurposed a little bit to help out with a pandemic, but they can not really do the job that needs to be done. In particular they are vulnerable to the pandemic themselves and all of the weapons of war cannot protect them. The real war needs to be against poverty and disease which are the breeders of war and pandemics. The real war needs to be against global warming. The real essential workers are construction workers who need to be constructing advanced green infrastructure.

What is clear is that real essential workers need to be paid more which argues for a lessening of economic inequality. So much of the wealth is held by people who are absolutely inessential to the health, welfare and betterment of people all around the world. A Green New Deal needs to be prioritized. Wealth needs to be taxed to pay for it. New York state needs to tax Wall Street to make up for its budget deficit. Priorities, priorities. The helping professionals and care workers need to be given more respect and money. Taxing inessential workers like hedge fund managers is what needs to pay for it.

Off the Top of My Head

Bernie Socks It To Them

by John Lawrence, February 25, 2020

The critics have piled on Bernie about how he's going to pay for his proposals for Medicare for All, a Green New Deal, forgiving student loan debt and free college tuition. Now Bernie has come out with a detailed plan about how to do it. The obvious answer is how do other countries do it? Most other advanced countries have free universal health care and free college tuition. They take it for granted. I had some passengers from Calgary, Alberta whom I asked 'how do you like the Canadian health care system?'. He replied, "It's free." I said, "Yeah, but don't you have to pay for it in your taxes?" He said, "I guess so." So he wasn't really concerned that he was paying taxes through the nose to pay for "free" health care. He didn't even know what percentage of his taxes went to health care. I suspect that once the tax structure changes here so that rich people pay more and poor people pay less that everything will be like that too.

It will cost $2.2 trillion to make public colleges, universities and trade schools tuition-free and to cancel all student debt over the next decade. It is fully paid for by a modest tax on Wall Street speculation that will raise an estimated $2.4 trillion over ten years. A Financial Transaction Tax has been talked about for years. Bernie is the only one bold enough to actually make it part of his campaign platform. It needs to be done. The financialization of the economy is what led to the 2008 economic debacle in which the banks were bailed out by the American people to the tune of trillions of dollars. So now even though it's years later, let them pay to bail out the American people. It's a good thing.

Bernie’s bill to expand Social Security will increase benefits for low-income senior citizens and people with disabilities by more than $1,300 a year. It is fully paid for by making the wealthiest 1.8 percent of Americans – those with incomes over $250,000 a year – pay the same rate into Social Security as working families. I like that a lot. Right now even though I'm still working and paying into social security, I'm receiving less than $700. a month in social security. Another $1300. a month would bring my social security up to $2000. a month. Why it's even enough to rent an apartment!

Bernie’s proposal to guarantee housing as a human right and to eliminate homelessness will cost $2.5 trillion over the next decade. It is fully paid for by a wealth tax on the top one-tenth of one percent – those who have a net worth of at least $32 million. (Bernie’s wealth tax will raise a total of $4.35 trillion.) A wealth tax on the rich! I love it. Eliminating homelessness and finally implementing the 1948 UN Declaration of Human Rights - priceless! It's time the millionaires and billionaires paid to eliminate poverty in this country. The wealth tax will also pay for universal child care and pre-school. By the way maybe the Congress should get on board and finally ratify the 1948 Declaration.

The Green New Deal will transform this country and be the first step in saving the planet from ultimate destruction. It needs to be extended to the rest of the world eventually as well. We need to cooperate with other countries to implement it and share renewable energy technology. This means joining China's Belt and Road initiative in terms of making sure everything under development is based on renewable energy and is non-polluting. It goes without saying that the US should rejoin the Paris Accords on climate change, but extend it even further.

All in all Bernie's plans are a wonderful and refreshing change of pace for the US of A and the rest of the world. If they come to pass, i will be proud of my country again for implementing both humanitarian policies and policies which will save the earth from a global warming catastrophe.

Off the Top of My Head

Bernie Sanders Best Candidate to Defeat Trump

by John Lawrence, February 16, 2020

There is a tug of war going on between Bernie and the so-called moderates. What the pundits don't understand is that the swing voters in the coming election don't just want somebody that can beat Trump. They want something different. That's why they voted for Trump in the first place. If the Democrats offer up a moderate, unexciting candidate, Trump will be reelected. Trump was a wild card; that's why people voted for him. They are still in the same mood. They want something different - not a party line Democrat.

Sure Trump has a base; the Democrats have a base, but this next election will be about who has the best ideas, not just turning out the base. Ideas are exciting especially when there are as many things that need to be dealt with as this country has. Certain issues have reached crisis proportions, namely, global warming, infrastructure, unending wars and health care. What young and swing voters don't want is a moderate of either party, and they will embrace a radical of either party. Those who voted for Trump in 2016 will turn around and vote for Bernie in 2020. By now Trump has pretty much worn out his welcome among a lot of people.

David Lazarus of the LA Times says that Bernie has done a lousy job of selling Medicare for All. He says $32 trillion for Medicare for All is a bargain.

[Democrats are] adept at highlighting the myriad problems with our healthcare system — the high costs, the millions uninsured, the financial devastation of getting sick.

But when it comes to solutions, most of the Democratic presidential candidates offer vague policy proposals and sidestep pointed questions about how much healthcare reform would cost.

This is simply foolish. On both counts — policy and price — the Dems have a winning political issue. ...

Gerald Kominski, a professor of health policy and management at UCLA, tells me the problem with communicating these ideas is that the scope of the problem is so large, and the underlying components so complex, many people can’t get their heads around such difficult policy matters.

“This easily slips into Nerd Land,” he said.

But once you clear away all the policy brush, Kominski observed, there’s a fairly simple message to be conveyed about Medicare for all or any other single-payer system.

“Most families would be better off,” he said.

There it is.

Yes, this is all very complicated. And, yes, there would be nothing easy about transforming the U.S. healthcare system into one more in line with our economic peers.

But let’s emphasize Kominski’s point: Most families would be better off.

That’s the case Democrats should be making, again and again, to the American people.

So what's so complicated about that? That's what a great communicator has to do. Make the case in the simplest terms. Bernie has made the case that there would be no premiums, no deductibles and no co-pays. He just needs to emphasize that the cost per person would be half of what it is now in line with costs per person in other advanced countries, and that there would be a sliding scale tax wise so that the rich would pay proportionately more while the middle class would pay proportionately less and the poor would pay nothing at all.

So rather than letting other candidates attack by mentioning an astronomical cost for Bernie's plan, he has to come back at them with the facts that for most people the cost would be less. He and Elizabeth Warren have to double down on the wealth tax and making corporations and the wealthy pay their fair share of taxes instead of getting tax subsidies.

Republicans will go nuts over Bernie being a "socialist", but most young people don't care about that label any more. They care about tangible things like free college tuition and the forgiveness of student loan debt which affects even people in their 60s.

Young people also don't want to inherit a dying planet. Better to siphon off the wealth of those who won't be around to see it and, therefore, don't care if the planet dies after they're gone. They will be like the rats leaving the sinking ship leaving the young to go down with it. But the young who will suffer sure do care about the planetary crisis that will be handed to them by their elders, and they will vote accordingly.

Off the Top of My Head

Greenhouse Gas Emissions Increasing Instead of Decreasing

by John Lawrence, November 29, 2019

Last year more Greenhouse gasses were emitted into the environment than ever. This trend is going in exactly the opposite direction that it needs to if planet earth will ever be a safe and welcoming place for our species and many others in years to come. Scientific American reported:

Global carbon emissions reached an all-time high in 2018, an extraordinary watermark in Earth’s history that underscores the need for faster and stronger action to address accelerating climate change, according to dozens of scientists.

A report released yesterday by a consortium of researchers known as the Global Carbon Project finds that global carbon dioxide emissions from burning fossil fuels are likely to have increased by about 2.7 percent in 2018, after a 1.6 percent increase in 2017.

What are we thinking? That the free market system is going to solve this planetary crisis? It is going to take concerted government action and the cooperation of governments around the world to deal effectively with this problem. The Green New Deal is absolutely essential in order the switch from a fossil fuel based economy to a renewable economy. The US needs to lead the rest of the world in this development in cooperation with China and other nations. If the earth is to survive as a livable planet, radical action needs to be taken now although nothing will be done till Trump and his Republican henchmen are out of office. That means that 2019 and 2020 will probably see even further increases in global greenhouse gas emissions. Whatever is happening now in this regard is totally ineffective.

It is going to take the rapid development of India assisted in great part by the US and China in bringing the poverty stricken in that country up to developed world standards in clean water and sanitation. They have to be pulled into the modern world by outside forces and at the same time converted to a renewable energy economy. It is going to take radical changes from a cow based diet to a plant based diet. It is going to take a whole new mindset regarding food, transportation, housing and everything else. The inhabitants of planet earth will either make these radical changes or else future generations, not those living now, will have to live with the consequences or die with them as the case may be.

Sustainability, not economic growth, has to be the bellwether and the keynote. A sustainable economy will be one unlike the economic systems existing on planet Earth now. We will need to consume less not more in an attempt to grow the economy. The economy has to fundamentally change, not grow but become sustainable, plant based and renewable energy based. People will have to radically alter their lifestyles. Consumption will have to decrease. The basics of life will have to be provided for all people. Poverty and war must be eliminated replaced by cooperation if Earth is to survive climate change.

High taxation nations like Sweden are full employment economies because they provide everyone with a job. If they can't find one in the private sector, government creates one by taxing the wealthy to get the money. Very little money is, therefore, spent on unemployment related welfare. This has to happen here with a Green New Deal providing the jobs. Sweden is what social democracy is all about. Bernie Sanders is well acquainted with this form of economy, and that's why he is the best candidate to lead this country and win the election in 2020. We don't need moderate action at this time. We've tried that, and it has failed. We need radical action before the Earth becomes a terminal case destroying the lives of future generations.

Off the Top of My Head

Trump's Tax Cuts Forcing the Fed to Buy Up US Treasurys

by John Lawrence, November18, 2019

Republicans used to stand for fiscal conservatism. But they're only fiscally conservative when Democrats are in power. When they control the purse strings, they spend like drunken sailors with the result that the national debt is now $23 trillion. During FY2019, the federal government spent $4.45 trillion and collected approximately $3.46 trillion in tax revenue. A little simple arithmetic shows that the US Federal government has to borrow almost a trillion dollars a year in order to make ends meet or 82.5 billion dollars a month. And this will go on and only likely increase ad infinitum.

"The belief in Washington and on Wall Street has long been that the U.S. government could just keep issuing debt because people around the world are eager to buy up this safe-haven asset. But there may be a limit to how much the market wants, especially if inflation starts rising and investors prefer to ditch bonds for higher-returning stocks."

However, there is another scenario. The Federal Reserve could just keep eating the debt much as it did during the various stages of quantitative easing (QE). The Fed paid the Wall Street banks in cash for the Treasury bonds it took on its balance sheet. This cash provided the liquidity which allowed the banks to keep functioning after the Great Recession of 2008. However, the Fed promised to start selling those Treasury bonds back into the market thus unwinding its balance sheet, what you might call a quantitative tightening. But the Fed didn't get very far with that until the liquidity of the big banks started to be a problem again. So the Fed is back to QE again although now it's not calling it that. However, it is infusing $60 billion a month into the repo market, and taking that much in Treasury bonds off the Wall Street banks' books.

Wall Street banks are required to buy US Treasury bonds thus soaking up US government debt, that is if no other country or individual or other entity wants to buy it. Increasingly, it's getting difficult for the Treasury to sell its debt as other countries like China, which holds the largest amount of US debt, are cutting back on their purchases especially in light of Trump's use of the US dollar in trade wars and sanctions. US debt is not seen as the gold standard  that it used to be. Therefore, the debt piles up on the balance sheets of Wall Street banks, and there is the threat of another liquidity crisis as there was in 2008. That's why the Fed is stepping in to buy up US Treasury debt and disappear it on its balance sheet thus providing liquidity to the Big Banks.

Market Watch writes:

Primary dealers are banks and other financial institutions approved to trade with the Federal Reserve. In return for that privilege, they are obligated to place bids at the U.S. Treasury Department’s debt auctions.

With the federal fiscal deficit widening, dealers have bought up an increasing amount of government debt, constraining their ability to provide liquidity to funding markets when needed, but only a small proportion of those holdings are in shorter-term Treasury bills.

U.S. Treasurys held by primary dealers stood at $206 billion in the week ending Sept. 25. This compared with their holdings of Treasury bills which averaged $22.9 billion over the last six months, according to Fed data.

So US Treasurys, largely as the result of Trump's tax cuts for the wealthy, are clogging up the system, and the Fed must step in again after it had promised to unwind its balance sheet comprising trillions of US government debt when economic times returned to normal. But what is normal these days? A lot of pundits think there will be QE, like strawberry fields, forever. That would be the new normal. But wait until there's a Democratic President, and Republicans will start screaming bloody murder again about the national debt.

 

Why We Need a Wealth Tax

by Robert Reich

Tuesday, May 14, 2019

The crisis of income inequality in America is well-known, but there is another economic crisis developing much faster and with worse consequences. I’m talking about inequality of wealth.

The wealth gap is now staggering. In the 1970s, the wealthiest tenth of Americans owned about a third of the nation’s total household wealth. Now, the wealthiest 10 percent owns about 75 percent of total household wealth. 

America’s richest one-tenth of one percentnow owns as much wealth as the bottom 90 percent.

Wealth isn’t like income.  Income is payment for work.  Wealth keeps growing automatically and exponentially because it’s parked in investments that generate even more wealth.

Wealth is also passed from generation to generation. An estimated 60% of the wealth in the United States is inherited. Many of today’s super-rich never did a day’s work in their lives.  The Walmart heirs alone have more wealth than the bottom42 percentof Americans combined.

America is now on the cusp of the largest intergenerational transfer of wealth in history. As wealthy boomers die, an estimated $30 trillion will go to their children over the next three decades.

Over time, this wealth will continue to grow even further – without these folks lifting a finger. This concentration of wealth will soon resemble the kind of dynasties common to European aristocracies in the seventeenth and eighteenth centuries.

It’s exactly what our Founding Fathers sought to combat by creating a system of government and economy grounded in meritocracy.

Dynastic wealth puts economic power into the hands of a relatively small number of people who make decisions about where and how to invest most of the nation’s capital, as well as which nonprofit enterprises and charities deserve support, and what politicians merit their campaign contributions. 

That means their decisions have a disproportionately large effect on America’s future.

Dynastic wealth also magnifies race and gender disparities. Because of racism and sexism, women and people of color not only earn less. They have also saved less. Which is why the racial wealth gap and the gender wealth gap are huge and growing.

Today, government is financed almost entirely by income taxes and payroll taxes – totally ignoring the giant and growing wealth at the top.

So how do we address the crisis of wealth inequality?

A wealth tax, as proposed by Senator Elizabeth Warren, would begin to tackle all this by placing a 2 percent tax on to wealth in excess of 50 million dollars. 

According to estimates, this tax would generate 2.75 trillion dollars over the next decade, which could be used for health care, education, infrastructure, and everything else we need.

Not only would a wealth tax raise revenue and help bring the economy back into balance, but it would also protect our democracy by reducing the influence of the super-rich on our political system.

We must demand an economy that works for the many, not one that concentrates wealth in the hands of a few. A wealth tax is a necessary first step.

The 12 Biggest Myths about Raising Taxes on the Rich

by Robert Reich

Monday, April 15, 2019

Some politicians are calling for higher taxes on the rich. Naturally, these proposals have unleashed a torrent of opposition – mostly from…the rich. Here are the 12 biggest myths they’re propounding: 

Myth 1: A top marginal tax rate applies to all of a rich person’s total income or wealth.

Wrong. It would only apply to dollars in excess of a certain level. The 70 percent income tax rate proposed by Congresswoman Alexandria Ocasio-Cortez would apply only to dollars in excess of 10 million dollars a year. The 2 percent wealth tax proposed by Elizabeth Warren would apply only to wealth in excess of 50 million dollars.

Myth 2 : Raising taxes on the rich is a far-left idea.

Baloney. 70 percent of Americans – including 54 percent of Republicans – support raising taxes on families making more than 10 million dollars a year.  And expecting the rich to pay their fair share is a traditional American idea. From 1930 to 1980, the average top marginal income tax rate was  78 percent. From 1951 to 1963 it exceeded 90 percent – again, only on dollars in excess of a very high threshold. Even considering all deductions and tax credits, the very rich paid over half of their top incomes in taxes.  

Myth 3: A wealth tax is unconstitutional.

Rubbish. Most locales already impose an annual wealth tax on the value of peoples’ homes – the main source of household wealth for most people. It’s called the property tax. The rich hold most of their wealth in stocks and bonds, so why should these forms of wealth escape taxation?  Article I Section 8 of the Constitution gives “Congress [the] power to lay and collect taxes.”

Myth 4: When taxes on the rich are cut, they invest more and everyone benefits, when taxes on the rich are increased, economic growth slows.

Utter baloney. Trickle-down economics is a cruel joke. Donald Trump, George W. Bush, and Ronald Reagan all cut taxes on the rich, and nothing trickled down. There’s no evidence that higher taxes on the rich slows economic growth. To the contrary, when the top marginal tax rate has been high – between 71 to 92 percent – growth has averaged 4 percent a year. But when top rate has been low – between 28 and 39 percent – growth has averaged only 2.1 percent.

Myth 5: When you cut taxes on corporations, they invest more, and create more jobs.

Wrong again. After Trump and the Republicans lowered the corporate tax rate in 2018, America’s largest corporations cut more jobs than they created. They used their tax savings largely to increase their stock prices by buying back their own shares of stock – enriching executives and wealthy investors but providing no real benefit to the economy.  

Myth 6: The rich already pay more than their fair share in taxes.

This is misleading, because it focuses only on income taxes – leaving out the large and growing tax burden on lower-income Americans; payroll taxes, state and local sales taxes, and property taxes take bigger bites out of the pay of lower-income families than higher-income.

Myth 7: The rich shouldn’t be taxed more because they already pay capital gains taxes.

Misleading. Rich families avoid paying capital gains taxes by passing their wealth on to their heirs. In fact, the largest share of big estates transferred from generation to generation are unrealized capital gains that have never been taxed.

Myth 8: The estate tax is a death tax that hits millions of Americans.

Baloney. The current estate tax, which only applies to assets in excess of 11 million dollars, or 22 million dollars for couples, affects fewer than 2,000 families.

Myth 9: If taxes are raised on the wealthy, they’ll find ways to evade them. So very little money is going to be raised.

More rubbish. For example, a 2 percent wealth tax, as proposed by Senator Elizabeth Warren, would raise around 2.75 trillion dollars over the next decade with very little tax evasion, according to research. A 70 percent tax on incomes over 10 million would raise close to 720 billion dollars over 10 years.

Myth 10: The only reason to raise taxes on the wealthy is to collect revenue.

No. Although these proposals would generate lots of revenue – and help us reduce the national debt while investing in schools, roads, and all the things we need – another major purpose is to reduce inequality, and thereby safeguard democracy against oligarchy.

Myth 11: It’s unfair to raise taxes on the wealthy.

Actually, it’s unfair not to raise taxes on the rich.  For the last 40 years, most Americans have seen no growth in their incomes at all, while the incomes of a minority at the top have skyrocketed. We’re rapidly heading toward a society dominated by a handful of super-rich, many of whom have never worked a day in their lives. More than 60 percent of wealth in America is now inherited.

Myth 12: They earned it. It’s their money.

Hogwash. It’s their country, too. They couldn’t maintain their fortunes without what America provides – national defense, police, laws, courts, political stability, and the Constitution. They couldn’t have got where they are without other things America provides – education, infrastructure, and a nation that respects private property. And to argue it’s “their money” also ignores a lot of other ways America has bestowed advantages on the rich – everything from bailing out Wall Street bankers when they get into trouble, to subsidizing the research of Big Pharma.

So the next time you hear one of these myths, know the truth.

Off the Top of My Head

Is Quantitative Easing Permanent?

by John Lawrence, April 12, 2019

With its QE policy the US central bank prints money and effectively gives it to the rich. The policy has prevented a recession because there is just more money floating around. Rich investors fuel start-ups, people get employed and the 401(k) owning middle class is happy to see their stock portfolios increase in value. Most of this money causes asset inflation meaning stocks and real estate. However, people in the lower middle class can't find a home to buy that they can afford, and the non-stock owning public is left out of this prosperous expansion of the economy. Rents are soaring and homelessness is on the increase.

The US dollar is not backed by gold or anything else so it is what is called fiat money. It's worth something because the government says it is. Flooding the economy with fiat money hasn't caused wage or price inflation like it was feared, but it has priced people out of homes. If one was smart enough to have invested in a home or the stock market many years ago, they are sitting pretty now. For the lower middle class, who don't own stocks or other financial instruments and are renters instead of owners of real estate, they are on the wrong side of the wealth and income divide. They are on the downside of economic inequality.

Another benefit of central bank money printing and giving it to the rich is that the government will always have buyers for US Treasury bonds so that it can run trillion dollar deficits ad infinitum. If the market for US Treasuries dries up, the US government is in a pickle. It has been sustained by the fact that the dollar is the world's reserve currency. Assets all over the world are priced in dollars. That has allowed the US to apply sanctions to governments and individuals who hold their wealth in dollar denominated assets. However, many countries in the world are changing their portfolios and banking arrangements so that the US doesn't have this hold over them. This means that the dollar will eventually lose value with respect to other currencies.

The Green New Deal would turn the current US economic model upside down. Instead of fiat money being injected at the top, it would be injected at the bottom benefiting primarily the poor and not benefiting the rich. It could be paid for partly by taxing the rich and partly by fiat money or money that has been printed in order to create good paying jobs as Abraham Lincoln did when he created the fiat Greenbacks to fund the Civil War. The Green New Deal plus Medicare for All will effectively take control of the economy away from the rich and give it to the poor. It could also cause wage and price inflation, but the asset inflation that we have now will attenuate. That means that the stock market and real estate prices will level off. People might again be able to afford to buy a house, and rents will become more reasonable.

Off the Top of My Head

Expanding Earned Income Tax Credit is Preferable to a Universal Basic Income

by John Lawrence, March 5, 2019

The EITC is a Federal program for low and moderate income earners which gives them a tax refund even if they don't pay any taxes. As such it is sort of a guaranteed income for those having little or no income. As a person's or family's income increases, the EITC gradually decreases until it disappears after a certain level of income is reached. As a family's income increases, the EITC effectively lowers the tax they would otherwise pay. In a random survey of 568 members of the American Economic Association in 2011, roughly 60% of economists agreed (31.7%) or agreed with provisos (30.8%) that the Earned Income Tax Credit program should be expanded.

The Universal Basic Income (UBI) would give a fixed amount of money every year to every American citizen. That's why I'm against it. The rich don't need an additional amount of income. The poor and moderate income group do. The EITC raises the income for low and moderate income families especially those with children. These are the people that need additional income the most. Some 40 million Americans are one paycheck away from the street. Just 39% of Americans say they have enough savings to cover a $1,000 emergency room visit or car repair, according to data released by the personal finance site Bankrate. What will retirement be like for them? Meanwhile, the three richest people in the US – Bill Gates, Jeff Bezos and Warren Buffett – own as much wealth as the bottom half of the US population, or 160 million people. Bezos' wealth accumulation vehicle, Amazon, will pay a whopping $0 in Federal taxes on $11.2 billion profits for 2018.

The beauty of the EITC is that it doesn't discourage people from working more and earning more. They still qualify for EITC albeit at a reduced level. Just as I believe that we should have Medicare for All with the rich paying more through increasing taxes on the rich, we should have an expanded EITC which I would call Social Security for All. There is no need for social security to be a universal program just as there is no need for a UBI. Rich people don't need an addition $1000 a month whether or not they paid into it. I am against universal programs that benefit the rich as much as they benefit the poor and middle income people.

Social security should be expanded for low and middle income retirees and eliminated for rich retirees. The EITC should be wrapped into social security. The whole program would benefit low and middle income people and families whether or not they were retired and whether or not they were supporting children. The income tax would just be adjusted to reflect these changes so that the rich and upper level income earners would pay more and lower income people would pay little or nothing or receive a monthly check from the government. This would constitute a negative tax for low and moderate income earners. Rather than a tax it would be a support. Low and moderate income earners would be supported by the government rather than taxed.

Robert Reich has some excellent ideas for expanding the EITC. See his article here. The gist of his ideas are the following:

1) Raise the maximum amount that very poor Americans receive from the Earned Income Tax Credit by several thousand dollars. 

2) Extend the Earned Income Tax Credit into the middle class, so even families earning the median family income – which was just about $76,000 in 2017 – will benefit. 

3) Expand the benefits of the Earned Income Tax Credit to two groups of Americans who are working hard, but not necessarily collecting paychecks: unpaid family caregivers of children and women.

4) Let people receive this money each month rather than in a lump-sum once a year at tax time.

These ideas combined with reducing the bloated military-complex budget approaching a trillion dollars a year will put the American People First rather than putting America First whatever that means. So the recipe is Medicare for all, Social Security for All and Tax the Rich,  Reduce the Military Budget to pay for it. That's simple, right?

Off the Top of My Head

Ann Coulter, Arch Conservative, Favors 70% Tax on the Rich

by John Lawrence, February 27, 2019

Whoever would have thought that the woman who pulls Trump's strings would have come out and advocated for that conservative bugaboo of all bugaboos: TAXING THE RICH! Will Rush Limbaugh and Sean Hannity kick her out of the tribe? Ann Coulter agrees with Democratic Socialist Alexandria Ocasio-Cortez that the rich should pay more. Coulter tweeted: "Ocasio-Cortez wants a 70-80% income tax on the rich. I agree! Start with the Koch Bros. -- and also make it WEALTH tax." A wealth tax has been proposed by Elizabeth Warren, another one of those pesky progressive Democrats. Has the right wing thrown in the towel on this issue?

The rich including Trump see taxing the rich as the harbinger of socialism if not communism. Robert Reich writes: "America will never be a socialist country,” Donald Trump declared in his State of the Union address. Someone should alert Trump that America is now a hotbed of socialism. But it is socialism for the rich. Everyone else is treated to harsh capitalism." Socialism for the rich is OK. The poor and middle class have to earn their money. You can't give them anything they haven't worked for as Ivanka Trump so eagerly laid out in her recent remarks. “I’ve spent a lot of time traveling around this country over the last four years. People want to work for what they get," Ivanka said in response to a question about the Green New Deal which Ocasio-Cortez advocates.

Sorry, Ivanka, the Green New Deal promises good paying 21st century jobs - not a free lunch - creating infrastructure that runs on renewable energy instead of greenhouse gas emitting fossil fuels. Alexandria said, "The world is going to end in 12 years if we don't address climate change" and she's right by all scientific estimates. Already there is a 3 degree C rise in temperatures globally baked into the cake according to Dahr Jamail's new book "The End of Ice." Even if we stopped emitting green house gasses today, even if all cars on the road were magically converted to plug-in hybrids today, the polar ice caps would still melt.

The glaciers in Alaska alone are losing an estimated 75 billion tons of ice every year.  The oceans, which absorb over 90 percent of the excess heat trapped by greenhouses gases in the atmosphere, are warming and acidifying, melting the polar ice caps and resulting in rising sea-levels and oxygen-starved ocean dead zones.  We await a 50-gigaton burp, or "pulse," of methane from thawing Arctic permafrost beneath the East Siberian Arctic Shelf, which will release the equivalent of around two-thirds of the total carbon dioxide pumped into the atmosphere since the beginning of the industrial era. Some 150 to 200 species of plants, insects, birds and mammals are becoming extinct every 24 hours – one thousand times the "natural" or "background" rate. This pace of extinction is greater than anything the world has experienced since the disappearance of the dinosaurs 65 million years ago.

So Alexandria Ocasio-Cortez's statement that we must address climate change in a much faster way than it is being addressed by America's version of capitalism is right on. The Old New Deal was necessary because of the Great Depression. It's not that people didn't work for what they got, but they built a lot of great infrastructure like the elementary school where I started my education, infrastructure that is still in use today. However, the free market system did not pay for it. It wouldn't have happened except for the fact that Franklin D Roosevelt and other Democrats in his administration were intent on saving what they could of the free market system, and to do that they had the government fund the Old New Deal.

What we are facing now is far more dire than the 25% unemployment of the Great Depression. It is literally the end of life on earth as we have known it. Already climate refugees are on the move to get away from countries adversely affected by climate change. Already villages are being relocated. Already islands are submerging in the oceans forcing people to move elsewhere. At the pace the world is moving, civilized life on planet Earth is all but doomed. We need to step up the pace as we did in the 1930s first with the Old New Deal and then with the war effort, both government funded projects. The effort that needs to be put into addressing climate change needs to exceed even those government funded efforts or the debate between socialism and capitalism will be moot, especially if there is no livable climate anywhere on the planet.

A US Tax on Wealth Is Long Overdue

Published on Tuesday, February 12, 2019 by Boston Globe

Between 1930 and 1980, the rate applied on the highest incomes was on average 81 percent, and the rate applied to the highest inherited estates was 74 percent. Clearly this did not destroy American capitalism.

by Thomas Piketty

 

2 Comments

Carefully calculated by economists Emmanuel Saez and Gabriel Zucman, the proposal by Sen. Elizabeth Warren (D-Mass.), now running for president, sets a rate of 2 percent on fortunes valued between $50 million and $1 billion, and 3 percent above $1 billion. (Photo: Getty Images)

What if the final blow for French President Emmanuel Macron came not from the yellow vests but from US Senator Elizabeth Warren of Massachusetts? Warren, who announced her candidacy for president on Saturday, has proposed what will doubtless be one of the key points of her campaign — the creation of a genuine federal progressive wealth tax.

Carefully calculated by Emmanuel Saez and Gabriel Zucman, the Warren proposal sets a rate of 2 percent on fortunes valued between $50 million and $1 billion, and 3 percent above $1 billion. The proposal also provides for an exit tax equal to 40 percent of total wealth for those who relinquish their American citizenship. The tax would apply to all assets, with no exemptions, with dissuasive sanctions for people and governments that do not transmit appropriate information on assets held abroad.

The debate has only just begun and the proposed schedule could still be extended and made more progressive — with rates rising, for example, to 5 to 10 percent per annum for multibillionaires. What is certain is that the issue of fiscal justice will be central to the presidential campaign. US Representative Alexandria Ocasio-Cortez of New York has suggested a rate of 70 percent on the highest incomes, while Senator Bernie Sanders of Vermont defends a tax rate of 77 percent on the highest inherited estates. While the Warren proposal is the most innovative, the three approaches are complementary and should be mutually beneficial. Advertisement

To understand this, let’s look back. Between 1880 and 1910, while the concentration of industrial and financial wealth was gaining momentum in the United States and the country was threatening to become almost as unequal as old Europe, a powerful political movement in favor of an improved distribution in wealth was developing. This led to the creation of a federal tax on income in 1913 and on inheritances in 1916.

Between 1930 and 1980, the rate applied on the highest incomes was on average 81 percent, and the rate applied to the highest inherited estates was 74 percent. Clearly this did not destroy American capitalism. Far from it. It made it more egalitarian and more productive, at a time when the United States had not forgotten that educational advancement and investment in training and skills — not the religion of property and inequality — were the backbone of prosperity.

Presidents Ronald Reagan, George W. Bush, and Donald Trump subsequently endeavored to destroy this heritage. They turned their backs on the egalitarian origins of the country by counting on historical amnesia and by fueling identity-based divisions. With the hindsight we have today, it is obvious that the outcome of this policy was disastrous. Between 1980 and 2020, the rise in per capita national income was halved in comparison with the period 1930-1980. What little growth there was ended up being swept up by the richest, the consequence being a complete stagnation in income for the poorest 50 percent. There is something obvious about the movement of a return to progressive taxation and greater fiscal justice that is emerging today and which is long overdue.

The innovation is that it is now a question of creating an annual wealth tax in addition to the income and inherited estate taxes. This is a crucial innovation in terms of justice and efficiency. Numerous one-shot capital levies have been successfully applied to real estate, professional, and financial assets subsequent to the world wars to pay off public debts, in particular in Japan, Germany, Italy, France and in many European countries. Collected only once, the rates applied to the largest private estates often rose to 40 and 50 percent, or even more.

With an annual wealth tax designed to be applied on a permanent basis, the rates are of necessity more restricted. However, they must be high enough to enable genuine mobility of wealth. From this point of view, the tax on inherited wealth comes much too late. We are not going to wait until Jeff Bezos or Mark Zuckerberg reach the age of 90 before they begin to pay taxes. With the 3 percent annual rate proposed by Warren, a static estate worth $100 billion would return to the community in 30 years. This is a good beginning but, given the average rate of progression of the highest financial assets, the aim should undoubtedly be higher (5 to 10 percent or more).

It is also crucial to allocate all the revenue to the reduction of inequalities. In particular, the American property tax, like the French real estate tax, weighs heavily on those with limited resources. Those two venerable property taxes, contrary to what is sometimes stated, tax not only the ownership of housing but also tax business assets (offices, plots of land, warehouses, etc.). The problem is that they have never been genuinely rethought since the 18th century. The time has come for them to become progressive taxes with graduated rates on net assets, with the key element being strong reductions for indebted households who are seeking to accede to property ownership. Let’s hope that the forthcoming American campaign, like the French discussion around the yellow vests, will at last afford the opportunity for an in-depth discussion on the taxation of property and fiscal justice.

---

Thomas Piketty is a French economist and the author of the best-selling book, Capital in the 21st Century.

As GOP Moves to Cut Medicare and Social Security, 60% of Americans Say Repeal Trump Tax Scam Instead

Published on Friday, October 26, 2018 by Common Dreams

"Working families shouldn't have to pay for the GOP tax bill. The rich and big corporations must pay their fair share of taxes!"

by Jake Johnson, staff writer

 

45 Comments

A woman holds a sign at a protest of the "Trump tax scam" on Dec.4, 2017. (Photo: CDEL Family/Flickr/cc)

As President Donald Trump and Republican leaders make clear that they intend to enact deep cuts to Medicare, Medicaid, and Social Security after next month's midterms in a supposed effort to rein in the soaring deficit—which has ballooned largely due to Trump's $1.5 trillion tax law—a survey published on Friday found that nearly two-thirds of Americans would prefer repealing the Republican tax cuts over slashing the safety net.

Conducted by NPR, PBS NewsHour, and Marist, the poll found that 60 percent of Americans would rather eliminate Trump's tax cuts than gut safety net programs to reduce the federal budget deficit. Just 21 percent of Americans said they would rather slash the safety net than repeal Trump's tax cuts, which have overwhelmingly benefited the rich and corporations.

The new survey comes just over a week after Senate Majority Leader Mitch McConnell (R-Ky.) blamed the nation's rising budget deficit on Medicare, Medicaid, and Social Security and declared that these programs must be cut to bring federal spending under control. Trump echoed McConnell just 24 hours later, promising "a lot" of spending cuts after the midterm elections.

Working families shouldn't have to pay for the #GOPTaxScam's bill. The rich and big corporations must pay their fair share of taxes! https://t.co/c1O6O5TQHm

— For Tax Fairness (@4TaxFairness) October 26, 2018

As Common Dreams has reported, the GOP cuts have steadily declined in popularity since Trump signed them into law last December, and most Americans say they have seen little to no benefit from the Republican law.

Meanwhile, the rich and massive corporations have seen an enormous windfall from the Republican tax cuts, which sparked an unprecedented spree of stock buybacks and record profits for Wall Street banks and major companies.

These disproportionate rewards for the rich likely explain why Republican candidates have "barely" been mentioning the tax law with just 10 days left before the Nov. 6 midterms.

"When you vote for bunk economics," concluded Patriotic Millionaires, "don't expect it to be an electoral boon."

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License