California Free Press

The Great Wealth Robbery

Published on Saturday, February 16, 2013 by Campaign for America's Future Blog

by Richard Eskow

Two important events took place this week. One was President Obama’s call for a higher minimum wage, which got a lot of attention. The other was a new report which showed just how much of our nation’s wealth continues to be hijacked by the wealthiest among us.

That didn’t get much attention.

There’s a Great Robbery underway, although most of its perpetrators don’t see themselves as robbers. Instead they’re sustained by delusions that protect them from facing the consequences of their own actions.

Heads I Win …

An updated report from economist Emmanuel Saez details the loss of income suffered by 99 percent of Americans, and the parallel gains made by the wealthiest among us. Its most startling finding may be this: The top 1 percent has captured 121 percent of the increases in income since the worst of the financial crisis, while the rest of the country has continued to fall behind.

If you thought the rich recovered from the crisis just fine but everybody else got the short end of the stick, relax: You’re not crazy. And since the financial crisis was caused by members of the 1 percent – not all of them, of course, just the ones we spent so much to rescue – it’s understandable if the injustice still rankles you.

You rescued them. Now they’re drinking your milkshake.

Tails You Lose

But this wealth shift is not a new phenomenon. As Saez notes in his paper, “After decades of stability … the top decile share has increased dramatically over the last twenty-five years.” In fact, the top 10 percent’s share of our national income is higher than it’s been since 1917 - and maybe longer. (The figures don’t go back any farther than that.)

Although it began during the Reagan years, to a certain extent this wealth shift has been a bipartisan phenomenon. During the Clinton boom years (more of a bubble, actually; Dean Baker has the details) the top 1 percent saw their real income grow by 98.7 percent, while the other 99 saw a smaller increase of 20.3 percent. They lost more during the recession that followed – a little over 30 percent, as opposed to 6.5 percent for everyone else – but more than made up the difference again during the Bush years.

The same thing happened during the Great Recession: The top 1 percent lost more during the initial shock, but they’re rapidly making up the difference now. Government policy’s been designed to help them. (Meanwhile, underwater homeowners still don’t have the help they need.)

The disparities are even greater when you include capital gains. (Saez uses pre-tax income for his figures. Given the generous tax breaks for capital gains and the many loopholes used by the wealthy,the after-tax differences could be even greater.) There’s even economic injustice at the top. Gains for the one percent have far outstripped those of the top five and top ten percent.

As the old song says: Them that has, gets.

If you can remember the sixties you weren’t there … or can’t afford to remember

The minimum wage has been falling since 1968. As John Schmitt notes in his paper, “The Minimum Wage Is Too Damn Low,” “By all of the most commonly used benchmarks – inflation, average wages, and productivity – the minimum wage is now far below its historical level.”

It’s currently $7.25. What would it have been if it had been tied to a commonly-used benchmark? Schmitt ran the numbers:

Consumer Price Index (CPI-I): $10.52

Current CPI methodology (CPI-U-RS): $9.22

As a percentage of average production worker’s earnings: $10.01

And if it had been tied to productivity gains the minimum wage would be $21.72 today. But that cream was skimmed off at the top.

Magical Thinking

There’s a myth in this country that enormous wealth doesn’t come from anywhere or anyone, that it’s self-creating and self-sustaining, thriving on pure oxygen like an epiphyte or a garden fairy. In reality, highly concentrated wealth is caused by actions – human actions with human consequences.

Saez: “A number of factors may help explain this increase in inequality, not only underlying technological changes but also the retreat of institutions developed during the New Deal and World War II – such as progressive tax policies, powerful unions, corporate provision of health and retirement benefits, and changing social norms regarding pay inequality.”

Wealth inequity is created whenever an employer lowers his employees’ wages, replaces a full-time worker with several part-timers, busts a union, cuts corners on workplace safety, or pays a lobbyist to change the rules.

It’s created whenever a job is shipped overseas, and when investments are shifted from job-producing industries to the non-productive financial sector. It’s created when GE outsources its manufacturing operation and gets into the banking (read, “gambling with taxpayers’ money”) business. Or when AIG stops insuring risk and starts betting on it.

And the process isn’t slowing down. In fact, it seems to be accelerating.

As Saez says, “We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional and tax reforms should be developed to counter it.”

Up

President Obama’s proposal is modest, and there’s no reason not to enact it immediately. For those who believe that businesses “can’t afford” to pay higher wages, some key facts:

Most low-wage workers work for large corporations, not Mom-and-Pop businesses.

A Data Brief from the National Employment Law Project finds that 66 percent of low-wage employees work for companies with more than 100 employees. A handful of very large corporations collectively employ nearly 8 million low-wage employees.

There’s no evidence minimum wage increases mean fewer jobs.

Opponents say a higher minimum wage means fewer jobs. But the official U.S. unemployment rate in 1968, when the real minimum wage was highest, was 3.6 percent. Today it’s 7.8 percent – and the unofficial numbers are even worse. At the state level,  the Fiscal Policy Institute recently concluded that “states with minimum wages above the federal level have had faster small business and retail job growth.”

Ninety-two percent of the 50 largest low‐wage employers in the country were profitable last year.

As the NELP notes, big corporations more than recovered from the recession: 75 percent are collecting more revenue, 63 percent are earning higher profits, and 73 percent have higher cash holdings than they did before the crisis.

Bringing It All Back Home

The real “job creators” aren’t the ultra-wealthy. If they could create jobs with all their added wealth, they would have done it already. The real job creators are working people with jobs.

They don’t invest their money in hedge funds or stash it in offshore accounts. They spend it: on food, transportation, their kids’ education, maybe a night at the movies … And then other people get jobs making those things possible.

We have a working model to follow: The USA in the 35 years after World War II. As Paul Krugman says, “To the extent that people say the economics is confusing or uncertain, that’s overwhelmingly because people want it to be.” We know how to do this.

Raising the minimum wage is a start. A maximum wage would help, too, by reducing CEOs’ incentives to emphasize quarterly gains over long-term growth and leaving more to be shared with employees.

We also need a national strategy for regaining the more reasonable distribution of income this country had in the 1950s. We need to ensure that the door of opportunity, which is closing every day for millions of young people, is opened again. And we need to ask the wealthiest to really pay their fair share – at something closer to the top tax rates of the 1950’s or 1960’s. (Elvis Presley’s manager “Colonel” Tom Parker once said “I consider it my patriotic duty to keep Elvis in the ninety percent tax bracket.”)

Most of all, we need to educate those around us so they understand what’s happening. That includes the well-intentioned well-to-do, who might do more to end the problem if they knew it existed.  After all, you can’t stop a robbery until you know it’s happening.

© 2013 Campaign for America's Future

Richard (RJ) Eskow is a well-known blogger and writer, a former Wall Street executive, an experienced consultant, and a former musician. He has experience in health insurance and economics, occupational health, benefits, risk management, finance, and information technology. Richard has consulting experience in the US and over 20 countries.

Upon Reflection: What I Believe

by John Lawrence from the San Diego Free Press

Well the New Year is upon us, and it's time to take stock and see if I can make any sense out of the goings on of the last year and the interaction of reality with my own mind. This is my crack at it.

1. I believe that gun ownership should be a privilege and not a right. The 2nd Amendment was constucted to be similar to the Swiss model in which citizens formed a militia for national defense. There was no standing army. That was the original intent of the framers of the Constitution for exactly the same reason: there was no standing army. Today that rationale is not relevant. Even Switzerland has moved the guns from homes to depots to prevent what little gun violence takes place there.

I don't believe background checks and a database of those with mental problems will solve much. In almost every mass murder, the perpetrators had no prior record of mental health problems although in retrospect everyone agrees that there were mental health problems. In almost every case, the guns were obtained legally. That tells you something which is that it is the proliferation of military type weapons with high capacity magazines that is the problem. These guns should not only be made illegal, but they should be taken off the streets, that is, confiscated or gotten rid of with buyback programs.

Terrorists have only been able to kill 17 people in the US since 9/11, but 88,000 Americans have died in gun violence from 2003 to 2010. Britain, which has very strict gun laws, had 41 gun murders in 2010 while the US had around 10,000. 6,626 Americans have died in the wars in Iraq and Afghanistan. About 3000 died in the tragedy of 9/11. The cost of the wars in Iraq and Afghanistan so far is around $4 trillion. At the same time zero dollars have been spent on the war on gun violence in the US in which about the same number of people die every year as died on 9/11 plus Iraq and Afghanistan (Americans, that is). Does this make any sense? As Pogo said, "We have met the enemy and the enemy is us."

2. I believe there should be a floor on poverty and a ceiling on wealth. For most of the last decade, the percentage of Americans living below the poverty line increased each year, from 12.3 percent in 2006 to 15.1 percent in 2010. In 2011 the official poverty rate was 15 percent, meaning that 46.2 million people live below the poverty line. The Walton family has more wealth than the lower 40% of the American population combined while workers at Wal-Mart subsist on wages so low that they need to supplement their incomes with food stamps and other social services driving up the cost of government.

Much of the wealth that  the upper 1% possesses is used to distrort the political system and was gained fraudulently by those in the financial sector. I wrote this in 2010 on Will Blog For Food:

"Hedge Fund manager John Paulson helped to design the Abacus fund for Goldman Sachs and filled it with a bunch of garbage. This fund was then peddled to unwary investors while Paulson shorted it. As a result, when the garbage in the fund went south, the investors lost $1 billion and Paulson's gamble netted him $3.7 billion. But that isn't even the worst of it. Taxpayers who bailed out the system actually paid Paulson the $3.7 billion - as if he needed it."

John Paulson hasn't been prosecuted for this fraudulent investment scheme and paid taxes on his income at the "carried interest" rate of 15% just like his fellow private equity fund manager, Mitt Romney. He has used some of his ill gotten gains to contribute to conservative causes as has billionaire Sheldon Adelson who has made his money off of seniors gambling away their social security checks.

I don't think anyone needs an income of more than $10 million a year, and a family of four needs an income of at least $40 thousand. These would be my recommended limits, for what they're worth, for the ceiling on wealth and the floor on poverty. Remember anyone earning an income of $10 million is going to store much of that as accumulated wealth which is going to provide a certain percentage return on investment (ROI in plutocrat speak) as unearned income each following year in addition to the $10 million earned (yeah, sure) income.

3. I believe that global warming is happening right now and is a result of human beings polluting the atmosphere with carbon emissions. As the saying goes "Don't shit where you eat" and we are shitting on Mother Earth. Future generations are going to have to eat and breathe here. Europeans and native Americans settled this continent without sending massive amounts of carbon into the atmosphere. We're going to have to relearn how to do the same, and there is not much time to waste without suffering the consequences that we're already starting to suffer.

As the number of billion dollar weather events starts to pile up, we will soon run out of money. We need to divert money from the bloated and wasteful military-industrial complex and spend it on infrastructure redevelopment in order to counteract and protect ourselves from the devastating aftermaths of extreme weather events like SuperStorm Sandy and SuperTyphoon Bopha. As I previously said, we have spent trillions to avenge the deaths of approximately 3000 people while spending hardly anything on gun control or infrastructure hardening. Both of the latter are bigger threats to American security than are the handful of self-proclaimed Al-Quaeda terrorists who have done a trivial amount of damage to the US since 9/11. Yet we spend trillions of dollars on them which mainly goes into the coffers of corrupt politicians and defense contractors. Not to mention the millions of civilians we have killed in Iraq and Afghanistan which guarantees a future generation of terrorists bent on avenging those deaths.

4. I don't believe that good middle class jobs are coming back as we recover from the Great Recession. They were disappearing long before the Great Recession hit. The combination of automating and computerizing manufacturing processes combined with the outsourcing of menial labor combined with the deunionization of the country means that we shouldn't sit around and hold our collective breaths expecting that everyone who has lost a good middle class job is going to get one back as we recover from recession and the unemployment rate gets down to 5%. The jobs that are being created are for the most part minimum wage service sector jobs. Even so-called full employment, if we achieve it, will consist in large part of those kinds of jobs. So what good is full employment as a measure of anything or a goal?

The so-called job creators are really job destroyers and they know that. They are just laughing up their sleeves as they automate and outsource thereby slashing the cost of production and increasing profits while at the same time calling for lower taxes on themselves on the grounds that they are job creators. This makes Wall Street very happy and top management is handsomely rewarded for doing this. As CEO pay soars, jobs are either outsourced or subcontracted to temp agencies who hire non-full time workers at minimal wages to do the heavy lifting. By this means the major corporations take no responsibility for low wages. It's somebody else, a sub-contractor, that's paying the low wages, not them. And a college education is no panacea. Middle aged college degreed folks are being let go, laid off and downsized never to be rehired again. A good job right out of college is no guarantee of continued employment as you become technologically obsolete in about 10 years.

What's the solution? I believe that self-employment is a big part of it. When you are employed by a corporation, you are vulnerable to being laid off for any reason at any time. When you're self employed, you can never be laid off. It may be too late for a lot of people, but young people coming up in school, even those college bound, should learn a trade while in high school that they can fall back on if need be. Most trades that serve the local community cannot and will not be outsourced and are amenable to self employment. The college educated crowd needs to think about what occupations and professions allow them to be self employed and which only allow them to be employees of some corporation. And most corporations don't want you if you've been laid off after the age of 50 when you are most vulnerable and desperately need a job.

I also believe that government has to be the employer of last resort. Corporations are in the business of outsourcing and creating temp jobs. Even startups usually only need employees until they really get rolling, go public and get obsessed with their stock price which means they need to reduce the cost of labor. At that point the job creators seek to creatively destroy American jobs and pocket increased profits.

Well, folks, there you have it in a nutshell. These are some of the topics I will be writing about in 2013. I also like to bring in the San Diego connection as what's happening in the wider world is also very definitely happening here as well. As far as our political system is concerned, my prediction is that Republicans in Congress will obstruct any meaningful legislation whatsoever and put a halt to any initiative President Obama wants to make. Better hope that 2014 brings a return to majorities in both the House and Senate for Democrats and that Obama can manage to get something constructive done for the good of the country in his last two years in office.

Happy New Year to All.

 

How Mitt Romney Drove Companies Bankrupt, Raided Pension Funds and Paid Himself Handsomely

by John Lawrence from the San Diego Free Press

Mitt Romney's Bain Capital was very good at making money for Mitt Romney. At the same time it loaded companies Bain bought with debt, borrowed even more money to pay dividends to Mitt Romney and destroyed or outsourced lots of jobs. It even raided pension funds. Then Romney turns around and holds himself up as a "successful businessman." Sure he was successful in terms of making money for himself. But this was at the expense of those workers at previously successful companies who lost their jobs when those companies went bankrupt thanks to the debt loaded on them due to money borrowed from banks that went directly into Romney's pocket.

Here's how a private equity fund such as Bain Capital works. It picks a successful company and then takes it over with a leveraged buyout (LBO). The money borrowed from a bank to pay off the owner or stockholders does not become the debt of Bain Capital. It becomes the debt of the company that was taken over. You might ask, "Why would a bank even loan money to place a company in debt for the purposes of being taken over by Bain Capital which does not even assume the debt?" Well, it's for the same reason that so many subprime loans were available. The bank does not continue to hold the loan. It offloads it to investors such as pension funds so the bank doesn't really care. They have no skin in the game. Why not loan Mitt Romney money to take over companies? There's good money in those commissions.

Pension funds show up again and again as the fall guys in Wall Street machinations. They are the dumb clucks who keep trying to make up for the fact they are 50% underfunded by entering into sucker bets and losing even more money. And since Romney and Bain do not assume the debt themselves, they don't care if the overleveraged company goes bankrupt since, if it does, they lose nothing. That company is just a money conduit for Romney since, as soon as they take it over, they have the company borrow even more money in order to pay Romney a dividend. You might ask. "Why would the owners of a company or the shareholders sell out to Bain Capital?" Because Bain offers them a really good deal, that's why. After all they don't care if they overpay. They're using OPM, other people's money. It's all based on a loan to the company they intend to take over, not a loan to Bain itself. Bain takes hardly any risk at all. So much for the risk takers that Romney eulogizes.

Romney pioneered the strategy of having a company Bain took over in a leveraged buyout borrow even more money to pay himself a dividend. So now the company is staggering under a huge load of debt and in many cases they can not keep up with the payments. In 1994 Bain bought medical equipment manufacturer Baxter International. After a merger with another company, it became known as Dade Behring. Bain then reduced R&D investment because Bain's game plan was to only hold the company for five years or so. So why invest for the long haul? The money borrowed from banks for the LBO was usually for five to eight years with small monthly payments and a big balloon payment at the end. About five years after Bain had acquired Dade, it was looking to get out. But not before it drained even more money from Dade and placed the company and its workers in even more jeopardy.

Bain froze the workers' pension benefits and converted them from a defined benefit plan, in which employees were entitled to 75% of the average of their last three years' salaries, to a cash-balance plan in which they would get a lump sum equal to what they were owed in 1999. Workers were furious. They threatened to sue, but never went through with the lawsuit because they were fearful of losing their jobs. Dade saved $10 to $40 million with this strategem. The very month Dade did the conversion, it used the projected savings as the basis to borrow $421 million placing Dade in even more debt. The result was that Dade paid Bain and its partner Goldman Sachs the entire amount as a dividend. Bain and Goldman had only put down $81 million to buy the company in the first place. Yet in June 1999 they received $365 million from the dividend, a gain of 4.3 times their initial investment. Consequently, Dade's debt more then doubled to $871 million in order to make this huge payment to Bain and Goldman. Romney had left operational management of Bain that year, though his disclosures show that he owned 16.5 percent of the Bain partnership responsible for the Dade investment until at least 2001. In order to make their loan payments, Dade had to cut not only R&D but also the core of the company. It sold off assets and fired workers. Nevertheless, the whole thing came crashing down in 2002 when Dade filed for bankruptcy protection. It was the end of Bain's and Goldman's involvement with Dade. They had looted the entire company, raided the pension fund, albeit indirectly, and caused mega job losses. Nevertheless, Romney could turn around calmly, face the cameras and proclaim himself a "successful businessman" for having made hundreds of millions of dollars for himself and his investors. Bain and Goldman had made a $280 million profit on an investment of only $85 million. Is this what America is all about? Is this what freedom consists of? Romney seems to think so.

Later Dade emerged from bankruptcy and, after increasing its investment in R&D, went on to become a successful company probably because Romney and Bain were no longer in the picture. They had done their part forcing the company into bankruptcy by having Dade take out huge bank loans in order to pay Romney and Goldman dividends.

Bain used the same playbook with several other companies: put down a small down payment, get a bank loan (which the bank resells to other investors) for a leveraged buyout (in which the company not Bain assumes the debt) and then after taking ownership get another bank loan to pay Bain a huge dividend while saddling the company with even more debt. As a result of these tactics at least six companies filed for bankruptcy between 1992 when Romney took over Bain Capital and 2004. The reason that Romney wants us to believe that he had nothing to do with Bain after 1999 is that most of these companies filed for bankruptcy between 2000 and 2004. Nevertheless, according to SEC filings Romney was sole owner and operational manager of Bain until 2001. During this period there were several multimillion-dollar investment deals, bankruptcies and a spate of layoffs and overseas job shifts at Bain-owned companies. No wonder Romney doesn't want to release his tax returns. They would show that Romney took dividends from several companies that went bankrupt during this period including Stage Stores, Ampad, GS Industries, Dade Behring, DDi and KB Toys. Mitt Romney, the successful businessman, doesn't want you to know how he profited from driving companies bankrupt and destroying jobs. In any event Bain made more than 20 percent of its money in its 1987 to 1995 funds from five companies that borrowed money to pay it dividends or buy back shares that later collapsed.

Since balloon payments on many of the loans that private equity funds had their take-over targets take out are due in the next few years, the eventual collapse of those companies could trigger the next big financial crisis. If Mitt Romney is elected President, it will be just in time to deal with that.

This article relies on the book, "The Buyout of America" by Josh Kosman (sub-title: How Private Equity Will Cause the Next Great Credit Crisis) and the Vanity Fair article, "Where the Money Lives," by Nicholas Saxson.

Mitt Romney: Vulture Capitalist

by John Lawrence

I have never heard so many conservative pundits offering gratuitous avuncular advice to Barack Obama that his campaign strategy attacking Bain Capital will not get him anywhere. Joe Scarborough of Morning Joe on msnbc and others have gone on and on about how using Bain Capital against Mitt Romney is not a good strategy. Well, when conservatives offer advice to Barack Obama about what will or will not work for him, Obama better do just the opposite of what they recommend because ultimately they want him to lose. Therefore, he should double down, not abandon, the Bain Capital strategy.

But the problem with Obama is that he starts out praising Romney for being a good businessman (Clinton said he was "superlative"), certainly something no Republican would do for Obama. Then Obama goes on to say that, while Romney created wealth for himself and his investors, the President of the US must be concerned about creating jobs for everyone. This is a roundabout, circuitous route to putting Romney down, a circumlocution, something the Republicans would never do. Instead, they start right our calling Obama a failure. Obama starts out praising Romney, then seeming to walk on eggshells aiming at a scholarly criticism of his activities at Bain. Obama should get right to the point: Romney made his money at Bain by destroying jobs and companies, picking over their bones like the vulture he is.

Bain Capital is a private equity (formerly known as leveraged buyout) firm. They changed the name  to protect the guilty. What they do is to pick the bones of perfectly healthy companies and in many cases drive them into bankruptcy. Here's how it works: they buy a private company with borrowed money (the leverage in leveraged buyout). But they don't buy just any company. They buy one with assets they can strip. It just so happens that they usually buy companies that have a unionized work force. Why? Because a company with a unionized work force usually has a pension fund. Their goal is to get their hands on that pension fund and transfer that asset to Bain Capital. So they borrow the money to buy a company, strip the pension fund and fire all the unionized workers. Then they hire a nonunionized work force to do the same jobs at half the pay. In this way they claim to have made the company "more efficient." Contrary to Republican hogwash, wealthy Individuals like Romney are job destroyers not job creators. Then the vulture capitalists borrow as much money as they can using the company itself as collateral. The next thing they do is to pay Mitt Romney himself, his partners and investors all the borrowed money plus the pension fund. They may also sell off parts of the company or move jobs overseas. Then the company is left to sink or swim on its own. If it can manage to pay all the increased debt Bain Capital put it in, it swims. If not, it sinks and goes bankrupt. In either case, Mitt Romney and Bain Capital have made tens or hundreds of millions of dollars.

President Obama's attack on Romney and Bain Capital has been rather tepid and timid. He essentially says that, while Romney and Bain have done wonderfully well for Bain Capital's investors making them a lot of money, that this is not the skill set required of the President of the United States who has to create jobs for the general public, not make a lot of money for investors. This is typical Barack Obama rationalizing. Instead, he should go for Romney's jugular, something the Republicans including Romney never fail to do, not congratulate him on making money for his investors. First of all, even the companies that have managed to survive the Bain treatment have ended up with a non-union work force working for minimal pay. The fact that Staples and some others are successful companies has nothing to do with it. Staples was never acquired by Bain. They just played a venture capital role there. Romney's role as a vulture capitalist was to identify companies with tangible assets and then to figure out a way to get control of those assets for Bain and its investors. But it gets worse from there.

This is from the LA Times:

Bain Capital had bought a controlling interest in a paper products company called Ampad for $5 million in 1992. Two years later, after Ampad bought a factory in Marion, Ind., the new management team dismissed about 200 workers, slashed salaries and benefits, and hired strikebreakers after the union called a walkout. “We were just fired,” Randy Johnson, a former worker and union officer at the Marion plant, recalled in a telephone interview. “They came in and said, ‘You’re all fired. If you want to work for us, here’s an application.’ We had insurance until the end of the week. That was it. It was brutal.” In October 1994, Johnson and other striking workers drove to Massachusetts to protest Romney’s Senate campaign. “We chased him everywhere,” Johnson recalled. “He took good jobs with benefits, and created low-wage, part-time, no-benefit jobs. That’s what he was creating with his investments.”

The Republicans like to point out how Solyndra, which was invested in by Obama's administration and then went bankrupt, was a huge flop. No matter how many successes the Obama administration has had, Republicans will characterize the whole program as a failure because of the failure of a small part of it. They don't mention the other successes like saving General Motors. By the same token Obama should talk about Ampad, GST Steel, Aventis and other companies whose bones have been picked by Romney and Bain and ignore any successes Romney and Bain might have had.

This is from Rolling Stone:

And let's take a look at the record specifically of Bain Capital, which Romney owned from 1992 to 2001. • 1988: Bain put $10 million down to buy Stage Stores, and in the mid-'90s took it public, collecting $184 million from stock offerings. Stage filed for bankruptcy in 2000. • 1992: Bain bought American Pad & Paper, investing $5 million, and collected $107 million from dividends. The business filed for bankruptcy in 2000. • 1993: Bain invested $25 million when buying GS Industries, and received $58 million from dividends. GS filed for bankruptcy in 2001. • 1994: Bain put $27 million down to buy medical equipment maker Dade Behring. Dade borrowed $230 million to buy some of its shares. Dade went bankrupt in 2002. • 1997: Bain invested $41 million when buying Details, and collected at least $70 million from stock offerings. The company filed for bankruptcy in 2003.

President Obama is afraid to criticize Romney's Bain Capital days because Republicans will accuse him of being against capitalism. Well, so what. Today's capitalism is not your Grandfather's capitalism. If a law were passed making it illegal to raid a company's pension fund and make a large payout to investors, would that be against capitalism? Capitalism is malleable. It only exists within a legal framework. Some of it should be outlawed like the part that let Romney buy companies with borrowed money and then take a tax writeoff because the money was borrowed. Wall street lobbyists have changed the laws regarding capitalism to their own advantage. The Commodities Futures Modernization Act of 2000 deregulated derivatives and helped to cause the financial meltdown of 2008. Advocating reregulating derivatives is not anti-capitalistic. So if Obama were to go after Romney's record as a vulture capitalist, it does not mean he is against capitalism, only capitalism as it has been "modernized" and deregulated.

Obama should double down on what Romney and  Bain Capital really did which was to load companies up with debt, take the borrowed money for their own personal benefit, raid pension funds, fire unionized workers and hire nonunionized ones at much reduced pay, sell off profitable parts of companies and then force them into bankruptcy. This is exactly what a vulture does: picks apart a carcass for its own profit. He should not give Romney one iota of credit for making money for himself and his investors. After all Romney will never be caught dead giving Obama one iota of credit for anything.

Why Neither Stimulus Nor Austerity Will Work to Revive Western Economies But Redistribution Will.

by John Lawrence

Think back a couple hundred years ago - before industrialization when economic life was much simpler. Let's assume that when a good or service was purchased, that the person who received the money spent it all - no savings. Therefore, money was circulated just like water can be circulated in a closed pipe. If the pipe makes a circle, then all that is needed to keep water flowing through the pipe is a pump. Similarly, when the blacksmith received $10. for shoeing a horse, we can assume that he took that money and spent it at the grocery. The grocer then took that same $10. and spent it with the farmer. The farmer took the money and spent it at the haberdasher's and so on. So the same $10. gets passed around from person to person until it lands back up at the blacksmith's again and the process repeats itself over and over. As long as all the yeoman in any given village have a good or service they can sell and as long as the money flows through the hands of each person in the village, that same $10. is used over and over; it is circulated round and round just like the water in the pipe. As long as the money flows fast enough, everyone can purchase what they need and business is good. GDP is a measure of how many transactions occur in any given year. The faster the money flows through the system, the greater is GDP.

Now what happens when one of the participants saves some of the money instead of spending it all? Then there is less money to flow through the system and economic activity and hence GDP will be lower. The more money that is saved, the more economic activity will decrease until the money supply is inadequate to meet people's needs. It is a well known fact that, when consumers spend more and save less, economic activity and GDP increase. That's why George W Bush sent everybody a check and told them to go out and spend it. When economic activity decreases enough, a recession or a depression occurs. In the US consumer spending accounts for 70% of GDP so, if consumer spending decreases, economic activity decreases. This would happen in the simple economy described above if, instead of the blacksmith spending his money at the grocer's, he saved it instead. So saving decreases economic activity and GDP. There is one caveat to that and that is, if instead of the blacksmith saving the money, he invested it by expanding his business and created a couple of additional jobs. Then those additional workers would also go out and spend their paycheck adding to economic activity.

When the economy goes into recession two things happen. Government revenues from taxes decline and consumers spend less because they have less money to spend. Keynsianism is a philosophy that says that the government should borrow money in a recession and spend it into the economy thus creating jobs and increasing economic activity or at least preventing starvation and dire need. The other way that economic activity can be expanded is for the central bank to loan money to banks which then loan it to businesses who want to expand their businesses thus creating jobs. So money is injected into the economy either by the government borrowing money or by the central bank printing money in the form of a loan. In either case debt is created and the economy becomes a debt based economy.

If we think of money circulating similar to water circulating in a network of pipes, if a business or an individual saves a portion of the money instead of spending it, there is a continual need for money creation to keep up the same level of economic activity. That's why capitalism has to be a growth based economy. When there was one blacksmith for every village, saving money was not a problem since the income from blacksmithing over the economy as a whole was dispersed to many blacksmiths who all spent most of it keeping it in circulation. If one blacksmith captured most of the business - let's say he called his business Blacksmiths Are Us - and franchised it throughout the whole economy, then all the profits would flow to one person - more or less - and money would be continually taken out of circulation necessitating growth and debt based money creation by the government or private businesses just to provide enough jobs to keep money circulating to all people with economic needs. Money saved and not spent is similar to water in a system of pipes entering a cul de sac or black hole from which it never emerges or to being siphoned off never to return to mainstream circulation.

In today's economy money is continually siphoned off by the major corporations who have not only nationalized but who have internationalized. It's as if Blacksmiths Are Us has gone global. That money which is taken out of the real economy goes into the financial economy which is a black hole from which money never emerges again into the real world economy. So there is a continual need for either the central bank to print money (increase the money supply) or for the government to prime the pump with debt based stimulus money (the fiscal method).

In a western capitalist economy there is a continual need for money to be created either by government borrowing and the provision of fiscal stimulus or by means of the central bank loaning money into the banking system. The only problem is that today, when the Federal Reserve (the central bank) loans money to other banks, the money goes not into the real economy where jobs are created but into the financial or casino economy. In other words it goes to rich people like Jamey Dimon of JP Morgan Chase or Lloyd Blankfein of Goldman Sachs who don't spend it in the real economy but who gamble it in the casino economy so it doesn't do too much good for the creation of jobs which provides for the distribution of money to all who need it. A job is seen as the only legitimate means for an economic unit to acquire the money it needs to meet its needs. Of couse, just giving the money to all who need it would increase economic activity and GDP, but that isn't seen as legitimate. Similarly, when the government borrows and spends, the money also does not circulate much since it is soon siphoned off by the Wal-Marts, the Exxon Mobils - the modern day versions of Blacksmiths Are Us - where it ends up in the financial economy. There is no very good way to keep the money circulating in the real economy since large corporations are siphoning it off at every turn which means that either the central bank has to keep printing money or the government has to keep borrowing and spending money, the Keynesian approach.

Therefore, neither the method of giving money to rich people through zero interest loans nor fiscal stimulus requiring more government debt will work in today's economy. Paul Krugman, who advocates fiscal stimulus and more government borrowing, is wrong and the Republican supply siders who advocate giving more money to the rich are also wrong. Obviously, the central bank cannot go on indefinitely printing money because of the devaluation of the currency and subsequent inflation and the government can not go on indefinitely borrowing money because interest on the debt eventually consumes all expenditures so what is the solution? Giving more tax breaks to the rich only compounds the problem of money being siphoned off from the real economy, taken out of circulation and placed in the financial or casino economy where it circulates only among the financial elite. The Republican solution is to speed up the process of redistributing money from the poor and middle class to the rich even more.

The only viable solution is to redistribute the money from rich to poor. The money that has been siphoned off and taken out of circulation by the Wal-Marts and Exxon Mobils of the world needs to be siphoned back into the real economy where it can continue to circulate. Too much money is ending up in the cul de sacs where it never reenters the real economy but instead circulates endlessly in the casino economy among very rich people. 300 years ago when the economy was much simpler and consisted of a yeomenry who provided a good or service and spent all the money they took in, money circulated endlessly in the real economy. Today, Wal-Mart and Exxon Mobil take most of the money out of the real economy in the form of profits. That money leaves the real economy and enters the financial economy which is a big black hole as far as the real economy is concerned. In order not to increase the money supply endlessly or to require the proliferation of new products and services, which provide a temporary increase in economic activity, new jobs and circulation of money to a wider distribution of individuals and families, money has to be recirculated and redistributed into the local real economy. And in order for the Federal Government not to have to borrow money endlessly, it needs to siphon money from the rich who won't spend it and redistribute it to the poor and middle class who will. In this manner the economy needs not to be based so much on debt based growth but can become more of a steady state, balanced economy. Money siphoned off by Blacksmiths Are Us is siphoned back again and redistributed to the local blacksmiths where it can circulate in the real economy again.

Another way the economy can grow without creating debt or increasing the money supply endlessly, which means just fueling the casino economy, is to take Ellen Brown's suggestios from her book Web of Debt, and that is for the central bank to not loan money into the economy with zero interest loans to the big banks, but instead to spend the money into the economy for infrastructure projects and the like. Thus the money supply is increased as needed without the creation of debt. This is the method Abraham Lincoln used to fight the Civil War and to build the transcontinental railroad. It is estimated he saved the nation $4 billion in interest by spending the money into the economy with greenbacks instead of loaning it into the economy at interest.

Taxing the rich amounts to siphoning back money which has been siphoned off from the real economy in the first place and putting it back into circulation amongst a wider distribution of people. The Blacksmith Are Us franchisees supply a uniform blacksmithing experience for weary travelers regardless of which village they happen to be in. As such they take business from the Mom and Pop blacksmiths and concentrate wealth at the central headquarters of Blacksmiths Are Us. We imagine that no matter which village George Washington or Thomas Jefferson was in, they could count on the fact that their blacksmithing needs were met with satisfaction when they shopped at Blacksmiths Are Us. However, this would diminish the amount of money in the real local economy due to the fact that the business of the local blacksmith would diminish since the profits would be shipped elsewhere.

A final note: with all the economic turmoil in Europoe over the eventual default by Greece on its loans and the fact that this could create economic chaos, instead it could be seen as an opportunity for Greece to set up its economy as non-debt based by having its central bank spend fiat money into the economy thus creating jobs and distributing income until the economy picks up steam of its own accord. Thus Greece could drop out of the eurozone with it's western debt based economic methods and align itself more with the non-western world to create a non-debt based society instead of one drowining in debt as it is presently constituted.

The Fable of the Century

by Robert Reich

Thursday, April 5, 2012

Imagine a country in which the very richest people get all the economic gains. They eventually accumulate so much of the nation’s total income and wealth that the middle class no longer has the purchasing power to keep the economy going full speed. Most of the middle class’s wages keep falling and their major asset – their home – keeps shrinking in value.

Imagine that the richest people in this country use some of their vast wealth to routinely bribe politicians. They get the politicians to cut their taxes so low there’s no money to finance important public investments that the middle class depends on – such as schools and roads, or safety nets such as health care for the elderly and poor.

Imagine further that among the richest of these rich are financiers. These financiers have so much power over the rest of the economy they get average taxpayers to bail them out when their bets in the casino called the stock market go bad. They have so much power they even shred regulations intended to limit their power. 

These financiers have so much power they force businesses to lay off millions of workers and to reduce the wages and benefits of millions of others, in order to maximize profits and raise share prices – all of which make the financiers even richer, because they own so many of shares of stock and run the casino. 

Now, imagine that among the richest of these financiers are people called private-equity managers who buy up companies in order to squeeze even more money out of them by loading them up with debt and firing even more of their employees, and then selling the companies for a fat profit.

Although these private-equity managers don’t even risk their own money – they round up investors to buy the target companies – they nonetheless pocket 20 percent of those fat profits.

And because of a loophole in the tax laws, which they created with their political bribes, these private equity managers are allowed to treat their whopping earnings as capital gains, taxed at only 15 percent – even though they themselves made no investment and didn’t risk a dime.

Finally, imagine there is a presidential election. One party, called the Republican Party, nominates as its candidate a private-equity manager who has raked in more than $20 million a year and paid only 13.9 percent in taxes – a lower tax rate than many in the middle class.

Yes, I know it sounds far-fetched. But bear with me because the fable gets even wilder. Imagine this candidate and his party come up with a plan to cut the taxes of the rich even more – so millionaires save another $150,000 a year. And their plan cuts everything else the middle class and the poor depend on – Medicare, Medicaid, education, job-training, food stamps, Pell grants, child nutrition, even law enforcement.

What happens next?

There are two endings to this fable. You have to decide which it’s to be.

In one ending the private-equity manager candidate gets all his friends and everyone in the Wall Street casino and everyone in every executive suite of big corporations to contribute the largest wad of campaign money ever assembled – beyond your imagination.

The candidate uses the money to run continuous advertisements telling the same big lies over and over, such as “don’t tax the wealthy because they create the jobs” and “don’t tax corporations or they’ll go abroad” and “government is your enemy” and “the other party wants to turn America into a socialist state.”

And because big lies told repeatedly start sounding like the truth, the citizens of the country begin to believe them, and they elect the private equity manager president. Then he and his friends turn the country into a plutocracy (which it was starting to become anyway).

But there’s another ending. In this one, the candidacy of the private equity manager (and all the money he and his friends use to try to sell their lies) has the opposite effect. It awakens the citizens of the country to what is happening to their economy and their democracy. It ignites a movement among the citizens to take it all back.

The citizens repudiate the private equity manager and everything he stands for, and the party that nominated him. And they begin to recreate an economy that works for everyone and a democracy that’s responsive to everyone.

Just a fable, of course. But the ending is up to you.

How Republican Presidents Lowered Taxes on the Rich and Raised Taxes on the Poor and Middle Class - Part 2, the Bush Sr, Clinton and Bush Jr Years

by John Lawrence

Part 1 of this series covering the Reagan years can be found here. This post relies on data from the following sources: Federal Income Tax Rates History, Social Security and MedicareTax Rates, Historical Capital Gains and Taxes and Party Control of Congress and the Presidency. In the first part we pointed out that Reagan under the tutelage of Ayn Rand lover Alan Greenspan flattened the tax code to just two rates: 15% for anyone making less than $56,427. and 28% for anyone making more than that amount. This effectively raised taxes on the poor and lowered them on the rich compared to the day Reagan entered office when the tax rate was zero on the poor and 70% on the rich. Reagan and Greenspan also drastically raised Medicare and Social Security (payroll) taxes which affect mainly the poor and middle class. Bush Sr served from 1989 till 1992 when Clinton took over. In 1991 under a Democratic Congress, Bush Sr raised taxes despite his pledge not to. Remember his campaign promise: "Read my lips. No new taxes." However, despite the big brou ha ha, Bush did not raise income taxes on the poor and middle class; he only raised them on the rich. You would think that, if the middle class and poor were paying attention, they would have been satisfied with this development and reelected Bush in 1992. But the Republicans and right wing media talking heads raised such a hue and cry, convincing voters that Bush Sr had raised taxes on all people and not just the top few percent, that Bush was defeated and Clinton elected. What Bush did was to add a third tax bracket of 31% for incomes over $135,336 while leaving unchanged the two lower tax brackets. Bush "unflattened" the tax code slightly which should have raised a cheer among the middle class, but it didn't due to the fact that they were convinced by the right wing punditry that Bush raised taxes period, end of story. They didn't distinguish whom Bush raised taxes on. They only paid attention long enough to understand that Bush raised taxes.

Bush Sr also raised FICA and SECA (Social Security and Medicare) taxes. These went from 7.150%  for employees and employers in 1987 to 7.51 in 1988 and 1999. The corresponding rates for the self-employed went from 14.3% in 1987 to 15.02% in 1988 and 1989. So what Bush gave with one hand to the poor and middle class in the form of not raising their income taxes, he took away with the other by raising FICA and SECA taxes which affect mainly the poor and middle class. The net effect was to make the total tax burden on the middle class as great or greater than the tax burden on the rich since the rich pay little FICA and SECA tax compared to their total income. Bush Sr and the Republicans were at it again in 1990, a year in which they raised FICA and SECA taxes to 7.65% for employees and employers and 15.3% for self-employed where they have remained to this day. So Bush Sr was not such a traitor to his class as one might think from just considering the income tax structure alone. The net effect was that he raised taxes on the poor and middle class much more than he raised them on the rich.

Bush Sr had a Democrat controlled Congress during his four year term and they managed to raise the capital gains tax from 28% to 28.93% in 1991, a piddling amount compared to the huge decreases which were to come later during the Bush Jr administration. So the rich had their capital gains taxes raised for the last year of the Bush Sr administration through no fault of Bush's own. It was the Democrats who pushed this tax increase through.

Clinton took over in 1993 and with a Democratic Congress unflattened the tax code even more adding two tax brackets at the high end. The following is the tax table for married couples filing jointly, inflation adjusted.

Table 1 - 1993 - Married Filing Jointly

Marginal            Tax Brackets
Tax Rate      Over       But Not Over

15.0%            $0           $57,298

28.0%       $57,298        $138,432

31.0%       $138,432      $217,392

36.0%       $217,392      $388,200

39.6%       $388,200 -

____________________________________________________________________

Despite the fact that Clinton raised only taxes on the rich and kept them the same on the poor and middle class, a fact that the vast majority of voters should have been happy with, Republicans managed to tag Clinton and the Democrats with the "tax and spend" and "big government" labels. FICA and SECA taxes remained the same under Clinton.

In 1994, half way into Clinton's first term, Republicans took over control of Congress. Despite that fact the income tax code remained substantially unchanged for the rest of Clinton's Presidency with the result that, by the time Clinton left office in 2000, there was a budget surplus and the nation was on track to eliminate the national debt entirely.

Capital gains taxes were a different story. They went from 28.93% in 1991 to 29.19% in 1993. The poor and middle class swallowed the Republican hogwash about Clinton raising their taxes and elected a Republican Congress in 1994. The Republican Congress slashed the capital gains tax all the way back to 21.19% in 1997 where it stayed for the remainder of the Clinton Presidency. So despite the fact that during the Clinton years income taxes were raised on the rich, capital gains taxes which affect primarily the rich were substantially reduced. The net result was that taxes on the rich were effectively lowered and despite that fact Clinton was able to run budget surpluses during his last few years in office. Go figure!

George W Bush was elected in 2000. Then the tax cutting which led to huge deficits began - with a vengeance. "You know how to spend your own money better than the government does." The Republicans were great at formulating slogans and defining the situation. What were the Democrats supposed to say to that: "The government knows better how to spend your money than you do"? Consequently, in 2001 the top tax rate was lowered by .5% from 39.6% to 39.1%. The middle three tax rates were lowered .1%, and the tax rate for the poor, the lowest tax bracket was not lowered at all. The net effect was to give the rich a big tax cut, the middle class a modest tax cut and the poor no tax cut. Here is the tax table:

Table 2 - 2001 - Married Filing Jointly

Marginal            Tax Brackets
Tax Rate      Over       But Not Over

15.0%       $0                $57,267

27.5%       $57,267        $138,416

30.5%       $138,416      $210,950

35.5%       $210,950      $376,732

39.1%       $376,732

____________________________________________________________________

In 2002 another half a percent was cut for the four highest tax brackets and in addition a new bracket was added at the bottom thus reducing taxes on the poor to 10% up till an income of $14,967. The 15% tax bracket was the only one not cut thus making a mockery out of tax cuts for the middle class. Here is the tax table for 2002:

Table 3 - 2002 - Married Filing Jointly

Marginal            Tax Brackets
Tax Rate      Over       But Not Over

10.0%          $0             $14,967

15.0%          $14,967     $58,246

27.0%          $58,246     $140,752

30.0%          $140,752   $214,464

35.0%          $214,464   $382,967

38.6%          $382,967

In 2003 there was another tax cut ... of course ... but only for the rich and upper middle class, not for the middle class or the poor!! 3.6% was cut off the top tax rate! 2% was cut from the next three tax rates leaving the bottom two tax rates all the way up to an income of $69,265 virtually untouched!! All the while the right wing propaganda machine was out to convince everyone that Bush Jr was cutting taxes for E..V..E..R..Y..B..O..D..Y. Here are the sad results:

Table 4 - 2003 - Married Filing Jointly

Marginal            Tax Brackets
Tax Rate      Over       But Not Over

10.0%          $0              $17,072

15.0%          $17,072      $69,265

25.0%          $69,265      $139,810

28.0%          $139,810    $213,039

33.0%          $213,039    $380,409

35.0%          $380,409

After 2003 the income tax cutting frenzy for the rich was over at least for the remaining years of the Bush Jr administration. The 2003 tax table was for all intents and purposes the tax structure that President Obama inherited when he became President in 2009. The same tax structure remains in effect till this day, Obama having failed to end the Bush tax cuts due to Republican intransigence and obstructionism and to raise the top rate back to the 39.5% that it was in the last years of the Clinton administration. As a consequence structural budget deficits continue to add immense sums to the national debt, and there is Republican pressure to cut spending on social programs like Social Security, Medicaid and Medicare but, of course, they don't want to reduce spending on the military. Obama may force their hand by ending the wars in Iraq and Afghanistan and talking up his desire on the campaign stump to spend half the savings on deficit reduction and half on rebuilding infrastructure, but he will need a Democrat controlled Congress to do anything of the sort.

In addition to the Bush Jr income tax cuts for the rich, he also cut capital gains taxes substantially during his term in office, an even greater boon to the rich than the income tax cuts. Capital gains taxes went from 21.19% in 2000 to 21.17% in 2001 and 21.16% in 2002. Then in 2003 they went all the way down to 16.05%. That was followed by a drop to 15.07% in 2006 and further down to 15.35% in 2008 where they remain today. The combined income and capital gains tax cuts which benefitted primarily the rich produced disastrous budget deficits, and, since structurally the Bush tax cuts remain in effect, the Obama administration is forced to run huge budget deficits which Republicans disingenuously blame him for although they refuse to raise taxes on the rich or let the Bush tax cuts expire which would ameliorate the situation.

Raising the top income tax rate back to 39.5% and the capital gains tax back to 28.93% (an almost doubling of capital gains tax) where they were under the Clinton administration would do a huge amount to eliminate the budget deficits that Obama is unfairly being tagged with. Adding more tax brackets for incomes above $382,967 where the highest rate now kicks in would also provide even more desperately needed revenue. Today when the Fortune 400 is composed exclusively of billionaires, tax brackets in the millions and billions of dollars are appropriate and only fair. Obama has presented this rather cleverly as the Buffet rule: a boss shouldn't be effectively taxed less than his secretary. Today most billionaires pay an effective tax rate around 15% since most of their income is composed of capital gains. The only way to implement the Buffet rule is to raise the capital gains tax since the income tax no matter how high it becomes for millionaires and billionaires will hardly affect them. In addition a financial transaction tax could raise as much as $100-$200 billion a year.

The Widening Wealth Divide, and Why We Need a Surtax on the Super Wealthy

by Robert Reich

Monday, March 12, 2012

Let Santorum and Romney duke it out for who will cut taxes on the wealthy the most and shred the public services everyone else depends on.

The rest of us ought to be having a serious discussion about a wealth tax. Because if you really want to know what’s happening to the American economy you need to look at household wealth — not just incomes.

The Fed just reported that household wealth increased from October through December. That’s the first gain in three quarters.

Good news? Take closer look. The entire gain came from increases in stock prices. Those increases in stock values more than made up for continued losses in home values.

But the vast majority of Americans don’t have their wealth in the stock market. Over 90 percent of the nation’s financial assets – including stocks and pension-fund holdings – are owned by the richest 10 percent of Americans. The top 1 percent owns 38 percent.

Most Americans have their wealth in their homes – whose prices continue to drop. Housing prices are down by a third from their 2006 peak.

So as the value of financial assets held by American households increased by $1.46 trillion in the fourth quarter, the wealthiest 10 percent of Americans became $1.3 trillion richer, and the wealthiest 1 percent became $554.8 billion richer.

But at the same time, as the value of household real estate fell by $367.4 billion in the fourth quarter, homeowners – mostly middle class – lost over $141 billion (owners’ equity is 38.4 percent of total household real estate).

Presto. America’s wealth gap – already wider than the nation’s income gap – has become even wider. The 400 richest Americans have more wealth than the bottom 150 million Americans put together.

Given this unprecedented concentration of wealth – and considering what the nation needs to do to rebuild our schools and infrastructure while at the same time saving Medicare and reducing the long-term budget deficit – shouldn’t we be aiming higher than a “Buffet tax” on the incomes of millionaires?

There should also be a surtax on the super rich.

Yale Professor Bruce Ackerman and Anne Alstott have proposed a 2 percent surtax on the wealth of the richest one-half of 1 percent of Americans owning more than $7.2 million of assets. They figure it would generate $70 billion a year, or $750 billion over the decade. That’s half the savings Congress’s now defunct Supercommittee was aiming for.

Instead of standing empty-handed while Santorum and Romney dominate the airwaves with their regressive Social Darwinism, Democrats need to be reminding Americans of what’s happening in the real economy – and what needs to happen.

The wealth gap is widening into a chasm. A surtax on the super rich is fair — and it’s necessary.

What the World Needs Now? - More Cooperation or More Competition?

by John Lawrence

When I was a graduate student at UCSD in the midst of the anti-war movement, protesting the war in Vietnam, I went to the library and pondered what would make the world a better place, what could I do to contribute something that might make war less likely and peace time activity more likely. I concluded that more cooperation was needed. More ways to resolve conflicts big and small. For example, democratic voting systems resolve conflicts in such a way that solutions are found that are acceptable to all parties for the most part. I took it for granted that institutions that provided for more cooperation and less competition were more desirable. I thought that this was what the Enlightenment was all about. My heroes were the Enlightenment superstars: Jeremy Bentham, John Stuart Mill, Rousseau, Diderot, Voltaire, John Locke.

As I sat there and went through the stacks, I discovered another field and another set of superstars. Social choice has a long history going back to the French Enlightenment philosophers, the Marquis de Condorcet and Jean-Charles de Borda, and even further back than that. One of the 19th century superstars in this field was none other than the Rev. C. L. Dodgson otherwise known as Lewis Carroll, the author of Alice in Wonderland. These guys came up with voting systems which are essential to democracy and are essential to the whole notion of cooperation and conflict resolution. The most recent work in this field was by Kenneth Arrow who published a book Social Choice and Individual Values in the 1950s which attempted to generalize conflict resolution in society in both the political and economic spheres. Arrow concluded that this was impossible and came up with his famous Impossibility Theorem which was a generalization using sophisticated mathematics of the paradox of voting that was known to Condorcet hundreds of years ago. Therefore, Arrow concluded democracy was impossible and any economic system other than capitalism was impossible too. Hmmm, I thought, this is obviously a cop-out because some political and economic systems are more desirable than others and Arrow has done nothing except to throw cold water on any framework that could consider these. I took it as my self-assigned task to prove that Arrow was wrong, that social choice is possible. My work can be found on the website Social Choice and Beyond.

My latest work is "Politonomics: A Meta-Theory Encompassing Political and Economic Decision Making." This is from the Abstract:

In “Social Choice and Individual Values,” Kenneth Arrow said , “In a capitalist democracy there are essentially two methods by which social choices can be made: voting, typically used to make ‘political’ decisions, and the market mechanism, typically used to make ‘economic’ decisions.” This paper resolves that dichotomy by developing a meta-theory from which can be derived methods for both political and economic decision making. This theory overcomes Arrow’s Impossibility Theorem in which he postulates that social choice is impossible and compensates for strategic voting, an undesirable aspect of decision making according to Gibbard and Satterthwaite. Thus the politonomics meta-theory spawns both political and economic systems which are indeed possible and which cannot be gamed. In a typical voting system the outcome of an election among several candidates results in one realized outcome – the winner of the election - which applies to all voters. In a typical economic system, a consumer may choose among a variety of possible baskets of consumer items and work programs with the result that multiple realized outcomes are possible with a unique or quasi-unique outcome for each worker/consumer. As the number of possible realized outcomes of a political-economic decision making process increases, the process becomes more economic and less political in nature and vice versa. We show that as the number of possible realized outcomes increases, voter/consumer/worker satisfaction or utility increases both individually and collectively.

I never considered, as I sat there pondering, that there would be people who would argue that what the world needed was not more cooperation but more competition, but, as I sit here today, I realize that the whole conservative right wing is in favor of just that. They want not more cooperation in either the political or economic realm but more competition believing that only winners should prevail and human progress is only possible when you give free reign to those among us who are the most talented, intelligent and ambitious. They believe that competition will result in the strongest among us winning just as Nietzsche believed that a good war hallows every cause. Their ethic is that the naturally gifted elite should prevail, and they are not concerned about what happens to the rest of us or of who is trampled in the process. This is also the philosophy of Ayn Rand as espoused in her novels Atlas Shrugged and The Fountainhead.

The debate today about increasing inequality in the world has to do with the prevalent conservative belief that only the strong should survive and be promoted and that freedom should preclude equality as a value. The rich should get more tax breaks because they are the true instigators of human progress and should be catered to at every turn. Perhaps a few crumbs will trickle down to the rest of us. This kind of thinking is counter to the Enlightenment and is fast returning us to a neo-Dark Age. No more is human progress to be measured in reduction of poverty and extension of basic services like health care to everyone. It is to be measured in terms of the great advances to human civilization like iPads, iPods and iPhones. People who are capable of coming up with these advances should be cut every break and none of the billions of dollars they make should be transferred by government to the least of these among us like the homeless, the poverty-stricken and the destitute because, well, they are the least among us, not the best among us who should be given every break.

Nevertheless, I remain in the camp of those who think that more cooperation in the political and economic spheres will do more for human progress than more competititon. I also have spent about 40 years in my spare time trying to prove that Arrow was wrong, that social choice is not impossible and that democracy in both the political and economic spheres is not only possible but desirable. This has a lot to do with voting systems, democratic institutions and constitutions but also with cooperative economic systems in which freedom is seen not as the freedom to make money at other people's expense (the losers in the competitive struggle) but the freedom to work as much or as little as one chooses and in accordance with one's preferences as much as possible. Freedom from work is for many people just as desirable a goal as the freedom to make billions of dollars, and wealthy people who don't have to work would be the first to tell you that. Economic democracy in my view is more desirable than cutthroat capitalism, and can be practiced not only at the national level, but at the enterprise level in the form of co-ops like the Mondragon Corporation.

Marx's famous definition of the "good society" was "from each according to his ability, to each according to his needs." This of course was perverted in defining communism as a society where all the wealth created by those who had a lot of talent and ability as well as a strong work ethic combined with those who had not so much in those categories would be thrown into a pot and then divided up in equal portions and handed out by the government. Such need not be the case in achieving the "good society." The "needs" part is pretty basic and could probably be accomplished with abouit 10% of the wealth that exists in the world today. Most people can provide for their own needs - no transfer necessary. There are some who cannot and to transfer a small part of the wealth of the wealthy to provide for their basic needs seems to me to be no more than humane. That still leaves the vast amount of wealth in the hands of the wealthy. In other words if you total up how much it would cost to provide for all the basic needs of everyone in the world and tote up how much wealth there exists in the world, it would take a fraction of all that wealth to provide the basic needs for everyone who cannot provide for their basic needs themselves who turn out to be mainly children, seniors and handicapped (whether physically or mentally) people.

A recent documentary by German TV station Deutsche Welle pointed out that half the world's production of food is wasted because super markets only want perfect vegetables and ones with slight blemishes are thrown out even though they are perfectly edible. Shelves need to be fully stocked with bread right up till closing hours even though any bread left over at the end of day will be thrown out as "day old." All the food that is thrown out by advanced nations is enough to feed all the world's hungry three times over although no governments or other institutions, much less the supermarkets themselves, seem to be interested in organizing that effort. This is what I mean by the fact that the basic needs of all the world's people could be satisfied without subtracting much if anything from the world's wealthy although a lot of them would admit they do not need incomes of millions of dollars a day like the Fortune 400 billionaires have.

Another documentary noted that Finnish school children have the highest test scores in the world despite the fact that they have one of the world's shortest school days with 15 minutes intermissions between classes during which time they are encouraged to go outdoors and play. All grades have large amounts of music, art and self-defined projects. They don't teach to the test. They are concerned with the development of each student as an overall human being not just as some super competitive cog in a nationally competitive machine. The Chinese on the other hand have the opposite approach demanding that children learn by rote methods and extra hours in school and at study. The Finnish schools are all public and everyone is accepted into every class. There are no advanced classes or tracking of students into lesser classes if they are not among the elite intellectually. Everyone is thrown in together; yet they have the best outcomes of any country in the world on standardized international tests. Egalitariansim seems to gain the best results.

An egalitarian ethic in which the concern is for the development of the whole human being rather than a promotion of just those who have superior abilities in accordance with a competitive ethic seems to me to be the most humanitarian way to treat both children and adults. The 1948 Universal Declaration of Human Rights already provides for most of the "from each according to their abilities, to each according to their needs" ethic. It calls for free health care which most advanced socierties, with the exception of the United States, already provide. It calls for free education and other public institutions and covers most basic human needs including food and shelter.

Here are Articles 25 and 26:

Article 25.

• (1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control.
• (2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or out of wedlock, shall enjoy the same social protection.

Article 26.

• (1) Everyone has the right to education. Education shall be free, at least in the elementary and fundamental stages. Elementary education shall be compulsory. Technical and professional education shall be made generally available and higher education shall be equally accessible to all on the basis of merit.
• (2) Education shall be directed to the full development of the human personality and to the strengthening of respect for human rights and fundamental freedoms. It shall promote understanding, tolerance and friendship among all nations, racial or religious groups, and shall further the activities of the United Nations for the maintenance of peace.
• (3) Parents have a prior right to choose the kind of education that shall be given to their children.

All the basic needs of everyone on the planet could be provided for without subtracting much of the wealth of the rich since most people can provide for at least their basic needs without any transfer of wealth whatsover being necessary. Interestingly, the US among other nations does provide food security for the poor through its food stamps program. And of course seniors are provided for through Medicare, Medicaid and Social Security, programs which conservative free marketers are anxious to change or eliminate.

I am with the Enlightenment thinkers especially the English utilitarians like Jeremy Bentham and John Stuart Mill who thought about the happiness of society as a whole and concluded that everyone counted, not only the ones with exceptional talent, ability and other admirable qualities. A society should be judged by how it treats "the least of these my brethren" which is the core and essence of Jesus' teachings but, sad to say, not the core and essence of Christianity as it exists in the world today. Perhaps we should start thinking about an alternative constitution for the US which has the world's oldest constitution (236 years old!) while being the world's youngest advanced nation. Other societies including most European societies while being older than the US have newer constitutions. As far-sighted as the Founding Fathers were, a new and updated constitution incorporating not only political but also economic rights along the lines of the UN Declaration of Human Rights would do much to right the wrongs and shortcomings of present day America and the world.

Manufacturing Illusions

by Robert Reich

Friday, February 17, 2012

Suddenly, manufacturing is back – at least on the election trail. But don’t be fooled. The real issue isn’t how to get manufacturing back. It’s how to get good jobs and good wages back. They aren’t at all the same thing.

Republicans have become born-again champions of American manufacturing. This may have something to do with crucial primaries occurring next week in Michigan and the following week in Ohio, both of them former arsenals of American manufacturing.

Mitt Romney says he’ll “work to bring manufacturing back” to America by being tough on China, which he describes as “stealing jobs” by keeping value of its currency artificially low and thereby making its exports cheaper.

Rick Santorum promises to “fight for American manufacturing” by eliminating corporate income taxes on manufacturers and allowing corporations to bring their foreign profits back to American tax free as long as they use the money to build new factories.

President Obama has also been pushing a manufacturing agenda. Last month the President unveiled a six-point plan to eliminate tax incentives for companies to move offshore and create new lures for them to bring jobs home. “Our goal,” he says, is to “create opportunities for hard-working Americans to start making stuff again.”

Meanwhile, American consumers’ pent-up demand for appliances, cars, and trucks have created a small boomlet in American manufacturing – setting off a wave of hope, mixed with nostalgic patriotism, that American manufacturing could be coming back. Clint Eastwood’s Super Bowl “Halftime in America” hit the mood exactly.

But American manufacturing won’t be coming back. Although 404,000 manufacturing jobs have been added since January 2010, that still leaves us with 5.5 million fewer factory jobs today than in July 2000 – and 12 million fewer than in 1990. The long-term trend is fewer and fewer factory jobs.

Even if we didn’t have to compete with lower-wage workers overseas, we’d still have fewer factory jobs because the old assembly line has been replaced by numerically-controlled machine tools and robotics. Manufacturing is going high-tech.

Bringing back American manufacturing isn’t the real challenge, anyway. It’s creating good jobs for the majority of Americans who lack four-year college degrees.

Manufacturing used to supply lots of these kind of jobs, but that was only because factory workers were represented by unions powerful enough to get high wages.

That’s no longer the case. Even the once-mighty United Auto Workers has been forced to accept pay packages for new hires at the Big Three that provide half what new hires got a decade ago. At $14 an hour, new auto workers earn about the same as most of America’s service-sector workers.

GM just announced record profits but its new workers won’t be getting much of a share.

In the 1950s, more than a third of American workers were represented by a union. Now, fewer than 7 percent of private-sector workers have a union behind them. If there’s a single reason why the median wage has dropped dramatically for non-college workers over the past three and a half decades, it’s the decline of unions.

How do the candidates stand on unions? Mitt Romney has done nothing but bash them. He vows to pass so-called “right to work” legislation barring job requirements of union membership and payment of union dues. “I’ve taken on union bosses before, ” he says,” and I’m happy to take them on again.” When Romney’s not blaming China for American manufacturers’ competitive problems he blames high union wages. Romney accuses the President of “stacking” the National Labor Relations Board with “union stooges.”

Rick Santorum says he’s supportive of private-sector unions. While in the Senate he voted against a national right to work law (Romney is now attacking him on this) but Santorum isn’t interested in strengthening unions, and he doesn’t like them in the public sector.

President Obama praises “unionized plants” – such as Master Lock, the Milwaukee maker of padlocks he visited last week, which brought back one hundred jobs from China. But the President has not promised that if reelected he’d push for the Employee Free Choice Act, which would make it easier for workers to organize a union. He had supported it in the 2008 election but never moved the legislation once elected.

The President has also been noticeably silent on the labor struggles that have been roiling the Midwest – from Wisconsin’s assault on the bargaining rights of public employees, through Indiana’s recently-enacted right to work law – the first in the rust belt.

The fact is, American corporations – both manufacturing and services – are doing wonderfully well. Their third quarter profits (the latest data available) totaled $2 trillion. That’s 19 percent higher than the pre-recession peak five years ago.

But American workers aren’t sharing in this bounty. Although jobs are slowly returning, wages continue to drop, adjusted for inflation. Of every dollar of income earned in the United States in the third quarter, just 44 cents went to workers’ wages and salaries — the smallest share since the government began keeping track in 1947.

The fundamental problem isn’t the decline of American manufacturing, and reviving manufacturing won’t solve it. The problem is the declining power of American workers to share in the gains of the American economy.

The Sad Spectacle of Obama’s Super PAC

by Robert Reich

Tuesday, February 7, 2012

It has been said there is no high ground in American politics since any politician who claims it is likely to be gunned down by those firing from the trenches. That’s how the Obama team justifies its decision to endorse a super PAC that can raise and spend unlimited sums for his campaign. 

Baloney. Good ends don’t justify corrupt means.

I understand the White House’s concerns. Obama is a proven fundraiser – he cobbled together an unprecedented $745 million for the 2008 election and has already raised $224 million for this one. But his aides figure Romney can raise almost as much, and they fear an additional $500 million or more will be funneled to Romney by a relative handful of rich individuals and corporations through right-wing super PACS like “American Crossroads.”

The White House was surprised that super PACs outspent the GOP candidates themselves in several of the early primary contests, and noted how easily Romney’s super PAC delivered Florida to him and pushed Newt Gingrich from first-place to fourth-place in Iowa.

Romney’s friends on Wall Street and in the executive suites of the nation’s biggest corporations have the deepest pockets in America. His super PAC got $18 million from just 200 donors in the second half of last year, including million-dollar checks from hedge-fund moguls, industrialists and bankers.

How many billionaires does it take to buy a presidential election? “With so much at stake” wrote Obama campaign manager Jim Messina on the Obama campaign’s blog, Obama couldn’t  “unilaterally disarm.”

But would refusing to be corrupted this way really amount to unilateral disarmament? To the contrary, I think it would have given the President a rallying cry that nearly all Americans would get behind: “More of the nation’s wealth and political power is now in the hands of fewer people and large corporations than since the era of the robber barons of the Gilded Age. I will not allow our democracy to be corrupted by this! I will fight to take back our government!”

Small donations would have flooded the Obama campaign, overwhelming Romney’s billionaire super PACs. The people would have been given a chance to be heard.

The sad truth is Obama has never really occupied the high ground on campaign finance. He refused public financing in 2008. Once president, he didn’t go to bat for a system of public financing that would have made it possible for candidates to raise enough money from small donors and matching public funds they wouldn’t need to rely on a few billionaires pumping unlimited sums into super PACS. He hasn’t even fought for public disclosure of super PAC donations.

And now he’s made a total mockery of the Court’s naïve belief that super PACs would remain separate from individual campaigns, by officially endorsing his own super PAC and allowing campaign manager Jim Messina and even cabinet officers to speak at his super PAC events. Obama will not appear at such events but he, Michelle Obama, and Vice President Joe Biden will encourage support of the Obama super PAC.

One Obama adviser says Obama’s decision to openly endorse his super PAC has had an immediate effect. “Our donors get it,” the official said, adding that they now want to “go fight the other side.”

Exactly. So now a relative handful of super-rich Democrats want fight a relative handful of super-rich Republicans. And we call this a democracy.

Wealth Accumulation for Dummies or Why Wealth Inequality is More Important Than Income Inequality

by John Lawrence

There is much talk about inequality lately. The top 1% take home 24% of the nation's income. In 1976 they took home just 9%. Wealth inequality is even worse. The top 1% of Americans own 40% of the nation's wealth. The bottom 80% own 7%. The concentration of wealth in the top 1% bodes ill for democracy. An aristocracy is in the process of being created that is controlling the levers of government by means of money in the form of campaign contributions and lobbying. Thus is democracy thwarted.

It shouldn't have to be this way. As technological progress has continued, wealth is being created at a rapid pace. If this wealth were evenly distributed, the average person should only be working 10 or 20 hours per week and have twice the income that he or she now receives. Think about it. Lesson 1 in "Wealth Creation for Dummies" is that as you become more wealthy you should be able to work fewer hours. A modest amount of wealth insures that a person doesn't have to work at all. A wealthy person receives most of their income from the return on their assets - which is another name for wealth - in the form of interest, dividends, rents or other forms of investments such as factories which are mainly capital investments in the form of robots rather than investments in human capital. They receive so-called "unearned income" while people whose only income is from their labor receive "earned income." Being wealthy to the point that you don't have to work does not mean that you have all the commonly imagined accoutrements of wealth - big houses, fancy cars, expensive jewelry etc. You can be wealthy to the point of not having to work and yet not be able to afford more than a modest lifestyle. At that point you have true freedom as you have complete control over your time and energy and are not accountable to anyone.

If wealth were evenly distributed and since most products are manufactured by automated processes requiring little labor, people could have most of what they consume while not having to work much. Certainly with the robotization of the work force and the even distribution of wealth, consumable products should cost virtually nothing. However, in the real world products do cost a great deal and the profits from the sale of those products go mainly to the upper 1% because they own most of the wealth. They own the factories that produce the products; they own the robots. They own the physical capital and supply chains and retail outlets. So rather than the wealth that is created by the robots being evenly distributed, it accumulates more and more in the hands of fewer and fewer people who end up with far more wealth than they really need to live even a high end lifestyle with multiple homes, cars yachts, airplanes, art, jewelry etc. They spend their extra money on lobbying and campaign contributions which gives them control over what has become an ersatz democracy.

Lesson 2 in "Wealth Creation for Dummies" is that as soon as possible you must get yourself in the position of not living paycheck to paycheck. This means that even if you have a good job, you can't be spending your whole paycheck every month shortly after you receive it. Because what happens is that as soon as some unexpected expense pops up, you go into debt and your financial situation worsens because now in addition to your other expenses you have to pay interest on that debt - to some wealthy person for whom it represents unearned income. You need a buffer whether in the form of a savings account or in the form of a Home Equity Line of Credit (HELOC) so that you can manage the ups and downs of cash flow without paying exhorbitant amounts of interest. You also need a second job, the proceeds of which go right into savings and creating wealth. A good way to do this is to buy fixer-uppers, fix them up and rent them out. At this point in time when interest rates and property values are extremely low, it's the ideal time to follow this strategy. As soon as the rent that can be charged exceeds the mortgage to be paid, you have a source of wealth that is creating unearned income and that will go on creating additional income, rent being one form of the phenomenon that wealth creates income, ad infinitum. These assets, unlike a pension, can be passed down from generation to generation.

It takes a surprisingly small amount of wealth to generate an income sufficient to live on providing you don't need to live the lifestyle of the rich and famous. For example, just three mortgage free rentals renting at approximately $1500. per month per property is enough for a small family to live on as long as you live modestly. And just because you collect unearned income every month doesn't mean that you can't continue to work at something you really love doing. Lesson 3 in "Wealth Creation for Dummies": Work as a self-employed person is far more rewarding then work as an employee. When you work for yourself, you aren't subject to being laid off, fired or having your job outsourced. You don't have to take a subservient position relative to an employer or potential employer. You don't have to go begging in the job market for a job. You have control over your time, work the hours you choose and vacation when you want not when your boss tells you to. You don't have to swallow hard and say nothing if your supervisor insults you. You are your own boss. This is what freedom is all about. Freedom is much more than just the freedom to make money which is what the right wing would have you believe.  Wealthy people no matter the amount of their wealth are self-employed by definition because they are not dependent on any job or any employer. In today's world of employee uncertainty, this kind of independence is priceless. 

But the real world situation is entirely different than the scenarios I've painted in "Wealth Creation for Dummies." Most people live paycheck to paycheck, are entirely dependent on someone giving them a job and are not in a position to contradict their boss. Meanwhile, wealth and the income that wealth produces as a return on assets goes to fewer and fewer people, exacerbating income and wealth inequality. Lesson 5 in "Wealth Creation for Dummies' is to change your ideas about what money is used for. Money shouldn't just be used for consumption. You don't need all the products that TV advertising is urging you to buy. You must develop sales resistance and use your money insofar as is possible for wealth creation. Isn't the goal to get in the position of not having to work? The typical middle class position on this is that you should work for a set period say 30 years as an employee at a job and then collect a pension for the rest of your life. This process does not really create wealth for you; it creates wealth for your employer because the assets the return on which goes to pay your pension are owned by your employer - not you. With a pension once you die, it goes away. If you own the wealth that your pension is based on instead of your employer owning it, you can pass it on to your heirs (Lesson 6).

Second, employers aren't providing set pensions any more - only 401ks which are defined contribution instead of defined benefit plans. This means that they may be totally worthless which many of them have turned out to be when you reach retirement age. Therefore, you have to create wealth for yourself (Lesson 7) instead of counting on your employer to do it for you. Thirdly, 30 year careers are few and far between any more. The shift from defined benefit pensions to 401ks really makes a sham and a mockery out of the traditional middle class aspiration of a college degree and a secure job with a secure retirement. There just ain't no such thing any more. Intead of wealth creation most college students are creating debt in the form of student loans which will follow them the rest of their lives. Therefore, you have to take wealth creation into your own hands and not expect some employer to allow you to live paycheck to paycheck. Now should you expect a college degree to in and of itself create wealth for you? A college degree only gives you a ticket of admission to the corporate world in the form of an employeehood. In this form you are likely to be laid off, outsourced or downsized. You are much better off starting to create wealth right out of high school instead of creating debt which is what most college students are doing. As a self-employed person you don't need a college degree and there are no roads to the creation of wealth that are closed to you. Just ask Bill Gates, Steve Jobs, Michael Dell or Larry Ellison - all college dropouts and high tech billionaires.

If you create wealth for yourself instead of relying on a pension you may be able to retire in less than 30 years. There's no law that determines when you should have to or not have to retire. If you are self-employed you can work as long as you want to. You don't have to retire at 65 if you love your work.

Now the concentration of income in the upper 1% which is a consequence of the concentration of wealth in the upper 1% leads to its own logical contradiction which suggests that this wealth maldistribution is not inevitable. Consider the largest concentration of wealth in the US - the Walton family based on the Wal-Mart chain of stores. But what does Wal-Mart really do? They amalgamate products manufactured in China, arrange them on store shelves and hire a few cashiers to collect money from consumers. It's not rocket science. The same applies to Home Depot, Best Buy, Costco, Target, Loew's and any other large nation wide retail chain. They provide nothing of value but they have concentrated wealth in fewer and fewer hands as they've replaced Mom and Pop operations throughout the country. This begs the question why shouldn't these retail operations which just assemble products made in China, arrange them on store shelves and hire check out people (which are increasingly being replaced with automated check out stations) be cooperatively owned with the rewards of ownership (shares of the wealth) being more evenly distributed among larger and larger numbers of people? It should be a no brainer because nothing these stores are doing requires a large amount of brain power to undertake.

Part of the answer is that the person or persons who started these retail stores were ambitious entrepreneurs who worked long hours to get their operations going. The average person does not have the time or energy (not to mention the capital) to do this or to attract a large number of people to get a cooperative venture going. In other words how do you set something like this up if not for the ambitions of the individual entrepreneur? Here's one way: a group of citizens could petition local government to provide startup money for such a venture. After all local government consists of a bunch of local citizens. If there was enough of a collective will to set up a co-op retail merchandising operation, it could be done using local government to provide capital and manpower and organization. Once in operation a co-op such as this could replace Target, Best Buy, Home Depot, Costco etc and profits could be plowed back into the local population. In addition an operation such as this could provide employment for the local population and a share of the wealth so created. In banking this is already being done in North Dakota which has a publicly owned state wide bank. The profits are owned by the people of North Dakota.

For another approach check out Mondragon.

This is exactly what is needed to distribute wealth more evenly and to distribute the demands for necessary labor more evenly. Instead of fewer and fewer people becoming fabulously wealthy and owning multiple million dollar homes which they don't need, the bulk of the population could be in the position of working fewer and fewer hours taking full advantage of the robotization of the work force and having income based on the wealth so created.

Lesson 7: Wealth produces income; income does not produce wealth if your mindset is to consume up to your income level. Therefore, consume less and instead of saving for your old age, invest to create wealth, but invest in real assets not in phony paper financial assets which can evaporate at a moment's notice.

Wall Street: The Centralization and Concentration of Capital

by John Lawrence

Marx's chief criticism of capitalism was that it led to the centralization and concentration of capital. In a society comprised of small scale enterprises such as the yeomanry and small scale farmers of early America, an America romanticised and favored by Thomas Jefferson, capital was widely dispersed in the form of small land holdings and businesses which replicated themselves throughout the US with different owners in every community. For example, each small town had a blacksmith shop owned by a single person who owned one and only one blacksmith shop. He didn't franchise his blacksmith shop operation all over the country calling it perhaps "Blacksmiths Are Us." He didn't go public with his blacksmith shop attracting investors from all over the country who bought shares in his blacksmith shop. He didn't acquire other blacksmith shops and merge with yet more blacksmith shops. He didn't expand into other towns creating  blacksmith shop megastores and forcing Mom and Pop blacksmiths out of operation. He didn't open a furniture store as an accompaniment to his blacksmith shop. All the techniques of modern capitaliasm - mergers and acquisitions, franchise operations, big box megastores - produce a centralization and concentration of capital or ownership in fewer and fewer hands. Instead of capital being dispersed in many hands, capital is concentrated in the hands of a few and the rest are left to be employees with zero capital assets.

The statistics are startling. Today the richest 400 Americans own more wealth than the bottom 150 million American citizens. According to Senator Bernie Sanders, six of the biggest banks own wealth equivalent to 60% of US GDP. Two of these banks, Citibank and Goldman Sachs, have been convicted of fleecing investors by selling them securities they knew were bogus and then betting that those securities would go bad. The top 1% earn 25% of the nation's income and own 40% of the nations's wealth. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. Despite owning the lion's share of wealth and income, three years ago American taxpayers provided the wealthy banks with the largest bailout in history. Furthermore, the Federal Reserve provided more than $16 trillion in low-interest loans to every major financial institution in this country, huge foreign banks, multi-national corporations, and some of the wealthiest people in the world. Meanwhile 43 million Americans live in poverty and millions have lost their homes through foreclosure. Countries with less income inequality than the US include Cambodia, Vietnam and Morocco. 

Is it any wonder then that the Occupy Wall Street protesters are proclaiming "We are the 99%." The 99% who are being left in the dust with no jobs, huge student loans, homes that are underwater or have been foreclosed on. No bailouts here. Thanks to Republican legislation, the terms of student loans are draconian. Unlike credit card loans student loans cannot be discharged in bankruptcy. They will follow you to the grave. And defaults due to lack of jobs can triple the amount owed. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was signed into law by President Bush and made possible by Republicans in Congress. It was designed to make it impossible to discharge student loans in bankruptcy and opened the way for a lucrative private loan industry to flourish. David Cay Johnston in his book Free Lunch says, "The idea that young minds should be a source of immediate profit is among the most coldly calculated changes in government which, over the past three decades, have taken from the many to enrich the few." Legislation to restore bankruptcy protection to student loans has been reintroduced in Congress by Democrats. Fat chance it will pass though with Republicans controlling the House and having the filibuster rule in the Senate.

People are facing retirement with no pensions, their 401ks having lost value or having been spent before retirement just to keep financially afloat. The 99 per centers include students, recently graduated students with huge student loans and no jobs, middle aged unemployed folks who are not being rehired, African Americans whose unemployment rates are sky high, people who have lost their homes to foreclosure - all those people who were not bailed out while the banks who were bailed out profit at their expense. The Obama administration failed to put sanctions on the banks allowing them to continue to profit with no accountability. No banksters went to jail. They made mortgage write downs voluntary on the part of the banks and so far banks have refused to volunteer. The cards have been stacked on the side of the banks and against the middle class. Is it any wonder then that people are occupying Wall Street whose CEOs make on average 300 times the salaries of average workers?

Johnston details a part of the process of how advanced US capitalism with government support centralizes and concentrates capital, ownership wealth and income in the hands of a few. He details how Mom and Pop stores are put out of commission by large mega stores which, with government help, take over retail trade while forcing former Moms and Pops to become employees rather than owners and concentrating wealth. He tells about Jim Weaknecht who had a little sporting goods store in Hamburg, Pennsylvania. In 2003 a sporting goods super store, Cabela's, opened  a few miles away. But far from being an exercise in free market capitalism, Cabela's demanded $32 million in government subsidies or else they would take their six acre store elsewhere. Cabela's wanted exemption from paying local property taxes for years to come and tax-exempt status for the "museum" part of the store in perpetuity.  In addition they wanted to pocket the sales tax. The store was 100 times bigger than Weaknecht's and stocked more guns and reels and hunting jackets than Weaknecht could sell in a lifetime. Their pitch was that people would come from miles away just to shop there bringing tourist dollars to Hamburg's restaurants and hotels. Shortly after Cabela's opened, Weaknecht's sales fell more than 70%. In less than two years he was out of business. Now Weaknecht works as an assistant manager at a grocery store chain and holds down a second job too. His wife, who previously devoted full time to their children, now also works two jobs. This is how, with government help, wealth and income along with political power is concentrated in the hands of a few. Cabela's has also opened numerous other super stores across the nation putting Mom and Pop operations out of business nationwide.

Johnson details how Wal-Mart pioneered the super store approach. "In seeking these subsidies, Cabela's was not inventing a new scheme. It was simply improving on a technique pioneered by an icon of retailing success, Sam Walton. The Walton story was not about the brave capitalist taking on risk and proving his mettle by being smarter than the other guy, no matter how carefully the Wal-Mart company has polished and sold that fairy tale. Sam Walton practiced corporate socialism. As much as he could, he put the public's money to work for his benefit. Free land, long-term leases at below-market rates, pocketing sales tax, even getting workers trained at government expense were among the ways Wal-Mart took every dollar of welfare it could get."

Fifty years ago, people shopped at a number of Mom and Pop stores rather than at one super store. For instance, there were paint stores, lumber stores, hardware stores, electrical supply stores all under different ownership and all under different ownership in different towns and cities. Now in one trip to Home Depot, you can buy all these items in one centralized location with the result that the smaller Mom and Pop stores have been put out of business and wealth has been centralized and concentrated. There are Home Depots in practically every large and middle sized town and city in America. The same holds true for large super market chains. Previously, shoppers went to a meat market for meat, a dairy for dairy items, a bakery for baked goods etc. Now one trip to a super market does it all and wealth has been centralized and concentrated in the hands of a few while the remaining population have become employees with no accumulation of wealth except for their houses which have drastically decreased in value in recent years.

The US has concentrated private wealth in the hands of the 1% while at the same time creating a concentration of debt in the government. Government debt has fueled private wealth as the government has been used just as a tool for benefitting private capitalists. The privatization of government functions has increased government debt while increasing private wealth. China, on the other hand, has a wealthy class including billionaires, less inequality than the US and a concentration of wealth in the hands of government. So wealth is dispersed at least between public and private entities and to a larger extent even among the public than in the US. China's sovereign wealth fund holds approximately $2 trillion of US debt. So while the US is a wealthy nation in terms of its cumulative wealth, that wealth is mostly in private hands and in the hands of the upper 1%. The US government itself is next to bankrupt. The US represents private wealth amid public squalor. 46 million people live below the poverty line as of 2011. Minorities are hit hardest. Blacks experience the highest poverty rate, at 27 percent, up from 25 percent in 2009, and Hispanics rose to 26 percent from 25 percent. For whites, 9.9 percent live in poverty, up from 9.4 percent in 2009. Asians were unchanged at 12.1 percent. The number without health insurance is on the rise. 43 million use food stamps to survive.

Marx foresaw that capitalism would lead to the concentration and centralization of wealth ownership in fewer and fewer hands. It is easy to see why. To recapitulate, mergers and acquisitions lead to larger and larger enterprises forcing smaller firms out of business. Franchise operations lead to replicating the same stores in every community with profits flowing to one centralized location. Think of MacDonald's, Wal-Mart, Home Depot and Starbucks which force less well capitalized Mom and Pop stores out of business. Loans and money from investors in equity shares is available to large scale enterprises but not to small Mom and Pop stores. The corporate form dictates that companies pursue the bottom line over all other possible goals. Owners of small scale enterprises are reduced to employees living paycheck to paycheck rather than owning capital which would tide them over economic downturns. So even though the corporate form was relatively new in Marx' day, he was remarkably prescient in showing how the dynamics of capitalism would centralize and concentrate wealth in fewer and fewer hands. That dynamic, along with the addition of political power to use government as a tool for the further accumulation of wealth which Marx did not foresee, is playing out today as Republicans go on the warpath against unions and government employees which will result in an even larger return to the owners of wealth while wages and benefits to workers remain stagnant or even decrease. The addition of computers and automated machinery means that workers will become increasingly irrelevant as they are replaced by capital equipment.

RIGHT WING BILLI0NAIRE KOCH BROTHERS NOW WORTH $50 BILLION

NEWSFLASH

From ThinkProgress, September 21, 2011

Forbes: Koch Brothers Now Worth $50 Billion | Forbes estimates that Tea Party petrochemical scions Charles and David Koch have a fortune of $25 billion each, making them the fourth richest Americans, behind only Bill Gates, Warren Buffet, and Larry Ellison. Their combined wealth of $50 billion is exceeded only by the Microsoft founder’s $59 billion fortune. Buoyed by aggressive speculative trading on volatile energy markets, the Koch brothers accumulated $15 billion in wealth since March 2010, a 43 percent increase.

 

 

 

By Brad Johnson on Sep 21, 2011 at 2:10 pm

Why Inequality is the Real Cause of Our Ongoing Terrible Economy

by Robert Reich

Sunday, September 4, 2011

THE 5 percent of Americans with the highest incomes now account for 37 percent of all consumer purchases, according to the latest research from Moody’s Analytics. That should come as no surprise. Our society has become more and more unequal.

When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?

The economy won’t really bounce back until America’s surge toward inequality is reversed. Even if by some miracle President Obama gets support for a second big stimulus while Ben S. Bernanke’s Fed keeps interest rates near zero, neither will do the trick without a middle class capable of spending. Pump-priming works only when a well contains enough water.

Look back over the last hundred years and you’ll see the pattern. During periods when the very rich took home a much smaller proportion of total income — as in the Great Prosperity between 1947 and 1977 — the nation as a whole grew faster and median wages surged. We created a virtuous cycle in which an ever growing middle class had the ability to consume more goods and services, which created more and better jobs, thereby stoking demand. The rising tide did in fact lift all boats.

During periods when the very rich took home a larger proportion — as between 1918 and 1933, and in the Great Regression from 1981 to the present day — growth slowed, median wages stagnated and we suffered giant downturns. It’s no mere coincidence that over the last century the top earners’ share of the nation’s total income peaked in 1928 and 2007 — the two years just preceding the biggest downturns.

Starting in the late 1970s, the middle class began to weaken. Although productivity continued to grow and the economy continued to expand, wages began flattening in the 1970s because new technologies — container ships, satellite communications, eventually computers and the Internet — started to undermine any American job that could be automated or done more cheaply abroad. The same technologies bestowed ever larger rewards on people who could use them to innovate and solve problems. Some were product entrepreneurs; a growing number were financial entrepreneurs. The pay of graduates of prestigious colleges and M.B.A. programs — the “talent” who reached the pinnacles of power in executive suites and on Wall Street — soared.

The middle class nonetheless continued to spend, at first enabled by the flow of women into the work force. (In the 1960s only 12 percent of married women with young children were working for pay; by the late 1990s, 55 percent were.) When that way of life stopped generating enough income, Americans went deeper into debt. From the late 1990s to 2007, the typical household debt grew by a third. As long as housing values continued to rise it seemed a painless way to get additional money.

Eventually, of course, the bubble burst. That ended the middle class’s remarkable ability to keep spending in the face of near stagnant wages. The puzzle is why so little has been done in the last 40 years to help deal with the subversion of the economic power of the middle class. With the continued gains from economic growth, the nation could have enabled more people to become problem solvers and innovators — through early childhood education, better public schools, expanded access to higher education and more efficient public transportation.

We might have enlarged safety nets — by having unemployment insurance cover part-time work, by giving transition assistance to move to new jobs in new locations, by creating insurance for communities that lost a major employer. And we could have made Medicare available to anyone.

Big companies could have been required to pay severance to American workers they let go and train them for new jobs. The minimum wage could have been pegged at half the median wage, and we could have insisted that the foreign nations we trade with do the same, so that all citizens could share in gains from trade.

We could have raised taxes on the rich and cut them for poorer Americans.

But starting in the late 1970s, and with increasing fervor over the next three decades, government did just the opposite. It deregulated and privatized. It cut spending on infrastructure as a percentage of the national economy and shifted more of the costs of public higher education to families. It shredded safety nets. (Only 27 percent of the unemployed are covered by unemployment insurance.) And it allowed companies to bust unions and threaten employees who tried to organize. Fewer than 8 percent of private-sector workers are unionized.

More generally, it stood by as big American companies became global companies with no more loyalty to the United States than a GPS satellite. Meanwhile, the top income tax rate was halved to 35 percent and many of the nation’s richest were allowed to treat their income as capital gains subject to no more than 15 percent tax. Inheritance taxes that affected only the topmost 1.5 percent of earners were sliced. Yet at the same time sales and payroll taxes — both taking a bigger chunk out of modest paychecks — were increased.

Most telling of all, Washington deregulated Wall Street while insuring it against major losses. In so doing, it allowed finance — which until then had been the servant of American industry — to become its master, demanding short-term profits over long-term growth and raking in an ever larger portion of the nation’s profits. By 2007, financial companies accounted for over 40 percent of American corporate profits and almost as great a percentage of pay, up from 10 percent during the Great Prosperity.

Some say the regressive lurch occurred because Americans lost confidence in government. But this argument has cause and effect backward. The tax revolts that thundered across America starting in the late 1970s were not so much ideological revolts against government — Americans still wanted all the government services they had before, and then some — as against paying more taxes on incomes that had stagnated. Inevitably, government services deteriorated and government deficits exploded, confirming the public’s growing cynicism about government’s doing anything right.

Some say we couldn’t have reversed the consequences of globalization and technological change. Yet the experiences of other nations, like Germany, suggest otherwise. Germany has grown faster than the United States for the last 15 years, and the gains have been more widely spread. While Americans’ average hourly pay has risen only 6 percent since 1985, adjusted for inflation, German workers’ pay has risen almost 30 percent. At the same time, the top 1 percent of German households now take home about 11 percent of all income — about the same as in 1970. And although in the last months Germany has been hit by the debt crisis of its neighbors, its unemployment is still below where it was when the financial crisis started in 2007.

How has Germany done it? Mainly by focusing like a laser on education (German math scores continue to extend their lead over American), and by maintaining strong labor unions.

THE real reason for America’s Great Regression was political. As income and wealth became more concentrated in fewer hands, American politics reverted to what Marriner S. Eccles, a former chairman of the Federal Reserve, described in the 1920s, when people “with great economic power had an undue influence in making the rules of the economic game.” With hefty campaign contributions and platoons of lobbyists and public relations spinners, America’s executive class has gained lower tax rates while resisting reforms that would spread the gains from growth.

Yet the rich are now being bitten by their own success. Those at the top would be better off with a smaller share of a rapidly growing economy than a large share of one that’s almost dead in the water.

The economy cannot possibly get out of its current doldrums without a strategy to revive the purchasing power of America’s vast middle class. The spending of the richest 5 percent alone will not lead to a virtuous cycle of more jobs and higher living standards. Nor can we rely on exports to fill the gap. It is impossible for every large economy, including the United States, to become a net exporter.

Reviving the middle class requires that we reverse the nation’s decades-long trend toward widening inequality. This is possible notwithstanding the political power of the executive class. So many people are now being hit by job losses, sagging incomes and declining home values that Americans could be mobilized.

Moreover, an economy is not a zero-sum game. Even the executive class has an enlightened self-interest in reversing the trend; just as a rising tide lifts all boats, the ebbing tide is now threatening to beach many of the yachts. The question is whether, and when, we will summon the political will. We have summoned it before in even bleaker times.

As the historian James Truslow Adams defined the American Dream when he coined the term at the depths of the Great Depression, what we seek is “a land in which life should be better and richer and fuller for everyone.”

That dream is still within our grasp.

France’s Rich Say ‘Tax Us More’.

By Robert Frank

August 23, 2011, from the Wall Street Journal

Warren Buffett is playing well in France.

Bloomberg News

A group of 16 of the richest people in France has signed a petition asking the French government to increase their taxes.  The group includes Liliane Bettencourt,  the billionaire heiress of L’Oreal; Christophe de Margerie, the head of oil giant Total;  Frederic Oudea of bank Société Générale;  and Jean-Cyril Spinetta, president of Air France KLM SA. (Given SocGen’s share price, Mr. Oudea may not have as much wealth to tax).

The group says the government should create a “special contribution” that would target the rich.

“We are conscious of having benefited from a French system and a European environment that we are attached to and which we hope to help maintain,” the petition  said.

Conservatives will argue that the French are already socialists, so why care? Those on the left will say the petition is proof of a new global movement to get the rich to pay more of a fair share.

In France, they may well get their wish. Unlike the U.S., where Warren Buffett’s Tax Pledge calling for higher taxes on millionaires and billionaires was met with stiff opposition from Republicans, France is leaning toward raising its already high taxes on the wealthy.

The wealthy pay a top rate of 40%. Plus, they pay an annual wealth tax on their total assets, levying fees of between 0.5% and 1.8% on assets above $1.1 million. (Not to mention all the other estate and inheritance and gift taxes and social taxes and corporate taxes and VAT taxes and, well, you get the idea).

President Sarkozy had been planning some minor tweaks to the deduction system. But after the nation’s recent financial turmoil and threats of a downgrade, it will have to take more drastic action. France’s budget chief said this month the government was working on a new contribution from taxpayers earning more than €1 million a year.

As they will quickly learn, however, there aren’t enough rich people in France to fill the budget hole.

Do you think the Buffett Tax Pledge will spread to other countries?

Why the Rich Should Pay Higher Taxes

Published on Monday, August 22, 2011 by CommonDreams.org

by Paul Buchheit

Wealthy Americans will recoil at the suggestion, likely responding with the tired mantra that the top earners pay most of the income tax. But two points can be made in response to that: (1) federal income tax is only a small part of the burden on the middle class. Based on data from the Institute on Taxation and Economic Policy, the total of all state and local taxes, social security taxes, and excise taxes (gasoline, alcohol, tobacco) consumes 21% of the annual incomes of the poorest half of America. For the richest 1% of Americans, the same taxes consume 7% of their incomes. And (2) the richest people pay most of the federal income taxes because they've made ALMOST ALL the new income over the past 30 years. Based on Tax Foundation figures, the richest 1% has TRIPLED ITS SHARE of America's income since 1980, AFTER TAXES.

But there are better reasons why the rich should pay higher taxes.

Do we want our national parks sold to billionaires? Do we want programs for music and the arts eliminated from schools, so that only children of the wealthy can participate in them? (photo: Plashing Vole)

The very rich benefit most from national security, government-funded research, infrastructure, and property laws. Defending the country benefits the rich more, because they have more to defend. Taxpayer-funded research at the Defense Advanced Research Projects Agency (the Internet), the National Institute of Health (pharmaceuticals), and the National Science Foundation (the Digital Library Initiative) has laid a half-century foundation for their idea-building. The interstates and airports and FAA and TSA benefit people who have the money to travel.

Over a hundred years ago, Teddy Roosevelt, facing an epidemic of inequality not unlike today, reminded us that "Great corporations exist only because they are created and safeguarded by [democratic] institutions; and it is therefore our right and our duty to see that they work in harmony with these institutions."

Here's another good reason for the rich to pay more taxes: With the drop in tax revenue, funding for the preservation of American culture is disappearing. Do we want our national treasures deprived of maintenance because of budget cuts, as is currently happening in Italy? Do we want our national parks sold to billionaires? Do we want programs for music and the arts eliminated from schools, so that only children of the wealthy can participate in them?

The 1912 book "Promised Land" by Mary Antin revealed the wonder of a Russian immigrant coming to the U.S.: "In America, then, everything was free...light was free...music was free."

Not that capitalist markets don't have their place. But the current view of democracy has gone to the other extreme, in which individualism and personal gain trump societal responsibility, and growing inequality makes community support and safeguards unnecessary for the privileged elite.

Finally, back to the tax statistics. Why should financial earnings (i.e., capital gains) be taxed less than wage earnings from actual work? The richest 10% of Americans own over 80% of the stocks, the gains from which are taxed at a 15% rate. Most wage earners pay more.

Furthermore, over the past 15 years millionaires have seen their income tax rates drop from 30% to 22%. During approximately the same time period, American economic growth declined from an annual 3.2 percent rate to 1.7 percent. Lower taxes for the rich do not lead to productivity.

Will the rich stop investing or move to another country if their taxes are increased? Not likely. They have it too good here. As Warren Buffett recently stated, "I have worked with investors for 60 years and I have yet to see anyone - not even when capital gains rates were 39.9 percent in 1976-77 - shy away from a sensible investment because of the tax rate on the potential gain."

Mr. Buffett is admitting what everyone else is beginning to realize. The rich take much more than they pay for.

Paul Buchheit is a college teacher, an active member of US Uncut Chicago, founder and developer of social justice and educational websites (UsAgainstGreed.org, PayUpNow.org, RappingHistory.org), and the editor and main author of "American Wars: Illusions and Realities" (Clarity Press). He can be reached at [email protected].

San Diego Billionaire Irwin Jacobs Agrees With Warren Buffet – the Rich Need to Be Taxed More

by Frank Gormlie on August 17, 2011 · 7 comments from the OB Rag

in American Empire, Economy, Popular

 
San Diego billionaire Irwin Jacobs

Billionaire Warren Buffett has been making headlines in his call for the super-rich of America to be taxed more. (See below.)

Now we hear that Irwin Jacobs – one of the richest San Diegans and co-founder of Qualcomm – agrees with Buffett.  Jacobs made this surprising statement during a meeting with the San Diego U-T Community Editorial Board earlier this week, where he raised questions about the assumption that higher taxes on the super-rich were bad for job creation, and completely agreed with Buffett.

In 2009, Forbes listed Jacobs as the 220th richest American, worth $1.6 Billion.

In an op-ed piece for the New York Times, Buffett wrote:

“My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.”

Warren Buffett

Buffett called for immediate increases on all taxable income for the 0.3 percent of U.S. taxpayers making $1 million or more a year, with an additional higher bracket for those making $10 million or more a year.

~

Stop Coddling the Super-Rich
 

By Warren E. Buffett / New York Times / Published August 14, 2011

See article here.

Get Corporations off Government's Back

by John Lawrence

The Tea Party wants to get "government off 'our' back." But is government really on our back or is the case really that corporations and wealthy interests are on government's back? There are 40,000 or more lobbyists in Washiongton, DC. They are there for the purposes of extracting taxpayer money for their corporate sponsors' benefits and for no other reason. The notion that taxpayer money goes to provide benefits for taxpayers, especially middle class taxpayers, is rather nieve. Taxpayer money goes to provide benefits for large corporations and the wealthy because the poor can't afford lobbyists. And the union movement is practically dead so union money is not influencing legislators to any great extent. Republican Governors like Scott Walker are doing their level best to kill off the remaining unions so that corporate sponsored lobbyists will have full sway in Washington. They aren't there to help the middle class; that's for sure. They are there to write legislation favorable to their own interests whether they be defense contractors lobbying for more money for military hardware or corporate flacks trying to drill holes in the tax code or lower the corporate tax rate. The notion that a lower corporate tax rate combined with closing the loopholes is preferable is nieve since lobbyists will only then proceed to drill new loopholes into the tax code at the lower rate.

Republicans argue that any expiration of a "temporary" tax cut such as the Bush tax cuts is actually a tax increase, but Michelle Bachman said on Meet the Press that she wouldn't be in favor of extending the "temporary" reduction in the payroll tax rate because "we can't afford it." Yet we can afford, according to her, to continue the temporary Bush tax cuts which amount to a whole hellava lot more. Why won't Bachman apply the same logic to the temporary payroll tax cuts? I'll tell you why. Because the payroll tax affects mainly the poor and middle class. It's a regressive tax that's used to pay social security recipients and for many years the excess was just combined with income tax revenues and spent in the General Fund. So General Fund expenditures were partially funded by a regressive tax on the poor. Right wingers love to point out that the poor and lower middle class pay hardly any income tax. What they don't point out is that they pay excessive payroll taxes, taxes that allow for no deductions or exemptions. For instance, if you're a poor self-employed worker earning $10,000 a year, you will pay over $1500. in payroll taxes no matter how many children you have or how many medical expenses or anything else. You will pay at a tax rate of 15.3% (except for this year for which there is a 2% reduction for employees), more than a hedge fund manager pays. Capital gains are taxed at only 15%. Is that fair? Of course not. As long as the money is being spent in the General Fund and treated as income tax revenue, deductions and exemptions should be allowed for payroll taxes which affect mainly the poor just as they are for income taxes which affect mainly the rich. When right wingers point out that the poor don't pay any income tax, they fail to point out that the poor, especially the poor self-employed, pay a higher rate, when you consider payroll taxes, than rich hedge fund managers including Warren Buffet. Please note that the rich pay hardly any payroll taxes and have voluminous deductions and exemptions on their income taxes.

So instead of getting government off our back which is the movie right wingers want you to see, instead we should be trying to get corporations off government's back, which is the reality they want you to ignore, so that government can better serve the interests and needs of the poor and middle class. The right wing makes no bones about this being class warfare. They flat out come out and say that they are in power for one reason and one reason only: to serve the needs of the rich corporate class. That is their purpose in life. They don't even try to hide it. Michelle Bachman is not in favor of extending unemployment benefits for the long term unemployed because "we simply can't afford it." Yeah, but we can still afford more tax breaks for the rich because they are the "job creators." Really? REALLY?? If they are the job creators, then where are the friggin jobs? They've had 30 years of supply side economics (or voodoo economics as the first George Bush christened it) and the job situation is worse than it was in the Great Depression in absolute numbers of people out of work and on the verge of desperation. We "can't afford" to allow them to subsist which would cost a paltry amount, but we can afford to give gargantuan tax breaks to the corporate class because - hint, hint - they might create a job or two somewhere down the line. Give me a break. The only jobs they are creating are overseas. Cheap labor combined with automation produces all the goods and most of the services that the US needs. Free trade has allowed the global labor force to be concentrated in the country where labor is cheapest and the finished product shipped to wherever it can be sold. Increasingly, this is not in the US where consumers have cut back on their spending finally realizing that their houses can no longer be used as ATMs.

We don't need small government, weak government, a government that corporate lobbyists can ride roughshod over; we need smart government, strong government, "right sized" government, a government which has the audacity to kick lobbyists out of Washington and get money out of politics. Most Republican Senators and Congressmen are merely front men for corporations. They are merely "political personalities" able to garner votes and get themselves elected. They are not legislators. Lobbyists write the laws. As front men for corporations, Republican Congressmen's paychecks are provided by the corporations they represent. They need big money to get elected. When their time in Congress is finished, they can look forward to a cushy job working for the corporations they represent and making use of their inside contacts in Washington to funnel more taxpayer money and taxpayer funded contracts to the corporations they first represented and later worked for. Small government simply means government dominated by large corporations which exists to extract taxpayer money, mainly from the poor and middle class, and transfer it to the wealthy in terms of tax breaks and government contracts. It's not the poor who are feeding off the government trough; it's the rich. They want you to watch this movie over here about welfare queens and ignore that reality over there about the transfer of wealth to the already wealthy. They want you to abhor the redistribution of wealth from the government to the poor and middle class in terms of entitlements and unemployment insurance while ignoring the transfer of wealth from the middle class to the rich.

And why should unelected political underworld figures like Grover Norquist be in the position of extracting a pledge from every elected Republican Congressman that they won't raise taxes? They were elected to do the public's bidding not Grover Norquist's. Unelected rogues like Karl Rove, Dick Army, the Koch brothers and Grover Norquist are trying to control the American political system just as unelected lobbyists swarm the Capitol. And as for getting money out of politics, who benefits the most from keeping money in politics? The TV and cable channels who receive huge sums of money in the form of political TV ads. That's where most of the money is spent. Consequently, you will never hear anything about getting money out of politics on Meet the Press, Face the Nation or on any cable news infotainment show. There are vested interests which want to keep money in politics, the more the better. The Citizens United Supreme Court decision was a windfall for media news channels. No wonder they give as much air as possible to charlatins like Sarah Palin and Christene O'Donnell; their paychecks could just as well be endorsed by big right wing money. Instead of getting people on their shows who are really intelligent and insightful, they get airheads and then look forward to another infusion of right wing cash. The exception is CNN's Fareed Zakaria who always books intelligent and articulate experts.

Getting government off corporations' backs implies a rational world in which corporations want nothing more than to compete freely in the free enterprise system without being interfered with by government. They just want to go merrily along competing with their competitors, providing jobs, serving the public interest and providing value to their shareholders. In reality this hands off approach is a total lie. Corporations are totally hands on when it comes to government. They spend big bucks on lobbyists to make sure that government cash and legislation is funneled their way. They are not simply competing with other corporations in the free marketplace. They are using government to their advantage, and they are making sure that the middle class does not get to use government to its advantage. They don't simply want to get government off their backs. They want to climb on the back of government. They want to make sure that government does not tell them what to do, whether or not they can destroy the environment or cheat consumers. They want to tell government what it can do which is to say remove any regulations which might protect the public or the environment and lower their profit margins. They want to get government out of their way so they can exploit foreign labor and American consumers because this will maximize their profits, and that, my friend, is their bottom line. They are here to serve themselves not the public and they will use every lever of government in order to do so.

Billionaire Warren Buffett, a Traitor to His Class, Suggests That Billionaires Should Be Taxed MORE!

STOP CODDLING THE SUPER-RICH

by Warren Buffett, from the New York Times, August 14, 2011

OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.

While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.

Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.

If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.

To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I didn’t refuse, nor did others. I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.)

I know well many of the mega-rich and, by and large, they are very decent people. They love America and appreciate the opportunity this country has given them. Many have joined the Giving Pledge, promising to give most of their wealth to philanthropy. Most wouldn’t mind being told to pay more in taxes as well, particularly when so many of their fellow citizens are truly suffering.

Twelve members of Congress will soon take on the crucial job of rearranging our country’s finances. They’ve been instructed to devise a plan that reduces the 10-year deficit by at least $1.5 trillion. It’s vital, however, that they achieve far more than that. Americans are rapidly losing faith in the ability of Congress to deal with our country’s fiscal problems. Only action that is immediate, real and very substantial will prevent that doubt from morphing into hopelessness. That feeling can create its own reality.

Job one for the 12 is to pare down some future promises that even a rich America can’t fulfill. Big money must be saved here. The 12 should then turn to the issue of revenues. I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.

Warren E. Buffett is the chairman and chief executive of Berkshire Hathaway.

The Top 1% Control 40% of US Wealth!

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Wealth in America: Whites Leave Minorities Behind

by Mike Brunker from msnbc.com, July 26, 2011

WASHINGTON — As Congress and the White House wrestle whether to raise taxes for the wealthiest Americans, a new analysis of Census data shows that the wealth gaps between whites and blacks and Hispanics widened dramatically during the recession.

The analysis by the Pew Research Center, released on Tuesday, found that from 2005 to 2009, inflation-adjusted median wealth fell 66 percent among Hispanic households and 53 percent among black households, compared with a 16 percent decline among white households.

Those declines increased the wealth gap between white and minority households to the largest since the census began collecting such data in 1984. The ratio of wealth for whites to blacks, for instance, is now roughly 20 to 1, compared to 12 to 1 in the first survey 25 years ago and 7 to 1 in 1995, when a booming economy lifted many low-income Americans into the middle class.

The wealth ratio for whites to Hispanics was 18 to 1 in 2009, also up from 7 to 1 in 1995, the Pew analysis found.

The declines from the recession left the median black household with $5,677 in wealth (assets minus debts, where assets include items like a car, a home, savings, retirement funds, etc.) and the typical Hispanic household with $6,325. White households, by comparison, had $113,149, the study found.

Sliced another way, the data from the Census Bureau’s Survey of Income and Program Participation (SIPP), showed that 35 percent of black households and 31 percent of Hispanic households had zero or negative net worth in 2009. The comparable rate for white households was 15 percent.

The SIPP income questionnaire is considered to provide the most comprehensive snapshot of household wealth by race and ethnicity.

The Pew analysis said the housing crisis was largely to blame for the widening gulf. The median level of home equity held by Hispanic homeowners declined by half from 2005 to 2009, from $99,983 to $49,145 it found. By comparison, white homeowners saw their median equity decline from $115,364 in 2005 to $95,000 in 2009. Black homeowners’ median equity fell from $76,910 to $59,000 over the same period.

The study said the sharper decline among Hispanics happened because a large share of Hispanics live in California, Florida, Nevada and Arizona, which were among the states hardest hit by the housing crisis.

Other studies have noted that blacks and Hispanics lost so much more home equity because they were far more likely to be sold a high-cost, sub-prime loan, regardless of their credit histories. Those mortgages now have the highest foreclosure rates.

The Grio: How minority families can help bridge the wealth gap

It also noted that because whites are more heavily invested in the recovering stock market than blacks or Hispanics, the former had recovered a higher percentage of the wealth lost to the recession.

National Urban League President and CEO Marc Morial called the report a “wake-up call” that minority communities need more investment in long-term job creation.

"A paramount issue for this nation for the 21st century is to ensure the narrowing and closing of the racial wealth gap," Morial told the Associated Press on Tuesday, a day before the National Urban League opens its annual convention in Boston. "It has deep social implications. It has deep political implications."

In Washington, the wealth gap has been a major point of friction in talks about raising the debt ceiling and putting the nation on sounder fiscal footing. President Barack Obama and Democrats have sought a variety of ways to increase revenue, all aimed at those in the upper income bracket.

The president has proposed closing loopholes in the tax code, such as breaks for owners of private jets and for oil companies as well as higher income tax rates on wealthier individuals and families. Republicans have made resistance to any tax increases a focal point in the debate, arguing that raising taxes in a recession is an impediment to creating jobs. Neither plan currently under consideration contains any tax increases.

More information

• Pew Social & Demographic Trends
• Census Bureau

The Associated Press contributed to this report.

Tax the Rich. Problem Solved

Published on Friday, July 8, 2011 by CommonDreams.org

by Carl Gibson

What if there was a group of terrorists holding your family hostage with a gun pointed at themselves, demanding the account number to your pension fund? Would you negotiate with the terrorists by allowing them access to your savings, or would you let them shoot themselves and keep your retirement money intact?

Congressional Republicans are threatening to default on the debt unless President Obama caves to their demands to cut Medicare, Medicaid and Social Security spending. Regardless of the market-crashing consequences of a debt default, actually doing so would be unconstitutional. Section 4 of the 14th Amendment clearly states that "The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions...shall not be questioned." Republicans are violating the constitution by threatening a debt default. End of discussion.

Credible economists and lawmakers on both sides generally agree that raising the debt ceiling is an essential part of governing, and that a large deficit can pose a danger to economic security. But if Speaker Boehner genuinely cares about deficit reduction, he need only look to ending his own party's policies and shifting the tax burden. Swearing allegiance to Grover Norquist's no-new-taxes pledge, the GOP will only allow room for $4 trillion in cuts, arguing this is a spending problem, not a revenue problem. However, their budget would collect exactly $4 trillion less over the next decade through even more tax cuts for corporations and the wealthy.

Contrary to Republican claims, the United States is one of the lowest-tax countries in the world-- U.S. corporations and wealthy citizens pay far less in taxes than other developed nations. Since 1950, capital gains taxes have dropped 10 percent, tax rates for million-dollar households have decreased 10 percent since the mid-nineties, and the estate tax has virtually disappeared for those with the largest fortunes since the onset of the Bush presidency. Four simple solutions would close that $4 trillion budget gap in the next decade, without even touching Social Security or Medicare.

By passing laws like Sen. Carl Levin's Stop Tax Haven Abuse Act, we could generate over $100 billion in new revenue from closing loopholes that allow corporations to shift profits to overseas bank accounts. Through modest taxation of speculative Wall Street trading, we could bring in another $150 billion per year. With higher income tax brackets for households earning over $1 million annually, as Rep. Jan Schakowsky has proposed, we would gain another $100 billion. And progressively taxing estates worth $5 million or more would mean an extra $45 billion in tax revenue.

A truly principled leader would refuse to negotiate with terrorists, and allow them to turn the gun on themselves. Our President needs to stand firmly behind these common-sense proposals, and remove from the table any cuts to the programs we've spent our lives funding from our own paychecks. No exceptions.

Carl Gibson is the co-founder of US Uncut, a grassroots movement to stop budget cuts by getting corporations to pay their fair share. He lives in Jackson, Mississippi where, among other things he works as a bouncer at the Club Bottoms Up. www.usuncut.org

Our Billionaires: the Ten Wealthiest Americans

From the OB Rag, June 20, 2011

by Mail Online

Here are America’s 10 wealthiest billionaires:

No. 1. : Bill Gates

Bill Gates

Microsoft tycoon Bill Gates is worth a huge net $54 billion.

No. 2.:  Warren Buffett

Warren Buffett

Financial magnate Warren Buffet smiles as he is introduced at the Berkshire Hathaway. Chairman Warren Buffett has $45 billion to smile about.

No. 3: Larry Ellison

Larry Ellison

Larry Ellison, chief executive officer of Oracle Corp., a computer technology company, is worth $27 billion

No. 4: Christy Walton and family

Christy Walton

As the widow of John Walton, son of Wal-Mart’s founder, Christy Walton has inherited a cool $24 billion

Charles Koch

No. 5: Charles Koch

The chairman and CEO of Koch Industries, said to be the largest private company in the world, is worth $22 billion

David Koch

No. 6: David Koch

As executive vice president of Koch Industries, David trails his brother slightly, with $21.5 billion

Nos. 7 and 8: Alice and Jim Walton

The Wal-Mart siblings and heirs are each worth between $20 and $20.1 billion.

No. 9: S. Robson Walton

Jim, Alice and Rob Walton

As chairman of Wal-Mart Stores Inc., Robson’s net worth stands at $19.7 billion

No. 10: Michael Bloomberg

Michael Bloomberg

New York City’s Mayor, who also owns media company Bloomberg LP, takes home $18 billion

The Growing Desperation of the Don’t-Raise-Taxes-on-the-Rich Crowd

by Robert Reich

Thursday, June 16, 2011

The much-vaunted Republican pledge not to raise any taxes is crumbling. Today 34 Senate Republicans voted to end the special tax breaks for ethanol.

According to no-tax-increase purists like Grover Norquist, this is tantamount to a tax increase.

The truth is, Republicans are divided between those who want to bring down the budget deficit and those who want to shrink government. Ending a special tax subsidy helps reduce the deficit but doesn’t necessarily shrink government. That’s why Norquist and his followers have insisted any such tax increase – including even the closing of tax loopholes – be directly linked to a corresponding tax cut.

In order to save face on today’s vote, Norquist says renegade Republicans will still be considered to have adhered to the pledge if they vote in favor of an amendment offered by Senator Jim DeMint to eliminate the estate tax. Talk about grasping at straws. DeMint’s amendment isn’t even up for a vote.

In short, the no-tax pledge is evaporating in the fresh air of reality.

What are anti-tax Republicans to do now?

For one, continue to distort the arguments of those who believe corporations and the rich should pay more taxes.

For example, in the lead op-ed piece in today’s Wall Street Journal, Cato Institute fellow Alan Reynolds claims a higher marginal tax on the super rich will bring in less revenue.

Reynolds uses my tax proposal from last February as his red herring. “Memo to Robert Reich,” he declares, “The income tax brought in less revenue when the highest rate was 70 percent to 91 percent [between 1950 and 1980] than it did when the highest rate was 28 percent.”

Reynolds bends the facts to make his case, picking and choosing among years.

In truth, the most important variable explaining the rise and fall of tax revenues as percent of GDP has been the business cycle, not the effective tax rate. In periods when the economy is growing briskly, tax revenues have risen as a percent of GDP, regardless of effective rates; in downturns, revenues have fallen.

Reynolds also distorts my proposal, implying that the bracket on which I call for a 70 percent tax is the same as in today’s tax code. Wrong. My proposed 70 percent rate would apply only to incomes over $15 million.

$15 million, Alan!

Under my proposal, incomes between $5 million and $15 million would be subjected to a 60 percent rate, and incomes between $500,000 and $5 million to a 50 percent rate.

Importantly, my proposal calls for a substantial rate reduction for families with incomes under $100,000. (Conveniently, Reynolds fails to mention this.)

Reynolds entirely ignores my central argument, which is that rather than depress economic growth, higher taxes on the rich correlate with higher growth. During almost three decades spanning 1951 to 1980, when the top rate was between 70 percent and 91 percent, average annual growth in the American economy was 3.7 percent.

Between 1983 and the start of the Great Recession, when the top rate dropped to between 35 percent and 39 percent, average growth was 3 percent.

How to explain this? Easy.

Since the early 1980s, a larger and larger share of total income has gone to the top (the richest 1 percent of Americans got 10 percent of total income in 1980, and get over 20 percent now). That’s left the vast middle class with insufficient purchasing power to boost the economy – without going deep into debt.

Lower tax rates on the rich — including lower capital gains rates — have exacerbated this regressive trend.

Finally, having misread the facts, distorted my proposal, and ignored my argument, Reynolds fails to rebut my conclusion that raising middle class purchasing power by lowering their tax rates while raising the rates at the top will help spur growth, to the benefit of all. Top earners will do better with a smaller share of a more rapidly- growing economy than a larger share of a slower-growing one.

If I were a cynic, I’d say the Republican right is showing signs of desperation.

The Rich Are Destroying the Economy

Published on Sunday, June 12, 2011 by CommonDreams.org

by Shamus Cooke

Ever since the Great Recession shook the foundations of the U.S. economy, President Obama has been promising recovery. Evidence of this recovery, we were told, was manifested in the massive post-bailout profits corporations made. Soon enough, the President assured us, these corporations would tire of hoarding mountains of cash and start a hiring bonanza, followed by raising wages and benefits. It was either wishful thinking or conscious deception. The recent stock market meltdown has squashed any hope of a corporate-led recovery.

The Democrats fought the recession by the same methods the Republicans used to create it: allowing the super rich to recklessly dominate the economy while giving them massive handouts. This strategy, commonly referred to as Reaganomics or Trickle Down Economics, is now religion to both Democrats and Republicans; never mind the staged in-fighting for the gullible or complicit media.

When it becomes obvious to even the President that the economic recovery never existed beyond the bank accounts of the rich, questions will have to be answered. Why, for example, did nobody in either political party foresee the disastrous consequences of the bailouts? Not only did the U.S. deficit drastically increase but the same U.S. corporations that caused the recession were given reinforcement for their destructive actions, ensuring that it would continue unabated.

In his book, Crisis Economics, Nouriel Roubini outlines the insane response to the recession by Republicans and Democrats. Because both parties simply threw money at the banks and hedge funds instead of punishing them, a condition of "moral hazard" was created, meaning, that banks would assume another bailout would come their way if they destroyed the economy again -- too big too fail, remember? Roubini explains how the Democrats allowed the "too big" banks to get even bigger; how Wall Street salaries based on short-term profits went unregulated; how the regulations that were put into place were inadequate and filled with loopholes; how nothing of any significance changed.

Roubini has also written extensively about how the post-bailout Federal Reserve policies were fueling a commodity bubble that may be in the midst of bursting, possibly triggering a double dip recession. Essentially the big banks and rich investors were borrowing cheap dollars from the Fed and investing abroad in commodities with the hopes of higher returns. Roubini states:

“The risk is that we are planting the seeds of the next financial crisis...this asset bubble is totally inconsistent with a weaker recovery of economic and financial fundamentals." (October 27, 2009).

This investor-created commodity bubble pushed up prices in oil, food, and other basic products, causing further pain for working families and the economy as a whole. This speculative bubble was easily predictable but ignored by both political parties, since they claimed the bubble was a sign of recovery.

Another mainstream economist, Paul Krugman, also admits that the rich's death-grip on the U.S. political and economic system is causing pain for everybody else:

"Far from being ready to spend more on job creation, both parties agree that it's time to slash spending - destroying jobs in the process - with the only difference being one of degree...policy makers are catering almost exclusively to the interests of rentiers [rich investors] - those who derive lots of income from assets, who lent large sums of money in the past, often unwisely, but are now being protected from loss at everyone else's expense." (June 10, 2011)

Krugman explains that this process continues because the rich dominate the political system through campaign contributions, "access to policy makers,” promises of high paying corporate jobs after their congressional term is over, and good o'l fashion corruption. Because he's a true blue Democrat at heart, Krugman nevertheless focuses most of his rage on Republicans.

Krugman's repeated calls to Democrats and Republicans to create jobs have fallen on deaf ears. Both parties agree that the "private sector" [corporations] should create jobs; until they decide to hire, nothing will happen. This is not merely "bad policy,” as liberals like Krugman like to fret about, but the conscious agenda of the rich. Corporations and rich investors love high unemployment. The Kansas City Star explains why:

"Last year [2010], for the second year in a row, U.S. companies got more work out of their employees while spending less on overall labor costs." (February 3, 2011)

It really is that simple. High unemployment creates a downward pressure on wages, allowing employers to work the remaining employees harder and thus to increase profits. This dynamic, combined with the above commodity speculation, has been the entire basis for the corporate recovery, while working people have literally seen nothing beneficial.

This process is an extension of the bailouts, in the sense that more wealth is being transferred from working people to the corporations. Since consumer spending accounts for 70 percent of the U.S. economy, policies like these ensure that another crisis is inevitable.

Further complicating matters is the ending of the Federal Reserve's Quantitative Easing program (printing money), which amounted to the Fed buying $600 billion in U.S. Treasury bonds since last fall, essentially funding the U.S. debt and driving down interest rates.

Since the Fed was buying 60 percent of the bonds, a new creditor will need to be found; and this lender will likely require higher interest rates before loaning to the U.S. government, to make sure the loan is profitable. And although different nations buy U.S. debt for different reasons, much of this debt is bought by rich U.S. citizens, who will put the squeeze on the rest of us that have to pay back this debt. The Washington Times explains:

"...Bill Gross, the head of America's own Pimco bond fund, the largest buyer of bonds worldwide, recently reduced Pimco's holdings of Treasuries to zero out of concern that they weren't yielding enough given the risks of inflation and deficit spending." (June 7, 2011)

When the Federal Reserve raises interest rates to satisfy these rich investors, the economy will likely take a further nosedive. It appears, then, that the rich have a win-win situation: they got free bailout money, which increased the deficit; and because the deficit is too high, the rich want higher interest rates for investing in U.S. Treasury Bonds. In both instances working people pay the bills.

This insanity cannot be stopped by conventional measures, since politicians are tone deaf to anything that doesn't ring of corporate cash. The jobs crisis continues as a result of the policy agreed to by both Democrats and Republicans. The labor movement has a special role to play in reversing the above policies.

The corporate-led discussion around cutting social programs to fix the deficits -- on a state and national level -- can be challenged by a nationally coordinated campaign of unions and community allies demanding: Tax the Rich! This demand is significant because it can address both the deficits and the jobs crisis: a massive public works program can be funded by taxing the corporations and the wealthy to pre-Reagan levels. And it makes complete sense because the growing inequalities in wealth over the past three decades has meant a spectacular concentration of wealth at the top. The rich have plenty of money to spare.

Organized labor needs to bring masses of people in the street all over the country in order to get attention and pressure the government to respond to these demands. And it can succeed, especially if it organizes a serious, protracted campaign and especially if this campaign does not get funneled into supporting Democratic candidates, the surest way to kill campaign momentum.

AFL-CIO President Richard Trumka recently spoke in favor of a strong, independent labor movement. This is the direction it must take, rather than relying on the Democrats. The labor movement must get its act together, unite to put up a fight and demand specific policies that can concretely address the crisis faced by millions of working people.

Shamus Cooke is a social service worker, trade unionist, and writer for Workers Action (www.workerscompass.org).  He can be reached at [email protected]

Taking the Side of the Billionaires

Published on Friday, May 27, 2011 by Consortiumnews.com

by Robert Parry

America’s Right – from the NFL lockout to Rep. Paul Ryan’s budget – side with the billionaires in what amounts to an escalating class war against the middle class and the poor

If American football fans end up facing a fall without NFL games, they probably won’t blame George W. Bush and other Republican presidents for packing the federal courts with right-wing judges, but it was two Bush appointees who reversed a District Court ruling that would have ended the lockout of players.

The Appeals Court judgment encouraged the NFL’s hardline billionaire owners to resist making the kinds of compromises that a few less intransigent owners recognize could easily resolve the impasse.

Now, the hardliners simply assume that Republican judges will keep siding with the NFL owners and thus enable them to beat down the players, eventually assuring the billionaire owners a bigger piece of the revenue pie – even if that means losing some or all of the 2011 season.

What many average Americans, especially white guys, don’t seem to understand is that whatever the populist-styled rhetoric of Fox News or Rush Limbaugh, the Right’s default position is to side with the billionaires – and to show little or no regard for the fate of anyone else, whether NFL players or sick senior citizens.

Still, one must give the Right credit for having worked hard refining how to phrase its arguments. Right-wingers even have turned the term “class warfare” against the Left by shouting the phrase in a mocking fashion whenever anyone tries to blunt the “class warfare” that the billionaires have been waging against the middle class and the poor for decades.

On right-wing TV and talk radio across the country, there are tag teams of macho men pretending that ”class warfare” exists only in the fevered imagination of the Left. But billionaire investor Warren Buffett has acknowledged the truth: “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”

The right-wing propagandists further earn their keep by disparaging science as “elitist.” So, even as the dire predictions from climate-change experts that global warming will generate more extreme weather seem to be coming true, many Americans who have listened to the “climate-change-deniers” for years still reject the scientific warnings.

While no single weather event can be connected to the broader trend of climate change, the warnings about what might happen when the earth’s atmosphere heats up and absorbs more moisture seem to be applicable to the historic flooding in some parts of the world, droughts in others, and the outbreak of particularly violent storms.

Heat and moisture are especially dangerous ingredients for hurricanes and tornados.

Ironically, the parts of the United States hardest hit by this severe weather are those represented predominately by Republicans who have been at the forefront of obstructing government efforts to address the global-warming crisis.

Flooding, hurricanes and tornados have inflicted horrendous damage on Mississippi, Alabama, Louisiana, Texas, Tennessee, Missouri and Oklahoma – all part of the Republican base.

God’s Punishment?

If televangelist Pat Robertson were a left-winger instead of a right-winger, he might be saying that God is punishing these “red states” for doubting the science of global warming.

However, even as the U.S. news obsesses over the violent weather, mainstream media stars have steered clear of whether global warming might be a factor. It’s as if they know that they’d only be inviting career-damaging attacks from the Right if they did anything to connect the dots.

The Right also is not eager to explain how these catastrophes will require emergency funding and rebuilding assistance from the federal government. After all, you don’t want Republican voters to understand that sometimes “self-reliance” alone doesn’t cut it; sometimes, we all need help and the government must be part of that assistance.

In the case of the killer tornado that devastated Joplin, Missouri, House Republicans, without a hint of irony, are extracting the funds for disaster relief from green energy programs, which remain a favorite GOP target since many Republicans still insist there is no such thing as global warming.

At both state and national levels, Republican leaders have lined up behind climate-change deniers, with former Minnesota Gov. Tim Pawlenty just the latest GOP presidential hopeful to apologize for his past support of a cap-and-trade system aimed at reducing global-warming gases.

Any serious move toward alternative energies would, of course, be costly to the giant oil companies and their billionaire owners, like David Koch of Koch Industries who has spent millions of dollars funding right-wing organizations, such as the Tea Party. The Right’s media/political operatives know better than to bite the hand that feeds them.

GOP orthodoxy also disdains tax increases on the rich or even elimination of tax breaks for the oil industry. The Republican insistence on low tax rates for the wealthy, in turn, has forced consideration of other policy proposals to achieve savings from services for average Americans.

That is why congressional Republicans have targeted Medicare with a plan that would end the current health program for the elderly and replace it with a scheme that would give subsidies to senior citizens who would then have to sign up for health insurance from private industry, which has proven itself far less efficient in providing health care than the government.

The GOP budget, drafted by House Budget Committee Chairman Paul Ryan of Wisconsin, would impose the Medicare changes on seniors beginning in 10 years.

Most attention on the Ryan plan has focused on estimates that it would cost the average senior citizen more than $6,000 extra per year, but the proposal also has the effect of privatizing Medicare, meaning that the government would make direct “premium support” payments to profit-making insurance companies whose interest is in maximizing profits, not providing the best possible care for old people.

While the Ryan plan would achieve budget “savings” by shifting the burden of health-care costs onto the elderly, Ryan’s budget also would lower tax rates for the wealthiest Americans even more, from 35 percent to 25 percent. Partly because of that tax cut, Ryan’s budget would still not be balanced for almost three decades.

Class Warfare

Thus, the battle lines of America’s “class warfare” are getting more sharply drawn. The conflict is now over the Right’s determination to concentrate even more money and power in the hands of the rich by hobbling any government capability to protect the people’s general welfare.

If the Right wins, individual Americans will be left essentially defenseless in the face of unbridled corporate power.

Ryan’s Medicare plan may be just the most striking example because it envisions sick old people trying to pick their way through a thicket of private insurance plans with all their confusing language designed to create excuses for denying coverage. It is not an exaggeration to say that Ryan’s tight-fisted Medicare plan could consign millions of Americans to a premature death.

The Right’s priorities hit home at a town hall meeting held by Rep. Rob Woodall, R-Georgia, when he chastised one of his constituents who worried that Ryan’s plan would leave Americans like her, whose employer doesn’t extend health benefits to retirees, out of luck.

“Hear yourself, ma’am. Hear yourself,” Woodall lectured the woman. “You want the government to take care of you, because your employer decided not to take care of you. My question is, ‘When do I decide I’m going to take care of me?’”

However, another constituent noted that Woodall accepted government-paid-for health insurance for himself.

“You are not obligated to take that if you don’t want to,” the woman said. “Why aren’t you going out on the free market in the state where you’re a resident and buy your own health care? Be an example. …

“Go and get it in a single-subscriber plan, like you want everybody else to have, because you want to end employer-sponsored health plans and government-sponsored health plans. … Decline the government health plan and go to Blue Cross/Blue Shield or whoever, and get one for yourself and see how tough it is.”

Woodall answered that he was taking his government health insurance “because it’s free. It’s because it’s free.”

Self-reliance, it seems, is easier to preach to others than to practice yourself.

Woodall’s explanation recalled the hypocrisy of free-market heroine Ayn Rand, whom Rep. Ryan has cited as his political inspiration. In her influential writings, Rand ranted against social programs that enabled the “parasites” among the middle-class and the poor to sap the strength from the admirable rich, but she secretly accepted the benefits of Medicare after she was diagnosed with lung cancer.

A two-pack-a-day smoker, Rand had denied the medical science about the dangers of cigarettes, much as her acolytes today reject the science of global warming. However, when she developed lung cancer, she connived to have Evva Pryor, an employee of Rand’s law firm, arrange Social Security and Medicare benefits for Ann O’Connor, Ayn Rand using her husband’s last name.

In 100 Voices: An Oral History of Ayn Rand, Scott McConnell, founder of the Ayn Rand Institute’s media department, quoted Pryor as saying: “Doctors cost a lot more money than books earn and she could be totally wiped out.”

So, when push came to shove, even Ayn Rand wasn’t above getting help from the “despised government.” However, her followers, including Rep. Ryan, now want to strip those guaranteed benefits from other Americans of more modest means than Ayn Rand.

It seems it’s okay for average Americans to be wiped out.

Hypocrisy, Hypocrisy

While the Right’s penchant for hypocrisy is well-known (note how many Republicans involved in the impeachment of President Bill Clinton had their own extra-marital affairs), the bigger mystery is why so many average-guy Americans volunteer to fight for the rich in the trenches of the Right’s class warfare.

Clearly, the Right’s propaganda with its endless repetition is very effective, especially given the failure of the American Left to invest significantly in a competing message machine. The Right also has adopted the tone of populism, albeit in support of a well-to-do economic elite.

Yet, perhaps most importantly, the Right has stuck with its battle plan for rallying a significant percentage of middle-class Americans against their own interests.

Four decades ago, President Richard Nixon and his subordinates won elections by demonizing “hippies,” “welfare queens” and the “liberal media.”

Then, in the late 1970s, a tripartite coalition took shape consisting of the Republican Establishment, neoconservatives and the leaders of the Christian Right. Each group had its priorities.

The rich Republicans wanted deep tax cuts and less business regulation; the neocons wanted big increases in military spending and a freer hand to wage wars; and the Christian Right agreed to supply political foot soldiers in exchange for concessions on social issues, such as abortion and gay rights. Ultimately, each part of the coalition got a chunk of what it wanted.

From Ronald Reagan to George W. Bush, the rich got their taxes slashed, saw regulations rolled back and gained a larger share of the nation’s wealth and political power. The neocons got massive military spending and the chance to dispatch U.S. soldiers to kill Israel’s Muslim enemies. The Christian Right got help in restricting abortions and punishing gays.

But what did the American middle-class get?

Over those three decades, the middle-class has stagnated or slipped backward. Labor unions were busted; jobs were shipped overseas; personal debt soared; education grew more expensive, along with medical care. People were working harder and longer – for less. Or they couldn’t find jobs at all.

With today’s Tea Party and the Ryan budget, the Right’s coalition is staying on the offensive. If the House budget were passed in total, tax rates for the rich would be reduced another 10 percentage points; military spending would remain high to please the neocons (who foresee a possible war with Iran); and Planned Parenthood and other pet targets of the Christian Right would be zeroed out.

Yet, with the proposed elimination of traditional Medicare, the Ryan budget has lifted the curtain on what the Right’s “free market” has in mind for most average Americans, who could expect to find their lives not only more brutish but shorter.

The real-life-and-death consequences of the Right’s tax cuts, military spending and culture wars are finally coming into focus. If you’re not rich – and can’t afford to pick up the higher tab on health care – you’re likely to die younger. Or your kids might have to dig into their pockets to help you out.

Less extreme but still troubling, another consequence of the Right’s remarkable success over the past three decades might become apparent on your TV screens this fall.

Thanks to all those right-wing judges packed onto federal appeals courts by Reagan and the two Bushes, American football fans might not have the NFL to watch.

The NFL’s lockout of its players seemed to be ending several weeks ago when a lower-court judge ruled against the billionaire owners, but the NFL’s lawyers confidently filed an appeal to a three-judge panel on the Eighth Circuit, knowing that they would surely get one dominated by Republican judges.

They did. Steven Colloton and Duane Benton, two Republicans appointed by George W. Bush, constituted the majority on the panel and reflexively sided with the NFL’s owners.

The ruling should have surprised no one. After all, the Right’s default position is almost always to side with the billionaires.

© 2011 Consortiumnews.com

Robert Parry broke many of the Iran-Contra stories in the 1980s for the Associated Press and Newsweek. His latest book, Neck Deep: The Disastrous Presidency of George W. Bush, was written with two of his sons, Sam and Nat. His two previous books are Secrecy & Privilege: The Rise of the Bush Dynasty from Watergate to Iraq and Lost History: Contras, Cocaine, the Press & 'Project Truth'.

more Robert Parry

Is the US a Wealthy Nation? Really??

by John Lawrence

We hear all this blather about how the US is such a wealthy nation. Not true. Before Ronald Reagan became President, the US was the world's largest creditor nation. People and countries owed us more money than we owed them. Now some 30 years later the US is the world's largest debtor nation. This is the definition of a poor - not a rich - nation. China on the other hand holds $3 trillion in international reserves including $1 trillion of US debt. Other nations have sovereign wealth funds which contain vast amounts of money. The US has only a huge pile of debt - some $14 trillion worth. The US used to be the world's largest importer of raw materials and exporter of manufactured goods. Now we're the world's largest exporter of raw materials and importer of manufactured goods with a trade deficit of some $600 billion a year. At the present time the US has a deficit of some $2 trillion in needed infrastructure repairs while China is building high speed rail track at such a rate that it will soon have more miles than the rest of the world combined. Meanwhile, the US spends more on its military establishment than the rest of the world combined while cutting safety nets and education for its own citizens.

Americans have pulled the wool over their own eyes. Despite having a national debt of $14 trillion, despite having gone from a net creditor nation to a net debtor nation in little over 30 years, despite having enormous trade deficits month after month, year after year, despite having an infrastructure in need of $2 trillion worth of repairs, Americans think they live in a wealthy nation. The truth of the matter is that the US is a poor nation within which live a lot of wealthy individuals. China on the other hand holds a little over $1 trillion of US debt making it a fairly wealthy nation albeit with a large but diminishing number of poor people. China is building new infrastructure at an astonishing rate. It's a fallacy to think a wealthy nation is a nation comprised of a large number of wealthy individuals. In fact many Banana Republics are comprised of a small class of wealthy individuals surrounded by a sea of poverty. The US is on track to becoming one of those. A recent survey showed that there is a higher level of inequality in the US than exists in Pakistan, Ethiopia and Ivory Coast. 

It is not hard to diagnose why the US is a poor nation which thinks itself rich while China is a rich nation which passes itself off as being poor. All the free trade agreements like NAFTA and CAFTA have resulted in the decimation of the US manufacturing base. US factories are closing in droves:

2010 comes in the midst of a stunning wave of U.S. factory closings that stretches from coast to coast.  Once upon a time America was the greatest manufacturing machine that the world has ever seen, but now it seems as though the only jobs available for working class Americans involve phrases such as “Welcome to Wal-Mart” and “Would you like fries with that?”  Even though the population of the United States has exploded over the last several decades, the number of Americans employed in the manufacturing sector today is smaller than it was in 1950.  America has become a voracious economic black hole that ”consumes” as much as possible and yet actually produces very little.  The United States is becoming deindustrialized at a blinding pace, and it is becoming increasingly difficult for blue collar American workers to find jobs that will actually enable them to support their families.  The sad truth is that American workers don’t have a whole lot to actually celebrate this Labor Day.  14 million U.S. workers are “officially unemployed” and tens of millions of others have been forced to take part-time or temporary jobs that they are overqualified for just so they can survive.   Unfortunately, this is not just a temporary situation for American workers.  As millions of good jobs continue to get outsourced and offshored, Labor Day celebrations in coming years will be even more depressing.

Since 2001, The U.S. Has Lost 42,400 factories. The "giant sucking sound" that Ross Perot predicted has become a point of actual fact. But this doesn't seem to bother America's leaders. They are dedicated to the policy that US consumption drives US GDP and as long as US GDP is the largest in the world, who cares? Sales are up! However China, as the world's second largest economy as measured by GDP, is on track to overtake the US in the near future. American politicians only care about transnational corporations, nominally American, and how they can maintain the US consumer appetite (and their profit margins) for buying their goods even though most of those goods are produced overseas. They coddle these corporations by lowering their taxes, having their lobbyists drill loophioles in the tax code and giving them a "tax holiday" during which they can "repatriate" their overseas capital and bring it "home" without any tax consequences.

The model of trickle down economics, long since discredited, is still being championed by right wing politicians with the result that the fig leaf of prosperity is being shredded to reveal a naked transfer of wealth from the middle class to the upper one per cent. Naked power grabs are becoming the order of the day as the recent vote to extend taxpayer subsidies to the five Big OIl companies, despite their being the most profitable corporations in human history, reveals. At the same time those same right wing policticians are demanding that the budget be balanced on the backs of the poor and middle class. While countries such as Norway fund their safety net with royalties from oil drilling, the US gives away its natural resources to oil corporations including BP which is not even headquartered in the US. The neocon model of privatization and eliminating safety nets, although unsuccessful in Argentina and Brazil, is achieving considerably more success when practiced here at home. Trade unions are being decimated. States are being turned into fiefdoms and dictatorships. Public education is being defunded. There is an all out assault on teachers, police and other public workers. The notion that government doesn't work and can't be trusted is being fostered.

The US is becoming the very definition of a Banana Republic. It is becoming a nation largely bereft of a middle class, a nation in which there exists a small class of extremely wealthy individuals surrounded by a sea of impoverishment, a nation of antiquated infrastructure, a nation in which there is no there there. All that exists is a diminshing probablity of getting rich or even making it into the middle class. Students are being saddled with immense and obscene amounts of student loan debt. Middle classers are losing their homes to foreclosure. Poor people are being shunted aside as food stamp programs are being shut down and home heating oil allowances are drying up. The war on the poor is raging. And the American people continue to vote the guys that are screwing them into office because they pander to them with promises of unlimited rights of gun ownership and promises that they won't allow gays to marry

The US in point of fact is not a wealthy nation despite attempts to brainwash us that it is, and it's becoming poorer by the hour. But instead of implementing a rational health care system, we continue to give away billions to the pharmaceutical companies that we wouldn't have to if the government weren't prevented by law from negotiating with them. We continue to give away billions in subsidies to Big Oil and Big Agriculture. We continue to give away billions in tax breaks to the rich. We continue to pour billions down ratholes in Afghanistan, Pakistan, Iraq, Israel and many other places. .

 

These countries are taking us for a ride, and the Israeli President Netanyahu lectures our President on why he won't cooperate to bring about mideast peace. They are manipulating us out of our money while actually working and fighting against us as revealed by Pakistan's harboring of bin Laden. If Obama had tried to coordinate bin Laden's capture with Pakistan instead of going it alone, bin Laden would probably have been tipped off with the result that the Seals, to Obama's embarassment, would not have found bin Laden at home. What, no bin Laden? Just innocent women and children.

As China eats the US' lunch and the rest of the world rips off Uncle Sucker for billions of US taxpayer dollars, the American people should get used to the fact that we're not number 1 any more. Far from being the world's richest nation we're fast becoming one of the world's poorest nations where some of the world's richest people happen to reside. But don't worry about them. They also own villas in France, Italy and Spain. They only continue to hold US citizenship as a convenience. They could live anywhere. They could headquarter their corporations anywhere. It's still convenient for them to headquarter here so they can use their lobbyists to rip off American taxpayers and sell into the American consumer market. But as time goes on most of their sales will be to emerging consumer markets in China and elsewhere.

 

The Great Switch by the Super Rich

by Robert Reich

Tuesday, May 17, 2011

Forty years ago, wealthy Americans financed the U.S. government mainly through their tax payments. Today wealthy Americans finance the government mainly by lending it money. While foreigners own most of our national debt, over 40 percent is owned by Americans – mostly the very wealthy.

This great switch by the super rich – from paying the government taxes to lending the government money — has gone almost unnoticed. But it’s critical for understanding the budget predicament we’re now in. And for getting out of it.  

Over that four decades, tax rates on the very rich have plummeted. Between the end of World War II and 1980, the top tax bracket remained over 70 percent — and even after deductions and credits was well over 50 percent. Now it’s 36 percent. As recently as the late 1980s, the capital gains rate was 35 percent. Now it’s 15 percent.

Not only are rates lower now, but loopholes are bigger. 18,000 households earning more than a half-million dollars last year paid no income taxes at all. In recent years, according to the IRS, the richest 400 Americans have paid only 18 percent of their total incomes in federal income taxes. Billionaire hedge-fund and private-equity managers are allowed to treat much of their incomes as capital gains (again, at 15 percent).

 Meanwhile, more and more of the nation’s income and wealth have gone to the top. In the late 1970s, the top 1 percent took home 9 percent of total national income. Now the top 1 percent’s take is more than 20 percent. Over the same period, the top one-tenth of one percent has tripled its share.

Wealth is even more concentrated at the top — more concentrated than at any time since the Gilded Age of the late 19^th century.

So what are America’s super rich doing with all this money? They’re investing it all over the world, wherever they can get the best return for any given level of risk. Treasury bills – essentially loans to the U.S. government — have proven good and safe investments, particularly during these last few tumultuous years.

You hear a lot of worries about foreigners dumping Treasuries if they lose confidence in the dollar because of our future budget deficits. What you hear less about are these super-rich Americans, who are just as likely to abandon Treasuries if spooked by future budget deficits.

The great irony is if America’s super rich financed the U.S. government the way they used to – by paying taxes rather than lending the government money – that long-term budget deficit would be far lower.

 

This is why a tax increase on the super rich must be part of any budget agreement. Otherwise the great switch by the super rich will make the income and wealth gap far wider.

Worse yet, average working Americans who can least afford it will either lose the services they depend on, or end up with a tax burden they cannot bear.

Make the Wealthy Pay to Save the USA

Published on Wednesday, May 4, 2011 by CommonDreams.org

by Dennis Rahkonen

For the past few months, we’ve been witnessing an inspiring, genuinely grass-roots rebellion of average Americans against corporate/financial profiteers savaging our collective well-being for their narrow, private gain.

It’s most powerful manifestation came in Wisconsin, where tens of thousands demonstrated outrage over atrociously arrogant, callously cruel Republican efforts to eviscerate organized labor.

As welcome as this explosion of populist protest has surely been, its amorphous spontaneity and incomplete cohesion evince a weakness that needs correction.

Much greater unity is required, stronger links between separate communities and regions are necessary, and a national people-before-profits agenda has to be drawn up, disseminated, and implemented.

In the interim -- as an effective programmatic counter to constant rape by marauding monopolists is being formulated -- it’s crucial to put forward an overriding progressive theme, expressed tersely in strong language well suited for street chants and bumper stickers, that every fair-minded citizen possessing a good heart can immediately, enthusiastically embrace.

That’s why “Make the wealthy pay to save the USA!” should figure prominently in everything we say or write about the profound systemic injustice under which increasing multitudes of our fellow citizens -- and we ourselves -- painfully suffer.

Most adult Americans are either workaday wage-earners or worked-a-lifetime retirees. They’re the folks to whom ‘government of the people, by the people, and for the people’ should properly apply.

It’s in clear furtherance of their welfare and common good that elected officials are duty-bound to constructively act, as our societal first priority. But just the opposite is happening.

Crony capitalist speculators who tanked our economy through their enormous greed and malfeasance are being shielded by conservative extremists like Scott Walker, Paul Ryan, and the Tea Party.

They would rather decimate collective bargaining, Social Security, Medicare, and Medicaid before eliminating unfair tax loopholes and havens for billionaires.

Constantly putting Wall Street ahead of Main Street is simply wrong. It’s also as socially unsustainable as similarly unfair practices were when ancient empires fell.

Appropriately taxing the mega rich and corporation -- together with ending ill-advised wars and curbing costly militarism -- could fix the deficit moving forward.

Our country’s been damaged long enough by those who treasonously owe primary allegiance to the Almighty Dollar.

As mass poverty and deprivation worsen, while fat cats unconscionably rake in more stolen booty, no reasonable person can fail to agree with what’s just been stated.

More importantly, no conservative can present a countering argument without clearly exposing the elitist, self-serving social irresponsibility that Republicans are afflicted with as if by a diabolical moral disease that’s completely contrary to both Golden Rule Christian teachings and key American ideals that they hypocritically profess to cherish.

We can’t lose if we gather in growing numbers in all venues of public expression to relentlessly speak (shout) these words with an insistent, unified voice:

Make the wealthy pay to save the USA!

Dennis Rahkonen, from Superior, Wisconsin, has been writing progressive commentary with a Heartland perspective for various outlets since the Sixties

Lawrence O'Donnell Answers Rush Limbaugh: What Would Jesus Do About the Budget?

Visit msnbc.com for breaking news, world news, and news about the economy

 

America's 10 Most Overpaid CEOs

from Mother Jones

 

The CEO who got a 449% raise for keeping his company in the red, and more tales of executive excess.

— By Josh Harkinson

Wed Apr. 20, 2011 12:01 AM PDT

The recession is far from over for millions of Americans, but prosperity has returned to the nation's boardrooms and corner offices. After two years of declines in the wake of the financial crisis, executive pay is skyrocketing. CEOs at the country's 200 largest companies earned an average of 20 percent more last year than in 2009, according to recent corporate filings. By comparison, average pay for workers in the private sector rose just 2.1 percent last year—nearly the smallest increase in decades.

While some CEOs, such as Apple's Steve Jobs, took symbolic $1 salaries last year, many kept drawing outsized checks. Below, we list 10 of 2010's most egregiously overcompensated executives. They're selected not just on the size of their pay packages, but how much more they were paid than their peers at similar companies, as well as the disparity between their personal bottom line and their companies'. These 10 vividly illustrate what veteran compensation consultant Bud Crystal views as a broad problem in many boardrooms: "You have almost no relationship between pay and performance when it comes to the CEO."

Philippe Dauman, Viacom

Compensation: $84.5 million
Stock performance (change 2009-2010): +30%

Viacom CEO Philippe Dauman's staggering $84.5 million take makes him the highest paid chief executive in the nation. After getting a 149 percent raise in 2010, his pay bested that of the fourth- and fifth-highest-earning CEOs combined—and that was only for nine months on the job (Viacom changed its fiscal year in 2010 to end in September). During that time, Dauman brought home an average of $312,963 a day. To be sure, Viacom, the gargantuan media conglomerate that runs Paramount Pictures, MTV, Comedy Central, and Nickelodeon, saw respectable growth last year. It defended Dauman's pay by arguing that $54.5 million of it was a one-time signing bonus tied to a six-and-a-half-year extension of his contract. Even if that bonus is averaged over that period, Dauman would still be, on a monthly basis, the highest paid CEO in America, overseeing a company whose stock price closed out the 2010 fiscal year down 12 percent from its 2007 high.

Ray Irani, Occidental Petroleum

Compensation: $76.1 million

Stock performance: 23%

In 2009, Occidental Petroleum's Ray Irani was already the highest paid CEO in the energy biz. In 2010, his pay more than doubled. Since Irani took the helm in 1990, he's earned more than $1 billion in salary and stock options. This includes a windfall of $400 million in 2006, one of the biggest single-year payouts in US corporate history. His compensation far outstrips that at other high-performing energy firms. In an unprecedented vote last May, Occidental's shareholders advised it to reject Irani's pay deal—one of only three shareholder rebukes to management on executive pay last year. Irani will take a salary cut this year and retire.

Lawrence J. Ellison, Oracle
Compensation: $70.1 million
Stock performance: +16%
Larry Ellison, the third richest man in America, gets props for taking a pay cut last year even as Oracle shares rose in value. Even so, the America's Cup winner still earned more than all but two CEOs. While Ellison founded Oracle and turned it into a tech giant, the days of triple digit growth at the software and server company are long gone. Oracle's 16 percent stock return last year barely outdid the S&P 500's average. And any karmic debt that Oracle owes its founder has surely been repaid. During the aughts, the company gave Ellison a total of $1.84 billion, making him the best paid CEO of the decade.

Wiliam Weldon, Johnson & Johnson

Compensation: $21.6 million
Stock performance: -0.5%

In 2009, Johnson & Johnson's sales declined for the first time since the Great Depression, battering its blue chip stock. A wave of product recalls last year further drove down share prices. But there are no more tears for CEO William Weldon, who earned $9.3 million in salary and stock options and a fat $12 million bonus, making him the nation's 12th-highest-paid CEO. It may help that Weldon chairs the J&J board and has personally nominated many of its members—the same people who approve his pay package. In its 2009 annual report, the board commended Weldon for his "strong leadership during a very demanding year." In the first four months of this year, the company's stock has fallen four percent.

John Chambers, Cisco Systems

Compensation: $18.9 million
Stock performance: +5%
"We have disappointed our investors and we have confused our employees," Cisco CEO John Chambers apologized to his employees last month after a year of anemic growth and profits. But he wasn't sorry enough to take a pass on his $18.9 million in pay, double what he earned in 2009. That figure includes $8.2 million in stock options, more than what 75 percent of his industry peers received. Cisco's shares fetch 35 percent less today than in 2006, when Chambers started as the chairman of its board. More bad news: Two years after buying the maker of the Flip video camera for $590 million, Cisco has just announced that it's spiking the product.

John Stumpf, Wells Fargo

Compensation: $17.6 million
Stock performance: +16%
In 2009, when Wells Fargo still owed the federal government $25 billion in bailout funds, CEO John Stumpf got a $5 million raise. The resulting hurricane of bad publicity may be why Wells Fargo cut Stumpf's base pay in 2010. But it still gave him a $3.3 million cash bonus, leaving his total earnings almost unchanged. He remains one of the country's highest-paid bank CEOs. A few secrets to his success: Profiting from foreclosing on homeowners and hoarding liquid assets to shore up the bank's bottom line.

Michael Strianese, L-3 Communications
Compensation: $16.5 million
Stock performance: -17.2%
This major defense contractor's shares plunged in 2010 due to fears of military spending cuts, an alleged Air Force security breach, and public backlash against its full-body airport "porno" scanners. Even so, CEO Michael Strianese got a raise, raking in $16.5 million. Since Strianese became CEO in 2006, his pay has jumped 70 percent even as L-3's shares have seesawed. As the budget debate began heating up last year, Defense Secretary Robert Gates told defense contractors to start delivering cost savings lest the government force them to do it. In response, Lockheed Martin announced modest cuts to its executive compensation. L-3, however, gave its head honchos a 22 percent pay hike.

Shantanu Narayen, Adobe Systems

Compensation: $12.2 million
Stock performance: -20.8 %
Last year, Shantanu Narayen earned about as much as the CEOs of eBay and Texas Instruments, tech firms with much better stock returns and double Adobe's market cap and profits. Narayen received a 143 percent raise even as Abobe, the maker of Flash, Photoshop, and PDF readers, released a disappointing earnings forecast in September that sent its shares plunging by 20 percent. Abobe claims to emphasize long-term growth over quick gains; like many companies, it grants most of its executive pay in the form of stock. Yet with its shares in the gutter, even a modest recovery this year could quickly give Narayen another windfall.

John Surma, United States Steel

Compensation: $8.3 million
Stock performance: 6.4%
Weak demand from beleaguered US manufacturers caused US Steel to underperform the rest of the S&P 500 last year. Nevertheless, CEO John Surma's pay shot up by a staggering 449 percent. To be fair, Surma earns a lot less than many of executives, and his raise reflects a pay cut that he took in 2009 as part of a turnaround plan. Yet that anticipated turnaround isn't complete. US Steel shaved its annual losses from $1.4 billion in 2009 to $482 million last year—not bad, but hardly in the clear yet.

Craig Dubow, Gannett

Compensation: $7.9 million
Stock performance: 2.8%
In January, the ailing newspaper giant announced that it would extend a two-year program of mandatory furloughs for its workers. CEO Craig Dubow would share in the pain by giving back a week's worth of pay. But he wouldn't return his 80 percent raise, which he'd earned while boosting profits through layoffs and wage cuts. Not that the downsizing has helped: In the past three years, the company's flagship USA Today has lost 20 percent of its readership; the company's stock is down by nearly half. On the Gannett Blog, a watchdog site run by a former USA today editor, reaction to Dubow's pay package was withering. "Pure and simple," one commenter wrote, "a laugh in every employee's face."

Josh Harkinson is a staff reporter at Mother Jones. For more of his stories, click here. Email him with tips at jharkinson (at) motherjones (dot) com. To follow him on Twitter, click here. Get Josh Harkinson's RSS feed.

Contrary to Republican Hogwash, Wealthy Individuals Are Job Destroyers Not Job Creators. Take Mitt Romney, For Example.

by John Lawrence

Mitt Romney made his millions as a leveraged buyout artist. His company, Bain Capital, did what many rich individuals and corporations do: they bought up companies, many of them profitable and doing just fine. They used borrowed money which then was added to that company's debt. Then they broke up the company, laying off workers, sending jobs overseas, selling off the profitable parts, making millions. Finally, they took the company into bankruptcy, washing their hands of the whole business. The workers were left jobless to fend for themselves. This is how wealthy individuals "create" jobs. The Republican mantra that the rich are job creators and, therefore, must be given "encouragement" in the form of more tax breaks is just not true. Their goal is to make money, and they do this by destroying companies and jobs and going overseas for what labor they do need. Then they import products back into the American market. They don't care a fig about Americans as workers, but they do want them as consumers.

This is from the Los Angeles Times:

From 1984 until 1999, Romney led Bain Capital, a Boston-based private equity group that earned jaw-dropping profits through leveraged buyouts, debt hedge funds, offshore tax havens and other financial strategies. In some cases, Romney’s team closed U.S. factories, causing hundreds of layoffs, or pocketed huge fees shortly before companies collapsed. ... Making his first bid for elected office, Romney boasted that he had helped create more than 10,000 jobs at companies he had retooled. But Kennedy painted him as someone “who puts profits over people,” and an ugly labor dispute soon helped sink Romney’s campaign. Bain Capital had bought a controlling interest in a paper products company called Ampad for $5 million in 1992. Two years later, after Ampad bought a factory in Marion, Ind., the new management team dismissed about 200 workers, slashed salaries and benefits, and hired strikebreakers after the union called a walkout. “We were just fired,” Randy Johnson, a former worker and union officer at the Marion plant, recalled in a telephone interview. “They came in and said, ‘You’re all fired. If you want to work for us, here’s an application.’ We had insurance until the end of the week. That was it. It was brutal.” In October 1994, Johnson and other striking workers drove to Massachusetts to protest Romney’s Senate campaign. “We chased him everywhere,” Johnson recalled. “He took good jobs with benefits, and created low-wage, part-time, no-benefit jobs. That’s what he was creating with his investments.” At first, Romney tried to justify the Indiana layoffs as necessary in “the real world.” He then sought to distance himself, arguing that he took a leave of absence from Bain Capital before Ampad bought the factory. The dispute proved potent, however, and Kennedy trounced him in the election.

Leveraged buyout firms are also called private equity firms. They are all the same. They buy a company with borrowed money, then cannibalize it, first borrowing against, then selling off the assets and laying off workers. They borrow as much money as they can overloading the company with debt. Finally, they take it into bankruptcy.

Simmons Mattress was a very fine and very profitable company until it was bought by a private equity firm. It had furnished mattresses for Air Force 1 and the Lincoln bedroom. It had been in business for over 100 years. This is from my blog on October 5, 2009:

Simmons says it will soon file for bankruptcy protection, as part of an agreement by its current owners to sell the company — the seventh time it has been sold in a little more than two decades — all after being owned for short periods by a parade of different investment groups, known as private equity firms, which try to buy undervalued companies, mostly with borrowed money. For many of the company’s investors, the sale will be a disaster. Its bondholders alone stand to lose more than $575 million. The company’s downfall has also devastated employees like Noble Rogers, who worked for 22 years at Simmons, most of that time at a factory outside Atlanta. He is one of 1,000 employees — more than one-quarter of the work force — laid off last year. But Thomas H. Lee Partners of Boston has not only escaped unscathed, it has made a profit. The investment firm, which bought Simmons in 2003, has pocketed around $77 million in profit, even as the company’s fortunes have declined. THL collected hundreds of millions of dollars from the company in the form of special dividends. It also paid itself millions more in fees, first for buying the company, then for helping run it. Last year, the firm even gave itself a small raise. Wall Street investment banks also cashed in. They collected millions for helping to arrange the takeovers and for selling the bonds that made those deals possible. All told, the various private equity owners have made around $750 million in profits from Simmons over the years. How so many people could make so much money on a company that has been driven into bankruptcy is a tale of these financial times and an example of a growing phenomenon in corporate America. Every step along the way, the buyers put Simmons deeper into debt. The financiers borrowed more and more money to pay ever higher prices for the company, enabling each previous owner to cash out profitably. But the load weighed down an otherwise healthy company. Today, Simmons owes $1.3 billion, compared with just $164 million in 1991, when it began to become a Wall Street version of “Flip This House.” In many ways, what private equity firms did at Simmons, and scores of other companies like it, mimicked the subprime mortgage boom. Fueled by easy money, not only from banks but also endowments and pension funds, buyout kings like THL upended the old order on Wall Street. It was, they said, the Golden Age of private equity — nothing less than a new era of capitalism. These private investors were able to buy companies like Simmons with borrowed money and put down relatively little of their own cash. Then, not long after, they often borrowed even more money, using the company’s assets as collateral — just like home buyers who took out home equity loans on top of their first mortgages. For the financiers, the rewards were enormous. Twice after buying Simmons, THL borrowed more. It used $375 million of that money to pay itself a dividend, thus recouping all of the cash it put down, and then some.

Republicans are pulling the wool over the public's eyes calling the rich "job creators" when in actuality, they are job destroyers. Their demands for tax breaks for the wealthy are a naked attempt to accrue more economic power for themselves and their sponsors. They are just shills for the wealthy, and their goal is to subjugate the working class and shred the social safety net. In this environment why would anyone aspire to becoming an "employee." It's like entering the henhouse after the fox has already been there and is in the process of devouring the chickens. You're putting yourselves at the mercy of financial vultures. It's much better to become your own employee. Let the 600,000 college educated white males who are out of work be a lesson! If you are self-employed, then at least you can't be laid off. Is a college diploma and a mound of student loan debt really worth it?

Romney, of course, is not the only one who has laid off American workers and sent jobs overseas. There's "Chainsaw" Al Dunlop who drove Sunbeam into the ground. This is from Slate:

A holy terror of a CEO, Dunlap has emerged as the mascot of a new kind of capitalism. Dunlapism begins and ends at Wall Street. Its sole credo is: "How can we make our stock worth more?" Nothing that is valued by less steely businessmen--loyalty to workers, responsibility to the community, relationships with suppliers, generosity in corporate philanthropy--matters to Dunlap. Business ethics professors tout "stakeholder capitalism." Dunlap sneers at the phrase. Dunlapism is the perfect religion for the Mutual Fund Age. As the AMA discovered, everyone who deals with Dunlap loses--except his stockholders. Other executives share his creed, but none matches Dunlap's methods. In the past two decades, the 60-year-old executive has run nine companies in the United States, Australia, and England. He served as right-hand man/enforcer for both Australian media magnate Kerry Packer and recently deceased British billionaire Sir James Goldsmith. In the process, he has earned a reputation as the most merciless turnaround artist in the world. To wit: As CEO of struggling cup manufacturer Lily Tulip Corp. in the '80s, Dunlap fired most of the senior managers, sold the corporate jet, closed the headquarters and two factories, dumped half the headquarters staff, and laid off a bunch of other workers. The stock price rose from $1.77 to $18.55 in his two-and-a-half-year tenure. At Scott Paper--his pre-Sunbeam tour of duty--he fired 11,000 employees (including half the managers and 20 percent of the company's hourly workers), eliminated the corporation's $3-million philanthropy budget, slashed R&D spending, and closed factories. Scott's market value stood at about $3 billion when Dunlap arrived in mid-1994. In late 1995, he sold Scott to Kimberly-Clark for $9.4 billion, pocketing $100 million for himself--a modest payoff, he says, for the $6 billion in increased shareholder value. Dunlapping continues at Sunbeam, a stagnant consumer-products company. Dunlap has fired 3,000 of 12,000 workers since taking over in July 1996; sold off subsidiaries employing another 3,000; eliminated corporate charity; and shuttered 18 of 26 factories. The payoff: Sunbeam's stock has climbed from $12 to $44 in barely a year. What distinguishes Dunlap from his colleagues is that he takes pride in his toughness, expressing only cursory regret for having cashiered thousands of his workers. When Newsweek ran a cover story about corporate layoffs, Dunlap contributed a gleeful column about how wonderful such firings are for stockholders. Then he savaged AT&T CEO Robert Allen publicly for not sacking enough people. He posed as Rambo on the cover of USA Today. And he titled his 1996 best seller Mean Business: How I Save Bad Companies and Make Good Companies Great. (In it, he likens himself to Michael Jordan and Bruce Springsteen, fellow "superstars.") It's easy to hate Dunlap for the wrong reason, which is that he is a brutal, heartless, arrogant bastard. According to Business Week, Dunlap skipped the funerals of both his parents, failed to support (or even pay attention to) the child from his first marriage, and refused to help pay for his niece's cancer treatments. But to criticize Dunlap for his cruelty is akin to scolding a lion for killing an antelope. Dunlap lacks conscience? Well, so does the market. If Wall Street were a CEO, it would skip its parents' funerals, too. And there is logic to Dunlap's cruelty. Struggling companies do need to shed workers in order to recover. Dumping 35 percent of your employees, as Dunlap did at Scott, may save the jobs of the other 65 percent. Stockholder profits should not necessarily be squandered on the CEO's favorite charity.

Although there are some benign CEOs, Mitt Romney and Chainsaw All Dunlop are not two of them. And these are the kinds of people that the Republicans want to give tax breaks? Not only do they not deserve them, their ill-gotten profits as job destroyers need to be taxed at an even higher rate. They are reponsible for offshoring American workers' jobs in order to reap higher profits for themselves and their shareholders. That's why dividends and capital gains which are taxed at a historically low 15% need to be taxed at a much higher rate. And a financial transaction tax needs to be implemented on every transaction. Instead of lowering corporate tax rates, the loopholes in the tax system, which allow many corporations to get away with paying nothing in taxes, need to be closed. Corporate subsidies need to be done away with. Social Security and Medicare need to be means tested. The rich should be made to pay for their own retirement and health care. God knows they can afford it. They don't need a voucher. But they should pay into it because if they should happen to go bankrupt they will need the safety net at that point, but, God knows, not before! They want private health care? Give it to them and make them pay for it but don't take Medicare and Social Security away from poor and middle class people. The social safety net shouldn't be for everybody, but only for those who need it. The mega-rich don't need it yet they collect Social Secuirty and are allowed to avail themselves of Medicare.

The rich say that if you tax corporations more they will just move their operations overseas. I say, "Let them, but then charge them and all others for the privilege of selling into the US consumer market, the largest in the world." How do you do this? With a VAT tax. This is the only kind of tax that they couldn't get out of no matter how much they and their army of tax accountants try to finagle. The VAT is how Germany manages to keep a healthy export economy and create high paying jobs within Germany. It's the only tax corporations could not get out of and would produce enough revenue to eliminate deficits. So let them move their operations overseas. Many of them pay no taxes and supply no American jobs now, so what good are they? They could be taxed sufficiently no matter where they are registered with a VAT if they want to continue to import into the American market. The same goes for the race to the bottom exemplified by many states and municipalities who give tax breaks to corporations to get them to build plants in their jurisdictions. If they have to pay a VAT, there is no incentive to locate a plant in any particular location so they will have to use other, more rational criteria for their plant locations.

Corporate subsidies need to be eliminated. That's mainly oil and agricultural subsidies that go to large corporations or to farmers in Texas that don't grow anything. Everything should be means tested. Means testing should be the mantra before any government money is given to anybody. Instead armies of corporate lobbyists roam Capitol Hill demanding favors for the job destroying rich people and corporations. Right wing talk show hosts engage in an elaborate shell game in which the poor and middle class are duped into watching the left hand of social issues while the right hand is stealing their pocketbook. The Defense Department is also largely a gigantic corporate welfare scheme. Let's make government smaller by reducing the size of the Defense Department and ending two wars. Government should be there to provide a safety net for the poor, not for the rich, as it is presently constituted. And all those demagoguing southern Republican Governors who don't want anything to do with Big Government in Washington - let them not come to Washington for a bailout then when their states are destroyed by tornadoes!

9 Things The Rich Don't Want You To Know About Taxes

Illustration by Justin Rose (Colorado Springs Independent)

By David Cay Johnston

 

Association of Alternative Newsweeklies | April 14, 2011

 

For three decades we have conducted a massive economic experiment, testing a theory known as supply-side economics. The theory goes like this: Lower tax rates will encourage more investment, which in turn will mean more jobs and greater prosperity -- so much so that tax revenues will go up, despite lower rates. The late Milton Friedman, the libertarian economist who wanted to shut down public parks because he considered them socialism, promoted this strategy. Ronald Reagan embraced Friedman's ideas and made them into policy when he was elected president in 1980.

For the past decade, we have doubled down on this theory of supply-side economics with the tax cuts sponsored by President George W Bush in 2001 and 2003, which President Obama has agreed to continue for two years. You would think that whether this grand experiment worked would be settled after three decades. You would think the practitioners of the dismal science of economics would look at their demand curves and the data on incomes and taxes and pronounce a verdict, the way Galileo and Copernicus did when they showed that geocentrism was a fantasy because Earth revolves around the sun (known as heliocentrism). But economics is not like that. It is not like physics with its laws and arithmetic with its absolute values.

Tax policy is something the Framers left to politics. And in politics, the facts often matter less then who has the biggest bullhorn.

The Mad Men who once ran campaigns featuring doctors extolling the health benefits of smoking are now busy marketing the dogma that tax cuts mean broad prosperity, no matter what the facts show.

As millions of Americans prepare to file their annual taxes, they do so in an environment of media-perpetuated tax myths. Here are a few points about taxes and the economy that you may not know, to consider as you prepare to file your taxes. (All figures are inflation adjusted.)

1: Poor Americans do pay taxes.

Gretchen Carlson, the Fox News host, said last year "47 percent of Americans don’t pay any taxes." John McCain and Sarah Palin both said similar things during the 2008 campaign about the bottom half of Americans.

Ari Fleischer, the former Bush White House spokesman, once said "50 percent of the country gets benefits without paying for them."

Actually, they pay lots of taxes -- just not lots of federal income taxes.

Data from the Tax Foundation shows that, in 2008, the average income for the bottom half of taxpayers was $15,300.

This year, the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.

But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more.

2: The wealthiest Americans don't carry the burden.

This is one of those oft-used canards. US Sen. Rand Paul, the tea party favorite from Kentucky, told David Letterman recently that "the wealthy do pay most of the taxes in this country."

The Internet is awash with statements that the top 1 percent pays, depending on the year, 38 percent or more than 40 percent of taxes.

It's true that the top 1 percent of wage earners paid 38 percent of the federal income taxes in 2008 (the most recent year for which data is available). But people forget that the income tax is less than half of federal taxes and only one-fifth of taxes at all levels of government.

Social Security, Medicare and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90 percent of wage earners. That's because, once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the exact same amount of Social Security taxes as someone who earns $106,800.

3: In fact, the wealthy are paying less taxes.

The Internal Revenue Service issues an annual report on the 400 highest income-tax payers. In 1961, there were 398 taxpayers who made $1 million or more, so I compared their income tax burdens from that year to 2007.

Despite skyrocketing incomes, the federal tax burden on the richest 400 has been slashed, thanks to a variety of loopholes, allowable deductions and other tools. The actual share of their income paid in taxes, according to the IRS, is 16.6 percent. Adding payroll taxes barely nudges that number.

Compare that to the vast majority of Americans, whose share of their income going to federal taxes increased from 13.1 percent in 1961 to 22.5 percent in 2007.

(By the way, during seven of the eight Bush years, the IRS report on the top 400 taxpayers was labeled a state secret, a policy that Obama overturned almost instantly after his inauguration.)

4: Many of the very richest pay no current income taxes at all.

John Paulson, the most successful hedge fund manager of all, bet against the mortgage market one year and then bet with Glenn Beck in the gold market the next. Paulson made himself $9 billion in fees in just two years. His current tax bill on that $9 billion? Zero.

Congress lets hedge fund managers earn all they can now and pay their taxes years from now.

In 2007, Congress debated whether hedge fund managers should pay the top tax rate that applies to wages, bonuses and other compensation for their labors, which is 35 percent. That tax rate starts at about $300,000 of taxable income; not even pocket change to Paulson, but almost 12 years of gross pay to the median-wage worker.

The Republicans and a key Democrat, Sen. Charles Schumer of New York, fought to keep the tax rate on hedge fund managers at 15 percent, arguing that the profits from hedge funds should be considered capital gains, not ordinary income, which got a lot of attention in the news.

What the news media missed is that hedge fund managers don't even pay 15 percent. At least, not currently. So long as they leave their money, known as "carried interest," in the hedge fund, their taxes are deferred. They only pay taxes when they cash out, which could be decades from now for younger managers. How do these hedge fund managers get money in the meantime? By borrowing against the carried interest, often at absurdly low rates -- currently about 2 percent.

Lots of other people live tax-free, too. I have Donald Trump's tax records for four years early in his career. He paid no taxes for two of those years. Big real-estate investors enjoy tax-free living under a 1993 law President Clinton signed. It lets "professional" real-estate investors use paper losses like depreciation on their buildings against any cash income, even if they end up with negative incomes like Trump.

Frank and Jamie McCourt, who own the Los Angeles Dodgers, have not paid any income taxes since at least 2004, their divorce case revealed. Yet they spent $45 million one year alone. How? They just borrowed against Dodger ticket revenue and other assets. To the IRS, they look like paupers.

In Wisconsin, Terrence Wall, who unsuccessfully sought the Republican nomination for US Senate in 2010, paid no income taxes on as much as $14 million of recent income, his disclosure forms showed. Asked about his living tax-free while working people pay taxes, he had a simple response: Everyone should pay less.

5: And (surprise!) since Reagan, only the wealthy have gained significant income.

The Heritage Foundation, the Cato Institute and similar conservative marketing organizations tell us relentlessly that lower tax rates will make us all better off.

"When tax rates are reduced, the economy's growth rate improves and living standards increase," according to Daniel J Mitchell, an economist at Heritage until he joined Cato. He says that supply-side economics is "the simple notion that lower tax rates will boost work, saving, investment and entrepreneurship."

When Reagan was elected president, the marginal tax rate for income was 70 percent. He cut it to 50 percent and then 28 percent starting in 1987. It was raised by George HW Bush and Clinton and then cut by George W Bush. The top rate is now 35 percent.

Since 1980, when President Reagan won election promising prosperity through tax cuts, the average income of the vast majority -- the bottom 90 percent of Americans -- has increased a meager $303, or 1 percent. Put another way, for each dollar people in the vast majority made in 1980, in 2008 their income was up to $1.01.

Those at the top did better. The top 1 percent's average income more than doubled to $1.1 million, according to an analysis of tax data by economists Thomas Piketty and Emmanuel Saez. The really rich, the top 10th of 1 percent, each enjoyed almost $4 in 2008 for each dollar in 1980.

The top 300,000 Americans now enjoy almost as much income as the bottom 150 million, the data show.

6: When it comes to corporations, the story is much the same -- less taxes.

Corporate profits in 2008, the latest year for which data is available, were $1,830 billion, up almost 12 percent from $1,638.7 in 2000. Yet even though corporate tax rates have not been cut, corporate income-tax revenues fell to $230 billion from $249 billion—an 8 percent decline, thanks to a number of loopholes. The official 2010 profit numbers are not added up and released by the government, but the amount paid in corporate taxes is: In 2010 they fell further, to $191 billion -- a decline of more than 23 percent compared with 2000.

7: Some corporate tax breaks destroy jobs.

Despite all the noise that America has the world's second highest corporate tax rate, the actual taxes paid by corporations are falling because of the growing number of loopholes and companies shifting profits to tax havens like the Cayman Islands.

And right now, America's corporations are sitting on close to $2 trillion in cash that is not being used to build factories, create jobs or anything else, but act as an insurance policy for managers unwilling to take the risk of actually building the businesses they are paid so well to run. That cash hoard, by the way, works out to nearly $13,000 per taxpaying household.

A corporate tax rate that is too low actually destroys jobs. That's because a higher tax rate encourages businesses (who don't want to pay taxes) to keep the profits in the business and reinvest, rather than pull them out as profits and have to pay high taxes.

The 2004 American Jobs Creation Act, which passed with bipartisan support, allowed more than 800 companies to bring profits that were untaxed but overseas back to the United States. Instead of paying the usual 35 percent tax, the companies paid just 5.25 percent.

The companies said bringing the money home -- "repatriating" it, they called it -- would mean lots of jobs. Sen. John Ensign, the Nevada Republican, put the figure at 660,000 new jobs.

Pfizer, the drug company, was the biggest beneficiary. It brought home $37 billion, saving $11 billion in taxes. Almost immediately, it started firing people. Since the law took effect, it has let 40,000 workers go. In all, it appears that at least 100,000 jobs were destroyed.

Now Congressional Republicans and some Democrats are gearing up again to pass another tax holiday, promoting a new Jobs Creation Act. It would affect 10 times as much money as the 2004 law.

8: Republicans like taxes too.

President Reagan signed into law 11 tax increases, targeted at people down the income ladder. His administration and the Washington press corps called the increases "revenue enhancers." Among other things, Reagan hiked Social Security taxes so high that, by the end of 2008, the government had collected more than $2 trillion in surplus tax. George W. Bush signed a tax increase, too, in 2006, despite his written ironclad pledge to never raise taxes on anyone.

It raised taxes on teenagers by requiring kids up to age 17, who earned money, to pay taxes at their parents' tax rate, which would almost always be higher than the rate they would otherwise pay. It was a story that ran buried inside The New York Times one Sunday, but nowhere else.

In fact, thanks to Republicans, one in three Americans will pay higher taxes this year than they did last year.

First, some history. In 2009, President Obama pushed his own tax cut -- for the working class. He persuaded Congress to enact the Making Work Pay tax credit. Over the two years 2009 and 2010, it saved single workers up to $800 and married heterosexual couples up to $1,600, even if only one spouse worked. The top 5 percent or so of taxpayers were denied this tax break.

The Obama administration called it "the biggest middle-class tax cut" ever. Yet last December, the Republicans, poised to regain control of the House of Representatives, killed Obama's Making Work Pay credit while extending the Bush tax cuts for two more years -- a policy Obama agreed to.

By doing so, Congressional Republican leaders increased taxes on a third of Americans, virtually all of them the working poor, this year.

As a result, of the 155 million households in the tax system, 51 million will pay an average of $129 more this year. That is $6.6 billion in higher taxes for the working poor, the nonpartisan Tax Policy Center estimated.

In addition, the Republicans changed the rate of workers' FICA contributions, which finances half of Social Security. The result:

If you are single and make less than $20,000, or married and make less than $40,000, you lose under this plan.

But the top 5 percent, people who make more than $106,800, will save $2,136 ($4,272 for two-career couples).

9: Other countries do it better.

We measure our economic progress, and our elected leaders debate tax policy, in terms of a crude measure known as gross domestic product. The way the official statistics are put together, each dollar spent buying solar energy equipment counts the same as each dollar spent investigating murders.

We do not give any measure of value to time spent rearing children or growing our own vegetables or to time off for leisure and community service.

And we do not measure the economic damage done by shocks, such as losing a job, which means not only loss of income and depletion of savings, but loss of health insurance, which a Harvard Medical School study found results in 45,000 unnecessary deaths each year.

Compare this to Germany, one of many countries with a smarter tax system and smarter spending policies.

Germans work less, make more per hour and get much better parental leave than Americans, many of whom get no fringe benefits such as health care, pensions or even a retirement savings plan. By many measures, the vast majority live better in Germany than in America.

To achieve this, German singles on average pay 52 percent of their income in taxes. Americans average 30 percent, according to the Organizations for Economic Cooperation and Development.

At first blush the German tax burden seems horrendous. But in Germany (as well as Britain, France, Scandinavia, Canada, Australia and Japan), tax-supported institutions provide many of the things Americans pay for with after-tax dollars. Buying wholesale rather than retail saves money.

A proper comparison would take the 30 percent average tax on American workers and add their out-of-pocket spending on health care, college tuition and fees for services and compare that with taxes that the average German pays. Add it all up and the combination of tax and personal spending is roughly equal in both countries, but with a large risk of catastrophic loss in America, and a tiny risk in Germany.

Americans take on $85 billion of debt each year for higher education, while college is financed by taxes in Germany and tuition is cheap to free in other modern countries. While soaring medical costs are a key reason that, since 1980, bankruptcy in America has increased 15 times faster than population growth, no one in Germany or the rest of the modern world goes broke because of accident or illness. And child poverty in America is the highest among modern countries -- almost twice the rate in Germany, which is close to the average of modern countries.

On the corporate tax side, the Germans encourage reinvestment at home and the outsourcing of low-value work, like auto assembly, and German rules tightly control accounting so that profits earned at home cannot be made to appear as profits earned in tax havens.

Adopting the German system is not the answer for America. But crafting a tax system that benefits the vast majority, reduces risks, provides universal health care and focuses on diplomacy rather than militarism abroad (and at home) would be a lot smarter than what we have now.

Here is a question to ask yourself: We started down this road with Reagan’s election in 1980 and upped the ante in this century with George W Bush.

How long does it take to conclude that a policy has failed to fulfill its promises? And as you think of that, keep in mind George Washington. When he fell ill, his doctors followed the common wisdom of the era. They cut him and bled him to remove bad blood. As Washington's condition grew worse, they bled him more. And like the mantra of tax cuts for the rich, they kept applying the same treatment until they killed him.

Luckily, we don't bleed the sick anymore, but we are bleeding our government to death.

David Cay Johnston is a columnist for tax.com and teaches the tax, property and regulatory law of the ancient world at Syracuse University College of Law and Whitman School of Management. He has also been called the “de facto chief tax enforcement officer of the United States” because his reporting in The New York Times shut down many tax dodges and schemes, just two of them valued by Congress at $260 billion. Johnston received a 2001 Pulitzer Prize for exposing tax loopholes and inequities. He wrote two bestsellers on taxes, Perfectly Legal and Free Lunch. Later this year, Johnston will be out with a new book, The Fine Print, revealing how big business, with help from politicians, abuses plain English to rob you blind.

 

Fighting for a People's Budget

by Katrina vanden Heuvel

from the Nation, April 14, 2011

On Wednesday, President Obama spoke in eloquent language of our social contract, of a progressive patriotism, and of a role for government that helps us “do together what we cannot do as well for ourselves.” It was a clear rebuke to the GOP’s Robin Hood in Reverse agenda—taking from the poor and middle-class in order to preserve tax breaks for corporations and the wealthiest Americans.

Obama made the right choice in defending Social Security, Medicare, and Medicaid, and pushing instead for healthcare reform—even putting negotiating drug prices on the table. He again refused to renew the Bush tax cuts for the wealthy—a pledge he has made and broken in the past. He also called for cuts in a defense budget that has contributed 2 out of 3 dollars in increased discretionary spending since 2001.

Yet in many ways his approach continues to legitimize the inside-the-beltway consensus that spending cuts must lead the way toward achieving fiscal responsibility. Just as the Simpson-Bowles Commission proposes, for every $1 raised by closing tax loopholes on wealthy Americans, the President proposes $2 in spending cuts. Two-thirds of those cuts would come from education, health and other social programs, while only one-third comes from the military budget. While the president speaks eloquently of his vision of “shared sacrifice,” in reality it is still a budget that hits the poor and the middle-class hardest while wealthy Americans and the military are asked to sacrifice far less. 

An alternative approach that deserves more attention is the “People’s Budget” offered by the Congressional Progressive Caucus (CPC). It will be introduced in the House on Thursday and it is the strongest rebuke—in the form of an amendment—to the unconscionable “Ryan Budget” for FY 2012. It’s a budget that gives the people—according to poll after poll—exactly what they want (something which shouldn’t be a rarity in a healthy, vibrant democracy).   

The People’s Budget lays out what a robust progressive agenda looks like. It protects an already frayed social net and promotes a progressive tax policy that makes millionaires, billionaires, and big corporations pay their fair share. It doesn’t stop at cutting the low-hanging fruit at the Pentagon, instead it brings our troops home from two wars that cost trillions of dollars and do nothing to make the US safer, and resets and rethinks what real security means in the 21^st century. 

“The People’s Budget generates a government surplus by 2021 by closing tax loopholes, ending corporate giveaways to oil, gas and nuclear entities, bringing our troops home, and creating jobs that expand the American tax base,” said Representative Raúl Grijalva, co-chair of the CPC. “This is a sensible solution that listens to what the American people have said about where our budget priorities should be.”

A range of smart groups and allies are pursuing an inside-outside strategy to push these kinds of wiser solutions on the table in our skewed debate. On Thursday, a bipartisan group of Members of Congress and veterans will hold a press conference to discuss Rethink Afghanistan’s War Tax I.O.U. campaign. The campaign features an online tool that calculates the amount of income tax an individual is paying towards the war, and users then receive an “I.O.U.” for that amount. Over 54,000 constituents have forwarded those I.O.U.s to their representatives, urging them to rethink the excessive levels of war spending that are wreaking havoc on the federal budget. 

While President Obama broke the silence about revenue in the current deficit debate, a new report from the Institute for Policy Studies—“Unnecessary Austerity”— outlines a bold plan for how Congress could raise more than $4 trillion over the next decade by reversing years of tax giveaways to the richest Americans and largest corporations. The eight new potential revenue sources, include: closing overseas tax havens; adding new tax brackets for households with more than $1 million in annual income; and instituting a modest financial transaction tax.

“Congress has prioritized tax cuts for the wealthy and failed to crack down on corporate tax dodgers, fueling a budget crisis,” said report co-author and Nation contributor Chuck Collins.

Joining the fight for a more sane approach to tax policy is a group of 700 business leaders and individuals in the top 5 percent of wealth and income who make up the Responsible Wealth network. Along with United for a Fair Economy, Responsible Wealth’s new Tax Wealth Like Work Campaign focuses attention on the discrepancies in the tax system that reward income from wealth over income from work. Capital gains and dividend income are taxed at a top rate of only 15 percent, while income earned from work is taxed at a top rate of 35 percent.

As Congress and cash-strapped states struggle to balance budgets, these wealthy people are urging that the income from their investment portfolios be taxed at the same rate as work income. That was done in the late 1980s under Presidents Reagan and Bush, and restoring the rates would raise $84 billion in 2011. The campaign is also building support for Congresswoman Jan Schakowsky’s Fairness in Taxation Act which would tax capital gains and dividend income as ordinary income for taxpayers with income over $1 million, and create higher income tax brackets for millionaires and billionaires. 

Finally, this weekend and on Tax Day, US Uncut and MoveOn will provide some street heat, hitting the pavement in actions coast-to-coast, demanding that corporations making billions in profits but pay nothing in taxes pay their fair share.

President Obama’s speech this week starts to move the budget debate in the right direction. But it’s up to the people and allies inside Congress to take the struggle to the next level, turning the tide on our democracy deficit which has produced—as Nobel-prize winning economist Joseph Stiglitz recently put it—a country “of the one percent, for the one percent, and by the one percent.”

Increase Top Marginal Tax Rates for Millionaires and Billionaires

 

As Services For Main Street Are Gutted, Richest Pay Lowest Taxes In A Generation

by Jaid Zilani, Think Progress, April 9, 2011

Last night President Obama and congressional negotiators cut a deal to keep the government running, cutting “$38.5 billion under current funding levels, per Republican demands,” and $78 billion below what Obama called for in his initial 2011 budget.

Yet as Republicans and Democrats continue to battle over the deficit within a political framing that includes taking aim at Pell Grants for low-income students — which Obama preemptively proposed to cut, calling summer grants “too expensive,” while Republicans want far deeper cuts than that — Head Start funding, and other programs from Main Street Americans, there is one group of Americans that seems to be getting away without having any sacrifices demanded of them: the very richest.

As this chart from from Wealth for the Common Good shows, the top 400 taxpayers — who have more wealth than half of all Americans combined — are paying lower taxes than they have in a generation, as their tax responsibilities have slowly collapsed since the New Deal era as working families have been asked to pay more and more:

 

 

There have been a handful of proposals by congressional progressives to once again put requiring more sacrifice from the luckiest among us back on the table. The Congressional Progressive Caucus recently unveiled a “People’s Budget” that would boost taxes on the wealthiest Americans, returning them to levels closer to where they were under Ronald Reagan’s first term — hardly socialism.

Yet these proposals have yet to gain steam, and the budget debate in Washington appears to revolve completely around cutting spending for Main Street Americans who’ve already been asked to pay too much during the recession. That’s why there’s a Main Street Movement demanding fair sacrifice and standing up for the great American middle class. Whether it succeeds may determine the fate of most hard-working Americans for a generation to come.

The US Should Add Higher Marginal Tax Rates for Upper Income Families and Corporations

by John Lawrence

The Tea Party says we are Taxed Enough Already. But who exactly is "We." Are upper income individuals and families taxed enough already or is it just lower income individuals and families? Here's the tax brackets for 2010:

Federal Income Tax Brackets For 2010 - Based On Taxable Income Ranges

Tax Rate Married Couples Filing Jointly Most Single Filers 10% Not over $16,750 Not over $8,375 15% $16,750 – $68,000 $8,375 – $34,000 25% $68,000 – $137,300 $34,000 – $82,400 28% $137,300 – $209,250 $82,400 – $171,850 33% $209,250 – $373,650 $171,850 – $373,650 35% Over $373,650 Over $373,650

How many middle class families would object to adding a few higher brackets like say a Tax Rate of 40% for Married Couples and Individuals with Incomes over $500,000. Why not 50% for incomes over $1 million, 60% for incomes over $5 million, 70% for incomes over $10 million, 80% for incomes over $100 million and 90% for incomes over $1 billion? Even at the 90% tax rate, a billionaire filing would still have 10% of $1 billion left over in disposable income which is $100 million. Pity the poor person who can't live on that! And then why are the real high earners whose income is mostly capital gains only taxed 15% when everyone who makes at least $16,750. or higher by the sweat of their brow is taxed at least 15%. A married couple making $16, 570 is poverty level. Why is some single billionaire taxed at the same rate as a poverty level family? Note there is no reduction in tax rate when there are children in the family. CEOs take most of their income in stock options. When they cash them in, their profit is all capital gains taxed at 15%. And please note that adding higher tax brackets for millionaires and billionaires while keeping the lower brackets exactly the way they are will not add one iota of taxation to the poor and middle class.

On January 28, 2011, it was reported in various news media on television and online that John Paulson earned at least $5,000,000,000 (five billion USD) in 2010. Since Paulson is a hedge fund manager he paid taxes at the 15% rate due to the tax loophole of "carried interest." If capital gains were taxed the same as regular income, he would have paid at the 35% rate, the same as someone making $373,650. If my tax table given above was in effect he would have paid at a 90% rate. The reason why the Federal government has such large deficits is that tax rates for the rich under Republican Presidents have been systematically lowered. Tax breaks have been given to the rich with the result that now there is a debt crisis and Republicans are attemtping at this late date to balance the budget on the backs of the poor and middle class while continuing to give even greater tax breaks to the rich. From 1946 to 1954 the top tax rate was either 89% or 90%. From 1956 to 1960 the top rate was 75%. Does it make sense that millionaires and billionaires, if they are not paying most of their tax at the 15% capital gains rate, are paying at the same rate as those making $373,650? Shouldn't there be a few higher brackets in the tax code say for income over $1 million and income over $1 billion at least?

The focus becomes even clearer when we look at top marginal tax rates. A marginal tax rate is tax on income over a certain amount. When we look at marginal rates, we see that millionaires and billionaires are treated the same as lower income individuals and families on lower amounts say the first $50,000. They would pay the same rate as everyone else on their first $50,000. of income. Then, for instance the marginal tax rate on income between $50K and $100K would be greater. For only that income over $100K would there be an even higher rate and so on. Higher marginal rates would only apply to that portion of income over a certain amount not to the entire income. Marginal tax rates collapse down to one effective overall rate on the entire amount of income, but it is instructive to think of the tax code in terms of marginal rates. The notion that, once a person makes over a certain amount, their need for that additional income diminishes supports the idea of progressive marginal tax rates. The top marginal rate from 1936 to 1963 was at least 79%. From 1948 to 1964 this applied to incomes above $400,000. From 1964 to 1980 it was at least 70% on incomes above approximately $200,000. Then Ronald Reagan was elected. Reagan lowered the top marginal rate to 50% in 1982 and then George H W Bush lowered it again to 28% in 1988. So this was definitely tax breaks for the rich. Any time the higher marginal tax rates are lowered or eliminated altogether, this constitutes, ipso facto, TAX BREAKS FOR THE RICH.

Clinton raised marginal tax rates and ran a surplus rather than the deficits accumulated under Reagan and George H W Bush who together quadrupled the national debt from $1 trillion to $4 trillion. Under George W Bush the top marginal tax rate was lowered from 39.6% to 35%. Bush's policies of tax lowering and increased spending (aka "growing" the size of government) were disastrous for the national debt. When conservatives talk about "small government," they ignore the fact that Bush presided over the largest increase in the size of government in history especially in the size of that portion of government attributed to defense. In 2000 when Bush became President the defense budget was $300 billion. When he left in 2009 the defense budget was around $700 billion. So Bush "grew" the size of government by at least a factor of two just for the defense budget alone. In addition Bush cut taxes for the wealthy several times which added to the national debt as revenues decreased and added an unpaid for prescription drug benefit for Medicare recipients which again added to the deficit and the debt. In short Bush doubled the size of the national debt from $5 billion to $10 billion. From Wikipedia:

Effect of policies on federal budget deficit and national debt Recent additions to U.S. public debt Fiscal year (begins 10/01 of prev. year) Value % of GDP 2001 $144.5 billion 1.4% 2002 $409.5 billion 3.9% 2003 $589.0 billion 5.5% 2004 $605.0 billion 5.3% 2005 $523.0 billion 4.3% 2006 $536.5 billion 4.1% 2007 $459.5 billion 3.4% 2008 $962.0 billion (proj.) 6.8% The cumulative debt of the United States in the past seven completed fiscal years was approximately $4.08 trillion, or about 40.8% of the total national debt at the time of that completion of approximately $10.0 trillion. The total surplus in FY 2001 was $128 billion. A combination of tax cuts and spending initiatives has added almost $1.7 trillion—through budget deficits—to the national debt since then (October 1, 2001 through September 30, 2007). It should be noted that yearly debt accumulation often exceeds the yearly budget deficit, because, for example, paying the interest on the debt is not planned in the budget to be paid off or because Social Security receipts run a surplus (see Fiscal policy of the United States). The total budget deficit for FY 2007 was $162 billion. ... Most debt was accumulated as a result of tax cuts and increased national security spending. According to Richard Kogan and Matt Fiedler, "the largest costs — $1.2 trillion over six years — resulted from the tax cuts enacted since the start of 2001. Increased spending for defense, international affairs, and homeland security – primarily for prosecuting the wars in Iraq and Afghanistan – also was quite costly, amounting to almost $800 billion to date. Together, tax cuts and the spending increases for these security programs account for 84 percent of the increases in debt racked up by Congress and the President over this period." Lawrence Kudlow, however, noted "The U.S. has spent roughly $750 billion for the five-year war. Sure, that’s a lot of money. But the total cost works out to 1 percent of the $63 trillion GDP over that time period. It's miniscule [sic]." He also reported that "during the five years of the Iraq war,. . .household net worth has increased by $20 trillion."  Nobel laureate Joseph Stiglitz has estimated the total cost of the Iraq War at closer to $3 trillion. Interest on the debt (including both public and intragovernmental amounts) increased from $322 billion to $454 billion annually. The share of public debt owned by foreigners increased significantly from 31% in June 2001 to 50% in June 2008, with the dollar balance owed to foreigners increasing from $1.0 trillion to $2.6 trillion. This also significantly increased the interest payments sent overseas, from approximately $50 billion in 2001 to $121 billion during 2008. President Bush also signed into law Medicare Part D, which provides additional prescription drug benefits to seniors. The program was not funded by any changes to the tax code. According to the GAO, this program alone created $8.4 trillion in unfunded obligations in present value terms, a larger fiscal challenge than Social Security.

So contrary to what the Republicans would have you believe, the US does not have a spending problem, it has a revenue problem brought about by insane policies of lowering taxes on the rich, increased defense spending and an unfunded prescription drug benefit. Now Obama, having inherited these built-in deficit producing Bush policies is being blamed for running the country into debt, and Republicans are attempting to balance the budget on the backs of the poor while giving even more tax breaks to the wealthy on the grounds that they are the "job creators." If they were truly job creators, don't you think that Bush tax lowering policies would have produced one job for the eight years Bush was in power? They didn't. Obama tried to get Medicare spending under control with his Affordable Care Act. Unfortunately, Republicans fought him every step of the way particularly on the elements which would have reduced spending on health care. If a public option had gone into effect, it would have reduced health care expense. If Medicare was allowed to negotiate prescription drug charges, that would have brought down the cost of Medicare.  Now Republicans want to privatize even Medicare which will mean that poor senior citizens will just die from lack of health care because they won't be able to afford private health insurance.

Taxes on corporations used to constitute a substantial part of US government revenues. No longer. The share that corporate tax revenues comprise of total federal tax revenues has collapsed, falling from an average of 28 percent of federal revenues in the 1950s and 21 percent in the 1960s to 9% in 2010. The Republican game plan has been to lower taxes on corporations and the wealthy while claiming that that will create jobs, a fact that has been historically proven to be untrue, and then to raise taxes on the poor and middle class while cutting social programs because they claim we can no longer afford them. When they talk about cutting government spending they never talk about cutting the bloated Defense Department budget which is larger than the rest of the world's military budgets combined. That is MIA from their conversations. They never talk about increasing government revenues in order to balance the budget.

If the US wants to get serious about decreasing deficits, it needs to roll back the Bush tax cuts, cut military spending and reform the Medicare prescription drug benefit. Just going back to pre-Bush policies would likely bring the budget under control. Ending the tax loopholes for corporations would bring in additional revenues. Corporations like GE and Exxon Mobil which make tens of billions of dollars in profits should not be getting billions of dollars from the US government in tax refunds. Subsidies to agriculture and Big Oil should be eliminated saving billions more. Adding higher income marginal tax brackets would broaden the notion of shared sacrifice. Democrats need to extend the scope of the debate to include these items. Instead they let the Republicans narrow the debate to just eliminating or decreasing programs which benefit the poor and middle class.

Fair Taxation Requires More Brackets at the Top

Published on Tuesday, April 5, 2011 by OtherWords

 

Some of the most affluent Americans actually pay lower effective tax rates than many middle class Americans.

 

by Mazher Ali

So many governors are hammering their budgets with a “we’re broke” message these days that it’s amazing our country hasn’t shattered into a thousand separate islands. More and more, however, rational voices are correctly asserting that we’re not broke.

The problem isn’t that the United States is out of money. It’s that a tiny sliver of households are under-taxed. The richest 10 percent of Americans own almost three-fourths of the country’s total wealth. Astoundingly, the most affluent 1 percent of Americans own more than one-third of our total wealth.

Thankfully, the message that our country isn't broke is making its way closer to the center of the tax and deficit debates. It can’t get there soon enough.

Many Republican lawmakers, along with governors like Wisconsin's Scott Walker and Ohio's John Kasich, bizarrely think that they can erase deficits with tens of billions of dollars in budget cuts and tax breaks for corporations and wealthy people who don’t need them. They’re ignoring the greatest economic returns available, which are provided by public investments, federal aid to states, and even unemployment benefits. Instead of helping save the middle class, they're propelling us toward a busted, plutocratic disaster.

The GOP's deficit obsession isn't just misguided. It turns a blind eye on the struggles of low- and middle-income Americans. In contrast, Rep. Jan Schakowsky’s sensible Fairness in Taxation Act would raise taxes on millionaires and billionaires, which better serves the American majority.

Currently, families earning $374,000 pay the exact same federal income tax rates as families with multi-million-dollar incomes, or even the handful who earn a billion bucks every year, such as the heirs of Walmart's founder. The lifestyles of the ultra-wealthy wouldn’t change in the least if they had to pay moderately higher income taxes. And it would boost our national economy.

The Fairness in Taxation Act calls for establishing five new tax brackets for incomes between $1 million and $1 billion, with rates ranging from 45 percent to 49 percent.

The Illinois Democrat's bill would also address an absurd aspect of our tax system, which wrongly favors wealth over work. Today, money earned through working nine-to-five or the graveyard shift is taxed at a higher rate than money obtained through windfalls. Capital gains, dividends, and other investment income derived from pre-existing wealth shouldn't be taxed at rates lower than income earned through work.

Three-quarters of all stocks and mutual funds owned by U.S. taxpayers belong to the richest 10 percent of American households. Therefore, some of the most affluent Americans actually pay lower effective tax rates than many middle-class Americans.

Take, for example, a weasel like Lloyd Blankfein, CEO of Goldman Sachs. He raked in just over $13 million in 2010 (excluding his bonus of some $12 million worth of shares in his company). Of that $13 million, only his base salary of $600,000 will be taxed according to the federal income tax rates. The remaining $12.4 million will be taxed at a top rate of 15 percent. Unfortunately, Blankfein is just one example of the kind of gross inequity that exists in the current tax system.

A century ago, tax policies adopted during President Teddy Roosevelt's administration were guided by sound principles that stand in direct contrast to those of today’s Republicans.

“No man should receive a dollar unless that dollar has been fairly earned,” explained Roosevelt in a 1910 speech. “Every dollar received should represent a dollar's worth of service rendered--not gambling in stocks…I believe in a graduated income tax on big fortunes."

The Fairness in Taxation Act takes aim at the same inequities Teddy Roosevelt--a Republican--identified long ago. If it were enacted this year, it would generate $78 billion that could fund jobs and social programs that Americans need now more than ever.

Repeat after me: we're not broke. It’s time to mandate that the wealthiest members of our communities share in the sacrifice of the economic recovery and pay their fair share. The Fairness in Taxation Act offers a clear path in that direction.

Mazher Ali is the communications coordinator for United for a Fair Economy (UFE). www.faireconomy.org

more Mazher Ali

Why We Must Raise Taxes on the Rich

by Robert Reich

Monday, April 4, 2011

It’s tax time. It’s also a time when right-wing Republicans are setting the agenda for massive spending cuts that will hurt most Americans.

Here’s the truth: The only way America can reduce the long-term budget deficit, maintain vital services, protect Social Security and Medicare, invest more in education and infrastructure, and not raise taxes on the working middle class is by raising taxes on the super rich.

Even if we got rid of corporate welfare subsidies for big oil, big agriculture, and big Pharma – even if we cut back on our bloated defense budget – it wouldn’t be nearly enough.

The vast majority of Americans can’t afford to pay more. Despite an economy that’s twice as large as it was thirty years ago, the bottom 90 percent are still stuck in the mud. If they’re employed they’re earning on average only about $280 more a year than thirty years ago, adjusted for inflation. That’s less than a 1 percent gain over more than a third of a century. (Families are doing somewhat better but that’s only because so many families now have to rely on two incomes.)

Yet even as their share of the nation’s total income has withered, the tax burden on the middle has grown. Today’s working and middle-class taxpayers are shelling out a bigger chunk of income in payroll taxes, sales taxes, and property taxes than thirty years ago.

It’s just the opposite for super rich.

The top 1 percent’s share of national income has doubled over the past three decades (from 10 percent in 1981 to well over 20 percent now). The richest one-tenth of 1 percent’s share has tripled. And they’re doing better than ever. According to a new analysis by the Wall Street Journal, total compensation and benefits at publicly-traded Wall Street banks and securities firms hit a record in 2010 — $135 billion. That’s up 5.7 percent from 2009.

Yet, remarkably, taxes on the top have plummeted. From the 1940s until 1980, the top tax income tax rate on the highest earners in America was at least 70 percent. In the 1950s, it was 91 percent. Now it’s 35 percent. Even if you include deductions and credits, the rich are now paying a far lower share of their incomes in taxes than at any time since World War II.

The estate tax (which only hits the top 2 percent) has also been slashed. In 2000 it was 55 percent and kicked in after $1 million. Today it’s 35 percent and kicks in at $5 million. Capital gains – comprising most of the income of the super-rich – were taxed at 35 percent in the late 1980s. They’re now taxed at 15 percent.

If the rich were taxed at the same rates they were half a century ago, they’d be paying in over $350 billion more this year alone, which translates into trillions over the next decade. That’s enough to accomplish everything the nation needs while also reducing future deficits.

If we also cut what we don’t need (corporate welfare and bloated defense), taxes could be reduced for everyone earning under $80,000, too. And with a single payer health-care system – Medicare for all – instead of a gaggle of for-profit providers, the nation could save billions more.

Yes, the rich will find ways to avoid paying more taxes courtesy of clever accountants and tax attorneys. But this has always been the case regardless of where the tax rate is set. That’s why the government should aim high. (During the 1950s, when the top rate was 91 percent, the rich exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent – still substantial by today’s standards.)

And yes, some of the super rich will move their money to the Cayman Islands and other tax shelters. But paying taxes is a central obligation of citizenship, and those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship.

But don’t the super-rich have enough political power to kill any attempt to get them to pay their fair share? Only if we let them. Here’s the issue around which Progressives, populists on the right and left, unionized workers, and all other working people who are just plain fed up ought to be able to unite.

Besides, the reason we have a Democrat in the White House – indeed, the reason we have a Democratic Party at all – is to try to rebalance the economy exactly this way.

All the President has to do is connect the dots – the explosion of income and wealth among America’s super-rich, the dramatic drop in their tax rates, the consequential devastating budget squeezes in Washington and in state capitals, and the slashing of vital public services for the middle class and the poor.

This shouldn’t be difficult. Most Americans are on the receiving end. By now they know trickle-down economics is a lie. And they sense the dice are loaded in favor of the multi-millionaires and billionaires, and their corporations, now paying a relative pittance in taxes. 

The President has the bully pulpit. But will he use it?

Georgia Gov. Nathan Deal Proposes Massive Tax Cuts For The Rich, Big Tax Hikes for Middle Class

by Zaid Jilani

From Think Progress, April 3, 2011

One of the organizing principles of the conservative movement revolves around always cutting taxes and resisting any moves towards raising revenues. Hundreds of conservatives have even signed Grover Norquist’s pledge to never, under any circumstances, support a tax increase.

Gov. Nathan Deal (R-GA) made tax cuts a major part of his campaign promise last fall. In an ad put out by his campaign in February 2010, Deal bragged about running on “tax-cutting policies.” Watch it:

 

 

Now that Deal is Governor, the state legislature is currently drafting major tax legislation. Deal has been a guiding hand in the negotiations over the bill, and stands behind the latest version of the bill being debated among senate and house legislators. The bill does, as Deal promised, cut many taxes.

For example, it lowers the state personal income tax rate from 6 to 4.5 percent. Yet at the same time, the bill is being touted as being revenue neutral — meaning that revenue has to come from somewhere. Georgia Republicans, under the leadership of Deal, have decided to make up the difference by eliminating a whole host of tax exemptions and increases in sales taxes. The end result? Georgians making over $180,000 would see steep tax cuts while middle class Georgians making between $20,000 and $180,000 would see tax hikes. This chart compiled by the Atlanta Journal-Constitution’s Jay Bookman using data from Georgia State University’s Fiscal Research Center illustrates this:

 

 

While negotiations over the tax bill are far from over, it appears that Deal and his Republican colleagues are standing behind a template that is becoming all too familiar for right-wing legislators: cut taxes on the wealthiest Americans and then demand that middle class and working class Main Street Americans pay out more in tax hikes or in reduced spending to health care, education, and other important investments. As ThinkProgress previously reported, at least a dozen states are currently pursuing corporate tax cuts while at the same time increasing burdens on working families.

Update Georgia Politico's Brett Johns has more details about how the GOP's plan is sizing up to slam the middle class and enrich the already wealthy

Teach-In at Bank of America: No New Tax Cuts for Corporations and Billionaires!

 

CHART: Taxing Millionaires Would Save Billions More Than Cutting Education And Programs For Main Street

by Zaid Jilani

From ThinkProgress, March 21, 2011

All around the country, right-wing legislators are asking Main Street Americans to pay for budget deficits caused mainly by a recession caused by Wall Street by attacking collective bargaining, and cutting necessary services and investments like college tuition aid and health care for the poor.

As these conservatives are cutting these services for hard-working middle class Americans, they are claiming they are acting out of need for “shared sacrifice.” Yet at the same time, the right continues to advocate for massive tax cuts for the wealthiest among us.

Rep. Jan Schakowksy (D-IL), along with a number of her progressive congressional colleagues, has introduced a plan that demands real “shared sacrifice.” Her plan, The Fairness in Taxation Act, calls for creating new tax brackets for the richest Americans, starting at a 45 percent rate for people whose income is $1 million. Her bracket would impose the highest rate — 49 percent — on billionaires.

A chart provided by her congressional office demonstrates that asking the wealthiest among us to pay a little more would actually save more money than all of the House Republicans’ cuts to domestic spending combined. House Resolution 1, which gutted funding on Pell Grants, low-income housing aid, community health centers, and other important programs for Main Street Americans, cut a total of $61 billion. Meanwhile, Schakowsky’s plan saves $78.9 billion, considerably more:

 

 

In an interview with ThinkProgress, Schakowsky said that she is “hoping” to build enough momentum within Congress to make her proposal the main alternative to the conservative slash-and-burn budget effort, saying that it is a “winner” for Democrats, both politically and on policy grounds. She said that the House Progressive Caucus is planning to do a road show in the summer to campaign on tax justice and endorsed the Main Street Movement that is defending the middle class across America:

THINKPROGRESS: You’ve mentioned a few times the grassroots movement that’s going on…that’s something that we here at ThinkProgress have dubbed the Main Street Movement, all around this country we’re seeing working families rise up. [...] I wonder if you’ve and your colleagues on the Progressive Caucus have thought about similar kinds of tactics [to the Tea Party], a road show, holding rallies, trying to engender grassroots momentum around your proposals.

SCHAKOWSKY: Well, the Progressive Caucus is planning a road show this summer. This will be a central theme of that. [...] But I think this needs to be bigger than that. [...] I like the idea of branding, I like the idea of the Main Street Movement, and I think it is beginning to seriously come together. I think all of the pieces are out there to put this together right now. This is a moment. I want to capture it right now by introducing this legislation that clearly states an alternative that is very popular.

Listen to it:

 

 

Indeed, taxing the super-wealthy is quite popular. A March 2 NBC News/Wall Street Journal poll found that 81 percent of Americans prefer taxing the wealthiest Americans more as their top choice for deficit reduction, while less than a third of Americans endorsed policy options like cutting funding to education and health care.

Update ThinkProgress commenter Jay Kimball used IRS data to put together the following graph showing how the richest 1 percent of Americans is nearly earning more money than they ever have while they are paying the lowest taxes in decades:

The Crisis is Our Unwillingness to Make Rich Pay Their Share

Published on Friday, March 11, 2011 by The Capital Times (Wisconsin)

by John Hallinan

U.S. corporations are sitting on $2 trillion in cash -- trillion, not billion. The same people who shipped millions of jobs overseas, caused the financial crisis, and pay themselves multimillion-dollar bonuses every year are now sitting on a mountain of cash. Yet both state and local governments feel the need to give them more tax cuts. To what end? So they can create more profits and sit on bigger piles of cash, so they can play monopoly as they buy each other out, or so they can give themselves even bigger bonuses? There is no indication that they are interested in doing anything to spur the economy.

In December we heard the Republicans tell us that people making over $250,000 per year couldn’t afford a 4 percent tax increase, and it would be terrible for the economy to increase their taxes. Thirty years ago they were paying 70 percent in taxes. Now they pay half that, but a 4 percent increase is just too much to bear.

Now we are told that state workers making $40,000 to $60,000 per year are stealing the state blind. The same workers who for the last two years have taken over a 3 percent pay cut in the form of furloughs are now told they haven’t sacrificed enough. Now they must forfeit 7 percent or more of their pay, and give up their right to negotiate their future. What is appalling is the state workers were willing to give up the money to help out the state. All they asked was to keep their right to negotiate. Yet the wealthiest in our country aren’t willing to give up anything to help our country out of the financial mess they created.

In 1980 Ronald Reagan told the biggest lie ever perpetuated on the American public. He condemned Jimmy Carter for running a $40 billion deficit, and then told everyone he could cut taxes and balance the budget. Voodoo economics -- that’s what George H.W. Bush called Reagan’s economic plan. He was right, and by the mid ’80s the budget deficit had ballooned to over $200 billion.

Of course it was the rich who walked away with virtually all of the Reagan tax cuts. During the last 25 years the Republicans have doubled down over and over again, giving more and more tax cuts to the rich. While the rich have gotten incredibly wealthy, the poor have gotten poorer. It is a reverse Robin Hood economy where we take from the poor and give to the rich. It has been the greatest transfer of wealth in the history of our country -- the 400 richest have more than the 155 million poorest.

Ballooning government deficits weren’t a problem when Republicans were in the White House, but with a Democratic president, it is suddenly a crisis. The recession we’ve been living through proves the fallacy of Milton Friedman, Reaganomics, Ayn Rand, Alan Greenspan and the rest who told us that markets are self-correcting and regulation is bad. Banking regulations kept this country out of serious recession for 70 years, but once the regulations were repealed it took only a decade to bring the world’s economy to its knees. Yet Republicans refuse to acknowledge how wrong they were as they continue to try to gut government regulations.

Every time a politician tells you he wants to make the government more business friendly, what he’s really telling you is that he wants to increase taxes on your children and grandchildren. Every environmental law that is weakened will mean a cleanup to be paid for by future generations. Every bad business practice that is endured will be funded by taxpayers having to clean up the mess at some later date.

Now we are told that everyone must sacrifice to bring state and federal government budgets in line. But somehow the sacrifices once again all fall on those at the bottom of the economic ladder. Once again businesses are given tax cuts, money is found to increase spending on roads, but education, health care and help for the poorest in our society are cut.

There isn’t a financial crisis at either the state or the federal government. The crisis is our unwillingness to ask those who have gained the most from our society pay a fair and equitable share from the wealth this society has allowed them to accumulate. It is the honest, Christian, and patriotic thing to do.

© 2011 The Capital Times

John Hallinan is a Stoughton, Wisconsin resident.

How to Create Jobs: Government Investment Funded by Those Who Have Jobs

by John lawrence

All those spending cuts Republicans are proposing will do nothing to help the jobs situation. In fact they will make it worse. It will take government spending, not eliminating the jobs of public workers like teachers to both create new jobs and maintain old ones. Unlike Keynes I don't propose deficit spending to create jobs. I propose taxing those who already have jobs particularly those who make vast amounts of money like hedge fund managers and corporate CEOs. Taxing those who have a job will not result in their losing their jobs. It will just result in a slightly lower standard of living. If by so doing jobs can be created without adding to the deficit, economic activity will increase and the tax base - and hence government revenues - will be augmented. The pump will have been primed. But just cutting government spending and reducing the tax base by giving more tax cuts to the rich will diminish the number of jobs as people get laid off because of the spending cuts. It's a vicious circle with a built-in race to the bottom - the bottom being no public services or investment in infrastructure or support for those who are destitute.

And on what grounds are the Republicans asking for tax cuts and spending cuts at the same time? Tax cuts reduce the revenues that government needs not only to function at the present level but to increase the number of jobs created by investments in infrastructure and needed public services. Do you really think that the rich, having their taxes reduced, are going to create jobs? That myth has been totally shattered by looking at the historical facts. That tax cutter, George W Bush, created a total of zero net jobs during his eight years in office. At the same time he doubled the national debt. If Republicans have their way, the number of jobs will diminish at the same time that spending cuts will result in the nation as a whole becoming more impoverished. It's a race to the bottom. Spending cuts reduce the number of jobs which reduces the tax base which reduces government revenues which leads to another round of spending cuts and round and round we go until we spiral downward in a race to the bottom and Third World status. We will become a nation mostly comprised of serfs and peons with a small number of corporate overlords.

Some people are doing fantastically well. Those people can certainly be taxed and the money spent to provide jobs for others. This will prime the pump of the economy, and allow the US to work its way out of the hole we're in. Doing the opposite - cutting taxes and reducing government investment - will further accelerate the downward spiral. The wealthy just are not going to create jobs. Far from being the job creators, they are the job destroyers at least of American jobs. Most of the jobs they create are in foreign countries. Most of their (private) investment is in foreign countries. Most of the money they make is made outside the US and so they pay no taxes on it. Their lobbyists see to it that that loophole remains open. So both as a source of government funding and as a source of job creation, they are a total waste and a total loss, but they are determinimg government policy. Who is advancing the countervailing theory that what is needed is more taxation of those who can afford to pay and more job creation spurred by the Federal government? No one. Certainly not President Obama. He subscribes to trickle down economics - a theory that has been disproved and discredited by history.

The US is literally falling apart. Teachers are being ruined by spending cuts to education. Doubling classroom sizes will drive them to insanity. It's absolutely nuts. Obama is not taking a stand. He is standing by while Republican governors are obliterating unions and, therefore, the middle class. He pledged to put on "comfortable shoes" and walk the picket line with union members, but he couldn't be farther away from that campaign rhetoric. Where was he when the protesters in Wisconsin were out in the streets? He probably couldn't find his comfortable shoes but I'm sure he was looking for them just like Bush looked for the weapons of mass destruction in Iraq. Just where could those comfortable shoes be? Not over here. Under the bed? Nope, not there. Let's see ... A few voices crying in the wilderness are advancing the thesis that loopholes need to be closed that allow corporations to pay a lower share of total taxes than at any time in history. But those voices are by and large falling on deaf ears. A large number of Americans would rather vote for the party that proposes to let them hold on to their guns and is against abortion and gays even though this party is screwing them in their pocketbooks. They vote against their economic interests either because they swallow the hogwash that the wealthy are the job creators or because they believe the right wing echo chamber of Fox News, Rush Limbaugh and Glenn Beck or because they don't realize what is happening to them.

If tax cuts and spending cuts become the modus operandi, the US can expect an economy in ruins by 2012. Obama's chances of being reelected will be toast. The resultant Great Depression will make the last Great Depression seem like a walk in the park. At least the less urbanized folk of the 1930s could grow their own vegetables and raise a few chickens. Today urbanized and suburbanized Americans are dependent on  having all their needs met by the market economy. Their level of self sufficiency is near zero. As more and more fall out of the middle class, they go straight to homelessness and excruciating poverty not to a deurbanized level of hard self sufficient work. They go to nonwork and a dependency on charitable handouts most of which will completely vanish under Republican auspices. Homeless shelters will close due to lack of funding. The homeless will be forced to steal food. Republican charity? - forget it - it's an oxymoron, a contradiction in terms - there is no such thing as Republican charity. Will the billionaires among us provide charity for the poor once government funding dries up? I doubt it. I doubt they have the resources to pick up the slack once government spending has diminished due to the downward spiral. The one thing government will continue to spend on though is the military-industrial complex. We have to make sure the American people are fully protected even though they may be starving to death and dying in the streets due to lack of health care. And Republicans will reduce the size of government by outsourcing its spending on the military to private corporations. See, no government spending. Just corporate spending (with public money). Miraculously, jobs are created in the private sector (funded by public money). Yea, Republicans - you will have reduced the size of government and increased the number of private sector jobs. The collusion between government and corporations will be complete. There will be no hue and cry about deficit spending as the deficit continues to skyrocket. The right wing echo chamber will suddenly be mum about deficit spending. But that's OK as long as the deficit spending is on the military. We Americans cannot be too safe even if we are starving in the process.

Franklin Delano Roosevelt had the right idea in the 1930s: tax the rich and use the money to provide jobs for the poor and middle class. The Republican philosophy of cutting government spending and giving tax breaks to the rich will guarantee that the US will become a third rate nation with large numbers of destitute people where once there was a middle class. When Obama is defeated in 2012, the new Republican President will be sure to cut spending (on the public) even more in order to give more tax breaks to the wealthy and increase spending on the military. The right hand giveth; the left hand taketh away. The US will become a nation of destitute peons with enormous military capabilities.

 

Philanthro-Feudalism Is the Future!

Published on Wednesday, March 9, 2011 by Grit TV 

 

by Laura Flanders

China’s new economic plan is a relic of the past. It focuses on raising standards of living. How quaint!

When China’s leaders unveiled their latest five-year plan recently, they revealed that their focus is on lowering inequality, investing in railroads, highways and hospitals and expanding domestic demand through income subsidies. Fancy that!

Those old world Chinese just don’t seem to get it, that the modern way is the American way: deregulate, concentrate wealth in the top 1 percent and then make sure those at the top don’t pay taxes!

Treated well enough, the rich will fund desperately-needed things like cancer research. Just look at David Koch. Keep government regulators’ hands off his cancer-causing formaldehyde, and he’ll happily put $100 million toward a new Institute for (some) Cancer Research at the Massachusetts Institute of Technology. (As long as it’s named after him. )

It’s the modern new twist on an Old World theme. We call it Philanthro-feudalism.

Those Chinese by contrast, so stuck in the past, are still looking to government to fund government things. They’re even spending public money on public projects—things like broadband internet for peasants and medical and technological research. Communists!

After all this time, they just don’t understand that the best guardians of public dollars are private bankers.

Here at home, we’re making remarkable advances! Our corporations recently gained the right to free speech and they’re so advanced that they’re preparing to spend billions to influence our next election! And a few pesky Wisconsin protesters aside, workers have realized that they don’t need rights, or jobs, or much in the way of wages.

The government of China clearly has a lot to learn. But meanwhile, let’s give ’em our thanks for still buying our bonds—and taking all those jobs off our hands.

One last thing, we’ve learned names matter. The poor aren’t eating so much these days in the US, but don’t call them peasants. They don’t like that. Here we call them consumers.

© 2011 The Nation

The F Word is a regular commentary by Laura Flanders, the host of GRITtv and editor of At The Tea Party, out now from OR Books. GRITtv broadcasts weekdays on DISH Network and DIRECTv, on cable, and online at GRITtv.org and TheNation.com. Follow GRITtv or GRITlaura on Twitter and be GRITtv's friend on Facebook.

more Laura Flanders

Koch Bros.: Pulling Back the Curtain on Political Puppetmasters

Visit msnbc.com for breaking news, world news, and news about the economy

 

How Koch Industries Makes Billions By Demanding Bailouts And Taxpayer Subsidies (Part 1)

by Lee Fang from Think Progress March 1, 2011

Koch Industries, the international conglomerate owned by Charles and David Koch, is not only the second largest private company in America, it is the most politically active. As ThinkProgress has carefully documented over the last three years, Koch groups have spent tens of millions to influence government policy — from financing the Tea Parties, to funding junk academic studies, to undisclosed attack ads against Democrats, to groups promoting climate change denial, to a large network of state-based and national think tanks. In an opinion column for the Wall Street Journal today, Koch Industries CEO Charles Koch fired back at his critics, who have grown more vocal as it has become clear that Koch groups are providing the political muscle for Gov. Scott Walker’s (R-WI) union-busting power grab.

In his piece, Charles portrays himself as simply an ideological advocate, and says his money to political groups is only meant to “enhance true economic freedom.” He chides special interests that have “successfully lobbied for special favors,” claiming “crony capitalism is much easier than competing in an open market.” But in reality, the focus of the Koch political machine is geared towards “crony capitalism” — corrupting government to make Charles and his brother David Koch richer. Koch’s Tea Party libertarianism is actually a thin veneer for the company’s long running history of winning special deals from the government and manipulating the market to pad Koch profits:

– The dirty secret of Koch Industries is its birth under the centrally-planned Soviet Union. Fred Koch, the founder of the company and father of David and Charles, helped construct fifteen oil refineries for Joseph Stalin before expanding the business in the United States.

– As Yasha Levine has reported, Koch exploits a number of government programs for profit. For instance, Georgia Pacific, a timber company subsidiary of Koch Industries, uses taxpayer money provided by the U.S. Forestry Service to provide their loggers with taxpayer-funded roads and access to virgin growth forests. “Logging companies such as Georgia-Pacific strip lands bare, destroy vast acreages and pay only a small fee to the federal government in proportion to what they take from the public,” according to the Institute for Public Accuracy. Levine also notes that Koch’s cattle ranching company, Matador Cattle Company, uses a New Deal program to profit off federal land for free.

– Koch Industries won massive government contracts using their close relationship with the Bush administration. The Bush administration, in a deal even conservatives alleged was a quid pro quo because of Koch’s campaign donations, handed Koch Industries a lucrative contract to supply the nation’s Strategic Petroleum Reserve with 8 million barrels of crude oil. The SPR deal, done initially in 2002, was renewed in 2004 by Bush administration officials. During the occupation of Iraq, Koch won significant contracts to buy Iraqi crude oil.

– Although Koch campaigned vigorously against health reform — running attack ads, sponsoring anti-health reform Tea Parties, and comparing health reform to the Holocaust — Koch Industries applied for health reform subsidies made possible by the Obama administration.

– The Koch brothers have claimed that they oppose government intervention in the market, but Koch Industries lobbies aggressively for taxpayer handouts. In Alaska, blogger Andrew Halcro reported that a Koch subsidiary in Fairbanks asked Gov. Sarah Palin’s administration to use taxpayer money to bail out one of their failing refinery.

– SolveClimate recently reported that Koch Industries will reap huge profits from the proposed Keystone XL Pipeline, which runs from Koch-owned tar sands mining centers in Canada to Koch-owned refineries in Texas. To build the pipeline, politicians throughout the Midwest, many of whom have received large Koch campaign donations, have used eminent domain — government seizures of private land. In Kansas, where Koch-funded officials advise Gov. Sam Brownback (R-KS) and the Republican legislature, the Keystone XL Pipeline is likely to receive a property tax exemption of ten years, a special loophole that will cost Kansas taxpayers about $50 million.

– Koch Industries has been the recipient of about $85 million in federal government contracts mostly from the Department of Defense. Koch also benefits directly from billions in taxpayer subsidies for oil companies and ethanol production.

Charles has compared himself to a libertarian “Martin Luther,” evangelizing to the world for their supply side cause. However, the tens of millions in campaign donations and the dozens of front groups funded by Koch work in tandem to promoting the business interests of Koch Industries.

Koch funds both socially conservative groups and socially liberal groups. However, Koch’s financing of front groups and political organizations all have one thing in common: every single Koch group attacks workers’ rights, promotes deregulation, and argues for radical supply side economics. Not only do the Koch’s front groups pad Koch Industries’ bottom line, they supply the Koch brother’s talking points. In fact, for his opinion piece today, Charles heavily relied on front groups he finances for statistics. The “freedom index” cited by Charles is a creation of the Koch-funded Heritage Foundation, and the erroneous “unfunded liabilities” claim was supplied by the Koch-funded National Center for Policy Analysis.

Rush Lumbaugh Continues his Distortion and Demagoguery

from Robert Reich's blog:

 

Ed. Note: There is plenty of redistribution of wealth in the US only it's not from rich to poor as Limbaugh suggests. It's the other way around - from poor and middle class to rich. 30,000 lobbyists on Capitol Hill see to that. And where are the lobbyists for the poor. Oh, I forgot. They can't afford one. Republican governors give tax breaks to the rich, then try to balance their budgets on the backs of the poor and middle class.

Why We Should Raise Taxes on the Super-Rich and Lower Them on the Middle Class

by Robert Reich

Tuesday, February 15, 2011

My proposal to raise the marginal tax to 70 percent on incomes over $15 million, to 60 percent on incomes between $5 million and $15 million, and to 50 percent on incomes between $500,000 and $5 million, has generated considerable debate. Some progressives think it’s pie-in-the-sky. Here, for example, is Andrew Leonard, a staff writer for Salon:

A 70 percent tax bracket for the richest Americans is pure fantasy – even suggesting it represents such a fundamental disconnect with the world as it exists today that it is hard to see why it should be taken seriously. I would be deeply worried about the sanity of a Democratic president who proposed such a thing.

Fantasy? I don’t know Mr. Leonard’s age but perhaps he could be forgiven for not recalling that between the late 1940s and 1980 America’s highest marginal rate averaged above 70 percent. Under Republican President Dwight Eisenhower it was 91 percent. Not until the 1980s did Ronald Reagan slash it to 28 percent. (Many considered Reagan’s own proposal a “fantasy” before it was enacted.)

Incidentally, during these years the nation’s pre-tax income was far less concentrated at the top than it is now. In the mid-1970s, for example, the top 1 percent got around 9 percent of total income. By 2007, they got 23.5 percent. So if anything, the argument for a higher marginal tax should be even more realistic now than it was during the days when it was taken for granted.

A disconnect with the world as it exists today? That’s exactly the point of proposing it. For years progressives have whined that Democratic presidents (Clinton, followed by Obama) compromise with Republicans while Republican presidents (Reagan through W) stand their ground – with the result that the center of political debate has moved steadily rightward. That’s the reason the world exists the way it does today. Isn’t it about time progressives had the courage of our conviction and got behind what we believe in, in the hope of moving the debate back to where it was?

Would a Democratic president be insane to propose such a thing? Not at all. In fact, polls show an increasing portion of the electorate angry with an insider “establishment” – on Wall Street, in corporate suites, and in Washington – that’s been feathering its nest at the public’s expense. The Tea Party is but one manifestation of a widening perception that the game is rigged in favor of the rich and powerful.

More importantly, it will soon become evident to most Americans that the only way to reduce the budget deficit, preserve programs deemed essential by the middle class, and not raise taxes on the middle, is to tax the top.

In fact, a Democratic president should propose a major permanent tax reduction on the middle class and working class. I suspect most of the public would find this attractive. But here again, the only way to accomplish this without busting the bank is to raise taxes on the rich.

Republicans have done a masterful job over the last thirty years convincing the public that any tax increase on the top is equivalent to a tax increase on everyone — selling the snake oil of “trickle down economics” and the patent lie that most middle-class people will eventually become millionaires. A Democratic president would do well to rebut these falsehoods by proposing a truly progressive tax.

Will the rich avoid it? Other critics of my proposal say there’s no way to have a truly progressive tax because the rich will always find ways to avoid it by means of clever accountants and tax attorneys. But this argument proves too much. Regardless of where the highest marginal tax rate is set, the rich will always manage to reduce what they owe. During the 1950s, when it was 91 percent, they exploited loopholes and deductions that as a practical matter reduced the effective top rate 50 to 60 percent. Yet that’s still substantial by today’s standards. The lesson is government should aim high, expecting that well-paid accountants will reduce whatever the rich owe.

Besides, the argument that the nation shouldn’t impose an obligation on the rich because they can wiggle out of it is an odd one. Taken to its logical extreme it would suggest we allow them to do whatever antisocial act they wish – grand larceny, homicide, or plunder – because they can always manage to avoid responsibility for it.

Some critics worry that if the marginal tax is raised too high, the very rich will simply take their money to a more hospitable jurisdiction. That’s surely possible. Some already do. But paying taxes is a central obligation of citizenship. Those who take their money abroad in an effort to avoid paying American taxes should lose their American citizenship.

Finally, there are some who say my proposal doesn’t stand a chance because the rich have too much political power. It’s true that as income and wealth have moved to the top, political clout has risen to the top as well.

But to succumb to cynicism about the possibility of progressive change because of the power of those at the top is to give up the battle before it’s even started. Haven’t we had enough of that?