Tax Cuts Are Theft

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.

Update: see Tax Cuts Are Theft: An Amplification by Sara Robinson.

Conservatives like to say that taxes are theft. In fact it is tax cuts that are theft because they break a long-standing contract.

The American Social Contract: We, the People built our democracy and the empowerment and protections it bestows. We built the infrastructure, schools and all of the public structures, laws, courts, monetary system, etc. that enable enterprise to prosper. That prosperity is the bounty of our democracy and by contract it is supposed to be shared and reinvested. That is the contract. Our system enables some people to become wealthy but all of us are supposed to benefit from this system. Why else would We, the People have set up this system, if not for the benefit of We, the People?

The American Social Contract is supposed to work like this:

virtual_cycle

A beneficial cycle: We invest in infrastructure and public structures that create the conditions for enterprise to form and prosper. We prepare the ground for business to thrive. When enterprise prospers we share the bounty, with good wages and benefits for the people who work in the businesses and taxes that provide for the general welfare and for reinvestment in the infrastructure and public structures that keep the system going.

We fought hard to develop this system and it worked for us. We, the People fought and built our government to empower and protect us providing social services for the general welfare. We, through our government built up infrastructure and public structures like courts, laws, schools, roads, bridges. That investment creates the conditions that enable commerce to prosper – the bounty of democracy. In return we ask those who benefit most from the enterprise we enabled to share the return on our investment with all of us – through good wages, benefits and taxes.

But the “Reagan Revolution” broke the contract. Since Reagan the system is working like this:

virtual_cycle_diverted

Since the Reagan Revolution with its tax cuts for the rich, its anti-government policies, and its deregulation of the big corporations our democracy is increasingly defunded (and that was the plan), infrastructure is crumbling, our schools are falling behind, factories and supply chains are being dismantled, those still at work are working longer hours for fewer benefits and falling wages, our pensions are gone, wealth and income are increasing concentrating at the very top, our country is declining.

This is the Reagan Revolution home to roost: the social contract is broken. Instead of providing good wages and benefits and paying taxes to provide for the general welfare and reinvestment in infrastructure and public structures, the bounty of our democracy is being diverted to a wealthy few.

We, the People built this country’s prosperity and this built wealth. We reinvested that wealth, building the world’s most competitive economy. Now a few people are gaming the system and breaking the formula, taking for themselves vast riches, leaving the rest of us to clean up the mess.

We must recognize and understand these tax cuts for what they are. They are a broken contract. These tax cuts for the wealthy are theft. And we must recognize the Reagan Revolution for what it has cost us. Our democracy has been corrupted and our political system has been captured. A wealthy few are taking all of the benefits of our efforts for themselves. The lack of investment in infrastructure, courts, schools and other public structures is making our country less competitive in the world. The Reagan Revolution is stealing our future.

Other posts in the Reagan Revolution Home To Roost series:

Reagan Revolution Home To Roost — In Charts
Reagan Revolution Home To Roost: America Drowning In Debt
Reagan Revolution Home To Roost: America Is Crumbling
Finance, Mine, Oil & Debt Disasters: THIS Is Deregulation

Sign up here for the CAF daily summary.

Tax Cuts Leave Nothing Behind — Infrastructure Investment Leaves Behind Infrastructure

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
Actually, the title kind of says it all, no?
If we spend money on tax cuts, the next year we only have debt and pay interest on the debt. For a clear example, just look at the damage the Bush tax cuts have done to the country. They left behind worse than nothing — we had years of slow growth, and the cuts caused a massive deficit and debt that plagues us now. And, because we didn’t have the money to use to maintain the infrastructure we are that much further behind on that task now.
If we spend money on improving the country’s infrastructure, we get all the job creation that comes from that work, and the next year you have that infrastructure there to help drive the economy. For a clear example, how did all that government spending on the Interstate Highway System work out for the economy? For a clear example, look at China’s investment in high-speed rail. They can now move people and goods so much more efficiently and faster between their cities, and they developed an industry that is now selling its expertise to the rest of the world.
Our country has a huge, huge infrastructure deficit. After the Reagan tax cuts started draining the government’s ability to be a government we slowed down or stopped maintenance of the country’s roads, bridges, water and sewer systems, transit systems, schools, dams & levees and everything else that didn’t blow someone up. Our rail system is not last-century, it is century-before-last! The American Society of Civil Engineers calculates that we are $2.2 trillion behind where we need to be. As a result we have fallen behind the rest of the world in competitiveness, efficiency, and of course job creation.
Connect the dots: We have about 10% unemployment and we have a huge, huge backlog of work that needs doing. And after that work gets done the economy will run much more smoothly and will be much more competitive.
To me it’s a no-brainer. Everyone benefits when we invest in jobs and infrastructure. We can see all around us that tax cuts leave nothing behind, and in fact make our problems worse.
Sign up here for the CAF daily summary.

Bravo To Congress’ Making It In America Push — What It Still Needs

This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
House leaders deserve praise for fighting for working people by launching a “Make It In America” initiative which they officially unveiled today. The country still badly needs an immediate job-creation effort, but this is a very important longer-term initiative for reviving America’s manufacturing base and restoring our competitiveness in the world economy. Good work!
Manufacturing is the core of our country’s income. Making things that we sell is how we earn money to buy things that others make. This is why it is so important to restore America’s manufacturing base and the infrastructure that supports it. People want to go into a store and have a choice to buy things that are made here.
This week these important bills made it to the House floor: (click through for details)

  • National Manufacturing Strategy Act
  • Clean Energy Technology Manufacturing and Export Assistance Act
  • End the Trade Deficit Act
  • As the Congress rolls out this initiative here are important components it should include:

    Buy American
    Public money should be going to our people. This is what other countries, like China, are doing with domestic preferences and “indigenous innovation” policies.

  • Pass “Made in America” policies in every phase of any manufacturing plan, boosting domestic content requirements in federal procurement, (state and local government should do the same with their procurement policies).
  • Trade policies
    (Is “trade” even the right word for making the same things in other countries that we used to make here.)
    We are doing very little to combat the mercantilist nations, in particular China and Germany. China manipulates its currency and will not match its exports with imports. Germany is limiting domestic consumption — the resulting trade surplus is out of balance.

  • End tax incentives to move production overseas; create incentives to keep production at home. Current laws allow corporations to defer taxes on income earned overseas, which almost forces companies to develop schemes to make goods outside the country.
  • Require tariffs on goods from countries that manipulate currency, to overcome the pricing advantage this creates.
  • What about a “democracy tariff?” This is a tariff on imports to counter the advantages that come from moving factories to countries where the people don’t have the power or opportunity to insist on fair wages and worker and environmental protections.
  • Encourage the “Green Economy”
    Stimulate American manufacture of wind turbines, solar panels, biofuels, etc. This creates jobs and makes us competitive in the new green economy that will replace the carbon economy.

  • Create a domestic non-carbon energy market with a strong Renewable Energy Standard (RES) and a direct carbon tax (since the Senate has blocked cap-and-trade).
  • Use government procurement to help trigger this market. Phase in purchases of non-carbon energy, creating a strong market, triggering increased investment. Procurement should require American-made components. For example, wind-power purchases should require American-made turbines are used.
  • Infrastructure
    Our roads, bridges, rail, water and electrical systems, etc. are the backbone of a competitive economy. The infrastructure enables business to thrive. If it is not kept in good working order and up-to-date (and it has not been), businesses do not thrive (and they aren’t).

  • We need the Congress to create a National Infrastructure Investment Bank, capitalized with public money to lure private capital for investment in rebuilding key components of America’s infrastructure. Stop the obstruction – we need this!
  • Rebuild existing, crumbling infrastructure. This “spending” investment earns the money back many times over.
  • Pass the surface transportation reauthorization bill. This will boost American industry as while creating jobs, saving energy and incentivizing green development.
  • Build new infrastructure-for-the-future like high-speed internet and high-speed rail and a national electric “smart grid”.
  • Require companies to make the infrastructure components in America.
  • This is a brief outline of some of the needed components in a Make It In America strategy. These are things that Congress can do. Congress must not back away from bold reforms in the face of resistance from the right-wing monopolist business lobbyists, who speak for the job exporters, and their “free-trade ideologue” allies.
    Sign up here for the CAF daily summary.

    If You Feed Them They Breed — And Other Dehumanizing Conservative Idiocy We Should Ignore

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
    The country is in an economic emergency. Unemployment — especially long-term unemployment — is at extremely high levels and the recovery is faltering. Conservatives are obstructing efforts to solve this because they believe it helps them in the November election. To this end conservatives are throwing out every possible argument against helping the economy to see if any of them stick, and to provide cover for opposing taking any action that might help matters.
    The latest nonsense they are spreading is that helping the unemployed keeps them from finding jobs. Good Lord! This is basically the old “if you feed them they just breed” storyline. They say “it makes them dependent” as if hard-working people laid off because of Wall Street’s scams are squirrels. Or, to hear the nasty way conservatives talk about these human beings, they are like rats. “Hobos,” one Congressman called the unemployed! And the DC elite listen, chuckle and repeat.
    But while they say unemployment assistance keeps these lazy parasites from finding jobs, they also obstruct bills that create jobs by maintaining and modernizing our infrastructure. This tells you it’s just something they say, to cover for what they do. And what they do is obstruct any effort to fix the problem because they believe they will benefit if it is not fixed.
    For example, the big DC drumbeat right now is against “spending.” They claim that government spending caused the crisis, ignoring and passing the buck on everything that actually caused it, especially their deregulation and their lack of oversight. They blame government for everything, so why should this be different.
    Along these lines they claim that the stimulus didn’t work, or even that spending made the problem worse, because there are still people out of work. But look at the following chart. The right side of the chart shows the effect of the stimulus. (Source, Jed Lewison and Karina Newton)
    monthly_private_sector_job_creationloss
    A conservative, anti-government myth that is everywhere now is that “Government forced banks to give loans to people who couldn’t pay them back, and this caused the financial collapse” — and its variant that it was about forcing banks to “help minorities. This is an example of the tactic of repeating a lie over and over until enough people believe it. To deflect people from understanding what really caused the crisis and from seeing that they are obstructing the effort to reform the financial system they made this one up” Unfortunately this has become what bloggers call a “zombie lie” — no matter how many times you prove it is just a lie, it comes back from the dead.
    The Zombie Lie Problem
    The “zombie lie” problem shows that it is a mistake to think that just arguing facts is a way to shoot this stuff down. Spending your time arguing facts with people who are trying to mislead misses the point. The lie is not about the facts, it is cover for the obstruction. When you try to argue a fact they will make up something else to throw you off track. Facts are not what this is about, feeding a narrative of no action is what this is about, because they understand that a bad economy helps them in the Fall.
    Listening to this stuff at all, and trying to argue facts just contributes to the lack of action. There comes a point when you have to stop llsteneing and getting bogged down by intentional distractions and get something done for the economy and the public.
    It Is Time To Stop Listening To This Stuff And ACT
    Enough with these stupid, heartless, dehumanizing right wing “if you feed them they breed” arguments that are preventing action. People are out of work and the recovery is faltering. It is time to push aside the nay-sayers, and get something done. The government simply has to step in and act. First, do the minimal, obvious things:
    1) Pass the unemployment extension, because people can’t find jobs.
    2) Continue COBRA subsidies, because so many of the long-term unemployed are older people who cannot get or afford insurance any other way. This is simple humanity, people! And, by the way, COBRA itself is running out for many people, never mind subsidies.
    3) Send aid to the states. 900,000 jobs in the states are riding on this help.
    At a minimum do this. Don’t get lost in the weeds of what bill to attach it to. Just do it. Bring it out by itself for an up or down vote so the public can clearly see who is helping and who is voting against jobs and help for the unemployed.
    But what Congress really ought to be doing is passing the George Miller “Local Jobs for America Act.” .
    As economists like Paul Krugman keep saying we risk going into a serious depression. At the least we are entering a pattern of slight recovery, slight decline for a decade. Look at what happened to Ireland when they tried “austerity.”
    Here is an undeniable fact about government spending. Government spending on infrastructure creates the conditions that enable businesses to prosper. Tax cuts leave nothing behind, but the roads, transit systems, ports, electric grid, Internet, courts, schools, universities, research, and all the rest that government spending creates make us competitive and are needed by businesses
    Do it. Ignore the obstructors who are trying to set the stage for November. Put people to work. Help the long-term unemployed. Pass jobs bills.. And spend on modernizing our infrastructure so American can be competitive again.
    Sign up here for the CAF daily summary.

    Stimulus Shifts To Reverse — Where Is The Congress?

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
    The stimulus is running out, millions lose health insurance in 12 days as COBRA subsidies start to run out, unemployment benefits also start running out, all while the unemployment rate is rising. Foreclosures are up. At the same time out-of-money states are laying off hundreds of thousands of employees, beginning with teachers. (But hey, who needs teachers?) They are deferring infrastructure maintenance like roadwork and water/sewer systems and other public investments that employ people while creating the conditions that enable to economy to grow.
    In fact, the stimulus is not only running out, but these state layoffs and other factors mean that government is now a net drag on the economy. The hope was that the stimulus would be enough to hold off the effects of the downturn and provide enough of a boost to get the “economic engine” running again. But for various reasons much of the stimulus was cut back or wasted on ineffective tax cuts, so as it runs out there are signs that the economy could sink back down.
    This chart shows government contribution to GDP growth, now negative due to state and local governments laying off employees and reducing infrastructure investment.
    publicsector1
    With all of this going on the DC “conventional wisdom” is that the economy has turned the corner, and no more help is needed. Wall Street and big corporations are making money again so it is time to move on and let regular people fend for themselves. The public wants jobs and a government that works for them, the DC insiders want government to stop spending on We, the People and focus on big corporations.
    Compare this DC “conventional wisdom” with the current jobs situation. While the economy has finally stopped losing jobs, it is not yet creating enough jobs even to keep up with new workers entering the labor force. Never mind putting unemployed people back to work. Following is a chart of job losses during recessions. This chart shows just how bad this recession is compared to previous recessions, and how we are nowhere near normal.
    EmployRecessionApril2010
    This “Wall Street and corporations are OK so our jobs here is done” sentiment combines with the right-wing drumbeat that anything government (We, the People) does is bad, (which translates to all decisions should be made by the biggest corporations) and the related drumbeat that any government spending on We, the People is a very bad thing after President Bush left us with a $1.4 trillion deficit.
    Congress, what’s the holdup?
    There are efforts in the Congress to try to do something to help the situation for regular people. For example, the War Supplemental (this is in a war bill because bills for bailing out Wall Street, and for anything to do with military MUST PASS and do so within 72 hours) contains $23 billion to help keep states from laying off 300,000 teachers. It is meeting opposition as “another bailout.” That’s right, the very people who bailed out Wall Street are now blocking a bill helping teachers, calling it a “bailout!”
    Then there is the Local Jobs for America Act. This act puts $75 billion into direct government hiring at the state and local level, creating or saving an estimated one million jobs. According to EPI, the $39 billion comes straight back from taxes and reduced unemployment payments!
    Unemployment is about 10%. Millions are unemployed and are about to lose COBRA subsidies and unemployment benefits. States are laying off hundreds of thousands. Investment in maintaining and modernizing infrastructure is nil. DC elites think everything is fine. The disconnect between people inside and outside the DC bubble is growing almost as fast as the concentration of wealth at the top.
    President Obama has talked about a bold, large scale vision for a new direction for the country. But Congress and the President are getting trapped in austerity budget thinking that won’t allow them to go in direction of stimulus and helping regular people. If there is to be no money because of an austerity budget then American competitiveness, the economy and the mood of the public can only get worse. Do the DC elites actually believe the public is going to reward this with votes?
    Sign up here for the CAF daily summary.

    Govt Spending: JOBS Today, Payoffs For Years To Come

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
    The commute between Baltimore and DC is the 4th-most congested route in the country. But a high-speed rail line would make this trip an 18-minute breeze (and also free up some of that congestion). They have been talking about building this rail line since 1994. Meanwhile other countries have been doing.
    Japan, Europe and now China are known for their efficient, high-speed rail transportation systems.

    By 2012, just four years after it began its first high-speed passenger service, China will have more high-speed train tracks than the rest of the world combined.

    Why is China inveswting so heavily in high-speed rail infrastructure? What does this investment bring to China?

    …designed to boost exports and revolutionize the flow of people and goods in the world’s fastest-rising economic powerhouses.
    “Just like our investment in the highway system in the 1950s and the rail system in the late 1800s, this will pay huge dividends for China to years to come,”

    Governement spending pays dividends for years to come
    That’s right. Government spending is investment that pays off. It pays off in jobs today, and it pays dividends for years to come. As I wrote the other day in China’s Stimulus Payoffbecause China’s government has invested heavily internally in high-speed rail, China is now in a position to bid on our own high-speed rail projects.
    Japan also invested heavily in high-speed rail, and they are also bidding on our (talked about) rail projects. In the news: LaHood Rides 502 KPH Maglev Train as Japan Seeks U.S. Sales

    Transportation Secretary Ray LaHood rode on a 502 kilometer-per-hour (312 mph) magnetic- levitation train in Japan, stoking optimism that the Asian nation may be able to sell the technology overseas.

    Japan’s government has pledged to support JR Central’s bid to build the Washington-Baltimore line, possibly including loans from a state-owned bank. Maglev trains float above the tracks and are propelled along by magnetic currents.

    Other countries understand that investing in infrastructure creates jobs today and enables economic growth later. Other countries understand that having a coordinated nation industrial/economic policy helps their businesses compete in the world’s economy. Other countries are swooping down on us, bidding for our minuscule projects and selling us their green energy systems. Meanwhile we are mired in this weird “free market” anti-government ideology that keeps us from taking control of our destiny and our economic future.
    Instead of talking about cutting back on spending, we should instead be investing heavily in our people and our infrastructure.
    Sign up here for the CAF daily summary.

    Reagan Revolution Home To Roost: America Is Crumbling

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
    The conservative argument of the last 30-40 years boils down to this: “Hey look at this big pile of seed corn. Let’s eat it!” Almost 30 years after the “Reagan Revolution” our infrastructure is crumbling around us. Since the Reagan-era tax cuts we have been deferring maintenance of (and never mind modernizing) our infrastructure, and as a result have become less competitive in the world economy.
    Meanwhile our economic competitors, countries like China and India, have been building infrastructure like crazy. Other countries are investing, educating, improving public services because they know these things make the economy explode later. A major component of China’s stimulus was infrastructure and public services – including public welfare – because of the economic benefits that come later.
    Now for those countries it is later, while for us it’s just becoming too late. Their investment is paying off while we’re having trouble paying off the accumulated Reagan/Bush tax-cut debt.
    How did we get here?
    Public infrastructure is the roads, courts, education, etc. that enable an economy to prosper. We got ourselves out of the Great Depression with a big investment in public infrastructure. The government taxed the wealthy and built or improved modern roads, bridges, post offices, courthouses, shipyards, schools and other public structures that enabled business to take off.
    And then business took off. The idea was, of course, that business would give back some of the returns to keep that process going. But instead the big companies and wealthy families funded a conservative propaganda machine that convinced people to let them just keep it. Look at this chart from 14 Ways A 90 Percent Top Tax Rate Fixes Our Economy And Our Country:

    krugman_chart

    You can clearly see that the money that should have been invested in maintaining and modernizing our infrastructure instead has gone to a few wealthy people at the top of the food chain. (We’re the food.) And of course, we all can clearly see the results of this in today’s economy. They ate the seed corn, America is crumbling.
    Now, here we are later and we are seeing the result of the Reagan Revolution. The American Society of Civil Engineers (ASCE) Infrastructure Report Card estimates that we are $2.2 trillion behind just on maintaining the existing infrastructure, never mind modernizing. Please click through and explore what ASCE is saying there. (Conservatives — there are lots of pictures!)
    What do we do?
    The answer is obvious. It is called public investment. Ask the big companies, the banks and the wealthy to pay back some of the incredible amounts of money they have been piling up as a result of the past investment that We, the People made in building that infrastructure that enabled the economy to boom. Use that money to invest in maintaining and modernizing the infrastructure so that the economy can again thrive for all of us.
    We can employ the unemployed and bring our infrastructure up to par at the same time. There is a lot of work that needs doing and we have a lot of people out of work.
    The payback will be enormous. The economy will explode. And we can build sustainability into the process this time.
    What is in the way?
    The problem now is that the corporate/conservative propaganda machine has gone way past talking people into cutting taxes for the rich and cutting back on public spending for infrastructure and our people. Now they have become very extreme, convincing a number of people that government spending – We, the People spending on the common good – and government itself – We, the People making the decisions for ourselves – is the wrong approach. They believe that any government at all is “socialism” — run for the benefit of all of us — and that all public services must be “privatized” — meaning run for the benefit of a few. They believe it is wrong, even immoral to have public schools, public transit, public health care, regulations that restrict what companies can do to consumers or the environment, etc.
    They have the megaphone because they have the money. We have to confront this head on.
    More to come!
    This is another story of a wealthy few selling off the country’s people and future. This is another story of gains for a few at the expense of the rest of us. These stories are becoming all too common. This is the Reagan Revolution coming home to roost, and I will continue to write about the terrible price we are paying and will be paying for a long time for the failed experiment in conservative ideology.
    Sign up here for the CAF daily summary.

    Ten Million Jobs Needed – Ten Million Jobs That Need Doing

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
    Dot: No net job gains since 2000. 8 million jobs lost in the recession. Never mind jobs for the 86,000 new people entering the labor force every month…
    Dot: According to the American Society of Civil Engineers (ASCE)

    “congested highways, overflowing sewers, and corroding bridges” were creating a “looming crisis that jeopardizes our nation’s prosperity and our quality of life.”

    Dot: From a recent NY Times story on our country’s water systems,

    Today, a significant water line bursts on average every two minutes somewhere in the country, according to a New York Times analysis of Environmental Protection Agency data.
    . . . State and federal studies indicate that thousands of water and sewer systems may be too old to function properly.
    [. . .] “There’s a lot of evidence that people are getting sick,” he added. “But because everything is out of sight, no one really understands how bad things have become.”

    Connect the dots.
    Ten million jobs needed. Ten million jobs that need doing.
    It’s called the infrastructure deficit. Right around 1981 we stopped improving the country’s infrastructure and even started to defer maintaining it. We started “living off the seed corn.” Now it is all catching up to us.
    I’ll be writing about infrastructure. Boring. Until it isn’t.

    Workers were repairing corroded joints on Minnesota’s busiest bridge when it collapsed into the Mississippi River yesterday, killing at least four people and leaving more than 20 missing, state officials said.
    … As many as 50 cars plunged into the river along with the six-story structure, authorities and eyewitnesses said.

    Sign up here for the CAF daily summary.

    Friedman On Competitiveness: Identifies Problem, Offers Exactly Wrong Solution

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
    Americans who travel out of the country will tell you about how the US is so visibly falling further and further behind the rest of the world. This hurts our ability to compete economically. The cause of the problem was tax cuts. The solution is certainly not more tax cuts.
    Thomas Friedman, in A Word From the Wise flies in from Asia and, using LAX as an example, observes how the US infrastructure is starting to fall apart because of deferred maintenance. He writes,

    Walking through its faded, cramped domestic terminal, I got the feeling of a place that once thought of itself as modern but has had one too many face-lifts and simply can’t hide the wrinkles anymore.

    Like so many problems we have today this one traces directly to failed conservative policies. Conservatives cut taxes for the rich, which forced the country to defer maintenance and borrow money. So we don’t keep things in good shape and we certainly don’t invest in new 21st-century infrastructure. Friedman writes,

    We are the United States of Deferred Maintenance. China is the People’s Republic of Deferred Gratification. They save, invest and build. We spend, borrow and patch.

    The problem goes beyond crumbling buildings, slow trains, and potholes. The long-term cost is that we fall behind the rest of the world in our ability to compete economically. Other governments are investing in 21st-century infrastructure, and we are not, because of our tax cuts:

    “… a 2009 study … measured … ‘the rate of change in innovation capacity’ over the last decade — in effect, how much countries were doing to make themselves more innovative for the future. The study relied on 16 different metrics of human capital — I.T. infrastructure, economic performance and so on. On this scale, the U.S. ranked dead last out of the same 40 nations. … When you take a hard look at the things that make any country competitive. … we are slipping.” (emphasis added)

    So what is the solution? The column advocates engaging in a race to the bottom by lowering corporate tax rates even more! So Friedman (a billionaire) and the CEO of Intel identify the problem and then get the solution exactly wrong (in a way that enriches billionaires, CEOs and big companies at the expense of the rest of us). He starts by saying we have been deferring maintaining our infrastructure (which is the result of tax cuts) and then says we need to CUT corporate taxes!
    Tax cuts are the reason we are not maintaining our infrastructure and reducing our country’s competitiveness — so let’s do it more? What is the matter with this guy? How are we ever going to bring our country’s infrastructure and education up to 21st-century standards if we further weaken our financial position with even more tax cuts?
    Another way that we are falling behind other countries in the global economic competition is that other countries have strategies to take our factories and jobs but we have no strategy for fighting back. Again, this is the result of our slavery to conservative policies. Conservatives say it is wrong for our government to get involved. They say “free markets” will come up with the solution.
    How is this “free-market” keep-government-out-of-it approach working out? Friedman interviews Intel CEO Paul Otellini on the advantages of building new manufacturing facilities in other countries,

    … If I build [a] factory in almost any other country in the world, where they have significant incentive programs, I could save $1 billion,” because of all the tax breaks these governments throw in. … “And it wasn’t because the labor costs are lower. … when you look at it after tax was substantially lower and you have local market access.”

    In other words, in order to seize the manufacturing capacity from us these countries lose money on the deal, with their governments putting up subsidies in the form of tax breaks. isn’t this “dumping” — selling below cost, paid for by government subsidies — which is illegal under trade laws? The idea is to seize the manufacturing capacity today, make us pay later.
    The right solution is to fight back – not further weaken ourselves. When other countries are cheating we have to fight back. It is time to develop a national economic/industrial strategy.
    Countries that use tax breaks to subsidize products are already fighting a trade war with us – and winning because we refuse to engage. If other countries want to play the game that way then we should play the same game back.
    The US is still a huge market and companies want to sell things here. Let’s use that. If they want to subsidize goods to cost less here, let’s make their goods cost more here instead. Impose a border tariff that compensates for subsidies, cheap labor, lax environmental standards, etc., so their goods do not cost less here. This way we capture the revenue that other governments are pumping into subsidies. Then we use that revenue to 1) modernize our own infrastructure and maybe even 2) subsidize our own exports.
    We need to stop weakening ourselves. Increase taxes so we can stop borrowing, start building a 21st-century infrastructure, and make our country competitive again.

    Create Real Jobs That Pay Off: Update Our 1970’S Infrastructure

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
    One legacy of the Reagan tax cuts is that we stopped maintaining – and never mind modernizing – our infrastructure. As a result there is a LOT of work that needs doing. And there are a very, very large number of unemployed people. Hmmm…
    There are so many more ways our economy suffers as the consequences of Reagan-era choices come home to roost. The current economic doldrums are in great part the result of Reagan-era choices:
    * The deferred infrastructure maintenance and modernization that resulted from the tax cuts mean that our economy is no longer world-class. Bob Herbert has been writing about this problem for a while. From his most recent,

    Schools, highways, the electric grid, water systems, ports, dams, levees — the list can seem endless — have to be maintained, upgraded, rebuilt or replaced if the U.S. is to remain a first-class nation with a first-class economy over the next several decades. And some entirely new infrastructure systems will have to be developed.

    So here we are with a massive infrastructure deficit that is harming our ability to compete economically in the world. Just one example: China has 42 high-speed rail lines coming into operation connecting their major cities, and we are just starting our first one connecting … Tampa to Orlando?
    * The education cutbacks then are really hurting now.
    * Energy. Cancelling all of Carter’s efforts to solve our energy problems has left the economy dependent on last century’s expensive and polluting energy sources and the monopolistic giants that control them.
    * Debt. Tax cuts creating “structural deficits” have built up tremendous debt and the accompanying burden of paying interest on that debt and dependence on those who fund our borrowing habit.
    * Militarization. We spend more on military than every other country on earth combined. The big defense corporations keep us from doing anything about it. Historically this kind of military spending and the resulting debt has ruined empires and kingdoms, and here we are.
    * Government. Outsourcing/cutting/destroying/hating government and the commons has left us ill-equipped to catch up with China and others, and deal with monopolistic multinational corporate giants.
    Schools, highways, power grid, … everything. And all this work needs to be done on top of the need to retrofit all of our country’s buildings to be energy efficient. Or we will just continue to fall forther behind. There is so much work that needs to be done. I wonder how the cost compares to the amounts that have been transferred to the very rich since the tax cuts started.
    Hmmm… Let’s see … high unemployment … lots of work that needs doing … massive wealth accumulated at the very top … hmmm… dot. dot. dot. And on top of that, there is all that evidence that past investment in infrastructure leads to great prosperity in the years following the investment … dot. dot. dot. hmmm… Ideas are forming… connections are being made…
    I can hear the shrieking from the “free market” conservative bunch now, just for thinking such thoughts: “But … but .. that would be just WRONG to just … give people jobs doing what needs to be done!!! and taxing the RICH — the very beneficiaries of past infrastructure investment — to pay for it? How can you even dare suggest such a thing???!!!”
    Public works projects — infrastructure. Example: In the 1950s, with top tax rates at 90%, we started the massive public works project that is the Interstate Highway System. How did that investment work out for our economy? How many companies benefitted from the ability to deliver trucked goods across the country in a short time? How did those top taxpayers do economically as a result of such investments?
    Hmmm…

    Cut Taxes At The Top And Pensions For Old People

    This post originally appeared at Campaign for America’s Future (CAF). I am a Fellow with CAF.
    Today’s new York Times has a front-page story (really an editorial) that promotes cutting the Social Security pensions of Americans and other things that we as citizens are entitled to.

    Many analysts say the president and Congress could send a strong signal to global markets by agreeing this year to a package of both long-term tax increases and spending reductions, especially in the popular entitlement programs, that would not take effect until 2012.

    Let’s remember how we got here.
    For decades following the depression and WWII the country had operated with a budget that was in or nearly in balance while maintaining our infrastructure and investing in our future. Past concentrations of wealth were decreasing, the middle class was expanding, and we led the world in growing prosperity.
    The trouble all started when we dramatically cut taxes on the rich. For decades the top tax rate was 90%. Then we cut it to 70% and then 50% dramatically from there all the way to around 30%. The budget immediately went completely out of balance. The tax cuts created a “structural deficit.”
    At the same time as we cut taxes for the rich we raised taxes on everyone else, saying the money would be used to pay for peoples’ retirement. However, that money instead was used to defer the damage caused by the tax cuts for the rich.
    And we started to dramatically increase the military budget. Today we spend about $1 trillion a year on military, veterans, intelligence, nukes, and the share of debt interest from past military spending — more than every other country in the world combined.
    And we started cutting everything else back. We cut back investing in R&D, schools, transportation, you name it. We stopped even maintaining the existing infrastructure. The very investment that could have led to economic growth was cut because of those tax cuts.
    And now because the debt and continued borrowing — caused by those huge tax cuts for the rich and huge increases in military spending — has gotten SO bad, the corporate and media elite demand that we … cut back the pensions of old people, further decrease infrastructure maintenance and investment, etc. ? As the SNL Church Lady used to say, “Isn’t that conveeeeenient?”
    They are trying very hard to keep the public from noting that we spend more on military than the rest of the world combined, and that the budget and economy worked so much better when tax rates at the top were very much higher. If you want to fix the borrowing you need to fix the cause of the borrowing. You need to get the money from where the money went.

    A New Economy from Old Roots?

    This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture as part of the Making It In America project. I am a Fellow with CAF.
    How do we build a new economy out of the collapse of the old economy? How do we start fresh to begin creating jobs again, while building in economic and environmental sustainability, as well as workplaces that respect human needs and rights? How do we change things so that we all get to share the benefits of the economy rather than just contributing to the increasing wealth of a few vastly wealthy people?
    While we look for a vision for a new economy, we should examine what has worked in the past. America had periods in which regular people enjoyed sustained increases in their standard of living. For a long time it was a conventional wisdom that each American generation would do better than the previous generation, more people would receive good educations, medical care would get better, the middle class would grow, leisure time would increase, poverty rates would decrease, retirement would be easier, etc.
    But this pattern stopped. Beginning in the late 1970s and especially in the 1980s incomes began to stagnate, wealth increasingly concentrated at the top, working hours and workplace pressures steadily increased, availability of good health care started to decrease, etc. The standard of living of most Americans began to and continues to decline. At the same time corporations became more predatory as consumer protections vanished. Meanwhile outsourcing, deunionization and other anti-worker policies led to increasingly unpleasant, stressful and unrewarding worklives for more and more people.
    Many of today’s problems are traceable directly to the policy results of anti-government propaganda that was blasted out from well-funded conservative think tanks starting in the 1970s. The anti-government campaign led to defunding of many national, state and local government programs that improved education, helped the poor or enriched people’s lives. We suffered deregulation in many areas where the government had protected consumers, workers, investors and the environment. Huge reductions in taxes for the wealthy were either offset by tax increases for the rest of us or government borrowing. And that borrowing has led to increasing problems of paying the interest and threats to funding even basic programs like Social Security and education.
    So what worked, before the conservatives trashed the place?
    Regulation
    One thing we know for sure now, learned the hardest way thanks to the financial crisis: regulation worked. Regulation was necessary, it worked, it kept firms from taking risks that could bring down the economy. And we can also see now how regulations protected consumers from predatory corporate activities, workers from wage theft or unsafe working conditions, and the environment from exploitation and destruction.
    Taxes
    Before Reagan the tax rates at the top were very high. After you reached – and took home – a certain very high income you paid a high percentage of the rest in taxes. This had many beneficial results – even for the people who paid higher taxes. Government could afford to keep the physical, education and legal infrastructure in good condition without borrowing. Government could afford to invest in programs that improved our standard of living, health, knowledge and technology, which helped businesses grow. Businesses thrived in such well-watered soil.
    The high tax rates also kept the bad side of human nature in check. When it took years to build up a fortune businesspeople had to rely on the health of the greater community to nurture their own wealth-building enterprises and keep them thriving over a long period. They had to think and act long-term. The roads needed to be kept in repair, the schools needed to provide excellent education to potential employees, the courts needed to be functional to enforce contracts, and they wanted the communities they were going to have to stay in to be pleasant places to live.
    But once taxes were lowered vast windfalls could be realized from a single event and it made more sense to try to fleece the community with quick-buck schemes than to rely on it. We began to see corporate raiders break up solid, ongoing companies, steal pension funds, etc., while encouraging communities to cut spending on schools, roads, etc. It became more profitable sell off or outsource our manufacturing capacity. And then, as things fell apart, the few who benefited could just fly away in their private jets or sail away in their huge yachts. The greater community was no longer any use to them except as crops to be harvested. Vulnerable consumers are the only crop that is coming up in this economy.
    Big Government
    Government is We, the People making the decisions. “Big government” is simply another way of saying that more of the important decisions are made by the people. Shrinking government means handing the decisions over to big corporations. In the real world this is the choice. And in the real world big corporations make decisions that benefit them, and only them. Before you badmouth government think carefully about what the alternative is.
    Old-Fashioned Government Planning
    As I said in a post a few months ago,

    The phrase “industrial policy” sounds so Walter Mondale, 1970s, smokestacks and brick factory old-fashioned. I suspect the subject turns people off, eyes glaze over, hands reach under the table for iPhones and Blackberries…

    But here we are without an industrial policy. How’s that working out for us? Every other country has one. China seriously has one. We instead have huge trade deficits. We don’t make things here so we have to borrow money to buy things made elsewhere.
    To add insult to injury, recently Deutsche Bank released a research note advising investors that the U.S. was not a good investment because of our lack of a government industrial policy. See Deutsche Bank: Absence of US Clean Energy Policy Will Send Global Capital Elsewhere.
    While we envision a new direction for our economy, maybe we should also be looking at returning to a few old-fashioned ways of doing things, too.