From Americans for Tax Fairness
A new web video unveiled today by the National Education Association and Americans for Tax Fairness vividly shows how extending the Bush tax cuts for CEOs and the richest 2 percent of Americans would be paid for by cutting education funding for kids.
In Wednesday’s debate Mitt Romney repeated his claim that cutting individual and corporate income taxes creates jobs. But when you look at what actually happened, the periods when we had the highest tax rates were the periods we had the greatest job and economic growth. And the periods with lower taxes had lower job and economic growth. (And we all know what happened in the Bush years…)
Here is Romney at Wednesday’s debate,
“54 percent of America’s workers work in businesses that are taxed not at the corporate tax rate, but at the individual tax rate. And if we lower that rate, they will be able to hire more people. For me, this is about jobs. This is about getting jobs for the American people.”
and,
“The problem with raising taxes is that it slows down the rate of growth. And you could never quite get the job done. I want to lower spending and encourage economic growth at the same time.”
So DO tax cuts for rich people and already-profitable businesses create jobs? DO businesses hire people when they have extra money? When few customers are coming through the door will tax cuts cause businesses to hire people to sit around reading newspapers or checking Twitter?
I think that people with jobs have money to spend and then the businesses that get their business will hire people, and will make money and be happy they have profits to pay taxes on. And I think that the numbers — and charts that help us visualize those numbers — back me up. Here are some of those numbers.
Michael Linden at Center for American Progress took a look at tax rates and job creation, in Rich People’s Taxes Have Little to Do with Job Creation, Conservative Arguments that Higher Income Taxes for the Wealthy Hurt Employment Don’t Hold Up to Scrutiny,
… in years when the top marginal rate was more than 90 percent, the average annual growth in total payroll employment was 2 percent. In years when the top marginal rate was 35 percent or less—which it is now—employment grew by an average of just 0.4 percent.
And there’s no cherry-picking here. Pick any threshold. When the marginal tax rate was 50 percent or above, annual employment growth averaged 2.3 percent, and when the rate was under 50, growth was half that.In fact, if you ranked each year since 1950 by overall job growth, the top five years would all boast marginal tax rates at 70 percent or higher. The top 10 years would share marginal tax rates at 50 percent or higher. The two worst years, on the other hand, were 2008 and 2009, when the top marginal tax rate was 35 percent. In the 13 years that the top marginal tax rate has been at its current level or lower, only one year even cracks the top 20 in overall job creation.
OK, got that? The periods of highest job growth correspond to the periods of highest tax rates on the wealthy. 70% top tax rates. 90% top tax rates. Maybe this is because that money gets used to build roads and bridges and buildings and ports and dams and the things that make our economy more efficient and competitive. And maybe because the years of low tax rates are the years of government cutbacks because there isn’t enough revenue coming in — infrastructure not maintained, education budgets cut, etc.
What do tax rates do to economic growth? Romney says raising taxes hurts the economy. Is that what happens?
Michael Linden looked at what happens with taxes and GDP growth, in The Myth of the Lower Marginal Tax Rates, Conservatives’ Go-To Growth Solution Doesn’t Hold Up (I’ll spare you the blow-up photo of Speaker Boehner’s face),
The top marginal income tax rate has ranged all the way from 92 percent down to 28 percent over the last 60 years. With such a large range, it should be easy to see the enormous impact of lower rates on overall economic growth, as conservatives routinely claim. Years with lower marginal rates should boast higher growth, right?
That’s definitely not what happened. In fact, growth was actually fastest in years with relatively high top marginal tax rates. Back in the 1950s, when the top marginal tax rate was more than 90 percent, real annual growth averaged more than 4 percent. During the last eight years, when the top marginal rate was just 35 percent, real growth was less than half that.Altogether, in years when the top marginal rate was lower than 39.6 percent—the top rate during the 1990s—annual real growth averaged 2.1 percent. In years when the rate was 39.6 percent or higher, real growth averaged 3.8 percent. The pattern is the same regardless of threshold. Take 50 percent, for example. Growth in years when the tax rate was less than 50 percent averaged 2.7 percent. In years with tax rates at or more than 50 percent, growth was 3.7 percent.
These numbers do not mean that higher rates necessarily lead to higher growth. But the central tenet of modern conservative economics is that a lower top marginal tax rate will result in more growth, and these numbers do show conclusively that history has not been kind to that theory.
Zaid Jilani at CAP’s Think Progress also takes a look, in Top Reagan Economic Advisor: Return To Clinton-Era Tax Rates Would Not Hurt Economic Growth,
Historically, the United States has actually had some of its strongest periods of economic growth while taxes were high. As this graph from Slate shows, some of our strongest periods of growth in gross domestic product actually occured while taxes were very high:
In the 1950s, which had one of the sharpest periods of economic growth in all of American economic history, the top marginal tax rates for the richest Americans stretched above 90 percent. Likewise, economic growth in the relatively higher-taxed 1990s was much stronger than in the 2000s. This isn’t to say that higher taxes necessarily cause greater economic growth, but it does seem to show that higher taxes do not appear necessarily to be impeding job growth, nor are lower taxes especially helpful.
OK, did you see those charts? Not only do high taxes on the rich not impede growth, but growth looks to be higher when taxes are higher. Maybe this is because higher taxes on the rich means that the government — We, the People — has more to spend on the things that make our economy more efficient and competitive like schools, roads, bridges, transit systems, courthouses, judges, etc…
And, again, the periods of low taxes are the periods of government cutbacks …
David Leonhardt at the NY Times looks at recent numbers, in Do Tax Cuts Lead to Economic Growth?
President George W. Bush and Congress, including Mr. Ryan, passed a large tax cut in 2001, sped up its implementation in 2003 and predicted that prosperity would follow.
The economic growth that actually followed — indeed, the whole history of the last 20 years — offers one of the most serious challenges to modern conservatism. Bill Clinton and the elder George Bush both raised taxes in the early 1990s, and conservatives predicted disaster. Instead, the economy boomed, and incomes grew at their fastest pace since the 1960s. Then came the younger Mr. Bush, the tax cuts, the disappointing expansion and the worst downturn since the Depression.
(Click that graphic for larger)
Whoa, did you see what happened after Bush cut taxes for the rich? Do you remember what happened after Bill Clinton got taxes increased on the rich?
My own 2010 post, Did The Rich Cause The Deficit? included this chart, (The red line is the tax rates, the blue is growth and the red arrow shows the trend.
Republicans have been holding to a no-tax pledge for decades as a strategy to undermine government. But more and more people are noticing that our schools, roads, police and fire departments, bridges, courts, food-safety system — and everything else non-military that our government does — are starting to fall apart. At the same time, Republican-created anti-deficit hysteria is starting to backfire on Republicans themselves. So are some Republicans starting to back off?
Before any deficit discussion begins people should be reminded of one very important and relevant fact: When ‘W’ Bush took office we had a huge budget surplus and we were on track to pay off the entire national debt in just ten years. In other words, our country’s debt would be entirely paid off by now, and there would be no emergency at all. But Bush changed some things, and said the return of budget deficits was “incredibly positive news,” and now we have a huge deficit and debt. The cause of our deficits and debt has implications for any discussion of what can be done about our deficits and debt.
As much as conservatives want to pretend otherwise, you can’t have strong, healthy, prospering businesses without a big, strong government. The kinds of businesses that don’t want a big, strong government are exactly the kinds of businesses that We, the People don’t want.
Government creates the “public structures” that support smaller, innovative business. Government defines the playing field for business, right down to defining and regulating the money itself. Government creates the laws that define what business even is, and the police and courts to enforce that law. Government provides the infrastructure that is the soil in which businesses thrive — or whither and die. Government educates the employees and innovators. Government negotiates the trade agreements that let businesses sell outside our country, and is supposed to protect our businesses from being undercut by those in other countries.
Government keeps larger, ultra-wealthy businesses from dominating, monopolizing and destroying the newer, innovative, disruptive, creative businesses that rise up out of We, the People.
But government can only do those things for us when it is big and strong. And that is why the very people and businesses — and countries — that want to dominate, monopolize, cheat, scam and take everything for themselves at the expense of the rest of us don’t want our government to be big and strong enough to stop them.
Imagine this, though it might be difficult: some people are greedy and want more for themselves, at the expense of the rest of us. Yes, this is shocking, but true!
Government protects us from those who would take advantage and take too much. Government does this both domestically and internationally. At home it protects us from criminals and exploiters. Government also protects us from physical and economic threats from other countries. As I discussed last week in Why Can’t Apple Make Your IPhone In America? we as a country face an updated, economic-attack version of these threats to our national security,
China sees itself as a country, and we no longer do. China competes with us as a country. But our businesses see themselves as GLOBALIZED, not as part of a country.
So since we – at least our businesses – no longer see themselves as part of a country we are not responding to this competition. We are not mobilizing to fight back.
In fact, China has essentially recruited our own business leaders to fight against our own government.
Our “system” generally works when it is in balance; consumers with jobs and money are customers for our businesses. When customers are coming in the door, companies hire more people to serve them. However, in a system the things that each individual wants to do can be bad if too many of them do those things at the same time.
An example of an unbalanced system: if every driver decided to drive on the same road at the same time no one would be able to move. This is where government is absolutely necessary to regulate the larger system and make sure it maintains balance.
Am economy example: all businesses want to reduce costs, and one way to do this is to cut the number of employees they have, increase the workload of the rest and do what they can to cut their pay and benefits. This is an example of something that each player in a system does that might be “good” for that individual player, but is really bad for the larger system if they all do it. When too many business reduce costs by cutting employees or paying less, the system collapses from lack of demand. Government is needed to keep businesses from laying off too many people or cutting pay. Sometimes government does this by stepping in and hiring people (or just giving them money like unemployment benefits), or buying things, thereby creating demand, causing businesses to hire. (See Actually, “The Rich” Don’t “Create Jobs,” We Do.)
Another example: When a business becomes powerful it uses that power to monopolize, to keep competition from being able to compete. Pretty soon there are just a few large businesses that can charge whatever they want. Without strong government to keep this from happening the system breaks down.
Taxes are the payback We, the People receive from our investment in creating the public structures that protect and empower us and enable our business to thrive. Taxes pay for the protections, courts, infrastructure, education and all the rest of the system that creates the prosperity and redistributes that prosperity to all of us, thereby balancing the system.
These diagrams are from Tax Cuts Are Theft, (please click through for more.)
The American Social Contract is supposed to work like this:
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:
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.
“We, the People” are the first three words of our Constitution. The writers of the Constitution were making a point, and to drive that point home they also made those three words the only words you can see from any distance:
“We, the People” was the point. This country exists for We, the People not for just a few people. We had fought a war to free ourselves from a system that was of, by and for a few wealthy and powerful people who controlled the levers of power, and we said, “Never again!” We designed a new system that was supposed to ensure that all of us prosper instead of a few people at the expense of the rest of us.
We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.
This Constitution is supposed to be for our benefit — all of us. The economy is supposed to be for the benefit of all of us. For our general welfare, not for just a few. And to protect us from the wealthy and powerful, government has to be big and strong.
Conservatives, funded by the already-wealthy — the 1% and their giant corporations — say we need less government, smaller government, government out of their way. They say they want our government to be small enough that they can “drown it in a bathtub.”
Think about what they are saying when they say they want less government: they want less decision-making by We, the People. They want less protection of our general welfare. They want less infrastructure for our smaller businesses to thrive in. They want less enforcement of laws that protect our wages, safety, environment and rules against scamming, scheming, and defrauding us. That is what “less government” means in a country where the government is We, the People…
When government is strong we have more enforcement of a level playing field for all of us, more education for all of us, more security for all of us, more protection of our environment, more infrastructure so our own startup businesses can flourish and compete, more parks, more promotion of the general welfare.
And when government is weak we end up with a very few greedy, ruthless billionaires and their giant corporations controlling the economy, stifling competition, scamming and defrauding us, and consuming the environment and resources for their own short-term profit.
Protect:
Enable and empower:
Invent and innovate:
Sustain:
Help me fill in this list. Leave a comment.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Deficit theater is coming to DC tomorrow, with a well-funded “fiscal summit.” The plot summary is that we have Deficit Trouble – Right Here In River City! so to fix it we need to cut Social Security and Medicare and the things democracy does for We, the People — while cutting taxes on the rich and their corporations to make us more “business-friendly.” (This musical is sometimes billed as “Simpson-Bowles” but it’s the same old song.)
All of this deficit hysteria today – when just over ten years ago we had such a large a budget surplus that we were projected to pay off our entire debt in … ten years! That’s right, Ten Years Ago We Were Paying Off The Nation’s Debt. But Then We Elected Obama.,
Just ten years ago this country was running huge surpluses and paying off its debt. But then we elected Obama and all hell broke loose. Oh, wait…
Between the time ten years ago when we had big surpluses and were paying off the debt and now when we are told the “Obama spending and deficit” mean we have to cut back on the things We, the People do for each other, something happened. Something changed. The things that happened, the things that changed, are being ignored in the current DC discussion about what we need to do to fix things.
Something happened. We had a surplus, and it was replaced by massive deficits. The last Bush budget year had a deficit of $1.4 trillion!
What happened under Bush? We cut taxes on the rich and doubled military spending. (And started wars.) And don’t forget collapsing the economy, forcing people onto unemployment and food stamps. That is why we have a deficit. We have a deficit because of tax cuts for the rich, huge military budget increases and the consequences of deregulating corporations.
Here are some questions for tomorrow’s deficit theater:
- How large was the country’s yearly budget deficit and total debt in the “Eisenhower/Truman” decades when the top tax rate was 90%?
- Today we have an “infrastructure deficit” – the amount needed to repair our country’s roads, bridges, sewers, etc. – of somewhere upwards of $1.6 trillion. Was our infrastructure kept in good repair before the top tax rates were cut?
- Concentration of wealth is long recognized as a threat to democracy, and now we are seeing a low-wage, everything-to-the-top economy with the greatest ever concentration of wealth going to a few at the top. Was the problem of wealth concentration increasing or decreasing before the top tax rates were cut?
- When top rates were high people couldn’t take home vast fortunes in a single year. When it took several years to make a fortune did corporations depend on long-term or short-term thinking? Did the executives of corporations care if the infrastructure and communities their companies depended on were in good shape? Did large corporations fleece customers and exploit employees for quarterly returns as they do now?
How do we fix this? Doesn’t it make sense to look at what caused the deficits and fix that? There actually are budget plans that get rid of the deficit without cutting back on the things democracy does for We, the People. Here is a post about one of those budget plans: The People’s Budget Balances The Budget — Why Isn’t It Part Of These “Deficit” Talks? Here is a post about another budget plan that fixes the deficit without cutting the thing democracy does for us Every Progressive Should Know About The “Budget For All”
So we know why we have a deficit, and we have realistic budget plans that undo the damage, maintain the things that democracy does for We, the People and invest in growing our economy. So why aren’t these plans part of the big DC deficit discussion? Maybe progressive plans that cut the deficit are not part of the DC deficit discussion because cutting the deficit isn’t really the point. This Deficit Story Can’t Be Repeated Often Enough!,
So we went from big surplus to huge, huge deficits. Bush said it was “incredibly positive news” when we went back into deficit spending. He said it was good news because it continued the plan to use debt to force the government to cut back. He said that. It was the plan. (Don’t take my word for it, click the links.)
The Reagan people said it too, back when they started the massive deficit spending. It was the plan: force the country into massive debt, “starve the beast,” and use that to force the government out of business, or at least to be “small enough to drown in a bathtub.” They forced the tax cuts and Reagan said this was “cutting the government’s allowance.” The point was to use revenue cutbacks to force government to shrink, to get out of the way of the 1%.
From Dear Deficit Commission, It’s Not Hard: (Click through to see bigger charts)
Dear Deficit Commission,
It’s not hard to figure out why we have a huge deficit. It’s so easy I don’t have to use words. Here are some pictures:
Bill Clinton raised taxes on the rich. Bush cut them.
Now, about that huge national debt…
The second chart kind of explains itself. The third chart can help you find a place to get some money:
(Note: There is no more Soviet Union.)
In case that isn’t clear enough, try this:
Let me know if you still have any questions.
We had a budget surplus. We were paying off the debt. Then something changed. If you want to fix the deficits, change it back.
Don’t fall for it. Deficits were the plan. Run up the borrowing, then come back with a scare campaign that stampedes people into accepting cuts in the things democracy does for We, the People. It was the plan.
If You Happen To Be In DC Tomorrow: May 15: Stand Against Austerity:
May 15, 2012 at 1 p.m. (Program starts 1:30 p.m.)
In Front Of the Peter G. Peterson Foundation Fiscal Summit
1301 Constitution Avenue NW, Washington, D.C.
Here’s one of those charts again, larger:
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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River City faces a terrible deficit, and if we don’t cut spending on the things We, the People do for each other right now, there will be trouble. We gotta do some austerity! We gotta eat that seed corn. We gotta stop taxing the 1% and stop paying for things the 99% need!
It’s a con as old as the hills. Whip up the people with fear, and then offer them the ready-made “solution.” In his post, Ya Got Trouble — A fresh look at an old con, Tom Sullivan nails it with a scene from The Music Man. For those not familiar with The Music Man, here is the lead-up: “River City ain’t in any trouble.” “Well, we’re going to have to create some.” Then the Republican Congressman Music Man goes out and whips the town into a state. He does it to sell them. (The following is from a local production, which YouTube allowed to be embedded here. To see the clip from the movie click here.)
.
From Sullivan’s post:
Trouble with a capital “T”
And that rhymes with “P”
and that stands for pool!
In one, short speech — building intensity as he goes — Professor Harold Hill gathers a crowd of onlookers and rattles off a litany of big city sins “the right kinda parents” worry about corrupting their children and their small town: sloth, drinking, gambling, being “stuck-up,” smoking, loose morals, and indecent pop culture. In a fevered crescendo, Hill warns parents of “shameless music • That’ll grab your son, your daughter • With the arms of a jungle animal instink!”
Sullivan explains the con:
Hill presses every button the people of River City, Iowa have to press, plus appeals to patriotism and God to create a city-wide moral crisis that four minutes earlier the townspeople didn’t know they had. Sound familiar?
Now strike pool. Insert contraception, voter fraud, death panels, or a half dozen other right-wing bogey men and the grifter’s pitch works the same. Today, Harold Hill would be working for Fox News or Americans for Prosperity. He’d be running American Crossroads, and making a lot more money.
This con has been perfected in recent years as The Shock Doctrine, forcing entire countries into debt or other crisis, then stepping in to plunder and privatize their resources, like what is happening to Greece right now.
Whipping Up Deficit Hysteria
This “con game” is what is happening to our own country as well, with the whipped-up terrification over deficits. The Reagan plan was cut taxes and increase military spending to force the country into debt, and then use the debt to force privatization of public resources into the hands of a few. George ‘W’ Bush said after cutting taxes on the rich and raising military spending that the resulting transformation of Clinton’s budget surplus into huge budget deficits was “incredibly positive news” because it would force us into near-bankruptcy. Yes, he said that.
But the solution offered — the current Republican budget that phases out Medicare and guts our government — doesn’t even cut the deficit! The Republican “austerity” budget starts with $10 trillion in tax cuts for the 1%! Then it guts most of what We, the People do for each other.
Don’t be fooled, it is just one more conservative con game.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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The new Republican budget (called the “Ryan Budget” by DC insiders) reflects current electoral reality: billionaires and corporations now finance candidates, and we get government of, by and for billionaires and corporations. The rest of us no longer matter, except as “the help” and, at least to the extent we haven’t been entirely fleeced, a flock to harvest. This budget starts with $10 trillion in tax cuts — mostly for the rich. After adding $10 trillion to the deficits Republicans then claim that severe cuts are necessary to “fight deficits.” Right. Details below.
Keep in mind where we are starting from: The way our economy and tax system is already structured, the top 1% received 93% of income gains from recovery. As Mitt Romney’s tax returns demonstrated, those at the very top — whose income comes as checks generated by the money they already have — already pay much lower tax rates than those of us who work for a living.
Shock Doctrine
“Nothing is more important in the face of a war than cutting taxes. — Republican Majority Leader Tom Delay, 2003”
After passing tax cut after tax cut, and military spending increase after military spending increase, and starting war after war, Republican borrowing has added up. So now Republicans terrify the public, telling them that budget deficits will lead to the destruction of the country — and soon. After a decade of screaming “9/11,” “9/11,” noun verb “9/11,” they now scream “deficit, deficit, deficit.” Then with the public suitably stirred up and terrified they offer “solutions” they say are necessary to cut the scary deficit (that they caused, for this purpose).
Behind a blizzard of fog and mirrors, the new Republican budget completes the ongoing shift of our government and our economy away from “we are in this together” democracy to a “you are on your own” system that is entirely for the benefit of a few at the top.
Cuts Taxes For The 1%
The smoke and mirrors: they claim this budget is necessary to reduce deficits, but it doesn’t even pretend to. Instead it starts by cutting taxes on the rich and their corporations by another $4.6 trillion while making permanent the Bush tax cuts, costing another $5.6 trillion. It gives a $187,000 tax cut To every millionaire!
Cuts Jobs
Ethan Pollack at the Economic Policy Institute describes how Ryan’s budget cuts would cost jobs — 4.1 million of them:
Paul Ryan’s latest budget doesn’t just fail to address job creation, itaggressively slows job growth. Against a current policy baseline, the budget cuts discretionary programs by about $120 billion over the next two years and mandatory programs by $284 billion, sucking demand out of the economy when it most needs it and leading to job loss. Using astandard macroeconomic model that is consistent with that used byprivate- and public-sector forecasters, the shock to aggregate demand from near-term spending cuts would result in roughly 1.3 million jobs lost in 2013 and 2.8 million jobs lost in 2014, or 4.1 million jobs through 2014.*
Cuts Everything Government Does For Regular People
This budget starts with $10 trillion in tax cuts for the wealthy! After handing billionaires and their corporations trillions, increasing deficits by an additional $10 trillion, the Republican budget then cuts the things government does for the rest of us: Medicare, Medicaid, food assistance and public investments (mostly infrastructure and education), and pretends it is necessary because of deficits. (It increases funding for military contractors.)
What is cut? The following is from an analysis by the Office of Democratic Whip Steny H. Hoyer:
A Choice of Two Futures: A Look at How the Republican Budget Ends Medicare, Destroys Jobs, Benefits the Wealthy
Ending the Medicare guarantee and raising health care costs for seniors:
Cutting taxes for the wealthiest Americans at the expense of working families:
Turning Medicaid into a block grant that jeopardizes access to affordable health and nursing home care for seniors and the disabled:
Making it harder for Americans to receive Social Security benefits:
Weakening our ability to out-educate competitors and build a competitive workforce:
Slashing assistance to low-income families:
Repealing patient protections and putting insurance companies – not American families – in control of health care:
Weakening national security:
Undermining American competitiveness by cutting investments in science, medical research, space and technology:
Threatening our clean energy future:
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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“There was clearly something wrong with the U.S. economy long before the crash.”
Consensus
Consensus. Again and again, people who examine what went wrong with our economy leading up to the great recession come to the same conclusions! Study after study, book after book, statement after statement, op-ed after op-ed, organization after organization, expert after expert, all weighing in, all coming to the same conclusions. One after another voices speak up (click through for just a sampling), voicing their understanding of what happened to the economy, what caused the crash and what we have to do to fix things. One after another they voice the same conclusions: our economy was damaged by,
All of these betrayals of the social contract were enabled by the influence of big money on our political system, including huge sums spent on an infrastructure of corporate/conservative organizations designed to propagandize the public into accepting these changes – or at least keeping the victims from rebelling.
This Time, The AFL-CIO
This time the AFL-CIO offers their analysis, Fixing What Is Wrong With Our Economy. Here are a few excerpts – but if you have been paying attention you have heard all of this again and again from all directions:
The crash was the end-result of policy changes brought in with the “Reagan Revolution:”
The crash of 2008 and the Great Recession were inevitable consequences of three decades of economic policies designed by and for Wall Street and the wealthiest Americans. At the heart of the problem was the hollowing out of American manufacturing, the growing dysfunction of our financial sector and a rapid increase in economic inequality, all of which crippled the growth engine of the U.S. economy.
Trade deals and policy choices that sent jobs, factories and industries out of the country:
[. . .] The deindustrialization of America and the substitution of speculation for productive investment were not accidents, they were not inevitable, and they were not the outcome of natural forces. They were the predictable results of mistaken policy choices made by politicians of both parties for more than a generation. These policy choices had victims with first and last names: millions of displaced workers, shuttered factories and hollowed-out communities across the country hobbled by shrinking tax bases that no longer could support vital public services.
In The Way
The corporate/conservative propaganda apparatus (and its candidates for office) continue to demand even more tax cuts for the wealthy and cuts in the things our government does for We, the People:
[. . .] The Republican candidates pretend that tax cuts for corporations and the wealthy are the answer to wage stagnation and the economic crisis, but the Bush years taught us that these obscenely wasteful tax cuts only make the problem worse. They are the equivalent of eating our seed corn, because they starve the kind of public investment in education, infrastructure and innovation that is indispensable for long-term economic growth.
The Fix
Again and again experts tell us how to fix the problems we face in our economy and society: restore democracy’s (the 99%’s) controls over corporations (the 1%) and especially re-regulate the financial sector, reverse the taxation policies that led to budget deficits and extreme inequality, fix the trade deals and other policies that led to trade deficits and allow the wealthy to pit working people against each other, and invest heavily in our country and people again. That’s a start, anyway — get the influence of big money and big money’s propaganda machine out of our politics and maybe after a while We, the People can start addressing the rest of our problems again.
The AFL-CIO’s conclusions, from a summary of the analysis:
The statement outlines several significant steps that need to be taken to build an economy that can compete with world economic powers like Germany and China and that works for all, including:
- Significant investment over the next decade in education and apprenticeship programs for young people, infrastructure, energy, manufacturing, transportation, skills training and new technologies;
- A fair share from Wall Street and the wealthiest Americans, who have benefited most from the economic policies of the past 30 years—pass a financial speculation tax, let the Bush tax cuts for the wealthy expire and tax capital gains at the same rate as ordinary income;
- Tackling the problems of wage stagnation and economic inequality by reforming labor laws so that all workers who want to form a union and bargain collectively have a fair opportunity to do so, making full employment the highest priority of our economic policy, increasing and indexing the minimum wage, shrinking the trade deficit and eliminating incentives for offshoring;
- Reviving U.S. manufacturing by bringing the trade deficit under control, enhancing Buy America safeguards, aggressively enforcing trade laws and ending incentives for offshoring;
- Once again regulating Wall Street, eliminating tax advantages for leveraged buyouts and finding other ways to favor strategic investment over short-term speculation;
- And working toward a global New Deal that establishes minimum standards for the global economy, prevents a race to the bottom, creates vibrant consumer markets in the global South and creates new markets for advanced U.S. manufacturing.
The American people aren’t stupid. Majorities are also coming to the same conclusions. The American Majority in poll after poll show agreement with these conclusions.
We have to reverse the corporate/conservative, anti-government, pro-1% policies that started about 35 years ago. All the charts show the changes, when the changes happened, and how those changes have worn away at our economy and our people — click through and see for yourself the story that the numbers tell: tax cuts, deregulation and outsourcing our jobs, factories and industries has not helped our economy or our people. Since then all the gains from the efforts of all of us have gone to fewer and fewer of us. Since then our infrastructure has fallen into disrepair. Since then our trade deficit has gotten worse and worse. Since then regular people — the 99% — have been falling further and further behind, democracy has eroded to the breaking point, with plutocracy — rule of, by and for the 1% — taking its place.
Our wealth is being extracted for the benefit of a few. We, the People must reassert control, or face further decline.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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President Obama put American manufacturing literally at the front and center of his State of the Union speech. American manufacturing was at the front of the speech and at the center of a “blueprint” for bringing back jobs and strengthening our economy. By placing manufacturing front and center he has taken this conversation further than any President before him.
There is good reason to cheer, but also good reason to ask for even more. He outlined steps to stop the outsourcing and start the insourcing, but there is not yet a comprehensive, overall government strategy to fix trade and capture the industries of the future.
Right up front the President talked about building “an America that attracts a new generation of high-tech manufacturing and high-paying jobs.” Then,
“Tonight, I want to speak about how we move forward and lay out a blueprint for an economy that’s built to last, an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.
This blueprint begins with American manufacturing.”
Bob Borosage, in The Obama State of the Union: A Progressive View,
On the economy, the speech led with more discussion of manufacturing than anyone has heard in years. The president wanted and deserved credit for saving Detroit – a key to his campaign in the Midwest – and wanted to highlight the uptick in manufacturing jobs and “insourcing,” the movement of some jobs back to the US.
Again, his agenda focused on mostly symbolic measures of populist appeal. In addition to the tax on multinationals, he promised a new trade enforcement effort to challenge China and others who trample global trade rules. With Romney promising to cite China for currency violation on day one if elected, the administration seems likely to finally challenge China, at least symbolically.
The President outlined steps to stop the outsourcing and start the insourcing. There are things that the Congress can do right now. These include but are not limited to,
This “blueprint” has a number of good, solid steps that will help stop the outsourcing and start the insourcing. But it is not a comprehensive national industrial/economic strategy that addresses the overall picture of all of the components of a national manufacturing ecosystem. To begin to address this, the President has established a cabinet-level Office of Manufacturing Policy to coordinate efforts of various government agencies.
Coordinating the efforts of various government agencies to help American exports is important, but this does not address the development of a national plan, like other countries have. We need this, too. A national plan would seek to cover all the elements of a healthy “industrial commons” — meaning all of the components of a healthy manufacturing ecosystem. These include government efforts to make sure the components are ready, funded and functioning:
Countries like China are engaged in national efforts to get all of these components lined up to capture industries like the new green energy revolution that is taking place. China is working to capture solar and wind energy manufacturing. They are working to capture high-speed rail manufacturing. The news about the reasons Apple and other high-tech manufactures have had to locate in China show how hard China has worked to capture that industry — and not without quite a bit of cheating that we are not stopping.
Our competitors are engaging in national efforts to line up all of these components to capture other new industries as they emerge. We are not.
This list of components of a national industrial/economic policy describes the kind of national effort that competitors like China are engaged in, and is the reason they are bringing in such a share of new industrial growth. To address this we have to see ourselves as a country, as China does, mutually supporting each other, to be able to embark on an undertaking like this. We have to abandon the “each of us on our own” and selfish, “in it only for ourselves” mentality that has set us apart, preventing national government efforts like other countries engage in.
Some of us hold on to an ideological fantasy that government is only in the way, but other countries do not. So the result is that we keep sending our companies out on their own against national systems. Even our largest companies cannot compete on their own against countries with national efforts to put all of these components in place. It takes a unified government effort.
We have to move to a “we are in this together” understanding of ourselves and our country if we want to bring back the shared prosperity we used to have, and can have again.
Update – White House fact sheet: FACT SHEET: President Obama’s Blueprint to Support U.S. Manufacturing Jobs, Discourage Outsourcing, and Encourage Insourcing
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Mitt Romney’s ultra-low tax rate on his ultra-high income is reviving questions about the breaks and perks that the wealthiest of the 1% receive from the rest of us. One of these is a special low tax rate for investments — as if anyone needed special tax incentives to induce them to make a bundle.
High Incomes At The Top
How much does Romney make? We won’t know until we get a chance to see his tax returns — if we do — but Romney described his $374,328 income from speaking fees last year as “not very much.” If $374K is “not very much” of his income … well … at least we can understand why he feels he can casually make $10,000 bets as if he was just pulling a dime from his pocket.
In his post What Mitt’s Taxes Could’ve Paid For (If Not For Those Cushy Tax Breaks), Richard Eskow writes,
1,470 households made more than a million dollars and yet paid nothing — zero, zip, nada — in Federal income tax in 2009.
[. . .] The top 25 hedge fund managers in the US made $22 billion in 2010.
Low Taxes At The Top
Mitt Romney’s admission that he probably pays a 15% tax rate shows us what is going on. For you or me, when our taxable income passes about $35,000, we start paying a 25% rate, much higher than Mitt pays on his millions on income. (That doesn’t mean we pay 25% on money up to $35K, which is what most people think. It means any additional money we make after the $35K is taxed at that higher rate rate. If we make $35,001 we only pay an increase of ten cents. That’s how tax brackets work.)
Lots Of Money To Use To Attack The Deficits
This special low tax rate on capital gains is sucking a lot of money out of We, the People’s ability to pay for our schools, military, infrastructure, etc, which is part of why we are borrowing so much. How much? Continuing to steal from Richard Eskow’s post,
As we wrote earlier, eliminating these tax breaks would add as much as $44 billion to our bottom line in the next ten years. Or to put it another way:
Ending cushy breaks for these 25 billionaires could also reduce the deficit by as much as $44 billion. Paging all deficit hawks!
In 2008 the taxable income of everyone earning above $100,000 was $3.4 trillion. If we concentrate our tax reform on the upper end of that spectrum — the Romneys, not the folks in the $100-$400 thousand range — we know that every percentage point in increased collection comes out to another $34 billion per year. That ain’t chicken feed.
Why The Low Capital Gains Tax Rate?
The justification for a special tax rate for gains from investing capital is supposed to be to provide an incentive to invest. But there is already a really good incentive to invest: to make a bundle of cash. Piling a special “incentive” on top of making a bundle of cash creates market distortions – moving investors away from deciding where to put their money based on the value and merits of the investment and toward tax-reduction schemes.
The necessary precondition for investing capital is having capital. So a tax break on the return from investing capital is by definition a break for the well-off. Here is the reality: capital gains are taxed at a lower rate because most of the income of the 1% is from capital gains, and most of the income of the 1% is from capital gains because the tax rate is lower. The “incentive to invest” should be making a good investment, period.
I’ll bet you $10,000 that getting rid of this tax break helps fix the deficit, and leads to a saner investment climate. (Of course, I’m kidding, I think that is a lot of money.)
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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One after another, the Republican Presidential candidates have come out with strong statements that appear to show support for making things in America and revitalizing American manufacturing. This is because they can read polls and polls show that Americans overwhelmingly want American manufacturing revitalized, are tired of offshoring, understand the importance of fixing trade deficits and want to see things made here again. Donald Trump gained a lot of traction from the appearance of taking on China. Mitt Romney also talks about how we need to take on China. Rick Santorum has his own “Made In America” plan. But do their actual proposals match up with their rhetoric?
Romney
Mitt Romney has strong words about China. For example, last week Romney visited Competitive Edge, an Iowa company that sells promotional campaign items that you can put your own brand or message on. (“We’ve got items for convention give-a-ways, business gifts, direct mail campaign items, fund raising, political campaigns, special events, company promotions, and more!”) At this campaign stop Romney said,
“I’ll clamp down on China that’s been cheating,” Romney said. “They’ve been stealing our intellectual property, our designs, our patents, our know-how, our brands, they’ve been hacking into our computers. That has got to stop.”
“I will stop it if I’m President of the United States,” Romney said.
However, in spite of Romney’s words, many wonder if he is only saying this to get votes. For example, the website for Competitive Edge, the site of his Iowa appearance, says, “Competitive Edge is a major importer of Specialty Products from Asia and Europe.” According to TPM, the president of Competitive Edge “said he doesn’t think Romney’s being completely serious when it comes to his tough China talk.” He explained,
“I think the rhetoric of a campaign is different than the actual application,” he said. “[Romney] will sit down and he will get the right people in, he will take the advice of maybe a Huntsman who will say, ‘this is how to handle China.’” … When it comes to actually governing, Greenspon said he expects Romney will take a much softer approach to China at the urging of his supporters in the business community.
So much for Romney. As with so many of his campaign positions, surrogates explain behind the scenes that he is just saying what he needs to say to get votes, what he will do if he is elected might or might be completely different, there is no way to know.
Santorum
Rick “not-Romney” Santorum is now the official #2 in the GOP race. Santorum can also read polls, and is offering a “Made In America” plan. The plan begins the way Santorum always begins, “Rick Santorum believes that to have a strong national economy, we must have strong families.”
Much of Santorum’s plan is the usual Big Lobbyist and Wall Street-backed Republican stuff about cutting taxes on the rich and getting rid of any restraints on the wealthy and powerful as “pro-growth” policies. Items 1,2,3,4,5,6,7,8 and 9 are actually all the same item: cut taxes on the rich and their big corporations.
And then Santorum diversifies. Item 13 is get rid of President Obama’s health care reform, with no explanation of how this will help manufacturing. Item 15 includes, “eliminate funding for Planned Parenthood and support adoption” and “eliminate funding for United Nations organizations that undermine America’s interests.” Again, there is no explanation of how these will help manufacturing. These points are apparently included in a manufacturing plan to reassure the Republican base that he is certifiably nuts, to attract Michelle Bachmann voters.
Some of the items appear to be the result of selling advertising space to lobbyists from various industries.
The plan is not all bad. Santorum accidentally comes up with a few things that would actually help American manufacturing. Of course, they are mostly just more about cutting taxes, but these cut specific taxes on manufacturers, which might help bring some manufacturing back. These are:
Santorum’s Item 32 is important, and I’m singling it out for attention: Strengthen our national security and national defense so that we are not dependent upon our foes or competitors for critical manufacturing, technology, energy and other security needs
So Santorum’s plan has a few good points but only barely matches the promise of its title. In reality it only offers more of the same policies that boost the 1% at the expense of everything else, even harming smaller manufacturers trying to compete with the multi-national giants. The plan even offers a number of items that have ravaged our manufacturing base, pushing even more disastrous “free-trade” agreements. And, the plan has the added bonus of a series of unrelated proposals apparently included only as filler and the necessary proof of insanity to qualify him in a Republican primary.
President Obama’s Office of Manufacturing Policy
As one component of a set of policy initiatives to improve manufacturing President Obama recently set up a new Office of Manufacturing Policy that will have cabinet-level status, reflecting the importance of the manufacturing sector to our economy. The office will coordinate the efforts of different government agencies, such as the Small Business Administration, the Department of Commerce and the Transportation Department.
Congressional Democrats’ Make In In America Plan
In May Democrats in the Congress brought out a “Make In In America” package of specific legislative proposals to revitalize American manufacturing. In Democrats’ Plan Makes Jobs In America I described the plan:
Congressional Democrats yesterday unveiled the Make It In America plan for the 112th congress. This is a set of specific, detailed, targeted bills that clearly create jobs and restore our economic competitiveness, beginning with a national strategy for manufacturing. This is very different from the vague, sloganeering, lobbyist-written plan offered by Senate Republicans.
Yesterday House Democratic Whip Steny Hoyer and Minority Leader Nancy Pelosi unveiled their Make It In America plan “to support job creation today and in the future by encouraging businesses to make products and innovate in the US and sell it to the world through strengthening our infrastructure and supporting investments in key areas like education and energy innovation.”
This Make It In America initiative involves a series of bills that have been introduced for consideration by the 112th Congress. This initiative will create jobs here, grow the economy and reduce the trade deficit, all of which help reduce our budget deficits. Creating jobs and growing the economy reduces deficits by increasing tax revenues and decreasing spending on unemployment benefits, food stamps, etc.
Click through for details of the plan.
A Warning
There is a warning here for President Obama and all other candidates of either party running for office in 2012: the public wants to see plans to bring back American manufacturing. The public understands what the NAFTA-style trade deals have done to our wages, jobs, factories, industries, trade deficit and economy. They hate Wall Street’s quick-buck outsourcing schemes and the trade deals that enabled them, and want American manufacturing revitalized. Supporting Wall Street and trade deals and the quick-buck, offshoring economy harms the country and for that reason is political suicide
The public wants to go into stores and see “Made In America” again.
Frank Sobatka explains:
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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Verizon needs to open a call center, which means a few new low-paying jobs. They get local governments bidding against each other, offering all kinds of tax breaks if only they’ll bring those jobs there. Before the bidding war these jobs will be in the economy somewhere, but local schools, police, etc. will be funded. After the bidding war the same number of jobs open up but schools, police, etc. are not funded — and the 1% are that much richer. Company after company does this. Community after community, desperate for jobs, loses. Schools, police, infrastructure go unfunded. Just who does this help? The 1%.
Earlier this month, the organization Citizens for Tax Justice joined with the Institute on Taxation and Economic Policy to release a report, “Corporate Taxpayers and Corporate Tax Dodgers, 2008-2010.” The report looked at 280 corporations, finding that 78 did not pay federal taxes in at least one of the past three years and 30 averaged a less-than-zero tax bill in the last three years. Yes, less-than-zero, meaning they got money from the government instead of paying taxes to the government.
Verizon In Focus
Now a report by Citizens for Tax Justice and Good Jobs First, ““Unpaid Bills: How Verizon Shortchanges Government Through Tax Dodging and Subsidies,” looks at one company in particular. I’ve been writing about how Verizon is very, very profitable, but is trying to force its workers to give up ever more pay, benefits, job security and dignity. The company’s workers are engaged in an effort to preserve a middle-class existence.
Yesterday I joined a press call that hilited this Verizon report. The company aggressively manipulated state tax rules, demanded subsidies, and used other methods to end up with a negative federal income tax rate, and receiving state and local tax subsidies in at least 13 states. When setting up call centers, for example, they offer localities the prospect of jobs that that will be created somewhere in US, where the company would have paid taxes to fund schools and infrastructure, but get the localities bidding against each other until they end up making a profit instead of paying taxes.
From the report,
With more than $100 billion in annual revenues and nearly $15 billion in operating profits, Verizon
Communications is a large and prosperous company that should pay a substantial amount in taxes to
federal, state and local governments.
- Verizon enjoyed some $14 billion in federal and state corporate income tax subsidies in the 2008-2010 period even though it earned $33.4 billion in pre-tax U.S. income during that time.
- At the federal level, Verizon should have paid about $11.4 billion at the statutory rate of 35 percent during the three-year period. Instead, it got $951 million in rebates, putting its federal tax subsidies at $12.3 billion. Its effective federal tax rate was -2.9 percent.
- At the state level, Verizon should have paid about $2.3 billion in corporate income taxes during the period but it handed over only $866 million. Its aggregate state rate was only 2.6 percent, far below the weighted state average rate of 6.8 percent. This gave it state tax subsidies of about $1.4 billion.
- Verizon also used a special tax loophole called the ReverseMorrisTrust to avoid paying about $1.5 billion in federal and state and local taxes on the sale of its landline assets in various states.
- Verizon also aggressively seeks state and local tax subsidies through credits, abatements and exemptions. There is no centralized reporting on these subsidies but in this report we document $180 million in special tax breaks and grants Verizon and VerizonWireless received in 13 states.
This post originally appeared at Campaign for America’s Future (CAF) at their Blog for OurFuture. I am a Fellow with CAF.
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