The GOP Plot to Screw the Economy and the Middle Class

Original Link: http://www.huffingtonpost.com/bob-cesca/the-gop-plot-to-screw-the_b_662953.html

By Bob Cesca

We're only three months away from the midterm election when a shockingly large number of American voters will inexplicably vote for Republican candidates. I have no idea if this will mean a Republican takeover of the House or Senate or both, but there will definitely be enough voter support for Republicans to significantly reduce the Democratic majorities in the House and Senate.

Why? Because too many voters tend to be low-information, knee-jerk Springfield-from-The-Simpsons types, and the Republicans have lashed their crazy trains to this new wave of inchoate roid-rage to help sweep them into more congressional seats.

Here are a few of the ongoing economic conditions facing a vast majority of Americans, many of whom are all revved up to vote Republican in November. According to Michael Snyder of the Business Insider:

• 61 percent of Americans "always or usually" live paycheck to paycheck, which was up from 49 percent in 2008 and 43 percent in 2007.
• 66 percent of the income growth between 2001 and 2007 went to the top 1 percent of all Americans.
• Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.
• The bottom 50 percent of income earners in the United States now collectively own less than 1 percent of the nation's wealth.
• In America today, the average time needed to find a job has risen to a record 35.2 weeks.
• More than 40 percent of Americans who actually are employed are now working in service jobs, which are often very low paying.
• Despite the financial crisis, the number of millionaires in the United States rose a whopping 16 percent to 7.8 million in 2009.
Oh, and the Center on Budget and Policy Priorities reported that wages for the highest 20 percent of earners rose by nearly 300 percent since 1979, while wages for the bottom and middle 20 percent increased only by 41 percent -- combined. Plotted on a graph, middle and working class wages have flatlined for 30 years. Roll all of these tragic figures into a slow growth recovery and here we are. Most of us in the middle class are screwed.

And thanks to an alliance between the Republicans (which includes the tea party), the increasingly dominant far-right media, a traditional "old media" that panders to the far-right, and right-of-center "conservadems" who pander to the Republicans, too many voters have decided that the Republican Party might be better suited to turn all of this around.

The big lie here is that if Congress stops spending, cuts the deficit and makes permanent the Bush tax cuts, especially the tax cuts for the wealthiest Americans, our problems will be solved -- even though these concepts are in direct conflict with each other. Not surprising given the ever-lengthening Republican syllabus of contradictions.

Here's how this new batch of contradictions plays out.

According to Republicans and their conservadem enablers, we have to cut the deficit and pay for every program Congress passes or else we're all doomed. We're stealing from our children, they say. This has manifested itself in Republican filibusters of both unemployment benefits ($34 billion) and a new jobs bill ($33 billion over ten years). A Republican filibuster killed the jobs bill, and, after many failed cloture votes, the filibuster of the unemployment benefits was finally defeated and the Senate Democrats passed the extensions. Throughout the past year and a half, it's been the same story. Any effort made by the Democrats to stimulate the economy has been filibustered by the Republicans. They say it's because of the deficit and debt.

And yet they want to make the Bush tax cuts permanent, which would add $678 billion dollars to the deficit -- and that's just the cost of the tax cuts going to the top two percent of earners. In other words, the Republicans want to spend $678 billion in further giveaways for the wealthiest two percent, and they don't care whether it increases the deficit.

By the way, the Republicans also recently voted against and defeated an amendment to strip Big Oil of its $35 billion in subsidies. Just thought I'd pass that along. Put another way, $678 billion in tax cuts for the wealthy? No problem. Deficit-shmeficit! But $34 billion in unemployment benefits for an out-of-work middle class at a time when companies aren't hiring (say nothing of the aforementioned bullet-points)? Evil! Instead, the Republicans want to give $35 billion to Big Oil in the form of corporate welfare during the worst oil spill in American history while telling unemployed middle class families to piss off.

Do we have a clear picture in terms of who and what the Republicans care about?

It surely isn't fiscal discipline or the deficit. And it surely isn't the middle class. The Bush tax cuts, if extended, would add $2 trillion to debt, so it's not that either. Throw in another policy started by the Republicans -- the war spending (more of which was passed yesterday without any worries about CBO scoring or making sure it's deficit neutral) -- and there's the vast majority of your deficit and debt for the next ten years. Not the stimulus or the bailouts. The long term budget impact of the wars and the Bush tax cuts literally dwarf the stimulus. Here's the CBPP evidence in colorful graph form:



That big blue chunk represents the Bush tax cut portion of the deficit. The yellow represents the wars. The light blue is the tax revenue lost to the recession. And those really narrow tan and red strata are TARP and the stimulus. Clearly we need to elect more Republicans so they can make permanent the big thick deficit hogs and kill that thin section for the stimulus.

Now, if you're a Republican, you might be clinging to the idea that extending the Bush tax cuts would have a stimulative effect on the economy (somehow) even though this hasn't been the case for the last ten years other than for the wealthiest Americans who have once again disproved the trickle-down theories at the heart of Reaganomics by pocketing their share of the trickle instead of reinvesting in jobs and wages for the middle class.

The Bush tax cuts will not stimulate the economy.

According to Moody's Analytics (hardly a left-wing apparatchik), for every dollar of government money spent on extending the Bush tax cuts, there's only a 32-cent return on investment in terms of economic stimulus. Not a solid investment. How about cutting the corporate tax rate? Also a 32-cent return in economic stimulus. Capital gains tax cuts? 37-cents. And, lumped together, there's your Republican plan for growing the economy. Dumb investments. Goldman Sachs would short these policies. I'm not sure they haven't, actually.

But what about the Democratic spending? For every dollar spent on unemployment benefits, there's a $1.61 return in economic stimulus. Good investment! How about infrastructure spending? $1.57 return. Aid to the states? $1.41. Temporary increase in food stamps? $1.74. Even the Obama tax credits for the middle class, $288 billion of the Recovery Act, account for up to $1.30.

Meanwhile, the Obama administration is working with a deficit commission which will focus on trimming the deficit after (we hope) the economy and jobs are back on track. The Republicans, of course, voted against forming a deficit commission.

Given the choice between deficit spending that significantly stimulates economic growth or deficit spending that barely makes a dent, which choice are the Republicans trying to sell? The really stupid deficit spending for the wealthy that barely makes a dent in the recovery. That's the Republican plan.

Also, contrary to popular far-right myths, it's worth noting that the Democrats and the White House have no intention of allowing the tax cuts for families earning less than $250,000 to expire. Those tax cuts will be renewed this year. As for the top tax brackets, you find me a multi-millionaire who pays the actual marginal rate every April and I'll show you a very rich moron. Most of these guys, after deductions and loopholes, pay an effective tax rate that's much lower than the middle class tax brackets. So don't tell me that millionaire Glenn Beck and millionaire Paris Hilton will be financially burdened by a 2.6 percent bump in their margin tax rate next year. Sorry, no. They won't be. And why do middle class Republican voters give a rip about Paris Hilton's tax rate? Because they believe they'll be as wealthy as Paris some day. But read those bullet-points again. It's not happening.

Unless there's some sort of mass epiphany, or unless the Democrats actually speak up and take the discourse by the horns and fight, middle class American voters in November will augment the number of Republicans (and conservadems) in Congress mostly because they've been suckered into endorsing these insane Republican economic policies. Subsequently, the Republicans will balloon the deficit and undermine the economic recovery in order to give more handouts to the super rich. And the middle class will continue to be an accomplice in its own slow-roasted homicide.

Whitman needs to get facts right on capital-gains tax

Original Link:

By Michael Hiltzik

Not only does California tax capital gains at the same rate as any other income — not higher, as gubernatorial candidate Meg Whitman says — but it also is in the mainstream in its practice.

Is it too much to ask that the best-financed statewide political campaign in the country — maybe in U.S. history — get things right about a central tenet of its electoral platform?

The question arises from GOP gubernatorial candidate Meg Whitman's new glossy campaign brochure, titled "Creating Jobs for a New California." In it she proposes killing the state tax on capital gains. "California is one of a few states in the country that taxes capital gains at a higher rate than traditional income," the booklet states.

Sorry, but that's not remotely true.

California taxes capital gains — profits from investments in stocks, bonds, real estate or businesses — at exactly the same rate as any other income, whether it's wages, dividends or your prize from Publishers Clearing House.

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The Whitman campaign's policy director, Richard Costigan, tried to tell me that the booklet's language meant the same thing as a phrase appearing in an earlier Whitman brochure, which said that California was one of a few states that "doesn't tax capital gains at a lower rate than traditional income."

But that's not accurate, either. First, as my son the PhD candidate points out, "not lower" is not synonymous with "higher."

Second, of the 40 other states that levy an income tax, all but 10 essentially treat long-term capital gains the same as ordinary income — at least they did in 2007, according to a 2008 study by the business accounting firm Ernst & Young.

In other words, California does what 30 other states do. By my reckoning, that makes it not "one of a few," but "right in the mainstream." (The brochure lists nine states with "no state capital gains taxes," but it's wrong about one of them, Tennessee, which does tax some cap gains.)

Let me say here that I hate to be picking on Whitman's tax policy, which is far superior to that of her opponent, Democrat Jerry Brown, in that she has a tax policy.

Brown's campaign remains in the "Don't bug me, I'm sleeping" mode, and as soon as he makes a proposal, I'll be happy to have at it. Meanwhile, Whitman's is the default tax plan for the state's near future.

Her claim about the capital gains tax is important for several reasons.

One is that there are only two explanations for why the Whitman campaign, which has put more than $90 million of the candidate's own money into the effort to get its message to voters, might publish a fundamental untruth like this: It's unbelievably sloppy, or it's deliberately trying to mislead people. Neither conclusion is very encouraging, especially the latter. If they really think California's capital gains tax is too high, why rely on a bogus claim to make the case?

There's also the question of why anyone would think that eliminating the capital gains tax would spur job growth in the state. The Whitman brochure says she is determined to implement "targeted tax cuts … to get Californians back to work," but her capital gains proposal is the model of an untargeted cut.

She wouldn't restrict the tax break to investments in California enterprises — you would get the same break on a stock market gain whether it came from shares in Dell (Texas) or Apple (California), or from backing a profitable start-up in Las Vegas rather than Long Beach.

Costigan says "there's a school of thought that reducing the capital gains tax stimulates the economy." But it's a school of ideologues, not empirical economists.

In 1998, when Congress was pondering a cut in the tax on long-term gains to 15% from 20%, the Congressional Budget Office projected that the change might add two or three hundredths of a percent at best to annual gross domestic product after 10 years — but it might reduce GDP instead. The cut went into effect in 2003 anyway, and obviously didn't prevent the economy from going in the tank in 2008.

The real problem with this proposal is that it looks like a pure handout, and a costly one, to the wealthy, a group that includes the billionaire Whitman herself. In 2008, according to figures from the Franchise Tax Board, more than 82% of the $56 billion in capital gains earned by California residents were reported by the top 1% of income earners (those touching about $500,000 or more) in 2008.

Costigan maintains that the state needs these well-heeled taxpayers because they're the investing class. But if they have no incentive to invest in California, it's hard to see any gain in relieving them of a huge chunk of their responsibility for supporting the state budget. The capital gains tax produces as much as $11 billion in revenue in a good year, and even in 2008, a terrible time for the stock market, it brought in $4.6 billion.

Costigan told me the capital gains tax proposal should be viewed as a piece of an integrated job-creating whole. Indeed, Whitman's plan involves incentives for a wide range of industries, some of which may make good sense.

She wants to relieve manufacturing companies of the state sales and use tax on equipment. That would cost $1 billion at the current year's 6% state sales tax rate, but if the savings is translated into jobs it might be money well spent. She wants to kill an $800 annual business tax, which she describes as a tax on "start-ups," though it applies to all limited partnerships.

Whitman proposes tax incentives to create "academic enterprise zones" around major universities. Unfortunately, the history of enterprise zones in this state is already a scandal, given that the ones we have cost some $500 million a year and don't seem to create jobs.

Costigan says Whitman's academic zones are a "more focused approach," though why technology firms need new incentives to locate near Berkeley, Stanford, UC San Diego and UC Irvine, neighborhoods already bristling with them, isn't too clear.

The common flaw in these proposals is the absence of evidence that they'll create new jobs, much less produce growth in a cost-effective way. Without that, Whitman is just offering a menu of handouts to favored industries and the rich.

The campaign says it ran all these ideas past business groups such as the California Chamber of Commerce. But I wouldn't trust the chamber for objective advice on business tax policy any more than I'd trust an edited videotape from Andrew Breitbart.

If Whitman were really interested in remaking the state's tax policy for the better, she'd be talking about the obvious flaws in the fabric. For starters, there's the lack of an oil severance tax. She's against it, even though Alaska, which she praises for having a 0% capital gains tax, charges oil companies 25% of the value of the crude they pump out of the earth. Then there are the property tax inequities created by Proposition 13, rewarding commercial landowners at the expense of homeowners. (She's also against rectifying those.)

Whitman's platform is a start, but only a start, in the debate we desperately need about state tax policy. But a debate with one participant won't do. Can someone wake up Mr. Brown and get him to engage?

Addicted to Bush

Original Link: http://www.nytimes.com/2010/07/23/opinion/23krugman.html

By PAUL KRUGMAN

For a couple of years, it was the love that dared not speak his name. In 2008, Republican candidates hardly ever mentioned the president still sitting in the White House. After the election, the G.O.P. did its best to shout down all talk about how we got into the mess we’re in, insisting that we needed to look forward, not back. And many in the news media played along, acting as if it was somehow uncouth for Democrats even to mention the Bush era and its legacy.

The truth, however, is that the only problem Republicans ever had with George W. Bush was his low approval rating. They always loved his policies and his governing style — and they want them back. In recent weeks, G.O.P. leaders have come out for a complete return to the Bush agenda, including tax breaks for the rich and financial deregulation. They’ve even resurrected the plan to cut future Social Security benefits.

But they have a problem: how can they embrace President Bush’s policies, given his record? After all, Mr. Bush’s two signature initiatives were tax cuts and the invasion of Iraq; both, in the eyes of the public, were abject failures. Tax cuts never yielded the promised prosperity, but along with other policies — especially the unfunded war in Iraq — they converted a budget surplus into a persistent deficit. Meanwhile, the W.M.D. we invaded Iraq to eliminate turned out not to exist, and by 2008 a majority of the public believed not just that the invasion was a mistake but that the Bush administration deliberately misled the nation into war. What’s a Republican to do?

You know the answer. There’s now a concerted effort under way to rehabilitate Mr. Bush’s image on at least three fronts: the economy, the deficit and the war.

On the economy: Last week Mitch McConnell, the Senate minority leader, declared that “there’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy.” So now the word is that the Bush-era economy was characterized by “vibrancy.”

I guess it depends on the meaning of the word “vibrant.” The actual record of the Bush years was (i) two and half years of declining employment, followed by (ii) four and a half years of modest job growth, at a pace significantly below the eight-year average under Bill Clinton, followed by (iii) a year of economic catastrophe. In 2007, at the height of the “Bush boom,” such as it was, median household income, adjusted for inflation, was still lower than it had been in 2000.

But the Bush apologists hope that you won’t remember all that. And they also have a theory, which I’ve been hearing more and more — namely, that President Obama, though not yet in office or even elected, caused the 2008 slump. You see, people were worried in advance about his future policies, and that’s what caused the economy to tank. Seriously.

On the deficit: Republicans are now claiming that the Bush administration was actually a paragon of fiscal responsibility, and that the deficit is Mr. Obama’s fault. “The last year of the Bush administration,” said Mr. McConnell recently, “the deficit as a percentage of gross domestic product was 3.2 percent, well within the range of what most economists think is manageable. A year and a half later, it’s almost 10 percent.”

But that 3.2 percent figure, it turns out, is for fiscal 2008 — which wasn’t the last year of the Bush administration, because it ended in September of 2008. In other words, it ended just as the failure of Lehman Brothers — on Mr. Bush’s watch — was triggering a broad financial and economic collapse. This collapse caused the deficit to soar: By the first quarter of 2009 — with only a trickle of stimulus funds flowing — federal borrowing had already reached almost 9 percent of G.D.P. To some of us, this says that the economic crisis that began under Mr. Bush is responsible for the great bulk of our current deficit. But the Republican Party is having none of it.

Finally, on the war: For most Americans, the whole debate about the war is old if painful news — but not for those obsessed with refurbishing the Bush image. Karl Rove now claims that his biggest mistake was letting Democrats get away with the “shameful” claim that the Bush administration hyped the case for invading Iraq. Let the whitewashing begin!

Again, Republicans aren’t trying to rescue George W. Bush’s reputation for sentimental reasons; they’re trying to clear the way for a return to Bush policies. And this carries a message for anyone hoping that the next time Republicans are in power, they’ll behave differently. If you believe that they’ve learned something — say, about fiscal prudence or the importance of effective regulation — you’re kidding yourself. You might as well face it: they’re addicted to Bush.

A version of this op-ed appeared in print on July 23, 2010, on page A23 of the New York edition.

Republicans don't give a damn about the deficit

Original Link: http://www.guardian.co.uk/commentisfree/cifamerica/2010/jul/15/republicans-dont-give-damn-about-deficit

By Sahil Kapur

The GOP's blocking of jobless benefits in the US Senate, while supporting huge tax cuts for the rich, shows its stance is political

As the US national unemployment rate remains high at 9.5%, Senate Republicans are persistently blocking the extension of expiring benefits for jobless Americans. Their primary concern is, apparently, that it'll increase the deficit.

"The only reason the unemployment extension hasn't passed is because Democrats simply refuse to pass a bill that doesn't add to the debt," claimed Mitch McConnell, the Senate's Republican leader.

But are Republicans really concerned with the deficit, or is this just a political ruse?

On Fox News Sunday, Jon Kyl, the second highest-ranking Republican in the Senate, was quizzed about his party's commitment to reducing the deficit. How, wondered the show's host, Chris Wallace, can the GOP support extending the 10-year, $678bn (£445bn) tax cuts for the richest few while they continually block unemployment benefits by invoking the nefarious consequences of a growing budget deficit?

"You do need to offset the cost of increased spending, and that's what Republicans object to," Kyl said. "But you should never have to offset cost of a deliberate decision to reduce tax rates on Americans." In short, he claimed budget shortfalls resulting from tax cuts don't need to be offset, but spending provisions do.

If you thought this was a slip-up or a lone viewpoint you'd be wrong. "That's been the majority Republican view for some time," McConnell told Talking Points Memo's Brian Beutler, trotting out the verifiably false claim that the 2001 Bush tax cuts didn't decrease tax revenues. "I think what Senator Kyl was expressing was the view of virtually every Republican on that subject." (As well as Democrat Ben Nelson.)

Ponder that for a minute. The official Republican stance is that taxes aren't relevant to budget problems, but spending is. In this case, $35bn for the jobless (during the worst economic crisis since the great depression) is unacceptable to them because it would bust the budget, but $678bn in breaks for the wealthiest is fine.

This is the party that has been viciously hammering President Obama and Democrats on the deficit over the last year and a half, and has invoked it to filibuster legislation after legislation on all sorts of issues (even on bills that the nonpartisan Congressional Budget Office says will cut the deficit, such as healthcare reform).

But the contrast between opposing relatively minor spending to shield the suffering of the unemployed while backing tax cuts for the rich takes this double standard to new levels. Especially when the tax breaks are projected to massively decrease government revenues.

What this suggests is that for Republicans, the deficit isn't a real concern – it's simply a political weapon. A cynical, clever tool that serves to weaken Obama's credibility as well as obstruct the Democrats' legislative ambitions. Whatever Republicans believe in their hearts, they know it's politically beneficial to prolong the suffering of the unemployed ahead of November's midterm elections – because, perverse as it may be in this situation, it'll wind up being a referendum on Democratic governance.

Textbook economics say it's prudent to boost domestic spending while running a deficit during major recessions – it shields the fall in consumer spending, which otherwise leads to a downward spiral of reduced investment, income, and ultimately jobs. Unemployment benefits are ground zero in this cycle, because they cushion the free-fall in demand while jobs are scarce. Extending these benefits would do more to augment short-term business confidence than pinching pennies to reduce the deficit during a downturn.

Either way, Republican tactics are working like a charm. Democrats have given up on further stimulus due to the harsh political climate and the sharp rise in deficit fears among the elite class (though certainly not among the public, which deems jobs far more important). For this, they'll pay a heavy price.

And the GOP will probably get away with it because, despite the amazing lack of evidence, it's simply a truism in the US media that Republicans care about the deficit while Democrats are fiscally reckless. Those who believe this may want to compare, for instance, the budget surpluses of the Clinton years (after he increased taxes), with the exploding deficits of the Bush years (after he cut taxes).

It's fine and fair for Republicans to stand on large tax cuts for the rich as a principle. But they can't do so while claiming to care a whit about the deficit. The budget is a result of money coming in (tax revenues) and money going out (spending). They can't disregard 50% of this equation and claim to be concerned with the outcome. Or at least be taken seriously while they're at it.

Redo That Voodoo

Original Link: http://www.nytimes.com/2010/07/16/opinion/16krugman.html

By PAUL KRUGMAN

Republicans are feeling good about the midterms — so good that they’ve started saying what they really think. This week the party’s Senate leadership stopped pretending that it cares about deficits, stating explicitly that while we can’t afford to aid the unemployed or prevent mass layoffs of schoolteachers, cost is literally no object when it comes to tax cuts for the affluent.

And that’s one reason — there are others — why you should fear the consequences if the G.O.P. actually does as well in November as it hopes.

For a while, leading Republicans posed as stern foes of federal red ink. Two weeks ago, in the official G.O.P. response to President Obama’s weekly radio address, Senator Saxby Chambliss devoted his entire time to the evils of government debt, “one of the most dangerous threats confronting America today.” He went on, “At some point we have to say ‘enough is enough.’ ”

But this past Monday Jon Kyl of Arizona, the second-ranking Republican in the Senate, was asked the obvious question: if deficits are so worrisome, what about the budgetary cost of extending the Bush tax cuts for the wealthy, which the Obama administration wants to let expire but Republicans want to make permanent? What should replace $650 billion or more in lost revenue over the next decade?

His answer was breathtaking: “You do need to offset the cost of increased spending. And that’s what Republicans object to. But you should never have to offset the cost of a deliberate decision to reduce tax rates on Americans.” So $30 billion in aid to the unemployed is unaffordable, but 20 times that much in tax cuts for the rich doesn’t count.

The next day, Mitch McConnell, the Senate minority leader, confirmed that Mr. Kyl was giving the official party line: “There’s no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject.”

Now there are many things one could call the Bush economy, an economy that, even before recession struck, was characterized by sluggish job growth and stagnant family incomes; “vibrant” isn’t one of them. But the real news here is the confirmation that Republicans remain committed to deep voodoo, the claim that cutting taxes actually increases revenues.

It’s not true, of course. Ronald Reagan said that his tax cuts would reduce deficits, then presided over a near-tripling of federal debt. When Bill Clinton raised taxes on top incomes, conservatives predicted economic disaster; what actually followed was an economic boom and a remarkable swing from budget deficit to surplus. Then the Bush tax cuts came along, helping turn that surplus into a persistent deficit, even before the crash.

But we’re talking about voodoo economics here, so perhaps it’s not surprising that belief in the magical powers of tax cuts is a zombie doctrine: no matter how many times you kill it with facts, it just keeps coming back. And despite repeated failure in practice, it is, more than ever, the official view of the G.O.P.

Why should this scare you? On paper, solving America’s long-run fiscal problems is eminently doable: stronger cost control for Medicare plus a moderate rise in taxes would get us most of the way there. And the perception that the deficit is manageable has helped keep U.S. borrowing costs low.

But if politicians who insist that the way to reduce deficits is to cut taxes, not raise them, start winning elections again, how much faith can anyone have that we’ll do what needs to be done? Yes, we can have a fiscal crisis. But if we do, it won’t be because we’ve spent too much trying to create jobs and help the unemployed. It will be because investors have looked at our politics and concluded, with justification, that we’ve turned into a banana republic.

Of course, flirting with crisis is arguably part of the plan. There has always been a sense in which voodoo economics was a cover story for the real doctrine, which was “starve the beast”: slash revenue with tax cuts, then demand spending cuts to close the resulting budget gap. The point is that starve the beast basically amounts to deliberately creating a fiscal crisis, in the belief that the crisis can be used to push through unpopular policies, like dismantling Social Security.

Anyway, we really should thank Senators Kyl and McConnell for their sudden outbursts of candor. They’ve now made it clear, in case anyone had doubts, that their previous posturing on the deficit was entirely hypocritical. If they really do have the kind of electoral win they’re expecting, they won’t try to reduce the deficit — they’ll try to make it explode by demanding even more budget-busting tax cuts.

Dirty Little Secrets the Republicans Don't Want You to Know

Original Link: http://www.huffingtonpost.com/robert-creamer/dirty-little-secrets-the_b_645404.html

By Robert Creamer

The Republicans have a set of dirty little (actually not so little) secrets they don't what you to know -- and certainly don't want you to think about when you go to the polls in November.

And the fact is that some of those secrets could provide Democrats with silver bullets this fall. But first let's recall the context.

Over the course of eight short years -- between 2000 and 2008 -- the Republicans methodically executed their plan to transform American society. They systematically transferred wealth from the middle class to the wealthiest two percent of Americans -- slashing taxes for the wealthy. They eviscerated the rules that held Wall Street, Big Oil and private insurance companies accountable to the public. They allowed and encouraged the recklessness of the big Wall Street banks that ultimately collapsed the economy and cost eight million Americans their jobs. They ignored exploding health care costs, tried to privatize Social Security, gave the drug companies open season to gouge American consumers and presided over a decline in real incomes averaging $2,000 per family. They entangled America in an enormously costly, unnecessary war in Iraq, pursued a directionless policy that left Afghanistan to fester, and sullied America's good name throughout the world.

Their economic policy of cutting taxes for the wealthy and deregulating big Corporations failed to create jobs. In fact, over his eight year term, George Bush's administration created exactly zero net private sector jobs. They inherited a Federal budget with surpluses as far as the eye could see and rolled up more debt than all of the previous Presidents in the over 200 years of American history. And in the end they left the economy in collapse.

This was not a disaster that could be remedied overnight. By taking bold action at the beginning of his administration, President Obama and the Democrats in Congress prevented the financial crisis from morphing into a Great Depression -- but the Republicans, some Democrats, and the powerful special interests have done everything they can to throw sand into the gears of change. Most importantly, they have stood in the way of providing enough economic stimulus to launch a robust, widespread economic recovery.

But notwithstanding Republican opposition, Obama, the Democrats and their progressive allies have -- after a century of trying -- finally passed health care reform allowing America to end its status as the only industrialized nation that did not provide health care as a right. They are on the brink of reining in the recklessness of the big Wall Street banks. And they have set the stage for massive long-term investments in economic growth and clean energy.

But it has been hard to pull the car out of the deep economic ditch and Americans are angry at the slow pace of economic recovery -- and also at the special interests that profited from their economic pain.

So the Republicans now have the audacity to argue that President Obama and the Democrats are somehow responsible for the hardships that they themselves created. In effect they want the election to be a referendum on whether the Democrats have mopped and swept fast enough cleaning up the mess that they created.

They will do everything they can to prevent America from focusing on the real choice before them in the fall elections -- a choice between going backward to the failed policies of the past that caused this catastrophe and a new direction that will create sustainable, long-term, bottom-up, widely shared economic growth. The real question before the country is whether it is willing to hand over the keys to the economy once again to the same gang that just caused the most serious economic pile up in 60 years.

That's where the dirty little secrets come in. It turns out that the leaders of the Republican Party have learned nothing from the reckless escapade that caused so much economic pain, and came perilously close to inflicting mortal wounds on the American economy.

They still actually believe -- despite what we have all just experienced -- that by "freeing" big oil, the insurance companies and Wall Street banks of the "burdens" of government accountability, that the plutocrats and the "invisible hand" of the market will lead American into the promised land of economic prosperity.

Some of the things they believe are not only dangerous to the economy, luckily they are also politically radioactive. And quite remarkably, many key Republicans are actually willing to say them out loud. Here are a few:

•Meet Congressman Paul Ryan. Ryan is the ranking Republican on the House Budget Committee. If the Republicans once again take control of the House, he will be the Chair of the Budget Committee. Ryan believes -- and says out loud -- that Medicare, one of the most popular Federal programs in history, should be abolished and replaced with vouchers for private insurance. Let's recall that one of the ways Republicans stirred up opposition to health insurance reform was by falsely accusing Democrats of wanting to cut Medicare. They convinced some unwitting seniors that "Government" should keep its hands off Medicare -- which is, of course, a "Government" program. Democrats need to make it crystal clear in this campaign that Republicans -- who opposed Medicare from its inception -- actually want to abolish the program and hand over control of health care for America's seniors to the same private insurance companies responsible for driving up rates three times faster than wages while their profits have exploded.

•Congressman John Boehner, the House Minority Leader, has endorsed another Ryan proposal to raise the retirement age of Social Security to 70 years old -- a proposal that might go over fine with a guy like Boehner who makes speeches for a living. But it won't be very popular at all with someone who has laid bricks, or run an earth mover, or waited tables for forty-five years.

•The whole Republican crew wants to resurrect the failed Bush proposal to "privatize" Social Security. The defeat of Bush's privatization plan was the turning point in the Bush Presidency. It was all downhill from there. Yet -- whether it's to pad the investment accounts of their friends on Wall Street or because they are "private markets uber alles true believers" -- the Republicans want to try it again. Only this time retirees won't have to work very hard to imagine what it would have been like if their Social Security checks had plummeted in value the way their 401K's did when the market collapsed just two years ago.

•The Republicans want to weaken and repeal the new law to rein in the recklessness of the big Wall Street banks. Most Republicans and Democrats voted to bail out the big banks to prevent a 1930's style market collapse. The difference is that Democrats supported legislation to rein in their recklessness -- that had cost 8 million Americans their jobs -- and assure that a bailout was never allowed to happen again. But with very few exceptions, the Republicans voted to a person against holding Wall Street accountable. Given a chance, they plan to team up with their pals on Wall Street to free them to return to their reckless ways at will. In fact, they told the titans of Wall Street as much in fundraising meetings, where those "masters of the Universe" were asked to ante up. Republicans claim to oppose more Wall Street bailouts, but they refuse to support legislation that would prevent one in the future and hold Wall Street accountable. That -- coupled with those big contributions from Wall Street -- is a position that is very difficult for average voters to swallow. In fact, the polling says it's down right toxic.

•Republicans have consistently voted against extending unemployment benefits to workers who have been laid off because of Bush-era policies and the recklessness of Wall Street. Remember, people who get unemployment benefits -- by definition -- are looking for jobs that the economy doesn't provide. In addition, many Republicans actually believe that the best way to spur employment is to lower the minimum wage.

•Finally, meet Congressman Joe Barton. If the Republicans win back control of Congress, he would once again most likely serve as the Chairman of the Energy and Commerce Committee -- the Committee that oversees the oil industry. Congressman Barton has never met an oil company he doesn't like. In fact, he's the guy who actually apologized to BP when they were forced by the Obama Administration to take economic responsibility for the disastrous Gulf oil spill. As a political matter, that's like apologizing to Jack the Ripper.

These are politically radioactive positions that do, in fact, define the core of Republican policy if they were once again to control the gavel in either House of Congress.

We hear a lot about how Democrats have to "localize" the elections to have a chance of victory in November. And it is true that people vote for people in elections -- and the quality of Democratic candidates will give them a major edge in many races. So while it is a good idea to "personalize" the races for Congress, the last thing Democrats should do is to "localize" them, because the party that nationalizes a midterm -- and dominates the national dialogue -- almost always comes out ahead.

Instead, Democrats need to take the offensive and dominate the national conversation by talking about what the Republicans actually believe and what they would do if they win in November. Voters must be offered a stark choice between Democratic and Republican policies in the fall. If they are, "Conventional Wisdom" that keeps predicting a Democratic disaster will be proven wrong, the same way it was when it predicted that America would never elect a tall, skinny African American guy named Barack Obama.

The Campaign for Progressive Taxation

Original Link: http://www.workerscompass.org/robertson_07-07-2010.html

By Ann Robertson

On June 28, 2010, the San Francisco Labor Council sponsored a forum on progressive taxation featuring three prominent speakers: Marty Hittelman, President of the California Federation of Teachers, Sarah Flocks, Policy Coordinator at the California Labor Federation, and Conny Ford, President of Office and Professional Employees International Union, Local 3 and Vice President of the San Francisco Labor Council. The following article constituted the basis for more abbreviated introductory comments by Ann Robertson, who chaired the meeting and is a delegate to the Labor Council from the California Faculty Association.

Virtually every major newspaper in the country has reported that working people are angry: They are angry at the government’s bailout of the bankers who recklessly drove the economy off the cliff, which amounted to rewarding bad behavior.

And they are angry because, although working people did nothing to create this economic crisis, we, and not the bankers, are being handed the bill, not only through our tax dollars that paid for the bailout, but through the devastation that has wracked our lives through loss of our jobs, our homes, our health care — all directly the result of the economic crisis.

The suffering has been intense.

2.5 million Americans have lost their homes to foreclosures, which continue to rise. And according to an AFL-CIO blog, 43 percent of us have been forced to take a pay cut; 38 percent of us, or someone close to us, has lost a job, and 27 percent have lost health care coverage. (AFL-CIO blog, June 7, 2010).

As we know first hand, the devastation in California has been particularly intense.

In California the official unemployment rate is 12.4 percent, but if one factors in those who are involuntarily working part-time and include discouraged workers, then the real unemployment rate is over 20 percent.

The unions have predicted that 36,000 teachers will be laid off this coming year in California. (PBS NewsHour, June 3, 2010).

It was recently reported that the government has been going after the pensions of state workers. Thus far, four unions have made concessions, meaning the state of California will cut its contribution to their pension funds while workers in some cases will have to pay double the amount into their retirement fund than they paid before. (The New York Times, June 19, 2010). The same is happening in many other states.

The California State University Trustees just raised student fees 5 percent and will likely raise them another 5 percent before the end of the year. These raises have come on the heels of a 30 percent raise last year, which in turn followed years of creeping increases.

And here in San Francisco, as many of you know, our schools are facing $113 million budget shortfall, meaning virtually all school programs will be cut to one degree or another. 200 teachers and administrators were laid off this spring. And teachers will be forced to take unpaid furloughs next year, resulting in a cut in their pay and a shortened school year. (San Francisco Chronicle, June 21, 2010).

350 San Francisco city workers were recently laid off, and this has come after 3 years of steady job elimination because of the recession so that our social services have been dramatically cut back.

Labor unions here in SF were just pressured into giving up nearly $300 million in concessions over the next 2 years, and we will pay higher fees for city services. (San Francisco Chronicle, June 3, 2010).

In light of all this palpable suffering, one wonders what the federal government is doing to alleviate the misery. Unfortunately, after enthusiastically embracing the bailout for the banks, the Obama administration has suddenly became worried about the rising deficit and is saying it cannot afford any more major bailouts.

But in direct contradiction to the government’s unwillingness to rescue working people, the labor movement is increasingly stepping up and taking the position that money is available not only for reducing the deficit but for putting people back to work through a massive public jobs program and for saving our social services.

But in order to understand the logic underlying labor’s proposals, it is important to realize that some people are doing fabulously well in the current period. In fact they are doing better than ever before. For example, in the late 19th century, the income of John D. Rockefeller, the richest person at that time was 7000 times the average income of workers. But today the highest income, which went to a hedge fund manager, was 38,000 times the average income. (The New York Times, Paul Krugman, April 27, 2007).

In 1970 the top CEOs made 40 times the salary of the average worker. In 2003 they made 1000 times as much as the average worker. Income inequality has been spiraling out of control in this country during the past four decades, and it continues to get worse.

And even though their income is at an all-time high, the taxes of the wealthiest Americans are at an all-time low: “Taxation has become much less progressive: according to estimates by the economists Thomas Piketty and Emmanuel Saez, average tax rates on the richest 0.01 percent of Americans have been cut in half since 1970, while taxes on the middle class have risen.” (Krugman, ibid.).

To his credit, Warren Buffet has criticized our tax rates because he is only taxed at a rate of 17.7 percent on his $46 million income while his secretary has to pay taxes at a rate of 30 percent. (Dorothy Brown, The New York Times, March 8, 2009).

Moreover, between 1998 and 2005, two out of every three corporations in the U.S. paid absolutely no taxes. (The New York Times, August 12, 2008).

According to the National Education Association, “…the richest Americans pay about $5 for every $100 of their income in state and local taxes. The poorest pay about $11. Also the share of taxes paid by corporations as a percentage of their profits has declined 50 percent over the last 20 years.”

Because the income of the rich is at an all time high while their taxes are lower than those of working people, different sectors within the labor movement have been stepping forward and proposing to create jobs, save public education and save social services by raising taxes on the rich and closing the tax loopholes that have allowed corporations often to avoid paying taxes altogether.

For example, the California Teachers Associaton announced in its publication, California Educator, May 2010, “CTA has collected enough signatures to qualify the Repeal Corporate Tax Loopholes initiative for the November ballot. However, legislators can and should take care of this injustice before November as part of the budget solution.”

In its April 2010 publication, Advocate, NEA reported that it has organized a campaign, called TEF (Taxes, Economic development, and Funding for schools) to address its finding that on the state and local level, the poor pay taxes at more than twice the rate as the rich. It is demanding that taxes be raised on the rich and on the corporations.

Meanwhile, the California Federation of Teachers, after enumerating the devastating cuts to the University of California, the California State University system, and the community colleges, argued:

Wealth has been massively redistributed in California and the nation over the past three decades — in the wrong direction. The top one percent of the economic pyramid own thirty-four percent of the wealth. The very richest people are paying less in taxes and keeping more money for themselves. Their luxury consumption and lower tax rates equal the neglect and decline of our public services.

So the CFT is also calling for higher taxes on the rich and closing corporate tax loopholes.

The California Faculty Association that covers faculty in the California State University system has been promoting an oil severance tax, meaning that the oil companies will have to pay a tax whenever they remove oil from the ground.

Finally, Richard Trumka, President of the AFL-CIO, has called on the government to create a massive public jobs program that would employ 10 million people while taxing Wall Street to pay for it.

Aside from the fact that it is morally offensive to skew the tax structure so that the rich pay taxes at a lower rate than working people, the proposals coming from the labor movement make good economic sense in several respects:

70 percent of the U.S. economy depends on consumption. Yet during the past four decades with the income of working people falling, our ability to engage in consumption has declined accordingly. The economy cannot thrive when most people cannot afford to buy the things they need.

But even more than this: economists have argued that one of the best ways to stimulate the economy is by investing in education. In this way citizens can acquire the skills that they need in order to become highly productive workers.
And a massive public jobs program that would put people back to work while being funded by Wall Street would reduce the deficit because their salaries would be taxed and they would no longer be collecting unemployment.
So the proposals coming from the labor movement are sound economic proposals that will have the force of lifting us out of the recession and raising the standard of living of working people.

And so the battle lines have been drawn. On one side stand the vast majority of the population, working people and the poor, who want to see those who are unemployed put back to work, they want quality affordable education for themselves and their children, and they want quality social services provided to them by their government. On the other side stand a fabulously rich minority who are tenaciously holding on to their wealth while fighting for an even greater share of society’s wealth.

It is important to realize that there are strong grounds for hope. The unions in Oregon just fought the corporations and won. They succeeded in passing two ballot initiatives, one that increased the tax rate on the rich and the other that eliminated some corporate tax loopholes. Also, here in California, Pacific Gas & Electric (PG&E) just spent $50 million in order to pass a measure that would have subverted the will of the majority of voters by requiring a two-thirds vote for a city to municipalize its energy. Yet PG&E lost, which goes to show that money does not always trump democracy. And finally, according to a recent Bloomberg National Poll, two-thirds of Americans support raising taxes on the rich in order to reduce the deficit and they “want their government to create jobs through spending on public works, investments in alternative energy or skills training for the jobless … and most are ready to hand the bill to the wealthy.”

On March 15, 2010, the San Francisco Labor Council passed a resolution calling for the building of a coalition among labor unions, community groups, and interested individuals to mount a campaign to save public education and social services through progressive taxation. This forum is a first step in the direction of implementing this resolution. Today we have brought together representatives from different sectors of the union movement to begin to unify our ranks in order to build a powerful movement.

Raising taxes on corporations and the rich is the moral thing to do. It is what the majority of people want. And it makes good economic sense. We can win this campaign.

Wealthy Reap Rewards While Those Who Work Lose

Original Link: http://ipsnews.net/news.asp?idnews=52103

By Adrianne Appel

Times are tough for workers in the U.S. where a recession has a stranglehold on much of the economy, but life is perfectly rosy for those at the top.

The riches of the wealthiest North Americans grew by double digits in 2009, primarily from interest their money earned when it was invested in the stock market and elsewhere, according to a report by the Boston Consulting Group.

Millionaires in the U.S. and Canada saw their wealth increase 15 percent in 2009, to a total of 4.6 trillion dollars, the report found.

Worldwide, 11 million - or less than 1 percent of all households - were millionaires in 2009. They owned about 38 percent of the world's wealth or 111 trillion dollars, up from about 36 percent in 2008, according to Boston Consulting Group.

About 4.7 million millionaires live in the U.S., four percent of the population and more than anywhere else in the world. Japan, China, Britain and Germany followed the U.S. in the number of millionaires.

Their fortune is a stark contrast to the lives of more than 15 million people in the U.S. who are unemployed and searching for work, and the eight million more who are just getting by with a part-time job, according to the U.S. Bureau of Labor Statistics. More than two million more people were working prior to the recession but have now dropped out of the labour force.

Apart from the newly unemployed, about 39 million people in the U.S. are chronically poor and do not have enough food to eat, according to the U.S. Census and U.S. Department of Agriculture.

"The nation's jobs crisis is so catastrophic that, unless Congress acts on the scale of the New Deal, millions of Americans will experience extremely long periods of unemployment for many years ahead," Lawrence Mishel, president of the Economic Policy Institute, told a panel of the Committee on Ways and Means recently.

Not so for millionaires and the uber-rich.

The uber-rich, those with more than 30 million dollars, are on the rebound. They spent more money in 2009 on fancy cars, yachts and jets compared to 2008, according to a study by Merrill Lynch-Capgemini. They bought fine art, expensive jewelry, gems and antiques, items that are likely to increase in value over time, so they can sell them later and make more money.

The recession isn't hitting those at the top as it has workers. In fact, many wealthy people benefited from the stock market's ups and downs, said Mike Lapham, director of the Responsible Wealth Project at United for a Fair Economy, an NGO in Boston.

"Folks at the top have a cushion, a disposable income to fall back on. Maybe their portfolios took a hit but they didn't lose their jobs and their homes. If they had losses, they can deduct them from their taxes," Lapham told IPS.

"Some people bet successfully on the financial system going under," he said. "The stock market went from 10,000 to 6,000 and back to 11,000. That's a big jump for people with significant portfolios."

"The people at bottom who've lost work, it'll be years before they get back to where they were before the crash," Lapham said.

The U.S. average national unemployment rate is 9.7 percent. Only those who are actively looking for work are included in this statistic. Among Black Americans, the rate is 15.5 percent and Latinos, 12.4 percent, according to the Bureau of Labor Statistics.

The Congressional Budget Office predicts that unemployment will remain almost unchanged in 2011, about 9.5 percent.

Many families have been surviving on small, weekly unemployment checks provided for 26 weeks by their state government, and an additional 73 weeks by the federal government. The first group of unemployed to run through both benefits hit that point Jul. 1, and today about a million people are receiving no assistance at all. About nine million more are still receiving unemployment payments.

Congress is considering extending federal assistance for another 20 weeks. The House approved the legislation, but the Senate did not. Congress left town for its holiday break until mid-July without passing the legislation.

In the Senate the issue fell almost precisely along party lines, with all but one Democrat for extending the benefit, and all but two Republicans against it, saying the 34- billion-dollar cost was not worth adding to the federal deficit.

Without the vote of Democratic Senator Ben Nelson, of Nebraska, the bill was one vote short of the 60 needed for passage.

"I think we're going to see a new wave of heartache here in Rhode Island," with the end of the federal assistance, Kate Brewster, executive director of the Poverty Institute, a Rhode Island NGO, told IPS.

The small, northeastern U.S. state, a former manufacturing centre whose jobs moved offshore, has struggled with higher unemployment and low-wage jobs for years. Most recently, it was hard hit by the foreclosure crisis and the downturn in the construction industry.

The ongoing unemployment and low jobs creation nationwide is helping to fuel the millions of foreclosures sweeping across the nation, according to a report by the Harvard University Joint Center for Housing Studies.

The nation's anemic jobs creation, high foreclosures and weak consumer spending has convinced Mishel and many economists that the U.S. is in for an extended downturn. Just 83,000 jobs were created in June, instead of the 150,000 needed for robust employment, according to the U.S. Labor Department.

"The United States is undergoing the worst economic downturn in 70 years, and the damage and suffering it is causing will last many years beyond the official end of the recession," Mishel said.

Rhode Island's future is uncertain.

"We've consistently had one of the highest rates of unemployment in the country," Brewster said. Today, in the midst of the recession, more people are showing up at soup kitchens for free meals and dialing in to a toll-free, crisis phone service for families in dire circumstances, she said.

"They've had an enormous influx of calls in the past 18 to 21 months," she said. Fewer services are available to help them.

"Within last five years the state cut back work support programmes like child care assistance and funded health insurance," Brewster said. "The cruel irony is that when families really need help, less is available."

The Root of Economic Fragility and Political Anger

Original Link: http://www.huffingtonpost.com/robert-reich/the-root-of-economic-frag_b_644465.html

By Robert Reich

Missing from almost all discussion of America's dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June's decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.

In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.

Meanwhile, a much smaller group of Americans' earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. Richard Stein, president of Global Sage, an executive search firm, tells the New York Times corporate clients have offered compensation packages of more than $1 million annually to a dozen candidates in just the last few weeks.

We're back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground.

And as long as this trend continues, we can't get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don't have enough purchasing power to buy what the economy is capable of producing.

America's median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped. Under these circumstances the only way the middle class could boost its purchasing power was to borrow, as it did with gusto. As housing prices rose, Americans turned their homes into ATMs. But such borrowing has its limits. When the debt bubble finally burst, vast numbers of people couldn't pay their bills, and banks couldn't collect.

Each of America's two biggest economic downturns over the last century has followed the same pattern. Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation's total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society expanded the circle of prosperity. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America's total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928--with 23.5 percent of the total.

We all know what happened in the years immediately following these twin peaks--in 1929 and 2008.

Yes, China, Germany and Japan have contributed to America's demand-side problem by failing to buy as much from us as we buy from them. But to believe that our continuing economic crisis stems mainly from the trade imbalance--we buy too much and save too little, while they do the reverse--is to miss the biggest imbalance of all. The problem isn't that typical Americans have spent beyond their means. It's that their means haven't kept up with what the growing economy could and should have been able to provide them.

A second parallel links 1929 with 2008: when earnings accumulate at the top, people at the top invest their wealth in whatever assets seem most likely to attract other big investors. This causes the prices of certain assets--commodities, stocks, dot-coms or real estate--to become wildly inflated. Such speculative bubbles eventually burst, leaving behind mountains of near-worthless collateral.

The crash of 2008 didn't turn into another Great Depression because the government learned the importance of flooding the market with cash, thereby temporarily rescuing some stranded consumers and most big bankers. But the financial rescue didn't change the economy's underlying structure -- median wages dropping while those at the top are raking in the lion's share of income.

That's why America's middle class still doesn't have the purchasing power it needs to reboot the economy, and why the so-called recovery will be so tepid--maybe even leading to a double dip. It's also why America will be vulnerable to even larger speculative booms and deeper busts in the years to come.

The structural problem began in the late 1970s when a wave of new technologies (air cargo, container ships and terminals, satellite communications and, later, the Internet) radically reduced the costs of outsourcing jobs abroad. Other new technologies (automated machinery, computers and ever more sophisticated software applications) took over many other jobs (remember bank tellers? telephone operators? service station attendants?). By the '80s, any job requiring that the same steps be performed repeatedly was disappearing--going over there or into software. Meanwhile, as the pay of most workers flattened or dropped, the pay of well-connected graduates of prestigious colleges and MBA programs--the so-called "talent" who reached the pinnacles of power in executive suites and on Wall Street--soared.

The puzzle is why so little was done to counteract these forces. Government could have given employees more bargaining power to get higher wages, especially in industries sheltered from global competition and requiring personal service: big-box retail stores, restaurants and hotel chains, and child- and eldercare, for instance. Safety nets could have been enlarged to compensate for increasing anxieties about job loss: unemployment insurance covering part-time work, wage insurance if pay drops, transition assistance to move to new jobs in new locations, insurance for communities that lose a major employer so they can lure other employers. With the gains from economic growth the nation could have provided Medicare for all, better schools, early childhood education, more affordable public universities, more extensive public transportation. And if more money was needed, taxes could have been raised on the rich.

Big, profitable companies could have been barred from laying off a large number of workers all at once, and could have been required to pay severance--say, a year of wages--to anyone they let go. Corporations whose research was subsidized by taxpayers could have been required to create jobs in the United States. The minimum wage could have been linked to inflation. And America's trading partners could have been pushed to establish minimum wages pegged to half their countries' median wages--thereby ensuring that all citizens shared in gains from trade and creating a new global middle class that would buy more of our exports.

But starting in the late 1970s, and with increasing fervor over the next three decades, government did just the opposite. It deregulated and privatized. It increased the cost of public higher education and cut public transportation. It shredded safety nets. It halved the top income tax rate from the range of 70-90 percent that prevailed during the 1950s and '60s to 28-40 percent; it allowed many of the nation's rich to treat their income as capital gains subject to no more than 15 percent tax and escape inheritance taxes altogether. At the same time, America boosted sales and payroll taxes, both of which have taken a bigger chunk out of the pay of the middle class and the poor than of the well-off.

Companies were allowed to slash jobs and wages, cut benefits and shift risks to employees (from you-can-count-on-it pensions to do-it-yourself 401(k)s, from good health coverage to soaring premiums and deductibles). They busted unions and threatened employees who tried to organize. The biggest companies went global with no more loyalty or connection to the United States than a GPS device. Washington deregulated Wall Street while insuring it against major losses, turning finance--which until recently had been the servant of American industry--into its master, demanding short-term profits over long-term growth and raking in an ever larger portion of the nation's profits. And nothing was done to impede CEO salaries from skyrocketing to more than 300 times that of the typical worker (from thirty times during the Great Prosperity of the 1950s and '60s), while the pay of financial executives and traders rose into the stratosphere.

It's too facile to blame Ronald Reagan and his Republican ilk. Democrats have been almost as reluctant to attack inequality or even to recognize it as the central economic and social problem of our age. (As Bill Clinton's labor secretary, I should know.) The reason is simple. As money has risen to the top, so has political power. Politicians are more dependent than ever on big money for their campaigns. Modern Washington is far removed from the Gilded Age, when, it's been said, the lackeys of robber barons literally deposited sacks of cash on the desks of friendly legislators. Today's cash comes in the form of ever increasing campaign donations from corporate executives and Wall Street, their ever larger platoons of lobbyists and their hordes of PR flacks.

The Great Recession could have spawned another era of fundamental reform, just as the Great Depression did. But the financial rescue reduced immediate demands for broader reform.

Obama might still have succeeded had he framed the challenge accurately. Yet in reassuring the public that the economy will return to normal he has missed a key opportunity to expose the longer-term scourge of widening inequality and its dangers. Containing the immediate financial crisis and then claiming the economy is on the mend has left the public with a diffuse set of economic problems that seem unrelated and inexplicable, as if a town's fire chief deals with a conflagration by protecting the biggest office buildings but leaving smaller fires simmering all over town: housing foreclosures, job losses, lower earnings, less economic security, soaring pay on Wall Street and in executive suites.

Much the same has occurred with efforts to reform the financial system. The White House and Democratic leaders could have described the overarching goal as overhauling economic institutions that bestow outsize rewards on a relative few while imposing extraordinary costs and risks on almost everyone else. Instead, they have defined the goal narrowly: reducing risks to the financial system caused by particular practices on Wall Street. The solution has thereby shriveled to a set of technical fixes for how the Street should conduct its business.

What we get from widening inequality is not only a more fragile economy but also an angrier politics. When virtually all the gains from growth go to a small minority at the top -- and the broad middle class can no longer pretend it's richer than it is by using homes as collateral for deepening indebtedness -- the result is deep-seated anxiety and frustration. This is an open invitation to demagogues who misconnect the dots and direct the anger toward immigrants, the poor, foreign nations, big government, "socialists," "intellectual elites," or even big business and Wall Street. The major fault line in American politics is no longer between Democrats and Republicans, liberals and conservatives, but between the "establishment" and an increasingly mad-as-hell populace determined to "take back America" from it.

When they understand where this is heading, powerful interests that have so far resisted fundamental reform may come to see that the alternative is far worse.

GOP Chooses Tax Cuts for Billionaires Over Jobless Benefits for the Unemployed

Original Link: http://crooksandliars.com/jon-perr/gop-chooses-tax-cuts-billionaires-over-jobless

By Jon Perr

Refusing to extend unemployment benefits to 1.2 million Americans by adding to the deficit, Senate Republicans by a 41 to 57 margin on Thursday again filibustered the Democratic $112 billion jobs bill. As it turns out, most of the roughly $35 billion still needed to pay for it could largely come from a single source: the estate tax. But thanks to the same GOP obstructionism, Republicans have chosen a one-year windfall for a handful of billionaires over millions of Americans in the throes of financial crisis.

Already scaled back from its original $200 billion price tag, the $112 billion jobs package includes tax cuts, critically needed aid to states and the extension of unemployment benefits. On Sunday, Maine Republican Olympia Snowe wrote to Harry Reid suggesting Democrats cut further by offering a stand-alone unemployment insurance bill. For a Republican Party which had no problem with deficit spending during times of prosperity, helping struggling Americans during a recession is another matter altogether, As the New York Times reported:

The Senate Republican leader, Mitch McConnell of Kentucky, has insisted that the bill not add to the deficit. Democrats argued that they had found ways to cover the entire cost of the $112 billion measure, with the exception of the $35.5 billion extension of unemployment benefits, which some Republicans said they could accept...

"The only thing Republicans have opposed in this debate are job-killing taxes and adding to the national debt," Mr. McConnell said. Anticipating that Democrats would reject his proposal, he added, "Their commitment to deficit spending trumps their desire to help the unemployed."

Of course, as they made crystal clear with the perpetual effort to kill the estate tax, Republicans' commitment to the rich trumps everything else.

In 2009, only 1 in 500 American estates paid taxes. In 2008, the tax produced $25 billion for the U.S. Treasury even in a year when the stock market was battered. But barring new legislation in Congress, in 2011 the estate tax rate will jump back up to its pre-2001 level of 55%, starting at $2 million per couple. In December, the House voted 225-200 to maintain 2009's rate of 45% beginning at $3.5 million per person or $7 million per couple. But as 2009 ended, Jon Kyl led the successful GOP effort to block the bill, ensuring the temporary one-year expiration of the estate tax on January 1st, 2010:

"It's a problem that doesn't have to exist if they'll just leave the existing law alone and let the rate go to zero, which is where everyone wants it to be."

Well, not everyone. Just, as the numbers show, the very, very rich.

Under the 2009 rate, 99.8% of estates owe no estate tax at all. And as the Center on Budget and Policy Priorities (CBPP) showed, over 62% of estate tax revenue comes from the "extreme wealthy" with fortunes greater than $20 million. "Only three percent of taxes owed" are paid by estates under $5 million. But as the Washington Post explained in April 2009, those are precisely the pockets Jon Kyl aided and abetted by Democrat Blanche Lincoln wants to line:

The estate tax is scheduled to disappear in 2010, only to be resurrected the following year at its 2001 level, when it applied only to estates worth over $2 million per couple at a rate of 55 percent. In fact, no one expects it to return to that level -- although letting it do so would be a far more rational response to the current crisis than the Lincoln-Kyl approach. Rather, President Obama has proposed holding the tax at this year's level: an exemption of $7 million per couple, with a 45 percent rate for amounts beyond that; this would cost $484 billion over 10 years. Senate Finance Committee Chairman Max Baucus (D-Mont.) has endorsed this solution, with indexing for inflation. This would hardly be punitive. At that level, 99.76 percent of estates would incur no tax whatsoever. Those who owe would pay, on average, $2.25 million less than they would have paid at the 2001 exemption level. Why in the world should these folks get more of a tax cut?

For their part, Lincoln and Kyl want to start at that $5 million individual threshold and adopt a lower 35% tax rate. In response, Vermont Independent Bernie Sanders this week sponsored a new estate tax overhaul, which at a time of record income inequality and growing fortunes for the wealthy would provide a richer haul for the Treasury. As the Wall Street Journal summed up Sanders' plan:

Mr. Sanders and his co-sponsors said, "It's time for multi-millionaires and billionaires to pay their fair share."

Under the proposal, as in 2009, the exemption would be $3.5 million for an individual, or as much as $7 million for a couple, with a tax rate of 45%. But estates with taxable assets between $10 million and $50 million would pay a 50% rate, and estates valued above $50 million would pay 55%. A further 10% surtax would apply to assets above $500 million.

The changes would be retroactive to Jan. 1 of this year.

As Kyl suggested on the Senate floor in December, Republicans want to bury the estate tax once and for all. And to be sure, The Republican scam over the so-called "death tax" is as bogus now as it was when President Bush first perpetrated it nine years ago. (The House GOP budget, fittingly unveiled by Rep. Paul Ryan on April Fool's Day 2009, would eliminate the estate tax altogether. CBPP estimated that ending the estate tax would cost the United States Treasury $1 trillion over 10 years.) While Nevada Senator John Ensign griped, "It destroys a lot of small businesses and a lot of family farms and ranches in America," House Minority Leader John Boehner (R-OH) groused:

"People who aren't wealthy, who may have built up value in land over generations and many family farms find themselves in situations where they've got to sell the farm in order the pay the taxes."

As it turns out, of course, not so much.

While CBPP estimated that only 1 in 500 estates is impacted by the current law, the Tax Policy Center quantified last year just how few family farms or small businesses are actually impacted by the estate tax proposals under consideration:

We estimate that under the Obama proposal, 100 family farms and businesses would owe tax. (We define such estates as those where farm or business assets are valued at under $5 million and comprise the majority of estate assets.) The Lincoln-Kyl proposal would cut the number to 40. Even under current law, fewer than 2,700 family farms and businesses would owe tax.

Sadly, right now no one is paying the estate tax. And in the case of the heirs of Texas billionaire Dan L. Duncan, a man who passed away in March, that literally means a multi-billion dollar pay day at the expense of everyone else.

Especially the 1.2 million increasingly desperate Americans whose unemployment benefits just came to an end, courtesy of the Republican Party. As Rhode Island Democratic Senator Sheldon Whitehouse rightly noted on Friday, with their trade-off Senate Republicans made very clear whose side they are on:

"What's particularly galling about this is that the Republicans cut this lifeline for middle class families, unemployed through no fault of their own, in the same month the first multi-billion estate passed tax free through to the heirs of a tycoon because of the Bush tax cuts, which weren't paid for. So, if you are concerned about the deficit, it's very selective concern about the deficit when you are letting billionaires' estates go through to their heirs untaxed, and cutting off the lifeline for unemployed families."

Meanwhile, back in Mitch McConnell's home state of Kentucky, the GOP's choice of rich kids over the jobless is having dire consequences. As his home town paper put it, "Congressional impasse could hit Kentuckians hard."

Cut Social Security to Fund the War?

Original Link: http://www.counterpunch.org/baker07022010.html

By DEAN BAKER

In a remarkable interview with the Pittsburgh Tribune-Review, House Republican Leader John Boehner explicitly called for cutting Social Security in order to pay for the war in Afghanistan. The article reports:

"Ensuring there's enough money to pay for the war will require reforming the country's entitlement system, Boehner said. He said he'd favor increasing the Social Security retirement age to 70 for people who have at least 20 years until retirement, tying cost-of-living increases to the consumer price index rather than wage inflation and limiting payments to those who need them."

In principle Boehner gave the Democrats as much ammunition as a serious political party could want. After all raising the retirement age and cutting Social Security benefits to pay for the war in Afghanistan is an idea that consistently polls in the high single decimals. We should expect every Democratic politician in the country to be jumping up and down demanding to know whether the Republican leader speaks for all Republicans.

That would be the case, unless of course the Democrats actually hold similar views. After all, several prominent Democrats have been saying in public recently that we will have to cut Social Security benefits (benefits workers have already paid for). These prominent Democrats also support the war in Afghanistan.

So, they may not use the same words as Mr. Boehner, but it seems that many Democrats may effectively agree that we have to cut Social Security to pay for the war in Afghanistan. It would be nice if they would insist that this is not true.