Liz Trussâs big bet since taking over as UK prime minister is to lower taxes just like St. Ronnie and Trump did in the US. Said Truss:
âLower taxes lead to economic growth, there is no doubt in my mind about that,â
Trickle down will work this time, we promise, say UK Conservatives.
The tax reductions will require the UK government to borrow bigly to balance their budget. They hope that there will be so much growth that the UK will make it all back in future tax payments. Just like in the US, the lie is that these tax cuts will pay for themselves! Something that has never happened.
The UK Treasury said that the top personal rate will be cut from 45% to 40%. That will be more beneficial for the wealthy than the majority of British society. Shortly after the cuts were announced on Friday, the pound sank almost 2.6% to its lowest level against the US dollar since 1985. Wrongo hates to quote Larry Summers, but he said this:
“The UK is behaving a bit like an emerging market turning itself into a submerging market…it is pursuing the worst macroeconomic policies of any major country in a long time.”
âLiz Truss just announced the UKâs biggest giveaway to the rich since 1972, which resulted in an IMF bailout. Now the pound is crashing in the middle of the worst inflation since the 70s. Bold strategy….Letâs see if it pays off.â
Itâs hard to believe this will go well with the UK already in a recession. On to cartoons.
âThe 140 years from 1870 to 2010 of the long twentieth century were, I strongly believe, the most consequential years of all humanityâs centuries.â
Matthews thinks itâs a bold claim. After all, homo sapiens has been around for at least 300,000 years; DeLongâs âlong twentieth centuryâ represents 0.05% of that history.
But DeLong says an incredible thing happened during that sliver of time that had eluded our species for the other 99.95% of our history: Before 1870, technological progress was glacial, but after 1870 it accelerated dramatically. More from Vox:
âDeLong reports that in 1870, an average unskilled male worker living in London could afford 5,000 calories for himself and his family on his daily wages. That was more than the 3,000 calories he couldâve afforded in 1600, a 66% increase….But by 2010, the same worker could afford 2.4 million calories a day, a nearly five hundred fold increase.â
DeLong is speaking of the nations of the rich north, not about all nations. Heâs saying that food surplus was the key driver of progress. Whatâs implied is that the greatest difference between the wealthy and everyone else was that the poor were living on the verge of starvation. Those basic economic facts shifted once having enough to eat ceased being societyâs most critical status distinction.
Another interesting statistic from the book:
â…the average number of years of a womanâs life spent either pregnant or breastfeeding…has gone down dramatically, from 20 years of a typical womanâs life in 1870 to four years today.â
Most historians present modern history as a long 19th century (from the French revolution in 1789) to the crisis of 1914. Which is then followed by a shorter 20th century ending with the fall of communism. DeLong, by contrast, argues that the period from 1870 to 2010 is best seen as a coherent whole: the first era, he argues, in which historical developments were overwhelmingly driven by economics.
â…despite the Industrial Revolution…for millennia, technological improvements never yielded enough new production to outrun population growth. Incomes had stuck close to subsistence levels. Yet from around 1870, growth found a new gear, and incomes in leading economies rose to unprecedented levels, then kept climbing.â
DeLong says that economic policy in this period was a duel between the ideas of Friedrich von Hayek, who extolled the power of the free market, and Karl Polanyi, who warned that the market should serve man, not man serving the market.
Before WWI, markets generated rapid growth along with soaring inequality. People pushed back, demanding greater political rights, which they used to pursue regulation of the economy and improved social insurance.
After WWII, a mix of a market economy and a generous safety-net made for a happy marriage of Hayek and Polanyi, improved by Keynes, who said that governments should act to prevent economic recessions. This led to a three-decade post-war period of growth unmatched before or since. DeLong calls them the Thirty Glorious Years; from 1945 to 1975, as the US and Europe recovered from World War II.
But when growth sagged and inflation rose in the 1970s, voters supported politicians promising market-friendly, or âneoliberalâ, economic growth reforms, like lower taxes and reduced regulation. But those reforms didnât keep economic growth high. And they also led to even worse inequality. Still, the US and other rich countries pressed on with them, right up to the 2008 global financial crisis, which marks the end of DeLongâs 20th century.
According to a paper by Carter C. Price and Kathryn Edwards of the RAND Corporation, had the more equitable income distribution that America experienced in those thirty glorious years stayed constant, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in just the year 2018. Thatâs an amount equal to nearly 12% of GDP.
Price and Edwards say that the cumulative inequality cost for our 40-year experiment in government-supported income inequality added up to $47 trillion from 1975 through 2018. And probably equaled $50 trillion by 2020.
Thatâs $50 trillion that would have made the vast majority of Americans far more healthy, resilient, and financially secure.
So, the big unanswered question is: Can we again return to a period where we see both economic growth and equitable growth? Itâs highly doubtful. As DeLong says in Time:
âOur current situation: in the rich countries there is enough by any reasonable standard, and yet we are all unhappy, all earnestly seeking to discover who the enemies are who have somehow stolen our rich birthright and fed us unappetizing lentil stew instead.â
The problem here is that our entire culture, economy and even our civilization is predicated around growth and people havenât known anything else. Hope youâve enjoyed the ride.
Time to wake up America! We need to reimagine capitalism, our taxation policies and our welfare scheme if we are to survive. Expect a rough adjustment. To help you wake up, listen, and watch Bruce Springsteen perform âDarlington Countyâ live in London in 2013:
âThe US economy is not currently in a recession. No, two quarters of negative growth arenât, whatever you may have heard, the âofficialâ or âtechnicalâ definition of a recession; that determination is made by a committee that has always relied on several indicators, especially job growth.â
Nonetheless, Wrongo predicts that over the next few months, the Big Brain News Pundits will spend mucho time arguing among themselves while we watch, about the meaning of the word “recession“. They will ensure that the word “recession” is said at least once every 30 seconds.
Wrongo brought this up a few weeks ago. Recessions are determined not by pundits but by a committee of economists at the National Bureau of Economics (NBER). The two measures that have had the most weight are real personal income and non-farm payroll employment. So, despite what youâre hearing, it boils down to income and employment. If income and employment turn south, thereâs a good chance economic output will be lower. From Robert J. Shapiro:
âStart with employment, which normally contracts in the first two quarters of recessions. Over the first six months of the 1990â91 recession, employment fell by 690,000, or 0.6%. Similarly, over the first two quarters of the recessions of 2001 and 2007â09, employment fell respectively by 761,000 and 426,000 positions, or 0.6% and 0.3%.â
But in the first two quarters of 2022, employment actually grew, increasing by 2,740,000, or 1.8%.
The main factor behind the lower GDP in the second quarter was business inventories. Businesses generally finance increases in their inventories. So as interest rates rose in the second quarter, inventory purchases fell sharply, subtracting 2% from GDP. GDP growth in the second quarter was -0.9%, so inventories accounted for all of the loss of GDP.
Inventories grew. but at a slower pace, bringing about the negative GDP performance. But this change in the rate of growth in inventories is not tied to either employment or to income, so weâre not in a recession, even though GDP fell.
But our bigger economic problem is inflation. Back to Krugman:
âObviously gasoline prices are down â almost 80 cents a gallon from their mid-June peak. (Remember those scare stories about $6 a gallon by August?)â
We all know that the Big Brain Pundits only really care about how much it costs to fill their gas tanks compared to what it may have cost when some other guy was president. Expect that they will ignore our record low unemployment, and the growth in median wages.
Despite growing slower than inflation, wages are growing at about 5.4% annually. Thatâs good, although it could be better. Yet, the Big Brains want us all to be worried about the possibility of recession and inflation occurring at the same time. Theyâre worrying about that old 1970âs bugaboo, stagflation, which is highly unlikely to occur, despite how much Republicans are rooting for it to happen.
If America really wants to stop inflation in its tracks, we know how to nudge prices in the right direction: Implement a windfall profits tax on oil and food companies, whose profits are off the charts, along with their prices. Also, we could pass the corporate minimum income tax that is a part of the proposed Inflation Reduction Act.
How well the Federal Reserve addresses inflation will decide how soon the current economic expansion ends, and a recession begins. Although the economyâs fundamentals are sound, thereâs a danger that the Fedâs interest rate hikes may dampen demand and employment too much. Thatâs a 50/50 call right now.
Time to wake up America! Weâre not in a recession, although we may see one in 2023. We donât have inflation under control yet, although thatâs likely to happen within the next year.
To help you wake up, watch and listen to Sir Elton John from his âFarewell Yellow Brick Roadâ tour. Wrongo and Ms. Right got to see him in Foxborough, MA last Wednesday, courtesy of daughter Kelly and her partner Bob.
It was Wrongoâs second time seeing Sir Elton, the first was at the Budokan in Tokyo in 1974.
Last Wednesday was a great night with an adoring audience for what seems to be near the end of his touring career. Hereâs his final encore from last weekâs performance, âGoodbye Yellow Brick Roadâ performed on the night we were there:
We are 100 days away from the midterms. Thatâs usually a blink of an eye in political time. But it can also be an eternity in politics under the right circumstances. And in this year of all years, nothing can be assumed. The Jan. 6 drip of negative information about Trump and his Republican henchmen, and the looming revolution that the judicial overturning of Roe has caused, might mean that anything is possible.
For more than a year, the news media have snowed us with their conventional wisdom about the mid-terms, insisting that the presidentâs Party will lose seats in Congress. But, Josh Marshall has thoughts about this (paywalled):
âNew Georgia Senate poll out this morning from The Atlanta Journal-Constitution: Warnock 46%, Walker 43%….Meanwhile, three new congressional generic polls have come out over the last 24 hours, two of which give the Democrats a six point advantage and one of which gives a 4 point margin. One of those 6 point margins is actually a Republican Party poll.â
Given the Republican advantage in Red states, six points may not insure that the Dems hold Congress. But we clearly shouldnât give up, because right now, the House isnât a lost cause.
Positive polling momentum brings with it both the energy and hope that a political turnaround is possible, even in 3+ months. Momentum is a thing in sports. Players and coaches usually cite momentum as a reason for victory in close contests. Maybe weâre seeing Biden and the Democrats building some political momentum.
Itâs also true that Republicans arenât reading the national mood as well as they think they are.
Just hours after the Republicans worked with Dems to pass the Chips and Science Act (CHIPS) which includes $52 billion in subsidies for chipmakers building new foundries in the US, Senate Majority Leader Chuck Schumer announced a deal to revive big portions of the Build Back Better (BBB) bill.
Sen. Manchin (D-WVA) had walked away from negotiations with Schumer on a scaled-down BBB tax bill that could only pass via Reconciliation two weeks ago. Then Senate Minority Leader McConnell let his guard down, and allowed Republicans to vote for CHIPS, which was popular with Senate Republicans.
Apparently Schumer and Manchin waited until the CHIPS bill cleared the Senate before announcing agreement for an even more scaled-down BBB program now called the Inflation Reduction Act (IRA), which has both significant funding for climate and a minimum corporate tax. It too will need to be passed by reconciliation, since it will have zero Republican support.
Schumerâs move caused a McConnell meltdown. Under orders from Mitch, Republicans got revenge by voting against a procedural vote to advance a bill that would expand health care access for military veterans who became ill after being exposed to toxic burn pits in Iraq and Afghanistan.
It was a near-legendary playing of McConnell by Schumer and Manchin. And it infuriated McConnell so much he took the bill to give medical care to dying veterans exposed to toxic burn pits hostage. It was a bill that Republicans had helped to pass overwhelmingly just a few weeks ago (it needed a technical fix). Blind sided veteran groups erupted in anger and indignation.
The GOP revealed itself to be, at least for now, incapable of making decisions that promote the common good. Their decision to turn against veterans was a grave miscalculation that will hopefully rouse a few million of the recalcitrant, alienated, apolitical 100 million Americans who typically decide not to vote in elections, to get straight to the polls.
This family-sized combo of a revival of the Biden agenda and angry Republicans making terrible choices on popular legislation may help the Dems in November.
Maybe a cosmic ray beam hit Washington and gave Schumer the Machiavellian cunning of a Republican and McConnell the guileless ways of a Democrat.
Had enough for this week? Wrongo certainly has. Letâs try to grab a few minutes and not think about the state of the world, or why Republicans insist on speaking like neo-Nazis. Itâs time for our Saturday Soother.
The drought in New England still has the upper hand. We have little need to cut our grass every week. Weâre watering a few specimen plants, but since our water source is a well, we must be careful.
Time to grab a mug of cold brew (or iced tea) and find a seat under a tree. Now watch and listen to Yo-Yo Ma perform âIn the Galeâ, which was shot outdoors in late spring. It is from The Birdsong Project, a community dedicated to the protection of bird life.
This performance includes many wild birds accompanying the cello:
Sunrise, high tide, Sea Street beach, East Dennis, MA – July 2022 photo by Bob Amaral Photography
The fallout from the Trump years continues. On Monday, ProPublica reported that the IRS had decided that the Family Research Council (FRC), a Right-Wing political lobbying group, qualifies as a church for tax purposes:
âThe Family Research Councilâs multimillion-dollar headquarters sit on G Street in Washington, DC, just steps from the US Capitol and the White House, a spot ideally situated for its work as a right-wing policy think tank and political pressure group.â
The FRC is now a church, thanks to the IRS and its Commissioner, Charles Rettig. You can be forgiven for not remembering that Trump appointed Rettig to be Commissioner of the IRS in 2018. He got the job by writing a 2016 op-ed saying Trump didnât have to release his tax returns, despite every major presidential candidate having done so since Nixon.
ProPublica noted that the FRC says on its website that it is a:
â…nonprofit research and educational organization dedicated to articulating and advancing a family-centered philosophy of public life. In addition to providing policy research and analysis….[the] FRC seeks to inform the news media, the academic community, business leaders, and the general public about family issues that affect the nation from a biblical worldview.â
Now that the IRS has blessed FRC as a church, it is no longer required to file a public tax return, (known as a Form 990), which reveals key salaries, the names of board members and related organizations, large payments and/or grants by the organization.
And unlike with charities, IRS investigators canât initiate an audit on a church unless a high-level Treasury Department official has approved the investigation.
Right Wing Watch, an organization that monitors the activities and rhetoric of right-wing activists and organizations reported on the ties between FRC and Trumpâs Jan. 6 effort to overturn the presidential election:
âThe Family Research Council…was deeply involved in…Trumpâs efforts to overturn the results of the 2020 electionâa fact made all the more apparent by revelations during the June 23 public hearing of the House select committee investigating the conspiracy that led to the Jan. 6, 2021, insurrection at the US Capitol.â
You probably remember the head of the FRC, Tony Perkins (not the deceased actor) by some of his grandstanding in the culture wars:
In 2005, Perkins was against disconnecting life support for Terri Schiavo, a woman who had been in a “persistent vegetative state” for a number of years.
In 2008, Perkins called the passage of California Proposition 8 (which prohibited same sex marriage in the state) “more important than the presidential election”.
In 2018, Perkins said, regarding Trump’s adulterous past, he should be given a “Mulligan“, because Trump was “providing the leadership we need at this time…â
âPart of FRCâs strategy is to pound home the false claim that LGBTQ people are more likely to sexually abuse children than heterosexual people. The American Psychological Association, among others, however, has concluded that âhomosexual men are not more likely to sexually abuse children than heterosexual men are.â
Designating the FRC as a church for tax purposes is part of a disturbing trend. The WaPo reported in 2020 about the growing list of religious groups seeking church status from the IRS.
The potential cost of becoming a church is that the organization can no longer conduct political operations on behalf of politicians or lobby on legislation. In practice, that is simple to get around. The FRC now has its church arm alongside a separate lobbying arm called Family Research Council Action.
The arms separate their messaging on two websites, with the FRC hosting issues-based content supporting its Christian worldview while the Family Research Council Action explicitly endorses candidates. Both arms are registered at the same address and both share all five of the part-time employees the FRC lists on its tax form, including Tony Perkins.
These “churches” sure have figured out how to run a scam on the US government.
Itâs past time for the IRS to end this charade and tax churches. Biden should fire IRS Commissioner Rettig, who was also the guy in charge when the IRS politically targeted Trump âenemiesâ James Comey and Andrew McCabe for invasive tax audits.
These people and their âchurchesâ are simply Republicans with a talent for abusing the bible and raising obscene amounts of money. Thomas Jefferson said it best:
âIn every country and in every age, the priest has been hostile to liberty. He is always in alliance with the despot, abetting his abuses in return for protection to his own.”
Spring snow, Mt. Princeton, CO – April 2022 photo by Haji Mahmood
For the past two years, Covid has thrown the global supply chain into a tailspin. Even though the cargo industryâs ships, trains, trucks, and planes worked full-time, we still have shortages. Now, Chinaâs zero Covid policy is increasing both the uncertainty and costs of efficiently operating the still-choked global supply chain.
âWe expect a bigger mess than last year,â said Jacques Vandermeiren, the chief executive officer of the Port of Antwerp, Europeâs second-busiest for container volume, in an interview. âIt will have a negative impact, and a big negative impact, for the whole of 2022.â
Bloomberg says that China accounts for about 12% of global trade. Itâs recent Covid lockdowns have idled factories and warehouses, slowed truck deliveries and exacerbated container logjams. And since US and European ports are already swamped, this new outage will leave them vulnerable to additional shocks.
China is home to six of the worldâs 10 largest container ports. Itâs the global economyâs most important manufacturing hub. While most countries have decided to learn to live with the Covid, Beijing has maintained its Zero Covid policy, where even small outbreaks can shut down large population centers and slow economic activity.
Itâs taking an average of 111 days for goods to reach a warehouse in the US from the moment theyâre ready to leave an Asian factory. Thatâs similar to the record of 113 set in January 2022 and more than double the time that the same trip took in 2019, according to Flexport Inc., a freight forwarder.
Julie Gerdeman, CEO of supply-chain risk analytics firm Everstream Analytics says:
âOnce product export activities resume and a large volume of vessels make their way to the US West Coast ports, we expect waiting times to increase significantly…â
Youâd think that after more than two years into this pandemic, America would have realized that single-sourcing much of our industrial production to a dictatorship is a bad idea. One with enormous consequences when something goes wrong.
But we havenât. US Treasury Secretary Janet Yellen has advocated for what she calls âfriend-shoringâ meaning reducing our dependence on China and Russia. Brian Ehrig, a partner at the consulting firm Kearney is co-author of a report that found 78% of CEOs are either considering reshoring or have done it already. He says that relocating supply chains:
â…might cost more, but if you can make smaller quantities that you can then sell at closer to full price, you can actually completely change the game…â
Le Monde reminds us that capitalism has created hidden dependencies in Ukraine. It is the main producer of the wiring harnesses that hold together the many electrical cables in a car. They quote Christine Lagarde, president of the European Central Bank (ECB) in a speech in Washington, DC: (brackets by Wrongo)
“Ukraine produces one fifth of Europeâs [harness] output,”
These parts are low value added, but essential in the construction of cars, a perfect outsourcing target for capitalism. Globalization isnât going to die; but maybe it can evolve. Much of that possible shift hinges on convincing consumers to accept higher prices for the certainty of supply.
For example, once the CDC finally gave us unambiguous advice about wearing masks, there was a huge rush to open mask production facilities in the US. But now theyâve all closed, because itâs cheaper to make masks in China.
Dictatorships can ensure that labor remains cheap. Thatâs great for capitalists, not so good for people who needed masks in 2020 when China decided to keep most of them for their population. Or, now, when China is still willing to shut down its economy to stop a Covid outbreak.
And, despite all the good will in the world, nobody will make masks in the US if it means their five-dollar boxes of masks go unsold because everyone is buying the one-dollar boxes. Instead, they will complain about how the company asking five dollars is a bloodsucker.
Weâre told that capitalism works. That it just does. That just-in-time supply cuts costs for consumers. But does it?
Art installation by Steve Lambert â 2013, Times Square, NYC
It’s proven not to work during an emergency. But what are the chances of re-shoring ever happening? Business school really only teaches one thing: Short-term profits rule and everything else is irrelevant.
After all, America is a business, not a country.
What should be readily apparent is that despite the CEO poll above, our corporate masters are certainly not thinking about systemic change to supply chains. Nor will they, as long as the focus is reducing costs as low as possible for maximum shareholder gain.
The point is that unless business is incentivized otherwise, don’t expect the supply chain to get any better. That incentive must come from the government in the form of tax policy or subsidy.
North Landing River, near Virginia Beach, VA – April 2022 photo by Erik Moore
Our media ecosystem is overwhelming us. Some of the information is accurate, some is bogus, and much is intentionally misleading. And thatâs a deliberate strategy. While it didnât originate with Steve Bannon, he perfected it with his thought that:
â…the Democrats donât matter….The real opposition is the media. And the way to deal with them is to flood the zone with shit.â
This is why the ongoing cultural war works so well for Republicans. Thereâs always some petty war going on between the Parties that’s stoked by the media. And itâs almost always about cultural issues since Republicans really donât have a policy platform, and donât want to go against large corporate America. When you go against corporations, you lose the money needed to get elected.
But we should see the big corporations as our common enemy. Time Magazine has an article about how overtime pay has disappeared:
âIf it feels like youâre working longer hours for less money than your parents or grandparents did, itâs because you probably are. Adjusted for inflation, average hourly wages have actually fallen since the early 1970s, while average hours worked have steadily climbed. American workers are increasingly underpaid, overworked, and overwhelmed.â
One reason is the loss of overtime pay:
âIf youâre under the age of 45, you may have no idea that overtime pay is even a thing. But…middle-class workers used to get a lot of it….That means that [for] every hour you work over 40 hours a week you work for free, contributing…a giant pool of free labor that modern employers have come to expect and exploit. Profits are up, real wages are down, and income inequality has soared to its highest level since the Gilded Age.â
Overtime pay was one of the great New Deal reforms. It was a core provision of the Fair Labor Standards Act (FLSA). The FLSA set the minimum wage at one-half the median wage and the overtime threshold at three times the minimumâan amount equal to 1.5 times the median wage.
But both the minimum wage and the overtime rules began to change in 1975, and rising income inequality since 1975 is responsible for a $50 trillion upward redistribution of wealth and income from the bottom 90% households to those in the top 1%. Hereâs a chart showing the impact of losing overtime. Productivity goes up, but is completely decoupled from income:
The Economic Policy Institute has a tool called âCompany Wage Trackerâ that allows you to select any big corporation and see what percentage of their employees make below a certain wage. For example, it shows that 51% of Walmart employees earn below $15/hr.
The NYT wrote about Mary Gundel, a manager at a Dollar General store in Tampa, FL who was fired for speaking out about the chainâs policies regarding overtime and short-staffing:
âThe store used to have about 198 hours a week to allocate to a staff of about seven people….But by the end of last month, she had only about 130 hours to allocate….With not as many hours to give to her staff, Ms. Gundel often had to operate the store on her own for long stretches, typically working six days and up to 60 hours a week with no overtime pay.â
Ms. Gundel was working 60 hours a week and making $51,000 a year. That means she’s making only a little more than the minimum wage. Dollar General is one of the most profitable retail chains in the country.
Prices are going up everywhere across America, and corporations are making proportionately more income. This is what the Democrats should be focusing on, standing up for workers, doing what is right as opposed to groping for answers to the Republicanâs culture war issues.
Thereâs plenty thatâs wrong in America. But whatâs wrong doesnât see the light of day alongside all of the pissing contests about Critical Race Theory, or predator grooming or LGBTQ issues. These are ginned-up to make sure you wonât pay attention to whatâs really going on.
Something seems to be brewing. Weâre seeing halting attempts at unionization at Starbucks and Amazon. Those employees want a better life; they want to have a seat at the table about the future of the company.
We need to remember that without the âessential workersâ the country grinds to a halt. We need to support those who try to organize. We need to wrest some economic power away from politicians and big businesses. And finally, some faceless people who are sick of being wronged are trying to do just that.
Enough for another week. Itâs time to let go of the news. Itâs time for our Saturday Soother. On the Fields of Wrong weâre preparing our vegetable garden, although it will be a few weeks before itâs warm enough for the plants to survive. We had an overnight temperature of 32° earlier this week.
Now, grab a seat by a large window and listen to violin soloist Soojin Han play Chopinâs âNocturne No.20 in C# minorâ in August 2019. Sheâs playing on a 1666 Stradivarius:
It sounds beautiful.
Chopin composed the piece in 1830, but it was published in 1875, 26 years after his death. It was featured in the movie “The Pianist” in 2002.
Sunset, Sequoia Lake, CA – April 2022 photo by An Pham
Today is tax day, and Wrongo will get his in on time. But the question of how America deals with its taxing is rightly under scrutiny. Blog reader Ottho H. commented on Wrongoâs Sunday post about the IRS:
âTo me itâs an enduring mystery, and a source of anger and disgust, why Congress starves the IRS…. Doubling the IRS budget (by, say, $12B per year) seems like the best and most âsure thingâ ROI the govât can make….To the extent that the âstarve or defund the IRSâ movement is due to lobbies and Congressmen out to protect and further enrich the already rich, then at least that should be made more transparent to the public. This is a no-brainer cause that I can get behind.â
The IRS is chronically underfunded. Government data show that millionaires and billionaires are rarely audited, while lower-income families are disproportionately targeted (five times more likely) for enforcement actions. The agency is severely understaffed. It works with outdated technology, meaning that any paper returns must first be transcribed into a computer. It also means hundreds of billions of dollars in taxes go uncollected.
The answer to so many of the IRSâs woes: antiquated tech systems, congested phone lines, threadbare enforcement – Â is more funding. Itâs one of the few federal agencies that would generate a large and nearly immediate return on investment if it could spend more.
âThis additional money for the IRS to target all Americans is absolutely wrong…It will target our families, itâs going to target our small businesses, and itâs going to go after them to get them to pay more money.â
And Sen. Todd Young (R-IN) about how new IRS funding would be used:
âWe know that most of this $80 billion will be used to enhance the ability of the IRS to target middle Americans…â
The Economist says that the IRS entered this tax season with a backlog of 24 million returns, 20 times worse than normal. At the end of this tax season, it will be nearly two years late in processing many of our returns:
âSpending [at] the agency has declined by nearly 20% since 2010. At the same time, the number of tax returns has increased by 20%. The backbone of the system, a nationwide taxpayer database, is built on top of a 1960s computer language rarely taught in schools.â
The IRS is in the process of hiring 10,000 workers to help clear the backlogs, but the biggest challenge is retaining their senior auditors. About a fifth of agency staff are eligible for retirement. Many have already left as a result of Covid, and they were exactly the kind of people needed to maintain the agencyâs enforcement efforts.
The Economist says that the IRS audited 0.3% of corporate tax returns filed in 2018, down from 1.6% in 2010. The number this year may be even lower. They quote Charles Rettig, IRS Commissioner, as estimating that the government loses about $1 trillion in tax revenues annually because of cheating.
Even if new funding is appropriated, it will take time to re-build the agency. Money that is appropriated now for that purpose would be spent over the course of the next fiscal year (which ends on 9/30/2023) and the effects of those reforms probably wouldn’t start to show in the statistics until then.
Itâs always been easier to destroy than it is to build. Credit the GOP for understanding this truth.
Time for the Republicans in Congress to wake up! No one likes paying taxes. Even for those who recognize that thereâs a societal gain when we all pay them, filing our tax returns is a hassle. Itâs time we had a better funded agency that could return the enforcement efforts back toward the richest corporations and wealthy individuals first.
To help our Congress Critters wake up, watch and listen to Mavis Staples perform âLove and Trustâ from her album âLive in Londonâ, recorded in 2018 at London’s Union Chapel. Sheâs joined by Jump Bluesman Rick Holmstrom on his Telecaster:
Sample Lyric:
The simplest things can be the hardest to do
Can’t find what you’re looking for even when it’s looking for you
The judge and criminal, the sinner and the priest
Got something in common, bring em all to their knees
[Chorus] Do what you can, do what you must Everybody’s trying to find the love and trust I walk the line, I walk it for us See me out here tryin’ to find some love and trust (Love and trust) (Love and trust)
Evan Osnos reports in the New Yorker that it was Sen. Manchin who suggested to Biden that the physical infrastructure bill and the social infrastructure bills be split from each other:
âIâm saying we can get an infrastructure dealâa traditional infrastructure deal….Then we come back on human infrastructure and look at the needs.â
Osnos goes on to say that even after the bills were split, and after months of giving ground to Manchin on the social spending particulars, Manchin never budged from an unreconstructed conservative talking point: give Americans too much help, such as extended unemployment insurance, and they will become lazy and dependent. Manchin told reporters:
âI cannot accept our economy, or basically our society, moving towards an entitlement mentality.â
Manchinâs opposition to the Build Back Better (BBB) bill has ended the expanded Child Tax Credit (CTC) program. According to the Treasury Department, in West Virginia, it delivered payments to 305,000 children. And statewide, 93% of children are eligible for the credit, equaling the highest rate in the country.
ABC reported that Manchin questioned whether parents would misuse CTC payments to buy drugs. In private conversations, Manchin also said he believed paid family leave would be exploited by West Virginians to go hunting during deer season. Bloomberg says heâs wrong:
Looking at the chart, people overwhelmingly have used it for food, rent, utilities and to buy clothing and education. The poorer the family, the greater chance the CTC will be spent on necessities: a report from the Center on Budget and Policy Priorities found 91% of households making less than $35,000 per year used the money to pay for food, shelter, clothing and other necessities. They also found that Black and Hispanic families were more likely to use their credits on education-related costs, such as school supplies.
An October survey by the Census Bureau found that 25% of parents with young children also use the credits to pay for child care. Manchin is worried that there will be people gaming the system, and since perfection is unattainable, we shouldnât be giving these kids and their parents anything.
His attitude is one that many Americans agree with. They think that since they arenât going hungry, thereâs no reason for anyone else to be hungry, either. Itâs a vestige of the Protestant work ethic. They think that people like CTC recipients shouldnât get free stuff, because it is taking something from them.
Itâs an ugly, selfish way of looking at life.
America has successfully stigmatized being poor. How many in the bottom quartile of income are conditioned to believe they donât deserve help? While corporations and the top 1% always lobby for financial assistance, and welcome it when it comes.
There are persistent rumors that Manchin will switch Parties. That shouldnât be the Democratsâ objective, but to the extent there is a purity test to be a Democrat, it probably includes helping poor children and their struggling parents.
OTOH, the Build Back Better bill isnât fully dead, nor is the voting rights bill. Thereâs a whole year left of appointing and legislating before the Republicans (possibly) retake Congress. Maybe weâll want 50 Senators until then?
Democrats know that few of those judges would have been confirmed without Manchin voting for cloture to end debate on their nominations. If Manchin were to change Parties and stop voting with the Democrats on procedural issues, almost none of the remaining White House appointments would be filled.
It seems clear that IF some version of BBB does pass the Senate, it wonât include all of the progressive goals. Wrongo assumes that both immigration reform and the CTC may need to be dealt with separately.
What Democrats will then need to decide is whether theyâre willing to hold their noses and vote for a bill that includes $500 billion in climate change investments, plus a critical childcare provision, more for health care, and a few other goodies.
Hereâs another seasonal tune, âChristmas Wrapping” by The Waitresses from 1981. This year marks 40 years since this holiday classic was released. In the song, the lead singer hints that there is a guy she met at a ski shop that she regrets not having the time to date. Later, she realizes that she must go back to the store, and meets the guy she had wanted to connect with:
Bear Canyon, Tucson AZ – October photo by Carla Mitchell
Way back in 2020 (remember 2020?), Democrats campaigned on raising taxes on the rich. Itâs still something that polls show a majority of Americans want. But House Dems are now proposing to raise the state and local tax (SALT) deduction, rather than eliminate it. The SALT tax limitation was one of the few responsible measures in the GOPâs 2017 tax-cut bill since it raised revenue mostly from wealthy people.
Wrongo lives in a state where the federal limitation of $10k on SALT taxes leaves him paying additional federal taxes. But most Americans are not impacted by the current limit on SALT deductions. Increasing it would primarily benefit Americaâs high income earners plus some middle class urban and suburban homeowners.
âHouse Democrats released Wednesday a new draft of their big social spending and climate bill â tucked inside of which was a massive new payoff to wealthy people. The Democratsâ bill is supposed to make the nation fairer and more competitive. This cynical, wasteful policy should have no place in it.â
A handful of Democrats from Blue states say they will oppose Bidenâs major social spending bill if it fails to include SALT cap ârelief.â Once again, the fault lines within the Democratic Party are visible. Pelosi is in a bind. Refuse the demands for repeal of the SALT cap, and Dems wonât have the votes to pass either Bidenâs big bill or the infrastructure bill. And since they already have a problem finding new revenue to offset the costs of their programs, so this will make that job a little harder. More from WaPo:
âUnder the House plan, the amount of state and local taxes people can deduct would rise from $10,000 to $72,500. This gives high-income people a $23,000 tax break. The Tax Foundation, a think tank, estimates that 70% of the tax change would flow to the people making $250,000 or more. The Committee for a Responsible Federal Budget reckons that the plan would cost $300 billion, which would make it the third-most costly item in the bill â far more than it would devote to major anti-poverty programs.â
No one who owes $72,500 in state and local taxes is middle-income, but the SALT deduction does help many in the middle class, at least in the Blue states. Since most Blue states are also high tax states, not having a limitation literally saves $ thousands in taxes for some in the middle class. It had been that way for decades until the GOP capped it in 2017 and gave that money to the rich by lowering their taxes.
Finally capping the SALT hurts the resale possibilities for some otherwise modest homes in high tax areas. Theyâre not going to appeal to a purchaser when the mortgage payment is about the same as the tax payment every month. When a new buyer canât completely deduct all of their property tax and local income taxes, it can make even a modest home look like a bad financial decision.
Sens. Robert Menendez (D-NJ) and Bernie Sanders (I-VT) unveiled an alternative plan that would keep the SALT cap, but exempt people who make less than $400,000 per year. That seems like a good idea. The House can repeal the SALT cap for those earning under $400,000 bringing it in line with the rest of Biden’s tax plan. This would help some in the middle class, although passing the Biden tax reform is still necessary.
Itâs Saturday, and therefore, time for us to put away our concerns about what happened in Virginia or whether Manchin is simply a time-waster. And letâs calm ourselves as we kick off the weekend. Itâs time for our Saturday Soother.
Here in CT, it was 29° Friday morning, making it three mornings of frost in a row. Our snowblower is coming back from the repair shop, and most plants are beginning their winter dormancy. At the Mansion of Wrong, weâve finished repairs to our bluestone walkway.
With a cold, clear weekend on tap, we all should bundle up and sit in a comfy chair by a window. Today, letâs start with a hot steaming cup of Toasted Coconut coffee ($18.99/12oz) from BD Provisions in New Milford CT.
And after another tough week, letâs watch and listen to Sting perform âIf Itâs Loveâ from his 2021 album âThe Bridge.â This song will put you in a good mood. And the dancers are wonderful. Watch it!
