Category: Tax Policy

Sunday Cartoon Blogging – October 24, 2021

Last Friday, Wrongo and Ms. Right got their Covid booster shots. It’s a sample of one, but at our local drugstore here in a very conservative part of Connecticut, there was a line to get shots. Some were there for their first vaccinations, but most were waiting for a booster. There’s never a line around here for anything, except when the lobster food truck rolls into town.

But sadly, this isn’t the story for the rest of the country, particularly for cops and heath care workers. Some are saying that the vaccine mandates do little. But health workers who don’t really believe in science are leaving the job. And cops who don’t really care about public safety are leaving policing. Sounds like mandates are working just fine. On to cartoons.

Mandates are nothing new:

Most Republicans want boosters:

Texas got two new districts. Then the GOP redrew urban districts so that incumbent minority congresspeople are now running against each other:

One of our two political parties thinks that elections shouldn’t be the basis for choosing our representatives. That means democracy doesn’t matter to them anymore. They say it’s because there’s too much voter fraud, and no one can trust the result of any election now, anywhere.

So, the Dems think the next step is to change the Senate rules, modifying the filibuster. That would pave the way to pass the Protect the Vote Act. But there’s real danger that when the Republicans inevitably regain the majority, they will change that law to whatever the next Trump-like Republican leader wants voting rights to be. Could it be that Republicans are blocking the bill, not just to deny voting rights to minorities, but to lure the Democrats into changing the filibuster?

The economic ship sails on, and 40 years later, there’s zero thought to changing the message:

Biden compromises on the social spending bill. Still, it’s not certain to pass:

If only there was a solution to our supply chain problems:

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We’d Better Build Back

The Daily Escape:

Sunset, Herring Cove, Provincetown MA – October 18, 2021, photo by Karen Riddett

“Men must either govern or be governed.”   ̶  Elihu Root, 1912 Nobel Peace Prize Winner

Wrongo has never cared for Biden’s “Build Back Better” slogan. He prefers “We’d Better Build Back.” The focus should be on what could happen if we remain on the track favored by Sens. Manchin and McConnell, along with McConnell’s Republican colleagues.

We’d better build back from the wreckage of the Trump presidency. We’d better build back from the wreckage caused by Congressional inaction for the past 20+ years.

Wrongo is currently reading “Wildland, The Making of America’s Fury” by Evan Osnos, journalist at the New Yorker. Osnos says in the Prologue, (pg. 13) that September 11, 2001, and January 6, 2021, were two cataclysmic events in American history, and that the intervening 20 years was: (emphasis by Wrongo)

“…a period in which Americans lost their vision for the common good, the capacity to see the union as larger than the sum of its parts. A century and a half after the Civil War, America was again a cloven nation. It’s stability was foundering on fundamental tensions over the balance between individual freedom and the protection of others, over the reckoning with injustice, and over a basic test of any political society: Whose life matters?”

Umair Haque makes the importance of building back clear in a way that only someone living abroad can:

“America has the rich world’s lowest quality of life, by a long way — after all, Americans will die 5–10 years younger than Spaniards or Germans, but even that understates the issue. It is uniquely a dismal life: nowhere else do we see opioid epidemics, kids massacring one another at schools, having “active shooter drills…”

Haque points out that the fundamentals of a decent life: A living wage, universal access to healthcare, affordable education and housing, and a secure retirement are no longer within reach for the average American.

That’s why we’d better build back.

Step one is to deal with the threats to democracy. We will soon know if the Democrats can actually rouse themselves from their Republican-lite slumbers to pass the Freedom to Vote Act to help get this done.

Step two is to pass the Build Back Better Act, Biden’s social spending bill. It’s now clear that the bill will need to shrink in order to pass. And like the House and Senate, America doesn’t agree on which of its big-ticket items are most important, but shrinkage is on the agenda.

The bill has remained popular in the polls. One thing that’s clear from public surveys: People want to pay for the bill by taxing the rich.

A Vox and Data for Progress poll, conducted between October 8-12, found that 71% of voters support raising taxes on the wealthiest 2% of Americans to pay for the bill. Eighty-six percent of Democrats and 50% of Republicans back that idea. Other tax provisions that could be included in the bill, like tax increases on corporations and capital gains, were supported by more than 65%. Increasing corporate taxes is Wrongo’s preferred policy approach to raising revenues.

Vitally important to the job of building a better country is the proposed new spending on health care, long-term care, childcare, and clean-energy jobs. These ideas are supported by 63% of voters in the poll.

The wisdom of the framers has given us an unrepresentative Senate. That unrepresentative Senate has given us the filibuster, which can be changed, but apparently not by our current Democratic Senators.

And despite its popularity, Biden’s social spending bill won’t be passed in its present form until Joe Manchin and Krysten Sinema get what they want removed from it. A real question is whether we have moderate Democrats or just mediocre Democrats who are willing to kill democracy as we know it for some phony principle.

But you can bet it’s not just Manchin and Sinema. There are at least 8-10 other Democratic Senators with substantial bases of wealthy contributors who feel the same pressures and are perfectly happy to have the whole package scaled down, delayed, and possibly killed.

This brings us to step three. Elect better Senators, but how? We were taught in school that in a democratic republic, you get the politicians that the voters (or at least those people who are allowed to vote) want.

This means we need better voters.

How do we get them? It’s hard to know how to do that, except you know, PASS THE FREEDOM TO VOTE ACT!

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DOD Could Save $1 Trillion Without Changing US Security

The Daily Escape:

Sea Street Beach East Dennis MA – October 2021 photo by Ulla Wise

Rather than adding to the current vibe of general despair, a new report from the nonpartisan Congressional Budget Office (CBO) offers a number of interesting perspectives on how the US defense budget could sustain a $1 trillion cut over the course of 10 years.

The CBO report says that national defense programs could absorb a well-structured $1 trillion cut while still protecting the homeland and America’s allies from foreign adversaries.

From Responsible Statecraft:

“The new report outlines three different options for cutting the Pentagon budget by $1 trillion over the next decade — a 14 percent reduction. Doing so would still leave the department with $6.3 trillion in taxpayer dollars over the next ten years, in inflation-adjusted 2022 dollars.”

The report’s mandate was to look at how to adjust the size and focus of US military under smaller federal budgets. It created three broad options to illustrate the range of strategies that the United States could pursue under a budget that would be cut gradually by a total of $1 trillion, or 14%, between 2022 and 2031. They developed the options using their Interactive Force Structure Tool.

Here are the CBO’s three options for military force reduction:

  • Maintain the existing national security strategy but with fewer personnel.
  • Change the existing national security strategy to focus more on countering adversaries with international allies and coalitions.
  • Change the existing national security strategy to focus more on protecting America’s access to sea, land, and air and space.

In all three options, the CBO slashed full-time active forces, while leaving the less expensive reserves at their current levels. While acknowledging that “none of the plans are without risk,” they concluded that the Pentagon could reduce spending without sacrificing our security.

According to the report, in all three of CBO’s options, units would be staffed, trained, and equipped at the same levels as they are today, but there would be fewer units, or different combinations of units. The CBO chose to retain fully staffed units because, while personnel are expensive, partially staffed units would not be able to execute their missions. That would make the US more of a paper tiger than we are currently.

The CBO report also put the potential cut in historical perspective. While significant, a $1 trillion cut (14%) over a decade would be far smaller than the cuts America’s military spending in 1988 to 1997 (30%), and the 25% cut we had in 2010-2015. A 14% cut from fiscal years 2022 to 2031 would also still leave annual defense spending at more than it was at any point from 1948 through 2002.

Lindsay Koshgarian, program director at the Institute for Policy Studies (IPS) said:

“The US military budget is now higher than it was at the peak of the Vietnam War, the Korean War, or the Cold War….We are spending far too much on the Pentagon, and too little on everything else…”

A $1 trillion saving isn’t chump change. Those funds could be used to prevent future pandemics, address climate change, or reduce economic injustice. None of those are small matters. And they are all matters of political priorities.

No self-respecting Republican war hawk would have anything to do with cutting the military’s budget. And with the exception of a handful of left leaning Democrats, every other Democrat will shrink from the idea of reducing the military budget. It’s too risky politically.

We actually need Congress to solve three problems: Our revenue problem, our social spending/cost inflation problem, and our defense spending problem.

The CBO idea tackles the defense spending, but we need to consider taxes and revenue along with spending. We need to raise taxes on corporations and the wealthiest individuals while cutting that defense spending.

Turning to social spending, if you ask Americans what spending they want to cut, they will never say that we ought to ravage people’s retirement security. And 90+% of entitlement spending goes to the elderly, the disabled, or people who worked at least 1,000 hours in the past year. The big savings should come from reducing the growth in the cost of medical services.

Taking $1 trillion from Pentagon spending would be a great start, but we have other work to do.

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Biden Invites Sinema and Manchin to Talks

The Daily Escape:

Sunset, Cape Disappointment, WA – September 2021 photo by Rick Berk Photography. The lighthouse was built in 1856 and was the first in the Pacific Northwest.

In politics as in business, there’s theater, and then there’s the real work. Biden outlined his goal of raising taxes on the wealthy to strengthen the middle class and boost the economy in remarks on Thursday afternoon at the White House.

On Wednesday, Biden met with Sens. Joe Manchin (D-WVA) and Kristen Sinema (D-AZ), looking to find a path forward on the infrastructure bill, along with the big social spending package and Machin’s voting rights bill.

Democrats will use budget reconciliation for the social spending bill, bypassing Republican opposition. It allows them to win Senate passage with 51 votes, with VP Harris casting the tie breaking vote, rather than the 60 votes that would otherwise be required.

But that means Manchin and Sinema need to vote for the big bill, something they have said they won’t do. No one who was in the room when the talks took place came out and said that a deal was pending. But there’s still time for that to emerge.

The House Ways and Means Committee unveiled a tax proposal this week to pay for the $3.5 trillion package, which includes Democrats’ plans for universal pre-K, expanding Medicare, child and elder care, and the environment. The committee approved its portions of the big bill in a near party-line vote Wednesday, which included the new tax provisions.

Predictably, the WSJ’s editorial board weighed in on the proposed tax plan, saying:

“…this bill looks like a House Democratic suicide note.”

More from the WSJ: (Emphasis by Wrongo)

“If Americans are successful, Democrats want to tax more of their income. The top individual tax rate will rise to 39.6% from 37%, as Mr. Biden promised. But wait: The higher tax rate will kick in at a mere $400,000 for individuals and $450,000 for married couples. That’s down from $523,600 and $628,300 under current law.”

A mere $450,000. They trot out their “pity the poor rich” trope any time the possibility that tax rates might be raised shows up. Let’s unpack this:

This opens the possibility that there will be some families that are below the 99th percentile of household income and above the 98th threshold. Under the new law, they would be forced to pay about $700 more in taxes than they do now. That’s assuming the Democrats’ latest effort at socialism in America is enacted. This paltry tax increase might cut into the nanny’s Christmas bonus. Why are Democrats so cruel?

More from the WSJ:

“This is a steep rate increase on two-earner upper-middle-class families. They may reach these income levels after a long career, and only for a couple of years, but Democrats want more than 40% if you include the 1.45% Medicare payroll tax and the 3.8% Obamacare surcharge on investment income.

If you make more than $5 million, there will also be a three-percentage-point income-tax surcharge. That would take the top tax rate to something like 46.4%. Add California or New York taxes, and government will take about 60%. “

The put-upon high-income salaried professionals follow this mantra:

“Why do I consider myself successful? Because I am rich! Why am I rich? Well, I was successful! All the other Whites in our gated community are exactly like me, only they’re slightly less successful!”

Note that the WSJ’s editorial board treats these proposed marginal tax rates as if they were effective tax rates. Effective tax rates are notoriously lower. For the top 1% of US taxpayers, (average income of $1.16 million in 2018), all federal taxes: income, payroll, corporate, estate, and excise, averaged 29.6% last year.

More from the WSJ on the Democrats’ plans for the estate tax: (emphasis by Wrongo)

“The death tax exemption would also be cut in half to $5.5 million—which would also hit small businesses and savers who have built up a small nest egg.”

The way the estate tax works is that you also get the full benefit of your spouse’s exemption, should you outlive him/her. So, the proposed $5.5 million exemption means that married couples would still get to pass on their “first” $11 million tax-free to their heirs.

In what world is $11 Million a “small” nest egg?

Republicans (and their media enablers) are always against tax increases. Derailing taxes, while appointing more conservative Supreme Court Justices are their political red lines.

It’s time for Democrats, including Manchin and Sinema, to stand shoulder-to-shoulder and get tax reform done this year.

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Lobbyists Are Hiring Democrats to Kill Tax Reform

The Daily Escape:

Sunset, Acadia NP, ME – 2021 photo by Rick Berk Fine Art Photography

From the NYT:

“The wealthiest 1 percent of Americans are the nation’s most egregious tax evaders, failing to pay as much as $163 billion in owed taxes per year, according to a Treasury Department report released on Wednesday. The analysis comes as the Biden administration pushes lawmakers to embrace its ambitious proposal to beef up the Internal Revenue Service to narrow the “tax gap,” which it estimates amounts to $7 trillion in unpaid taxes over a decade.”

The Treasury Department estimates that its tax gap proposals could raise $700 billion over a decade.

This is crucial, since Democrats are counting on collecting unpaid taxes to help pay for the $3.5 trillion spending package they are drafting. The House is set this month to begin advancing the spending package, but liberal and moderate factions of DC Democrats are divided over how much to spend and how to offset the cost.

Republicans are unified in opposition to the legislation, and the US Chamber of Commerce has vowed to defeat it. Among the other players are the Business Roundtable and Americans for Tax Reform. And fronting for them is a former Democratic Senator, Heidi Heitkamp. They have unleashed a lobbying operation targeting a small number of moderate Democrats in Congress who hold the balance of power.

Democrats hold a fragile majority in both Houses of Congress. Any hope to enact an ambitious domestic reform program requires that all Dems be on board. Moreover, increasing taxes on corporations and the very rich will be heavy lifts, given the opposition.

From NY Magazine’s Jonathan Chait: (brackets by Wrongo)

“Last week, Democratic senator turned anti-tax lobbyist Heidi Heitkamp, who represented North Dakota for one term before losing in 2018, appeared on CNBC to make a surprisingly emotional appeal against President Biden’s plan to close a notorious loophole for the wealthy. The loophole, called “stepped-up basis”…[that] allows capital gains to escape any tax at all as long as the owners pass the asset on to their heirs before they sell it.”

It turns out that Heitkamp is one of several Democrats lobbying against the Biden tax plan. Chait cites former Democratic Congressman Nick Rahall, who published an op-ed in his hometown West Virginia newspaper advising Democrats that they:

“…can avoid alienating rural states by keeping family-owned businesses and farms in mind.”

Former Democratic Senator Max Baucus (MT) has also stepped forward to write an op-ed advising Democrats that their political fortunes hinge on maintaining low tax rates for wealthy heirs.

The NYT reported that Heitkamp was recruited to the anti-Biden side by superlobbyist John Breaux, a former Louisiana Democratic Senator and Congressman, who once confessed:

“My vote can’t be bought, but it can be rented.”

Washed up politicians all move on to their second act: Monetizing their influence.

Heitkamp told the NYT that she’s finding a receptive audience among potential swing voters in rural areas, especially owners of family farms, even though Democrats say those voters would never be affected by the proposed tax changes:

“This is very consistent with my concern about revitalizing the Democratic Party in rural America….You may want to do this…but understand there will be risk….”

Is her point that if Democrats don’t preserve the loophole that allows fabulous amounts of wealth to escape taxation when passed down to wealthy heirs, they might alienate hardscrabble rural voters?

Will Dems risk losing more of those voters if they put a crimp in the elites’ efforts to maintain entrenched and inherited privileges across generations? Whatever happened to the narrative that rural Real Americansℱ voted for Trump to protest America’s rigged economy?

Rural people, like everybody else, want elected officials who will have their backs and fight for them.

We’ve had this kind of manipulation for the last 50 years. It’s how we got a society where some can buy $3 million weekend “cottages”, while so many other Americans line up at food banks or can’t get basic health care.

It’s true that enacting a big tax hike comes with risks: Corporations and the wealthy will fund a lot of Republican TV ads attacking Dems over it.

The risk is worth it. Otherwise, for every dollar in tax hikes Democrats concede to Republicans and the US Chamber of Commerce, they will have to give up a dollar in spending on programs like Medicare, Medicaid, or the child tax credit.

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Monday Wake Up Call – August 16, 2021

The Daily Escape:

Bear Sculpture, Kent CT – August 2021 iPhone photo by Wrongo

ProPublica reported that: “Secret IRS Files Reveal How Much the Ultrawealthy Gained by Shaping Trump’s Big, Beautiful Tax Cut”. The article shows how billionaire business owners deployed lobbyists to make sure Trump’s 2017 tax bill was tailored to their benefit: (emphasis by Wrongo)

“In the first year after Trump signed the legislation, just 82 ultrawealthy households collectively walked away with more than $1 billion in total savings….Republican and Democratic tycoons alike saw their tax bills chopped by tens of millions, among them: media magnate and former Democratic presidential candidate Michael Bloomberg; the Bechtel family…and the heirs of the late Houston pipeline billionaire Dan Duncan.”

Trump’s Tax Cuts and Jobs Act was the biggest rewrite of the tax code in decades. It is arguably the most consequential legislative achievement by any one-term president. It was crafted in secret, with lobbyist input, and then rushed through the legislative process.

ProPublica says that as the draft of the bill made its way through Congress, lawmakers and hired lobbyist friendly to billionaires were able to shape the bill’s language to accommodate special interests. The final version of the bill led to a vast redistribution of wealth to the pockets of a few wealthy families.

This siphoned away billions in tax revenue from the nation’s coffers. Here’s a chart of the tax savings of the big winners:

This gets a little technical. Corporate taxes are paid by what are known as C corporations, including large firms like AT&T or Amazon. But most businesses in the US aren’t C corporations, they’re what are called pass-through corporations. The name comes from the fact that when one of these businesses makes money, the profits are not subject to corporate taxes. Instead, the profits “pass through” directly to the owners, who pay taxes on the profits on their personal returns.

Pass-throughs include the full gamut of American business, from small barbershops to law firms to, in the case of Uline, #2 on the list above, a packaging distributor with thousands of employees.

Republicans touted the Trump tax cut as boosting “small business” and/or “Main Street,” and it’s true that many small businesses got a modest tax break. But a recent study by the Treasury Department found that the top 1% of Americans by income have reaped nearly 60% of the billions in tax savings created by the provision. And most of that amount went to the top 0.1%.

That’s because most of the pass-through profits in the country flow to the wealthy owners of a limited group of large companies. The tax break is due to expire after 2025, and Democrats in Congress want to end the provision early.

Senate Finance Chair Ron Wyden, (D-OR), has proposed legislation that would end the tax cut early for the ultrawealthy. He wants to end the gravy train for anyone making over $500,000 per year. It would be extended to the business owners below that threshold. Wyden’s proposal would make the policy both fairer and less complex, while also raising $ billions for priorities like childcare, education, and health care.

Time to wake up America! The current complaints by Republicans about the Biden efforts to rebuild the economy say that we shouldn’t have the nice things Biden has promised. They now (again) complain about the federal deficit. They continue to sit on their hands about raising taxes on their donors, despite those same donors reaping most of the benefits not only from the Trump tax cut, but from the surge of the national economy since it bottomed while Trump was managing the pandemic.

To help you wake up, watch and listen to “Patria Y Vida” (homeland and life)  the song that has defined this summer’s uprising in Cuba. The title is a take-off on the slogan used by Fidel Castro, “Patria O Muerte” (homeland or death) for 62 years, since the start of the Cuban revolution.

This song of summer is also a deep protest song:

This is a rough time in Cuba. Trump’s sanctions policy sharply restricted the foreign remittances on which many Cubans rely. Then came the pandemic, which decimated the tourism industry. Cuba’s GDP has dropped roughly 11% since 2019.

In response to a recurring chorus saying, “It’s over now,” the singers call to Cuban officials and tell them: “Your time is done, the silence has been broken
we’re not afraid, the trickery is over now, 62 years of doing damage to our country.”

They add, “Let’s start to build what we’ve dreamed of; of what they destroyed by their own hand.”

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Saturday Soother – July 10, 2021

The Daily Escape:

Sunset at White Sands NP, NM – 2021 photo by Guyin6300dollarsuit.

Gabriel Zucman and Gus Wezerek had an opinion piece in the NYT about the divergence between personal and corporate tax rates:

“In the decades after World War II, close to 50% of American companies’ earnings went to state and federal taxes. Economically, it was a golden period. Middle-class incomes grew at roughly the same rate as those of the richest Americans.

But as globalization gave companies the ability to choose where they recorded profits, Congress scrambled to keep their business by lowering corporate taxes. In 2018, American companies were taxed at an average effective rate of less than 14%, by our calculations.”

For the past 30 years, corporate tax breaks have helped business owners amass huge amounts of money, much of which is kept offshore. Their gain has been the loss for middle-class Americans, who have footed the bill, as Congress has supported our federal budgets by raising taxes on wages:

This chart shows the result of Republican policies. Corporate taxes are at an all-time low, while many profitable corporations pay no tax at all, and workers’ taxes on wages have risen. This has caused a huge and still growing gap in income and wealth between the rich who lead America’s corporations and the rest of us.

Let’s spend a minute on some tax arcana. There used to be a tax regulation that kept income out of tax havens. It is called unitary taxation, a method of allocating corporate profit to a particular state (or country) where that corporation has a taxable presence. It attributes the corporation’s total worldwide profit (or loss) to each jurisdiction, based on factors such as the proportion of sales, assets, or payroll in that jurisdiction.

If this were in effect, it would slow the parking of profits in tax havens by multinationals. California and other states used to use unitary taxation. It was the subject of two US Supreme Court cases: Mobil Oil v. Vermont and Exxon v. Wisconsin, both decided in 1980 in favor of the unitary tax principle. In other words, in favor of the states.

In 1983, the US Supreme Court again ruled in favor of unitary taxation but this time on a worldwide basis in their Container Corporation vs. Franchise Tax Board decision.

That’s when St. Ronnie pressured California and other states to adopt a restricted version known as the water’s edge method that excludes the profits of foreign affiliates from a state’s pre-apportionment tax base. This allowed profit-shifting to tax haven affiliates to mushroom to what we see today.

Biden is trying to end the race to the bottom on corporate tax rates. But even if Congress approves the 15% global minimum corporate tax, it won’t be sufficient to close the growing economic gap between America’s corporations and its workers. Taxing multinationals at 15% would still leave them facing a lower rate than the average American pays in state and federal income tax.

What’s really needed is a 25% percent minimum corporate tax. That would bring in about $200 billion in additional revenue annually. Over 10 years, that would be enough to pay for nationwide high-speed internet, free community college and universal preschool for 3- and 4-year-olds.

All are worthy uses of tax dollars, but it’s doubtful that all Senate Democrats, much less enough Senate Republicans would support a 25% floor for corporations.

A Republican Congress took a shot at reforming the hiding of offshore profits with their 2017 Tax Cut and Jobs Act, which failed. Data from the Bureau of Economic Analysis suggest profits booked in foreign tax havens have not declined since the law was passed.

In 2018, US corporations reported more profit in Ireland than in Mexico, China, Germany and France combined. For example, in 2018, Facebook made $15 billion in profit in Ireland, about $10 million for each of its Irish employees, while Bristol Myers Squibb’s reported profit in Ireland worked out to about $7.5 million per employee.

For decades, Congress tried unsuccessfully to play catch-up as business owners and a handful of tax havens have driven our tax policy. The result is that we’re a nation where working-class Americans are left with underfunded public schools while the wealthiest Americans are boarding rocket ships in some ego-fueled game.

Time for a post-tropical storm Elsa break! Just when you think all is lost, you discover it isn’t. For the first time, Queen Elizabeth has decided that you can now have a picnic on the front lawn of Buckingham Palace. Don’t get too excited, there are rules: No knives to slice your cheese, no dogs, no prosecco. Besides, 78,000 people are already on the waiting list:

Now take a moment, and listen to Czech composer Bedƙich Smetana’s String Quartet No.1 In E Minor “From My Life“, the Largo movement by the Amadeus Quartet, recorded in 2013:

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Deferred Maintenance is America’s Exceptionalism

The Daily Escape:

West Cornwall Covered Bridge, West Cornwall, CT – photo by Juergen Roth Photography. The 172’ bridge spans the Housatonic River.

America runs on deferred maintenance. We won’t do a thing today that can be put off for another day, another year, or several years. The ongoing disaster of the collapsed condo at Champlain Towers South in Florida is a perfect metaphor for America. A quick look at some details is instructive.

The NYT had a story about the conflicts among residents and the Champlain Towers South condo board. A report indicated that major repairs were needed to maintain the structural integrity of the building. But the repairs weren’t popular with the residents: (brackets by Wrongo)

“Steve Rosenthal, 72, a restaurant advertising executive, went to the gym in the building nearly every day. Afterward, he would stop at the pool, where he could see a crack on a third-floor balcony that he described as ‘atrocious.’ But he called the $135,000 assessment [to fix the problems] on his condo, a corner unit with double balconies, a ‘second mortgage’.

‘It’s an upscale building, but it’s not the Ritz or the Four Seasons….The people that live [here]…aren’t Rockefellers or Rothschilds. We’re upper middle class, I guess, and a lot of us are retired’….When a neighbor knocked on his door, 705, with a petition against the assessment, Mr. Rosenthal signed it. The first payment was due on July 1.”

BTW, Rosenthal survived the condo collapse. He was rescued from the intact part of the collapsed building, and he’s staying in a Residence Inn a few blocks away. Worse, Rosenthal has filed a lawsuit against the condo board for negligence and against the property for shoddy construction!

America is filled with assholes like Rosenthal. They’ve taken over – they dominate our politics (I’m talking to you Mitch). They dole out promotions to other assholes. They punish anyone who tries to do the right thing. They tell us how to vote, and who to love. (Hat tip: Jessica Wildfire)

Their attitude that “This seems bad, but if I have to pay to fix it, count me out” is the position of many, many Americans, regardless of what kind of deferred maintenance is being considered. Fixing our roads? Sorry, no gas tax increases. Better school buildings? Property taxes are too damn high. Better Internet? Why? Better health insurance? Socialism!

DC politics is infested with a “we can’t afford this” knee-jerk reaction whenever the subject of dealing with America’s deferred maintenance is on the table. And of course, that’s the thinking that deferred the maintenance in the first place.

It’s particularly bad when the subject is how to deal with climate change. What incentives are there to alter behavior to prevent change that will have most of its effects after 2050? The answer is none, except for an intangible feeling that you’ve done the right thing for posterity.

Current stakeholders (regardless of whether they have a stake in a property, a city, or the entire country), willingly defer maintenance to the next generation of stakeholders, when it will be much, much more expensive. Eventually, the problem can’t be remedied. Like In the Florida condo, that’s when things start collapsing, and people start dying.

Perhaps someone should have said to the condo residents: “You can probably play Russian roulette without dying, but do you really like your odds?”

There was a 1981 ad by Fram Oil Filters  that had the tag line: “pay me now or, pay me later.” Imagine, accountability and wisdom brought to you by Madison Avenue! When we move from car maintenance to the country, the answer is you’ll pay WAY more later. We’ve been blowing off serious repair and replacement of our infrastructure for decades.

We’ve blown off making sure that all Americans have safe bridges and roads.

We’ve blown off making sure that all Americans have basic health insurance.

We’ve blown off immigration reform.

We’ve blown off gun sanity.

We’re blowing off moving from fossil fuels to renewables.

Do you see the parallel in how we respond to these issues? First, there’s a warning, then there’s evidence, followed by denial, delay, and ultimately, disaster. There’s no problem, if there is a problem, it’s too expensive to fix. Maybe we can fix it in a few years, eventually followed by incalculable cost and misery.

We’re the only rich country that kicks the can down the road on anything that’s politically difficult. You know that’s true if you’ve been to an airport in China or Europe. If you’ve taken public transit in Europe or Hong Kong. If you’ve seen the ports in Rotterdam or in Asia.

Time to kill all the assholes.

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Saturday Soother – June 26, 2021

The Daily Escape:

Low tide, Thumpertown Beach, Cape Cod MA – July 4, 2018 iPhone photo by Wrongo

After Biden and a bipartisan group of US lawmakers announced a deal on infrastructure, it soon became clear that Democrats would only support it if it was passed alongside a big reconciliation bill, something that Wrongo suggested was the only way to play infrastructure with the Republicans.

The American Society of Civil Engineers says that we need to spend $2.59 trillion in the next decade on pure, traditional infrastructure. According to a fact sheet released by the White House, Part 1 includes just $579 billion in new infrastructure spending over the course of five years, with $309 billion going to transportation and $109 billion earmarked for roads, bridges, and other projects.

That means there needs to be two bills: one, a “hard infrastructure” bill along the lines of the framework agreed on Thursday, and the second, a “broadly defined infrastructure” bill containing the other provisions Biden originally wanted in his big infrastructure bill.

If a bipartisan Part 1 appeases enough moderates of both parties sufficiently to get them not to raise hell over a reconciliation Part 2, then Biden will be acknowledged as better at politics than the pundits.

OTOH, McConnell says Biden can have Part 1 only if he doesn’t ask for Part 2. That sets up the possibility that Democrats must choose between something that’s admittedly terrible, or nothing. Biden says he won’t sign the first unless he is also given the second one to sign, while Pelosi says the first bill won’t pass the House until the reconciliation bill passes the Senate.

As with everything in DC, the usual caveats apply: So. Much. Can. Go. Wrong. The two-track Senate strategy (one bill bipartisan, another through reconciliation) requires extraordinary political deftness, possibly a bridge too far for the craptacular Senate Majority Leader Schumer.

A few words about Part 1 from Common Dreams:

  • Rather than pushing for taxes targeting rich individuals and corporations, a White House fact sheet on the bipartisan package outlines other potential financing sources, from unused Coronavirus funds to reinstating Superfund fees for chemicals.
  • The proposal also relies on public-private partnerships, (P3s), private activity bonds, and asset recycling for infrastructure investment.

When politicians say “asset recycling” they mean the sale or lease of public assets to the private sector so the government can put that money toward new investments. But the devil is in the details, and how we fund new infrastructure can’t be through privatizing our existing infrastructure.

America won’t get a redo once its public infrastructure is privatized.

In some places public/private partnerships can be tolerable. Think rail policy where Amtrak’s funding is contingent on some sort of matching grants for private freight service improvement. This can be better justified as both are connected as part of the same rail network and improvements can be easily tracked.

But elsewhere, it can’t, especially in power and telecom, where P3s only serve to prevent public services from being offered. This sounds like how Philadelphia and other cities sold off infrastructure like parking garages and parking meters. The city derived no recurring income, while private companies collected the monies.

From Benjamin Studebaker:

“In most democracies, a working legislative majority allows the government to pass legislation. In the United States, things don’t work this way….As our problems slowly mount, neither the Democrats or the Republicans are able to experiment with policy solutions. The policies that do get passed are the result of fraught compromises. It’s never clear who is responsible for the policies that issue from the federal government, and every time anything goes wrong every part of the US government passes the buck to every other part.”

The failure to make essential investments in the basic infrastructure of the country is not consistent with having a functioning state. Either the filibuster must go, or the primary system must go. The primary system is here to stay because it is equated with democracy itself in the US. Therefore, sooner or later, the filibuster will go.

So, rather than teasing Americans with the promise of a new Roosevelt administration (in aviator shades), it looks like we’re in for another round of gridlock.

That’s enough politics for this Saturday. It’s time for our Saturday Soother. Wrongo and Ms. Right are spending a few days on Cape Cod, which is always enjoyable. So, before going off to watch another beautiful sunset, let’s take a few minutes to relax and listen to the Second movement (largo) of Dvoƙák’s “From the New World“, performed here in 1985 by the Vienna Philharmonic, directed by the late Herbert von Karajan:

 

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Why Won’t Manchin Help Keep Jobs in West Virginia?

The Daily Escape:

Grand Canyon NP at golden hour – photo by indieaz

Viatris is a new pharmaceutical company formed by the merger of Mylan and Upjohn late last year. Their strategy for improving profits post-merger was as is usual, to restructure and cut $1 billion in costs. One victim of the cost-cutting is the Viatris plant in Morgantown, West Virginia. The company announced the plant would close last December.

The Morgantown plant has been in operation since 1965. It employs between 1,500 and 2,000, whose jobs will be offshored to India and Australia. These are well-paying jobs in one of America’s poorer states. The bulk of the layoffs will occur on July 31, when 1,246 people will be let go, including 764 union workers and 482 nonunion staff. Complete closure will happen by March 2022.

Mylan reported $3.9 billion in profits in 2019. Naturally, local union president Joe Gouzd had harsh words for Viatris:

“This is the last generic pharmaceutical manufacturing giant in the US, and executives are offshoring our jobs to India for more profits. What is this going to do to us if we have another pandemic?”

The local union represents about 900 workers. Gouzd said:

“…we’re going to rid ourselves of 2,000 high-paying jobs in north central West Virginia, taking out $150m to $200m out of the local economy…”

The West Virginia legislature passed a bill calling on Governor Jim Justice and Joe Biden to save the jobs. Biden has proposed taxing companies that offshore jobs, but it remains to be seen whether he will be successful.

Senators Elizabeth Warren and Marco Rubio introduced the Pharmaceutical Supply Chain Review Act to study America’s over-reliance on foreign countries in pharmaceutical industry, but neither West Virginia Senator has sponsored the bill.

The Guardian reports that Republican Senator Shelley Moore Capito has ignored pleas to work with Biden officials to save the plant. Democrat Joe Manchin, whose daughter Heather Bresch served as Mylan’s chief executive until she retired in 2020, didn’t fully ignore their requests to get involved; he held a Zoom meeting in December that might as well have focused on “thoughts and prayers.”

Isn’t it curious that the state’s two Senators aren’t trying hard to keep jobs in their state?

You probably hadn’t heard that Bresch collected $37.6 million when she stepped down from Mylan. You also missed that under her leadership, Mylan recently undertook what’s called a “tax inversion”, changing its headquarters for tax purposes from Pittsburgh, PA to the Netherlands, reaping big tax breaks. So, less tax revenue for America.

Earlier, Mylan disclosed that it is in an ongoing lawsuit by the Public Employees Retirement System of Mississippi that alleges misconduct by the company. The suit alleges “misrepresentation and concealment of violations of FDA regulations governing pharmaceutical product quality and safety.” In 2016 and in 2018, the FDA found documentation, record-keeping, quality-control and cleaning issues. The plant was shut down temporarily after the 2018 findings. It then reduced production volume by about two thirds, and “right sized” plant staff.

But we initially heard about Ms. Bresch during Mylan’s EpiPen pricing controversy. They had been hiking prices for years on their epinephrine injector to the point where many people could no longer pay for it. Along with the EpiPen fiasco, Mylan paid $465 million to the federal government to settle claims it underpaid Medicaid rebates.

Understandably, the town and the state are looking for ways to head off the layoffs. Last week, members of the union and others rallied outside the state capitol in Charleston to urge Republican governor Jim Justice to help save the facility. According to the union, Justice said his administration was trying to find an alternative to closure, including holding talks with two companies that have expressed an interest in buying the plant.

But Justice said that Viatris was not cooperating:

“We’ve talked with Viatris, and we continue to struggle with them….They’re difficult to work with. The least they could do …is be cooperative.”

So, Viatris isn’t the best of corporate citizens. That doesn’t make them different from most multinationals. That means political pressure is the only leverage that will keep these jobs in America.

Yet, when you see these two “bipartisan” Senators not lift a finger to help the soon-to-be unemployed citizens of their own state, you have to ask: Why haven’t they done more?

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