Category: Tax Policy

Monday Wake Up Call, Bipartisan Kabuki Play Edition – June 21, 2021

The Daily Escape:

North Umpqua River, Glide OR – 2021 photo by Bobbie Shots Photography

We’re hearing a lot of talk about a bipartisan infrastructure plan. The plan would spend about $1 trillion over the next eight years. But that’s only about half of what Biden had asked for and won’t accomplish anywhere near all that he wanted. But half is better than nothing, and if the plan were fair, Wrongo would support it.

Sen. Lindsey Graham (R-SC) made headlines on Sunday by saying he’s the latest Republican Senator to support the bipartisan infrastructure deal in the Senate. On Fox News, he said:

“I think the difference between this negotiation and the earlier negotiation is that we are willing to add more new money to infrastructure in this package and I am hopeful that the White House and Joe Biden stay involved, we can get there,”

He also said that the “bipartisan” support will disappear if Democrats signal that they intend to follow it up with a second infrastructure package passed via reconciliation.

But is there any reason to believe he, or other Republicans involved in these negotiations are acting in good faith? Or is this another game like what happened with Obama’s Affordable Care Act negotiations? Will Republicans simply try to run out the clock on the legislative calendar and then ultimately vote no on the final bill?

The bipartisan proposal is led by Sens. Rob Portman (R-OH) and Kyrsten Sinema (D-Ariz.). It costs about $973 billion over five years or $1.2 trillion over eight. The plan would have $579 billion in new spending. That makes the bill’s total new investment about one-fourth the size of  Biden’s initial proposal. Graham joined the group, including 10 Democrats and 10 other Republicans, as its 21st member.

But as always in DC, the devil is in the details.  Their plan uses public infrastructure funds for “public private partnerships” in the form of thousands of new toll roads. It uses money already earmarked for COVID relief funds, rather than paying with more progressive taxation. It imposes new taxes and surcharges on electric vehicles, a disincentive when we should be doing our best to phase out fossil fuels. But more about that below.

OTOH, there are worthwhile elements of their funding methodology. They are suggesting ramped-up IRS enforcement to pay for a portion of the spending. In a NYT op-ed last Wednesday, five former Treasury Secretaries Timothy Geithner, Jacob Lew, Henry Paulson, Robert Rubin and Larry Summers all agreed that the country should strengthen its tax system by collecting uncollected taxes.

The Treasury’s Office of Tax Analysis estimates that this could generate $700 billion over the next 10 years. But the former Treasury Secretaries say that is a modest estimate, citing former IRS commissioners who say it could be as large as $1.6 trillion.

The taxes on electric vehicles can be justified, since drivers of EVs do not pay gas taxes that fund highway maintenance, even though they use roads and highways just like gas-powered cars. But an EV tax must be paired with investments in electric charging stations or else the net effect would be to slow America’s transition off fossil fuels.

We’re watching as, Eric Levitz says, a staring contest between moderates and liberals. Liberals can’t pass anything without Manchin and Sinema’s votes. Moderates won’t get federal dollars for their states without the liberal’s cooperation. Both factions are waiting for the other to blink, while Republicans are happily trying to keep the stare down going: The longer it lasts, the less time Democrats will have to pass new laws before midterm season begins.

The Republicans are bragging that the plan doesn’t raise taxes. That’s not exactly true. They mean the plan doesn’t raise taxes on corporations or the rich. They don’t seem to mind that the plan would take money out of the pockets of working- and middle-class people.

The legislative calendar is a scarce resource. The Senate has only six more workweeks before summer’s end. Time to wake up Democrats! Biden can support this $1 trillion bill, but he must also keep pressing forward with a reconciliation bill to address other infrastructure priorities.

To help you wake up listen to the great Pink Martini perform their song, “Hang on Little Tomato“. Here it’s performed live in Portland, Oregon in December 2005, featuring vocalist China Forbes.

The song was inspired by an ad for Hunt’s Ketchup in a 1964 issue of Life magazine telling a green tomato to stay on the vine and ripen. It’s been popular lately as a song of hope:

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The Covid Recession and American Capitalism

The Daily Escape:

Upper Buttermilk Falls, Ithaca NY – June 2021 iPhone photo by Wrongo

The following chart appeared in the NYT on Tuesday in an article claiming that the recession is over. The unfortunate reality is that the COVID recession was artificially induced by a shutdown of the economy. But it may now be transitioning into a longer, systemic recession caused by poor economic policy. Take a look at the chart:

While economists say that, by traditional definitions, the Covid recession didn’t last very long, we are still down 7 million jobs from pre-pandemic levels, even while personal income is back to pre-Pandemic levels. So, how can the recession be over?

And why are lawmakers in Republican states calling for an end to unemployment benefits when so many remain out of work? Zandar says we should start by looking at Tennessee’s official job posting website:

“There are more than 250,000 jobs available in Tennessee right now, but….Only 3% of the jobs posted — about 8,500 as of Friday evening — pay $20,000 [per year] or more. The federal poverty line for a family of three is just under $22,000.”

Of the 8,500 jobs on the state of Tennessee’s official job board, about 8,250 pay $10 an hour or less, which is a poverty level wage even in Tennessee. But Tennessee’s governor Lee has decided to stop accepting CARES Act money in July, saying he didn’t want to pay people to sit at home.

As Ezra Klein said in the NYT: America doesn’t fight poverty, it runs on it.

“The American economy runs on poverty, or at least the constant threat of it. Americans like their goods cheap and their services plentiful and the two of them, together, require a sprawling labor force willing to work tough jobs at crummy wages. On the right, the barest glimmer of worker power is treated as a policy emergency, and the whip of poverty, not the lure of higher wages, is the appropriate response…”

More from Klein:

“Vast numbers of Americans are kept poor for a reason. Any whiff of labor organization, or worker solidarity is ruthlessly annihilated in order to maintain millions of Americans working for single-digit hourly wages, or slightly higher wages, but no benefits whatsoever. We demand it, because we know corporations will just break our backs with higher prices if we give in. Either way, we’re the ones who pay, and it’s never the billionaires.”

Klein mentioned a report, “A Guaranteed Income for the 21st Century,” that would guarantee a $12,500 annual income for every adult and a $4,500 allowance for every child. It’s what wonks call a “negative income tax” plan — unlike a universal basic income, it phases out as households rise into the middle class.

The team estimates that its proposal would eliminate poverty while costing $876 billion annually.

To give a sense of scale, total federal spending in 2019 was about $4.4 trillion, with $1 trillion of that financing Social Security payments and $1.1 trillion supporting Medicaid, Medicare, the Affordable Care Act and the Children’s Health Insurance Program. As Paul Campos says:

“$876 billion represents less than the growth in the personal fortunes of America’s 651 billionaires over the course of the 16 months of the COVID pandemic. Not, mind you, anything like those fortunes themselves, but merely the growth in the personal fortunes of 651 people over the past year and a third.”

A simple annual wealth tax on the incremental gain in wealth of obscenely rich Americans would by itself pay for somewhere between a third and half of the cost of eliminating poverty in this country, via straightforward wealth redistribution.

So why don’t we get rid of poverty by giving people without money, money? Because we haven’t adjusted psychologically and politically to the fact that the developed economies produce so much wealth that getting rid of poverty could be a minor problem of distribution, one that merely requires a social commitment to doing it.

Instead, we tell the people at the bottom of wage distribution: “This is America. If you don’t like being poor, you can always do something about it, like not being poor.” And many of us go back to eating our dollar menu cheeseburgers and thinking to ourselves “I don’t know anybody *that* poor”.

Except that if you think about it, you know plenty of people who ARE that poor. And apparently, many of us want to keep it that way, just in case we end up rich someday.

America’s $21 trillion American economy has been captured by its oligarchs and their political servants who say we can’t eliminate poverty because that would be socialism, and socialism makes the baby Jesus cry.

So, 50 million Americans continue to wake up dirt poor every day.

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Monday Wake Up Call – June 7, 2021

The Daily Escape:

Sunset, Paines Creek Beach, Cape Cod MA – May 2021 photo by Kristen Wilkinson Photography

People worldwide are finally waking up to the tax mischief of multinational corporations. When Treasury Secretary Janet Yellen announced earlier this year that it was time to end the “race to the bottom” and implement a global minimum tax for corporations, few took her seriously.

But now we could be on the cusp of a once-in-a-generation moment that would benefit funding of our public services immensely.

On Saturday at the G7 meeting, the members agreed to back a new global minimum tax rate of 15% for companies to pay on income, regardless of where they are based. The deal is focused on two main changes: reallocating taxes towards countries where economic activity takes place, rather than where these firms choose to book their profits, along with setting a minimum tax rate.

If enacted, the agreement would stop large multinational companies from locating in tax havens, which will force them to pay more taxes. This is clearly revolutionary. The winners would be large economies where multinationals sell a lot, but where they book little taxable profit, thanks to tax loopholes that allow them to siphon off income into low-tax jurisdictions.

This has become a larger problem since the rise of the digital giants like Apple and Google, companies with mostly intangible assets. The most obvious losers will be the tax haven countries that, more than half a century ago, started taking advantage of globalization by drastically lowering their tax rates.

The most sophisticated firms, those with battalions of tax lawyers and accountants, have for years employed tax loopholes in individual countries’ tax laws to minimize their total tax liability. While not all tax loopholes deal with international sales, they are a prime method that the biggest firms use to avoid income taxes.

The NYT cites a report from the EU Tax Observatory which estimated that a 15% minimum tax would yield an additional $58 billion in tax revenue per year.

Between 2011 and 2020, Amazon, Facebook, Alphabet (the owner of Google), Netflix, Apple, and Microsoft paid roughly $219 billion in income taxes, which amounted to just 3.6% of their more than $6 trillion in total revenue, according to the Fair Tax Foundation.

Had these six firms paid the prevailing tax rates in the countries in which they operate, they would have given global tax authorities over $149 billion more than they did over the past decade.

But tax reform isn’t a sure thing. Next month, the G7 must sell the concept to finance ministers from the broader G20 group of nations. If that is successful, officials hope that a final deal can be signed by the Group of 20 leaders when they meet next in October. Ireland, which has a tax rate of 12.5%, has come out against the global minimum tax. China has been quiet, but is considered unlikely to buy in.

G7 finance officials think that if enough advanced economies sign on, other countries will be compelled to follow suit. They plan to exert political pressure on Ireland to join the agreement.

The Biden administration has been eager to reach an agreement because a global minimum tax is an ingredient in its plans to raise the US corporate tax rate to 28% from the current 21%, to help shave the deficit. While Republicans and corporations think that increasing taxes would make American companies less competitive, getting other countries to go along with a minimum tax rate on overseas profits would minimize the home field disadvantage to American companies.

Time to wake up, America! We need our Congress, along with world leaders, to step up and enact this new tax policy. Changes to the tax code requires approval from both Houses of Congress, so this may never happen.

To help you wake up, listen to a cover of Bob Dylan’s “Everything Is Broken” by RL Burnside, with an all-star supporting cast including Buddy Guy with the first guitar solo, Derek Trucks with the second guitar solo and James Cotton on solo harmonica.

You may not be aware that Rolling Stone has a list of their top 80 Dylan covers . Here’s Burnside’s blues take on Dylan:

Sample lyric:

Broken hands on broken ploughs,

Broken treaties, broken vows,

Broken pipes, broken tools,

People bending broken rules.

Hound dog howling, bull frog croaking,

Everything is broken.

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The New Housing Bubble

The Daily Escape:

Shakers Creek flowing into the Mohawk River, Colonie NY – April 2021 photo by M’ke Helbing.

We’re hearing about bidding wars for single family homes, often with winning bids that are substantially above already high asking prices. In fact, house prices have risen by 11.2% from a year ago, the largest increase since housing bubble #1 in 2006, according to the National Case-Shiller Home Price Index for January.

The Home Price Index measures “house-price inflation” by comparing the sales price of a house in the current month to the price of the same house when it sold previously. It’s tracking the dollars it takes to buy the same house over time.

But house price inflation isn’t part of the Consumer Price Index (CPI). While about one-third of CPI is based on housing costs, it only tracks rents, not home prices. So, you can see what’s going on: Everybody knows that the costs of home ownership are surging, but only a portion are included in our inflation measures, so inflation is being understated.

Let’s look at the NY metro area. It covers NYC and numerous counties in the states of New York, New Jersey, and Connecticut. Here’s the spike in prices over the past six months:

House prices rose 11.2% for the year. There were big differences between price tiers, with low-end house prices surging by 14.9%, while condo prices remained in a tight range for the past three years, and the NYT reports that Manhattan condo developers are selling units at big discounts.

There’s another factor driving prices. The WSJ reports that: (brackets by Wrongo)

“From…individuals [with]a few thousand dollars to pensions and private-equity firms with billions, yield-chasing investors are snapping up single-family houses to rent out or flip. They are competing for houses with ordinary Americans, who are armed with the cheapest mortgage financing ever, and driving up home prices.”

The WSJ quotes John Burns, a real estate consultant: (emphasis by Wrongo)

“You now have permanent capital competing with a young couple trying to buy a house.” Burns estimates that in many of the nation’s top markets, roughly one in every five houses sold is bought by someone who never moves in.”

Houston is a favorite location, with investors accounting for 24% of home purchases. More from Burns: (emphasis by Wrongo)

“Limited housing supply, low rates, a global reach for yield, and what we’re calling the institutionalization of real-estate investors has set the stage for another speculative investor-driven home price bubble…”

This is the second try by institutional investors to play in the single-family home market. Starting in 2011, they bought foreclosed homes at steep discounts, accounting for about a third of sales in some markets and setting a floor for then-falling home prices.

It turned out that renting suburban homes proved very profitable. The pandemic has brought a new race for suburban housing. And the big new-home builders like DR Horton and Lennar Corp, are working directly with institutional investors. They’re building blocks of homes, and selling them to the investors, who rent them out.

Horton built 124 houses in Conroe, Texas, rented them out and then put the whole community up for sale. It was purchased by an online property-investing platform, Fundrise LLC, which manages more than $1 billion on behalf of about 150,000 individuals.

Lennar just announced a rental venture with investment firms including Allianz and Centerbridge Partners to which it will sell more than $4 billion of new houses.

This is late-stage capitalism at work. Young working couples are increasingly shut out of buying homes, and that’s both depressing and disturbing.  America has failed them. It would be helpful for families to buy homes instead of renting, and pricing families out of home ownership carries risks to a cohesive society.

And the Right wonders why young people are turning to socialism. Freezing young people out of the housing market could have disastrous social consequences.

We should have tax policies that disincentivize ownership of multiple single-family homes, especially by investment funds. The way to remedy this is to steer investors to other assets that don’t directly impact individual welfare to the same degree as housing.

Back in the 2006-2009 housing bubble, we had plenty of speculators and an excess of housing inventory. It was so bad that Wrongo’s barber owned nine rental houses in three states before the bust.

This time around, we have very low inventory, the lowest rates ever, and big money chasing yield. Once pension funds are investing in an appreciating asset class, you know the bubble is about to burst

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Biden’s Infrastructure Plan

The Daily Escape:

Crepuscular rays at White Sands NM, NM – photo by dantreks

Biden announced his big infrastructure plan on Wednesday. The American Jobs Plan is a $2+ trillion proposal that is an expansive interpretation of the word “infrastructure.”

Naturally, Republicans are against it. South Dakota Gov. Kristi L. Noem (R) disparaged it on Fox:

“I was shocked by how much doesn’t go into infrastructure…It goes into research and development. It goes into housing and pipes and different initiatives, green energy.”

So, Republicans aren’t sure what “infrastructure” is? Or maybe, they want Biden restricted to being President Pothole? They must know that “pipe” and “green energy” are well within the definition of “infrastructure.”

But they would be against it, no matter how little it contained. Today’s Republican Congress is even worse than it was in 2009. Back then, Obama’s stimulus bill to combat the Great Recession, (like Biden’s stimulus bill after COVID-19), received zero GOP votes in the House. In the Senate, Obama got three more Republican votes than Biden. And in the 2010 midterms, the GOP regained control of both chambers, setting its template for 2022.

Now In 2021, Republicans no longer run on policy. They’re running against a mythic Democratic party bent on imposing socialism, demeaning Christianity, defunding the police, coddling menacing migrants, and supporting angry American minorities.

If you’re a Republican politician, you’re not offering any actual policy. They’re offering to fight Democrats, and that seems to be enough to get reelected. This means that Republicans will filibuster any bill the Democrats can’t pass through reconciliation.

Biden knows that. So, his legislative strategy prioritizes rebuilding American infrastructure, something that has a broad consensus within the electorate. His plan includes a commitment to confronting climate change (and creating jobs) by modernizing the electrical grid, encouraging the development of alternative energy sources, and building charging stations across America.

He plans to combat poverty and buttress the middle class through funding childcare, universal pre-K, and free community college, while extending the child tax credits authorized by his stimulus plan.

Taken together, his American Jobs Plan represents Biden’s belief that the pandemic has changed what is politically possible. He proposed to open the way to expanding government’s role in addressing our economic and societal weaknesses, on a scale of spending we wouldn’t have dreamed possible.

He’s taken the ideas originally outlined in the Green New Deal in 2019 and repackaged them under the more politically popular umbrella of infrastructure, including some of the same goals. Biden’s plan isn’t the Green New Deal in sheep’s clothing, regardless of what Republicans say.

To help cover the costs of his plan, Biden proposes raising taxes on corporations, the affluent, estates, and capital gains, starting with corporate taxes. He’s proposing an accompanying tax plan, the Made in America Tax Plan. If it passes, it will pay for the American Jobs Plan in 15 years, and reduce deficits from then on.

Biden proposes to set the corporate tax rate at 28%, from its current rate of 21%, nowhere near the 35% tax rate before the 2017 tax cuts. He also plans to discourage offshoring of corporations and to get rid of subsidies for fossil fuels. Here’s a chart that gives some historical perspective about Biden’s corporate tax proposal:

It’s clear that despite Republican wailing that the infrastructure plan is a “trojan horse” for raising taxes, the reality is that corporate taxes will still be lower than at any point since the 1940’s.

Even this may be a bridge too far, since the Senate’s most conspicuous swing vote, Sen. Joe Manchin (D-WVA), says that while he favors tax hikes, he insists that infrastructure legislation should be passed with bipartisan support.

This suggests a longish legislative process. As a realist, Biden will be happy to again pass landmark legislation with no Republican support. But first he must get Manchin to labor through the thankless work of establishing that the GOP is unwilling to work toward a meaningful compromise.

OTOH, a new Morning Consult/Politico poll says that by a two-to-one margin voters prefer an infrastructure bill that includes tax hikes to one that does not have those tax hikes. That means the GOP may be in trouble if it castigates Biden and Democrats if they pass his plan.

Despite Wrongo’s early misgivings, Biden is the reset button that America desperately needed. He was outwardly moderate but has moved to embrace more progressive positions.

But we shouldn’t underestimate the damage Republicans can do with their singular focus on power and winning the 2022 mid-terms.

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Monday Wake Up Call – IRS Funding Edition, March 22, 2021

The Daily Escape:

Slot Canyon, Grand Staircase Escalante National Monument, UT – photo by chipotle42

Today we turn our attention to the IRS. David Sirota wrote in the Daily Poster that new IRS figures compiled by Syracuse University show that in the past eight years, there was a 72% drop in the number of IRS audits of people making more than $1 million.

Last year, 98% of individuals making more than $1 million didn’t face an audit. At a time when Americans face growing economic inequality, the IRS is letting billions of dollars in tax revenue slip through its fingers because budget and staffing cuts have left the agency incapable of effectively auditing the 637,212 millionaires now living in the US. It’s worth noting that the number of American millionaires has increased by 88% since 2012.

What’s more, the IRS audit focus has shifted from the wealthy to the poor. A large group of progressive organizations sent a letter to the Biden administration saying: (emphasis by Wrongo)

“Since 2011, audit rates for millionaires, who are disproportionately white, have dropped more than twice as much as for taxpayers claiming the (Earned Income Tax Credit), who are disproportionately people of color. Audit coverage is now the heaviest in many low-income majority-Black counties.”

A recent Treasury Department report concluded that at the IRS:

“…high-income taxpayers are generally not a collection priority, nor is there a strategy in place to address nonpayment by high-income taxpayers.”

As evidence, the report showed that the agency failed to recover more than 60% of the $4 billion in back taxes owed by those making more than $1.5 million.

At the same time, overall enforcement has been hobbled by draconian budget reductions that have resulted in 43% fewer IRS revenue agents and 26% percent fewer IRS criminal investigators in the last decade:

There’s also been a 51% drop in the number of audits of America’s largest corporations. Sirota says that in 2012, almost all of our corporate behemoths were audited. However, in 2020, only about 38% were audited.

There are two separate problems here. First, the IRS budget has been cut dramatically by Republicans. Between 2010 and 2018, the IRS’s budget was slashed by more than 20%, and its enforcement budget has been cut by 24%, according to the Center on Budget and Policy Priorities, leading to the substantial reduction in IRS agents shown above.

A July 2020 report from the Congressional Budget Office found that increasing funding for IRS enforcement by $40 billion would boost revenues by more than $100 billion over the next decade. From Sirota:

“To that end, Reps. Ro Khanna (D-CA) and Peter DeFazio (D-OR) — both Congressional Progressive Caucus members — have recently introduced separate bills that would boost the IRS’s enforcement budget and audit rates.”

Khanna’s legislation would increase IRS enforcement funding by $70 billion and require the agency to audit 95% of large corporations, 50% of individuals reporting more than $10 million of annual income, and 20% of individuals reporting more than $1 million of income. Sounds about right.

IRS referrals for criminal prosecution and Justice Department tax convictions have both hit an all-time low. The US is estimated to be losing roughly $600 billion/year in revenue from unpaid taxes, while wealthy taxpayers are evading or avoiding paying their fair share. Better enforcement will produce revenue and bring renewed respect for our legal system.

We must have more tax revenue, and while Rep. Khanna’s bill would go a long way toward making things right, we also must raise our corporate tax rates, and the IRS must reassess its audit priorities.

We can’t be auditing more poor people than millionaires.

Wake up America! It’s time to stop our largest corporations and our wealthiest individuals from skating out on their tax responsibilities. To help you wake up, listen to the Tedeschi Trucks Band performing  “The Sky is Crying” at the Royal Albert Hall. Performing at the Royal Albert seems to bring the best out of American groups. Here’s another great example:

Some prefer the Stevie Ray Vaughn version, but this is at least as good.

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Monday Wake Up Call – Infrastructure Edition, March 15, 2021

The Daily Escape:

Ruby Beach Overlook, Olympic NP, WA – 2021 photo by Erwin Buske

Back in pre-history or as Wrongo likes to call it, 2004, John Edwards said that there were two Americas. He was talking about social stratification and its pernicious impact on social cohesion in America.

Biden and Congress have just passed the American Recovery Plan into law. It provides a temporary assistance to many Americans, particularly for those in the two Americas who are struggling in our economy. As Wrongo said yesterday, although total wages are now at the level they were before the Covid recession, almost 10 million fewer Americans are working! If we are to be a healthy society, these people need jobs.

Listening to Republicans, there’s no money left in the piggy bank to fund the rest of what America needs to do. They say our debt is too high, and that it would be a terrible mistake to raise taxes on corporations or the wealthy to fund our needs.

Yet, something must be done about the disaster that is America’s infrastructure. Biden has said that improving and modernizing our infrastructure is a high priority for his administration. He campaigned on a $2 trillion infrastructure plan to create a:

“modern, sustainable infrastructure and an equitable clean energy future.”

But there is a huge chasm between where we are and where we need to go. From the WaPo: (parenthesis by Wrongo)

“America can put a rover on Mars, but it can’t keep the lights on and water running in the city that birthed the modern space program (Houston). It can develop vaccines….to combat a world-altering illness but suffers one of the developed world’s highest death rates due to lack of prevention and care.”

America’s recent historic breakthroughs in science, medicine and technology coexist alongside monumental failures of infrastructure, public health, and education. More from the WaPo: (emphasis by Wrongo)

“The disparities reflect a multitude of factors…but primarily stem from a few big ones: Compared with other well-to-do nations, the US has tended to prioritize private wealth over public resources, individualism over equity and the shiny new thing over the dull but necessary task of maintaining its infrastructure, much of which is fast becoming a 20th century relic.”

One of our two Americas pays a heavier price for our politicians’ unwillingness to build new infrastructure. Yet politicians kick the can down the road, since higher taxes to fix things is rarely a winning political strategy.

From highways to airports, from internet access to schools, to the electric grid, our infrastructure isn’t distributed equally. Even in richer zip codes, infrastructure quality is uneven. The myth that America treats everyone equally regardless of race, color, or creed is as decrepit as our bridges and highways.

Americans used to be proud of their infrastructure. But since Reagan, Republicans have believed that government spending is a problem. Loving new roads, bridges and tunnels changed to outright suspicion when austerity became the Republican religion.

They are always willing to cut taxes by $trillions to further enrich wealthy people. But they scoff at building a high-speed rail network, a high-speed internet network, or an integrated electric grid. If you’ve ever traveled through a Chinese airport, or traveled by rail in Europe, you have experienced awesome infrastructure projects, things that are normal in most developed nations.

Yet in America, we’re far behind, mostly because Republicans put growing personal wealth ahead of supporting the public good. Much of this hurts the bottom half of the US population more than the top half. It hurts rural America more than urban and suburban America. Most suburbs are as modern and safe as any major city in Europe or Asia. Their public schools are modern and largely well-equipped.

None of these are true in rural or inner-city America.

The time has come to address infrastructure. At least some of it must be paid for by new taxes, even if that means zero Republican political support.

Time to wake up America! We can do better for both Americas by investing in education, infrastructure, and people. And we can give some of those 10 million long-term unemployed workers a new opportunity to succeed in a growing US economy.

To help you wake up, let’s go back to the 1980s, and listen to the Eurythmics do a live version of “Would I Lie to You”. High energy and lots of fun:

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New Relief Bill Rewards Businesses

The Daily Escape:

Hayden Valley, Yellowstone NP – December 2020 photo by Jack Bell

Politico reports that Congressional leaders are nearing a deal on Covid relief. The deal could be done by the time you read this.

The relief package is divided into two parts. The first bill, with a stated cost of $748 billion, funds the Paycheck Protection Program (PPP), along with $300 per week for unemployment benefits.

The second bill ties liability protections for companies demanded by Republicans to the Democrats’ demand for funding for state and local governments.

The big-ticket items in the first bill include one-time stimulus checks to individuals in the $600 to $700 range, an extension of federal unemployment benefits with an additional weekly amount of $300. There is $325 billion for small businesses, $257 billion for the PPP, some $ billions for vaccines, and to help schools open safely.

Delayed until the New Year is bill two, including money for state and local governments faced with laying off municipal workers, and liability protection for companies that put their employees in danger from the virus through inadequate safety measures. The items in the second bill are what have stalled negotiations for weeks.

Lee Fang of the Intercept reports that the draft of the first bill circulating on Capitol Hill contains several adjustments to the PPP, the centerpiece of the government’s earlier efforts to curb job loss stemming from the pandemic. One of the revisions is a radical change that would result in a major windfall for the highest-income Americans and large corporations. That provision allows businesses claiming expenses reimbursed by PPP forgivable loans, (already tax-free), to also be used as deductions when calculating taxable income.

In other words, the change would allow a corporation that claimed $1 million in PPP reimbursements to also deduct the same $1 million on its tax return, thereby reducing their taxable income by $1 million. Until now, IRS rules prohibited tax-free government grants and reimbursements from being used as deductions. The Intercept quotes Steven Rosenthal from the Tax Policy Center, who estimates that this PPP deduction provision could reduce the taxes of the highest-income taxpayers by at least $100 billion without benefiting workers or the unemployed.

This tax deduction provision technically applies to all PPP recipients, but few will be able to take the additional tax benefit. Wealthy business owners and large corporations claim the lion’s share of business expense deductions. This group would include wealthy doctors and financial consultants, and those who make over $1 million in yearly income.

This tax provision has been pushed by Rep Richard Neal, (D-MA), and Sen Chuck Grassley, (R-IA). There has been little pushback to these tax giveaways, reflecting a general consensus in Congress around the value of more business tax cuts. Lawmakers, including Senate Majority Leader Mitch McConnell, (R-KY), have described the PPP extension and expansion as an “uncontroversial” aspect of stimulus talks.

This should be pretty simple. If you get a PPP loan, and it is later forgiven, the expenses paid with the loan proceeds shouldn’t be deductible. The company didn’t pay taxes on the PPP loan cash proceeds and thus shouldn’t receive a deduction against taxable income for the expenses paid. That’s double-dipping.

The big idea behind PPP loan forgiveness was to help businesses retain employees and pay certain qualified expenses like rent and utilities, not to enrich employers.

Also buried in the bill is another bailout for US Airlines. They stand to get another $17 billion taxpayer-funded bailout if the first bill becomes law. From Wolf Richter:

“Democrats and Republicans may not agree on much of anything these days, but they both love to bail out airline shareholders and bondholders. And that’s what this is – dressed up as payroll protection and airline support program.”

The new airline bailout comes on top of what they received in the original stimulus bill: $25 billion in payroll support, an additional $25 billion in loans for passenger airlines, and over $10 billion in grants and loans for cargo airlines and aviation contractors.

Let’s remember that the top four airlines have burned their cash by repurchasing $45 billion of their shares since 2012. They don’t need more of our money, Chapter 11 bankruptcy works. Delta, American and United have previously restructured in bankruptcy court, and it worked fine. They know how to do that.

And let’s tell it like it is: If there wasn’t a majority of Republicans in the Senate, the people would get the checks and the unemployment relief they really need.

Win in Georgia!

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Can America Avoid Becoming a Failed State?

The Daily Escape:

Fall sunset, Shenandoah NP, VA – photo by juliend73

Sorry, but this column is going to be a downer.

We’ve been talking for the past few days about how hard it is to get politicians to focus on fixing what’s wrong in America. Wrongo originally started down this path in 2009. His plan was to lay out the problems, and to suggest ways in which America might fix them.

But 11 years later, little of what has been suggested here has occurred. Explaining what’s wrong has made very little difference.

Our really big problems now seem to be locked in: Climate change will happen. We can’t (or won’t) deal with the burgeoning disinformation platforms that threaten civil society. It’s difficult to see what will change our growing income inequality. As always, politicians are itching for a fight with some country. Today, the villain is China. Globalization has won, our supply chains now hold us hostage, and our economic future is increasingly controlled by Asia.

America is fast becoming a failed state: Our president tells people to drink bleach. There are more than 100,000 dead in the pandemic, and a significant percentage of them probably were needless deaths.

We have the ability to deal with the crises,but we’re choosing not to. Trump and McConnell, along with Biden, Pelosi and Schumer, all have access to the same, or more likely better information than we do.

They are choosing to ignore that the country is going to hell. Instead, they use each individual crisis for their own political benefit, and for their patrons’ financial benefit. They choose to ignore the near-certainty of a second wave of infections in the fall of 2020, bringing with it the possibility of a second economic collapse, along with more deaths.

We no longer provide the basics for our citizens. We live in a nation where income, savings, happiness, trust in government, and social cohesion are all in free-fall.

This is a recipe for social collapse.

In America most infrastructure is decrepit, from airports, to schools, to roads, because there hasn’t been much public investment. That’s because Americans don’t want to pay higher taxes like the Europeans do. Politicians on both sides still believe the evidence-free ideology of neoliberalism: We’ll all be rich if we invest in nothing, and wait for Mr. Market to correctly allocate resources.

No one cares about anyone else. Nobody will support any group’s pursuit of any goal unless it is also their goal. American life is becoming purely individualistic, adversarial, and acquisitive.

We haven’t invested in the systems that provide healthcare, education, retirement, and childcare. As a result, the average American family now goes without many of these things, since they’re priced out unless they have high paying jobs.

We pay absurd prices for health care. Having a child? That’ll be $50K. An operation? It will cost about what you would pay for a starter home. If she didn’t have health insurance, Wrongo’s daughter’s medication would cost $10,250/month. These basics of life are affordable in the rest of the rich world, but in America, they cost more than the average person can pay.

The average American now dies with $62k in debt. Life has become a sequence of unrepayable loans. Student debt becomes credit card debt and a mortgage, which leads to medical debt. These forms of debt define life in America. The average American is now a poor person, in the sense that they barely make enough to pay for the basics of life. Today, 80% of Americans live paycheck to paycheck, struggle to pay their basic bills, and 63% can’t raise $500 for an emergency.

These are the statistics of a nation that is descending into poverty.

Can it be fixed? Sure, but who’s going to pay for it? If taxes can’t be raised, if deficits can’t grow, what will happen? Nothing.

Except that we will move closer to a collapse. Our leaders say it’s because there isn’t an alternative. They say that we don’t have the money to pay for the changes we want. 70% of Americans say they want decent healthcare, retirement, and education, but they never vote for it.

Not even when it is offered during the primaries.

And it’s never offered in the general election, because nobody will vote for higher taxes to fund a functioning society. The idea simply isn’t acceptable to either of our political parties.

Wrongo’s decade of writing about what’s wrong hasn’t changed anything. Change requires a commitment to taking political risks, and massive voter turnout.

Otherwise, same old, same old is the path to our society’s destruction.

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Monday Wake Up Call – May 18, 2020

The Daily Escape:

Colorado River, from South Kaibab trail, Grand Canyon NP, AZ  – photo by DJ Memering. The bridge is called the Black Suspension Bridge. It is 5,260 ft below the canyon rim.

The CARES Act was sold as emergency funding for individuals and small businesses. In all, Congress has authorized $3.3 trillion in coronavirus relief in four separate acts over the last two months. The stated intent of those bills was to protect the American economy from long-term harm caused by the overall impact of the virus.

Alas, Congress also took care of their true constituents, Big Oil and other fossil fuel companies. Those companies got CARES Act tax breaks. The subsidies were supposed to help bail out small businesses pounded by the pandemic, but at least $1.9 billion of it was sent to fossil fuel companies and their executives.

Bloomberg News reports:

“$1.9 billion in CARES Act tax benefits are being claimed by at least 37 oil companies, service firms, and contractors”

Bloomberg used the example of Diamond Offshore Drilling Inc. who manipulated the bailout: (emphasis by Wrongo)

“As it headed toward bankruptcy, Diamond Offshore Drilling Inc. took advantage of a little-noticed provision in the stimulus bill Congress passed in March to get a $9.7 million tax refund. Then, it asked a bankruptcy judge to authorize the same amount as bonuses to nine executives.”

But, Diamond’s refund wasn’t all. Some went to their larger competitors. More from Bloomberg:

“…$55 million for Denver-based Antero Midstream Corp., $41.2 million for supplier Oil States International Inc. and $96 million for Oklahoma-based producer Devon Energy Corp.”

In addition, Kevin Crowley reports that Marathon Oil got $411m, Occidental $195m, and Valero $110m.

Hats off to all of our Senators, Congresscritters and the Trump administration! They all continue pursuing a pro-fossil fuel agenda, even as the economic disaster of the pandemic unfolds. Bernie Sanders tweeted:

“Good thing President Trump is looking out for the real victims of the coronavirus: fossil fuel executives,”

But, Bernie apparently voted for the bill, which passed the Senate in a unanimous vote. Hypocrisy much, Bernie?

These loopholes in the Act were deliberately written in so that corporations could feed at the trough along with small businesses, and we the people. Moreover, the initial bill was written in the House, although presumably in consultation with Trump and the Republicans. So, you can view this as either the cost of doing business for Democrats, or as just another day at the office listening to the lobbyists. Subsidy legislation has been a bipartisan objective.

Its always been this way. Here’s a cartoon from 1920 that could be drawn today:

Let’s remember that a big issue was the requirement for oversight, particularly after Trump said he wasn’t interested in having any. A compromise was struck so that an oversight commission could be empaneled to keep track of how the money was spent.

Today, it remains without a leader. Four of the five members of the Congressional Oversight Commission have been appointed, but Speaker Nancy Pelosi, (D-CA) and Senate Majority Leader Mitch McConnell, (R-KY) have not agreed on a chair.

While the current members of the panel can perform some oversight, without a leader, it can’t hire staff or set up office space. In addition, the four members have not met as a group since the economic rescue law was passed. The PBS NewsHour quotes John Coates, a professor of law and economics at Harvard Law School:

“If the commission is not functioning — which it is not — then there is no oversight on a huge part of the economic rescue law…”

We seem to be able to bail out the rich every few decades, and we always seem to do it on the backs of the poor. It will probably happen again in another 10 years or so. Between these bailouts, politicians and pundits appear on all of the news shows, and write very serious articles proclaiming the need to resist socialism and to preserve “the free market” for the sake of “wealth creation and innovation”.

Time to wake up America! This great con has been going on for all of Wrongo’s lifetime and by looking at the cartoon above, for a few lifetimes before. Yet voters seem to be oblivious to this insidious form of corruption each and every time they go to the polls.

To help America wake up, let’s listen to Drive by Truckers, and their tune “Armageddon’s Back in Town” from their 2020 album, “The Unraveling”

Sample Lyric:

There’ll be no healing
From the art of double-dealing
Armageddon’s back in town again

Those who read the Wrongologist in email can view the video here.

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