The Presidency – Page 33 – The Wrongologist

Monday Wake Up Call – June 28, 2021

The Daily Escape:

Sunset, Thumpertown Beach, Eastham, Cape Cod MA – June 2021 iPhone photo by Wrongo

Today’s new Republican talking point is that the main reason violent crime is on the rise is that Democrats have “stigmatized one of the most honorable professions in America.”

How is it that the Party that wants to drown the government in a bathtub, that worships guns, and believes Americans must be armed against their government, holds on to its brand as the Party of “law and order”?

Murder is up all over America. The GOP wants to blame “defund the police”, the Black Lives Matter movement, and whatever Antifa is. Toss in the horror of Critical Race Theory, and in a way, they’re trying out another “Willie Horton” political argument on the rest of us. (hat tip to WaMo)

For those who don’t remember, GHW Bush exploited Willie Horton’s 1986 rape of a woman in Maryland that occurred while Horton skipped out of his furlough. He raped and stabbed her.

Bush used this to trigger voters’ conscious and unconscious racial biases about African American men in his 1988 presidential election run against Michael Dukakis, who was governor of Massachusetts, the state Horton fled after his early release.

No one really knows why murders are up, but surely, it’s a multi-factor problem. Last week, Derek Chauvin was sentenced to 22.5 years for murdering George Floyd. That’s about 10 years above the usual sentence recommended by law. But Chauvin’s sentencing doesn’t begin to solve America’s problem with policing.

And it won’t do anything for America’s murder rate.

A few things are certain. The NYT reported on a survey of almost 200 police departments nationwide that indicated retirements were up 45% while resignations rose by 18% in the last year, compared with the previous 12 months. From the NYT:

“New York City saw 2,600 officers retire in 2020 compared with 1,509 the year before. Resignations in Seattle increased to 123 from 34 and retirements to 96 from 43. Minneapolis, which had 912 uniformed officers in May 2019, is now down to 699.”

This is happening while most cities are contending with a rise in shootings and homicides. It raises in Wrongo’s mind a certain aroma of White fragility among police specifically, and Republicans generally.

The idea that Republicans are now wringing their hands and cops are quitting the job because activists carry signs that say defund the police, seems a disproportionate response to what the police continue to do to minorities.

These topics are far too complicated for one column, but let’s touch on a few high-level concerns: Killings are a direct result of the prevalence of guns in our country. We know that in most countries, police are under significantly less stress because they are don’t fear that every encounter will be with someone with a gun. From the NYT:

“…officers said they were asked to handle too much; they were constantly thrown at tangled societal problems like mental health breakdowns or drug overdoses, they said, for which they were ill-equipped — then blamed when things went wrong.”

This leads to the deliberately misunderstood (by Republicans) “defund” concept, which wants to redeploy some public spending on better services and better outcomes for citizens. It does that by providing additional resources that remove cops from situations that they are neither well-trained for, nor well-suited to address.

Second, law enforcement culture must change. The militarization of America’s police forces must be reversed. The power of police unions to influence police department culture must end.

Third, Democrats are running a big risk by not also focusing on the public safety issues of minority voters. Too many five-year-olds have been shot on their front stoops this year, and their grandmas who vote know that.

Axios reports that the Democratic messaging group Future Majority has identified areas where Republicans hold a political advantage. Republicans outperformed Democrats on jobs and the economy, gun rights, and “keeping you and your family safe.” In addition, of the issues polled, “defunding the police,” “open borders” and “reparations for slavery” were by far the biggest turnoffs for independents and voters in general.

The question for Democrats is how to balance changing police culture while seeing that people are protected? There’s a growing cop shortage, and Democrats are scrambling to develop a more complete response on crime.

So far this year, 21,099 Americans have been killed by a gun, including 11,550 suicides. Another 18,596 people have been wounded. Of that number, 720 children and teens under age 18 have been killed by guns, and another 1,852 have been wounded. And there have been 298 mass shootings resulting in 334 deaths and 1,244 injuries.

It’s time for action Democrats! Stop letting the GOP define your policies for you. To help you wake up, listen to Bananarama’s “Cruel Summer”. The video is a time capsule of 1980s NYC. If you remember, in 1980, people said: The future will be awesome! In 2021 Republicans are saying: I want to go back to the 80s:

Sunday Cartoon Blogging – June 27, 2021

Long-time blog reader Terry McK. commented about yesterday’s column on infrastructure:

“If we look at the collapse in Florida, there is a simple lesson about infrastructure. A report has just emerged that shows that the building had many compromises – but presumably, the costs of rehabbing the structure were prohibitive. We have deferred maintenance costs for so long across the US and one can see the results in bridges and tunnels across the US. So, what is needed is more money, not the shell game of making something look like it won’t cost more money.

But real money means taxes.”

Terry’s right, the Florida condo is a metaphor for the failure of our legislators to legislate. Here’s a view of the horrific damage:

Photo via AP

A 2018 engineer’s report cited by the NYT found major structural damage to the concrete slab below the pool deck and “abundant cracking and crumbling” of the columns, beams and walls of the parking garage. And two and a half years later, before a repair project was scheduled to begin, the building pancaked without warning.

The city released that report saying the damage was caused perhaps by years of exposure to salt air and water intrusion: (brackets by Wrongo)

“Though some of this damage is minor, most of the concrete deterioration needs to be repaired in a timely fashion…[in order to maintain]…the structural integrity” [of the building]”.

Prior repairs to cracks were failing. Concrete on many balconies were also deteriorating. This building isn’t a public property. Responsibility for its maintenance is on the shoulders of the owners, the condo association, which will probably declare bankruptcy and move on.

But the collapse is an object lesson for our DC pols. First, it reminds us that our public infrastructure is deteriorating and in need of replacement. Second, Republicans who lecture us about personal responsibility and that there is no free lunch, nonetheless are always fighting to cut taxes and limit funding for maintaining our infrastructure.

They would also support the right of the condo ownership to declare bankruptcy.

Third, it shows how important it is not to turn over public goods to public/private partnerships to build, own and manage, and then expect them to stay safe and intact. The economic incentives for private parties maintaining public goods will be all wrong. On to cartoons.

Washington’s unvirtuous circle:

It’s clear who’s truly against America:

Derek goes away:

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 Dvořák’s “From the New World“, performed here in 1985 by the Vienna Philharmonic, directed by the late Herbert von Karajan:

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?

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:

Sunday Cartoon Blogging – June 20, 2021

Wrongo went to his local power equipment repair place on Saturday. It was the first time he consciously didn’t wear a mask in a public setting. Two weeks ago, he went with son Sean to watch a baseball game at Yankee Stadium. While we had seats in the vaccinated section, it was wonderful to be a human among a large gathering of humans, doing very human things.

Connecticut has a new Covid infection rate of less than 2 per 100,000. Our county has zero hospitalized Covid patients and a vaccination rate of more than 70%. That’s not true for much of Red America. An MD friend wrote this on her Facebook page: (emphasis by Wrongo)

“England just delayed their full re-opening by 4 weeks as Covid cases are rising again even though 80% of adults are vaccinated. 99% of their cases are the Delta variant now and a vast majority of their new cases are in children and young adults who have not yet been vaccinated. 10% of hospitalized patients with the Covid Delta variant have been fully vaccinated (Pfizer is 96% effective in preventing severe illness w/Delta variant while Astra Zeneca is 92% effective). We are usually about 3-4 weeks behind Europe.”

As the Delta variant becomes more widespread in the US in the next 4 to 8 weeks, it will be a real challenge for our poorly vaccinated states. No one really knows how to reach those who refuse to get vaccinated. But Wrongo no longer cares what happens to them. If they don’t want to take basic health precautions, it’s on them:

If you are fully vaccinated, go outside. Be around other people. Bask in the sun. Draw energy from sunlight and the other people.

The Supremes upheld the ACA for a third time. Not everyone is happy:

Juneteenth is now a national holiday:

We should never underestimate the importance of symbolism. And as symbolic gestures go, who exactly could be insulted by celebrating the emancipation of enslaved people in America? A national holiday might not be as substantial as a voting rights law, but everything doesn’t have to be judged through the same lens.

Putin Summit wasn’t fun for somebody:

GOP is not happy with the Summit. They fail to see the irony:

Senate Authorizes New Industrial Policy

The Daily Escape:

Oro Valley, AZ – 2021 photo by PoohBear512

On June 8, the Senate passed a major industrial policy bill that would direct government investment toward critical technological sectors. The bill is intended to reinvigorate the manufacturing segment of the US technology sector, providing alternatives to supply chains dependent on Chinese microchips. Some argue that it also lays the foundation for long-term economic and technological competition with China. The bill passed with a filibuster-proof 68 votes.

The debate over industrial policy is politically charged because it goes to the heart of a deeper, long-standing controversy over the role of free markets and the role of the government in the economy.

Proponents of a state-directed and funded industrial policy argue that the government has the duty to structure the economy in the national interest, since the free market may fail to do so. We know that manufacturing provides stable, well-paid employment, but that isn’t factored into an individual firm’s decision-making. We can look at American firm’s offshoring of production even though it has cost jobs domestically while also offshoring manufacturing know-how.

As we discovered with Covid, it is very important to produce critical goods domestically. Industrial policy can help a country determine what critical goods it needs to produce domestically, such as medical supplies, or military equipment, for national security reasons. We learned about the automotive chip shortage, which is part of the greater issue of foreign control of global computer chip production.

There is also an argument that the government should fund R&D because the societal benefits go far beyond what companies will ever invest in.

Industrial policy fell out of favor in the US during the 1980s and 1990s with the development of the Washington Consensus, that defined economic development as the result of free-market policies such as the privatization of state enterprises and promotion of free trade.

But because of our competition with China, there’s a renewed interest among DC politicians across the aisle with again doing what Republicans have castigated Democrats for doing: “Betting on winners and losers”.

The bill authorizes the lion’s share of the money, totaling $190 billion, for a major rethinking of federal science, technology and research spending. It creates a new technology division within the National Science Foundation to focus on emerging areas including artificial intelligence. It also gives $10 billion for the Commerce Department to invest in new technology hubs so that other regions and cities across the country can attract the same sort of economic opportunities as Silicon Valley.

If some version of the bill eventually passes both Houses and is signed into law by Biden, it represents a major shift in how the US government manages its relations with the tech sector.

Both Republican and Democrats now suddenly seem interested in government intervention in domestic markets. It turns out that bipartisanship is on the menu whenever the issue is socialism for corporations. We can easily pass legislation that sends $ billions to corporations, but money for voting rights, people’s domestic lives, and infrastructure? Not now, maybe not ever.

China has invested in R&D while the lion’s share of American firms have squandered their money on share buybacks. Shame on us for supporting tax cuts for corporations! If only we had the foresight to know how stupid those things were. Here’s a chart:

Source: Council on Foreign Relations

Oh wait. Many of us had that foresight.

We did this with Japan back in the late 1970s. Earlier, we outspent the Russians in the space race.

This time we will probably give $ billions to the some of the same companies that decided to move their factories to China in the first place. Oversight will be crucially important.

Nothing we do will prevent China from educating its people, building new infrastructure, and focusing on STEM. But we can keep our edge over the Chinese by focusing on education, basic research, infrastructure upgrades, and STEM.

And the Chinese won’t be an easy target.

While we debate whether intelligent design and Critical Race Theory should be taught in our schools, the Chinese will be colonizing the Moon. While we fight about the 2nd Amendment, the Chinese are moving to dominate the global economy.

Most of the bill funds domestic investments to remain technologically competitive and reduce dependence on our economic adversaries. This seems like sound policy.

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…”

New Jan. 6 Report Doesn’t Go Far Enough

The Daily Escape:

Lupine super bloom, Folsom Lake, CA – May 2021 photo by Ed Kornegay

A joint report from the Senate Rules and Administration, and the Homeland Security and Governmental Affairs Committees reveals that Capitol Police had specific intelligence indicating an armed invasion of the Capitol at least two weeks before the Jan. 6 riot, but a series of omissions and miscommunications kept that information from reaching front-line officers targeted by the violence.

Sen. Gary Peters (D-MI), chair of the Homeland Security panel, told reporters:

“There were significant, widespread and unacceptable breakdowns in the intelligence gathering….The failure to adequately assess the threat of violence on that day contributed significantly to the breach of the Capitol….The attack was, quite frankly, planned in plain sight.”

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.

The Wrongologist

Geopolitics, Power and Political Economy

Category: The Presidency

Sunday Cartoon Blogging – June 27, 2021

Saturday Soother – June 26, 2021

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

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

Sunday Cartoon Blogging – June 20, 2021

Senate Authorizes New Industrial Policy

New Jan. 6 Report Doesn’t Go Far Enough

Monday Wake Up Call – June 7, 2021