Corporations, Not Congress, Do The Right Thing

The Daily Escape:

Winter, Stowe VT – photo by John H. Knox

On January 6 2021 America’s professional managerial class felt fear for the first time since WWII. These corporate titans saw our democracy stumble. And they didn’t like it, since they have a vested interest in the US continuing to be a stable democracy. They rely on the rule of law to allow them to operate in a predictable and rational environment. That environment was jeopardized last week.

For the moment, the USA is effectively without a leader. We’ve heard no public briefings from the White House, FBI, Department of Homeland Security, or the Justice Department about what happened on January 6, or what has happened since. We’ve heard only Trump say he isn’t responsible for the attack on the Capitol.

The acting Secretary of the Department of Homeland Security resigned. The Defense Department is being run by a Trump lackey. Outgoing Secretary of State Pompeo is trying to blow up the entire Biden administration by recognizing the independence of Taiwan.

America is crying out for leadership, and a broad coalition of CEOs stepped up to silence Trump. These CEOs acted faster and more effectively as a check on the president’s power than Congress could, or would. A new overt corporatist political force is emerging, and Facebook (excuse the pun) is its face. Facebook COO Sheryl Sandberg said:

“You cannot call for violence…the risk to our democracy was too big. We felt that we had to take the unprecedented step of an indefinite ban, and I’m glad that we did.”

Twitter followed suit with a permanent Trump ban.

For years, many people, including Trump, have used these platforms to undermine democracy. Since before the November election, they have used these platforms to attempt to nullify the results of the November election, and install Donald Trump as an illegitimate president. From Jonathan Last:

“Had this attempt been successful, it would have been the end of American democracy and, consequently, the failure of the rule of law. This would have had dire consequences for Twitter, Facebook, and every company in America because it would have meant that they were no longer subject to the predictable process of the rule of law, but rather…the pleasure of a strongman.”

Despite the whining on the Right, there is no right of free speech on private platforms like Twitter, Facebook and Google. Those companies built, and now operate their platforms, and they are available to most for free. That doesn’t imply that individuals or corporations must be free to say anything they want while using them.

The people who run Twitter and Facebook are just as qualified to make judgments about what’s useful for a healthy society as any Right Wing politician. Anyone who says that these platform companies must simply let anyone join their platforms, and then allow them to do whatever they want, are simply wrong.

We’ve learned last week that when a sitting president threatens the political stability of the country by inciting an insurrectionist mob that storms the Capitol, corporate America will do everything in its power to restrain him.

This week, the tech giants including Facebook, Google, Amazon and Twitter worked in concert to decapitate Trump and the extreme Right.

Other corporations pulled political funding from all legislators who supported overturning the result of November’s free and fair election. Several major companies on Monday said they planned to cut off political donations to the 147 members of Congress who last week voted against certifying the results of the presidential election. Other major corporations said they are suspending all contributions from their political action committees. This is a sign of corporate America’s growing unease with the election falsehoods promoted by Trump, along with the violent attacks he encouraged.

All of this happened before the House could even schedule a vote on impeachment.

It also highlights the inaction by the Senate. For the first time in the last ten presidential transitions, the GOP-led Senate is not confirming Biden cabinet members prior to the inauguration.

There will be no head of the CIA, no Homeland Security secretary, Attorney General, Secretary of State, or Secretary of Health and Human Services when Biden takes office. This, despite being hip deep in a domestic terror attack during a pandemic that’s killed nearly 400,000 Americans.

And everyone should have a problem with the fact that the New England Patriots’ head coach Bill Belichick, by refusing Trump’s offer of a Medal of Freedom, is showing more moral leadership than any Republican Representative or Senator.

Between the demonstrations we saw last summer, through the Georgia Senate runoff election, political activism is on the rise across America. That now includes major corporations.

There will be no going back.

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Pentagon Can’t Account for $6.5 Trillion

Let’s take another break from the cacophony of the presidential campaign to provide some insight into a Pentagon report that the mainstream media barely covered.

The Inspector General (IG) of the US Department of Defense (DoD) issued an audit report on July 26, stating that the DoD cannot account for $6.5 trillion in total funds, of which, $2.8 trillion is “missing” from the last fiscal quarter. According to the IG’s report: (brackets by the Wrongologist)

Army and Defense Finance and Accounting Service [DFAS] Indianapolis personnel did not adequately support $2.8 trillion in third quarter adjustments and $6.5 trillion in year-end adjustments made to Army General Fund [AGF] data during FY 2015 financial statement compilation…We conducted this audit in accordance with generally accepted government auditing standards.

The IG also said that the DoD agrees they received these funds, agrees the funds are gone, and claims not to have records of where the money went. This doesn’t mean that the money (or equipment and supplies) was embezzled, but without accounting records, the Pentagon just doesn’t know what happened to it.

This isn’t a new problem. On September 10, 2001, then Sec Def Donald Rumsfeld reported that the DoD could not find $2.3 trillion of our tax dollars. After the next day’s al Qaeda attack, the Pentagon and the Congress lost focus on this problem. From the Fiscal Times:

Starting in 1996, federal agencies were mandated by law to conduct regular financial audits. However, the Pentagon has NEVER complied with that federal law. In 20 years, it has never been able to account for the trillions of dollars in taxpayer funds it has spent. An increasingly impatient Congress has demanded that the Army achieve “audit readiness” for the first time by Sept. 30, 2017, so that lawmakers can get a better handle on military spending.

But the IG report says (pg. 21), that they are not likely to comply:

Until the Army and DFAS Indianapolis correct these control deficiencies, there is considerable risk that the AGF financial statements will be materially misstated and the Army will not achieve audit readiness by the congressionally mandated September 30, 2017, deadline.

If this was your bank, and they agreed that they had received a large deposit from you, agreed that they had no idea where it was, and had no plans to refund it, you would sue and move to another bank.

Since this is the Pentagon, you can’t do either. Congress has been allowing the Pentagon to get away with this travesty for decades. Heads should roll at the Pentagon, but where is the Congressional oversight?

Sorry, this is gross negligence, and it isn’t excused because it is done by our “warrior” class who are only trying to keep us safe.

Think about it, $6.5 trillion lost is the equivalent of embezzling $1 billion a day for 18 years. Another way to look at the issue, is that the Pentagon can’t account for around $86 million in our tax dollars per hour. That means the Pentagon misplaces enough of your tax dollars every day to deliver every American free health care.

Now, they almost certainly didn’t lose or steal that much, but they shouldn’t have so much dough to play with until they learn how to account for what they get.

The people deserve whatever regime they endure.

This should be unendurable.

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How Brexit Informs The Pant Suit’s Strategy

We are told that the Pant Suit is the candidate of the status quo, while the Pant Load is a wild card who will bring about change, possibly change that causes immediate remorse if he is elected. That’s just what the UK is experiencing. After a weekend facing the realities of Brexit, 3.5 million Brits have signed a petition for a do-over vote on “Remain vs. Leave”.

The pundits say Clinton can’t be the candidate of change because she supports President Obama, and the common view is that her first term would be Obama’s third term. But, if Brexit has relevance for the American election, she must avoid appearing to be the candidate of the status quo.

If the Pant Load can make the election about any kind of change vs. more of the same, Clinton will be vulnerable.

She should run against Trump’s fitness to govern, and the fitness of the Republicans in Congress to govern as well. After all, Republican Congressional leaders decided not to govern in January 2009, and so far, they have not paid a political price for their obstructionism. Of course, Mr. Obama tried to run against the do-nothing Congress in 2014, and the result was that the GOP took control of both houses.

Maybe it would be different this time for the Pant Suit.  As Steve Waldman said about this strategy at the WaMo:

But if it could ever work, it’s now.  The most recent Economist/YouGov poll reported a 9% approval for Congress among registered voters. It is literally the most unpopular Congress in the history of polling.  Clinton can make the attack more effectively than Obama, because it won’t sound as much like blame-shifting.

And she could make running against Congress sound like change. She needs to shift some of her focus away from declaring the Pant Load unfit for office. That is, unless he keeps making more mistakes like his inexplicable PR disaster in Scotland.  If he does that, her speeches will write themselves, and he will keep sliding in the polls.

She should run to enact specific things that Congress has blocked – infrastructure spending, ending tax breaks for corporate off-shoring, and universal background checks for gun ownership. But she needs to distance herself from more from Obama on global trade deals. Consider this from the Detroit Free Press:

CNN’s exit poll, which surveyed 1,601 Michigan Democratic voters as they left their precincts Tuesday, showed that 58% of them believed trade with other countries costs jobs, compared to 30% who believe they create them. And among those who believe trade costs jobs, Sanders won by a large margin, 58%-41%.

Michigan is a key state for Clinton, and she needs to build a firewall in a few other states that Obama won in 2012, but where she now has some trouble, if the June 21 Quinnipiac polls for Florida, Ohio, and Pennsylvania are correct. The polls show Clinton with a clear lead in Florida (47%-39%), but locked in ties in Ohio (40%-40%) and Pennsylvania (42%-41%).

She has to keep the Pant Load from winning both Ohio and Pennsylvania, which right now, look to be toss-ups, meaning Trump could win both. Pennsylvania also has a number of swing House districts and an important Senate race, so Clinton must work hard there, even if it were completely in the bag for her. OTOH, PA elected a Democratic governor in the 2014 Republican landslide, and hasn’t gone red in a presidential election since 1988. This, from Booman:

For starters, Obama won in 2012 with 332 Electoral College votes to Mitt Romney’s 206. If we keep everything the same and award Ohio and Pennsylvania to Trump, the result is 294-244.

So, winning Ohio and Pennsylvania would be a start for the Pant Load, but without Florida, it’s hard to get from 244 to the 270 votes needed to win. In fact, without Florida, Trump would have to win Ohio, Pennsylvania, Virginia, New Hampshire and Michigan, while losing Iowa in order to garner a 277-261 victory.

It’s a long way to November, and who knows who will win? It’s difficult to believe it will be close, but we lived through two Nixon wins, so electing someone you dislike and distrust is nothing new for America.

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Sunday Cartoon Blogging – June 26, 2016

Sunday cartoons return! Sorry for the hiatus, but it was unavoidable.

Quite the week. Did the sky just fall on the UK? We will have more over the next few days. There is still left-over emotion about Orlando. We had a sit-in by Dems, or as one wag said, it was the first time in years that Democrats stayed up past 10:00pm. But, did it achieve much? And of course, there is the 2016 presidential campaign.

Europe and the UK worked for nearly 70 years to put the EU together, and it is undone in an evening:

COW Brexit 2

The conventional economists’ view of what Brexit means:

COW Brexit 3

UK Prime Minister David Cameron misreads the people, pays the price:

COW Brexit 4

Orlando led to sit-ins, political and otherwise:

COW Sit In

Loyalty oaths were on display after Orlando:

COW Loyalty

Trump has less campaign dough than expected, but there was a benefit:

COW Bigger Hands

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The Pant Suit vs The Pant Load© Part II – Funding Infrastructure

Here is an issue on which the presidential candidates of the two parties seem to agree: Funding infrastructure, or at least, funding roads.

Over the past 50 years, US investment in transportation infrastructure as a share of GDP has shrunk by half. China is outspending us four to one and Europe two to one on transportation infrastructure. We have over 100,000 bridges in this country old enough to qualify for Medicare.

The Economist reported that the American Society of Civil Engineers (ASCE) thinks that additional spending of $1.6 trillion is needed by 2020 to bring the quality of the country’s infrastructure up from “poor” to “good”. The Economist indicated that over the past decade, America’s roads have fallen from seventh to fourteenth in the World Economic Forum’s rankings of the quality of infrastructure.

Part of the problem is that the federal tax on gasoline, which provides most of the funding for federal spending on roads, has been 18.4 cents per gallon since 1993, yet over that period, the price of construction materials and the wages of construction workers have both risen by more than 75%.

And Congress hasn’t helped. They have passed 35 stop-gap funding bills to extend transportation funding. However, most transportation projects are not built in just one year, they are complex, multi-year projects.

Last December, Congress passed the “Fixing America’s Surface Transportation Act”, or the FAST Act – which authorized $305 billion over fiscal years 2016 through 2020 for roads, bridges, public transit, and rail. Of that amount only $70 billion represents a new cash infusion for road repairs. Since the total highway need is $740 billion, there is a big funding gap.

Bizarrely, most of the funding for FAST was paid for by raiding the capital of the Federal Reserve. The Congressional Budget Office recently projected that the money in the Highway Trust Fund will run out in six years, and the fund faces a shortfall of $100 billion by 2026.

The funding gap hasn’t escaped the attention of the two presidential candidates. In a rare show of agreement, they are both for infrastructure spending. So, what do they want to do? Unsurprisingly, Trump hasn’t proposed a specific funding level. In his book, “Crippled America: How to Make America Great Again“, Trump says he’s in favor of major public investment in infrastructure repair and expansion.

“If we do what we have to do correctly…we can create the biggest economic boom in this country since the New Deal when our vast infrastructure was first put into place. It’s a no-brainer.”

It’s a “no-brainer” but, with “no amount”.

Hillary Clinton wants to commit $275 billion in public funds over five years, including $25 billion in capital for a new national infrastructure bank to generate another $225 billion in direct loans, loan guarantees and other forms of credit.

Neither candidate is proposing anything that meets the total financing need.

Today, the federal government is responsible only for about 25% of spending on highways and the FAST alternative will be an unreliable future funding source. Federal net investment has been negative since 2011, meaning that Congress is not spending enough to maintain the roads and bridges we have.

By contrast, many states have raised local taxes on gasoline: 12 states have raised gas taxes in the last 18 months. Most states tax by the gallon, and have benefited from the falling oil price, which has boosted sales of gasoline by 3% nationally. In fact, states are beginning to spend more than the federal government as a percentage of GDP:

State Spending to GDP Growth

But, state gas taxes have the same problem as the federal gas tax: They are fixed per gallon, so inflation erodes their value over time. And state budgets can’t grow to the sky. In many cases, states are under pressure to balance their budgets.

As a result, state politicians are burning political capital just standing still. That means the presidential candidates and Congress must find a way to finance more federal infrastructure investment.

Perhaps the gas tax is the wrong way to go. Rising vehicle fuel economy means more miles driven on fewer gallons of gas. With the move to electric cars, Highway Trust Fund revenue will be even lower. And fewer people own cars, but everyone benefits from good roads. People buy food trucked on our roads. They buy clothes, furniture, etc. trucked on our roads. They are carried to hospitals in ambulances on those roads.

The solution is a general road tax that everyone pays.

So, be on the lookout for Trump or Clinton’s rhetoric on infrastructure solutions. This is a yuuge problem that is not going away.

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Road Trip Vol. II

Finally, trees with green leaves, green grass and temps in the 50’s. There was snow cover along I-95 for 630 miles south from the mansion of Wrong in Connecticut. After that, we passed through 50+ miles of ice-covered trees. In that part of America, there seemed to be few snow plows, so gas station and supermarket parking lots were ice-covered. Many schools and stores were closed.

I-95 was dry from Baltimore to Savannah, due to Socialist snow plows clearing and salting the roads. Apparently, the Obama tyranny will never end.

Have you noticed that Congress looks more and more like their owners?

COW Rich Dogs

Boehner is convinced that America will blame the Democrats when funding for the Department of Homeland Security expires. The reality may be the opposite:

COW DHS

Today’s Links:

What ISIS wants. A must read from The Atlantic.

Netanyahu wrecked a two-state solution with Palestinians in 2011. Found this at Sic Semper Tyrannis, a go-to blog on military strategy in the Middle East

Hillary Clinton and Elizabeth Warren have “cordial” meeting. Does cordial mean, “civil, but can’t stand each other?” Were they smiling, or grinding their teeth?

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Sunday Cartoon Blogging – August 3, 2014

For those on vacation, or without access to the Interwebs, here is a summation of this week’s wrong:
• The Senate couldn’t pass a bill to impose taxes on companies that move overseas
• The House didn’t vote on Mr. Boehner’s immigration bill because Sen. Ted Cruz blocked it
• We brokered a 72-hour cease-fire between Israel and Hamas that lasted 90 minutes
• The Times of Israel took down a blog post that made a case for genocide
• Mr. Obama admitted that we torture

That’s not a lot of humor to work with, but here are the best. Congress hurries to not finish their work:

COW DoNothing

 

Ted Cruz driving baby Boehner:

COW Cruz

 

Genocide of Palestinians is contemplated in the Times of Israel:

Genocide

Yochanan Gordon framed his premise as “a question for all the humanitarians out there”:

Prime Minister Benjamin Netanyahu clearly stated at the outset of this incursion that his objective is to restore a sustainable quiet for the citizens of Israel. We have already established that it is the responsibility of every government to ensure the safety and security of its people. If political leaders and military experts determine that the only way to achieve its goal of sustaining quiet is through genocide is it then permissible to achieve those responsible goals?

Umm, wasn’t that the excuse Nazis gave the world about Jews, Gypsies, and Homosexuals?

And Mr. Netanyahu told the White House not to force a truce with Palestinian militants on Israel. He apparently advised the Obama administration “not to ever second guess me again” on the matter.

So, it looks increasingly like we need a 3-State solution:

COW Ceasefire

 

 

 

 

 

 

 

 

 

 

 

 

 

In yesterday’s speech, President Obama said “We tortured some folks” and that “we shouldn’t be too sanctimonious”. The President:

It is important for us not to feel too sanctimonious in retrospect about the tough job those folks had… A lot of those folks were working hard under enormous pressure and are real patriots…That needs to be understood and accepted. We have to as a country take responsibility for that so hopefully we don’t do it again in the future.

Apparently, some people didn’t agree:

What would cause Mr. Obama to make this “apology” for torture? Has he lost touch, or is he living in a bubble of intelligence advisers that he can’t or won’t fire?

This is reminiscent of the way that J. Edgar Hoover controlled (or intimidated) presidents in what we used to think was another age. Who, or what, is making this president say such crap, and not take what are to most of us, obvious actions?

 

 

 

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Only Chumps Pay Taxes

Corporate America knows it has a problem when Fortune Magazine calls them out. Fortune has an article by Allan Sloane called “Positively un-American tax dodges.” The headline shows their opinion about large US companies who are moving their “headquarters” overseas to dodge billions in taxes, meaning the rest of us will have to pay their share. From Sloane: (brackets by the Wrongologist)

[There is] a new kind of American corporate exceptionalism: companies that have decided to desert our country to avoid paying taxes but expect to keep receiving the full array of benefits that being American confers, and that everyone else is paying for

One of the companies that is moving offshore is Medtronic, a Minnesota-based medical device manufacturer that is heading to Ireland. But only for tax purposes. The Irish Independent quotes Medtronic’s CEO:

Some people have misinterpreted the recent announcement that we are acquiring an Irish company and declaring our principal executives’ offices in that country to mean that we are leaving Minnesota… Nothing could be further from the truth. The Medtronic operating headquarters where I go to work every day will stay right where it is in Fridley, MN

This is called “Inversion” in tax law circles. Companies buy a foreign-headquarted firm and then make it the parent company for tax purposes. In their quest to maximize shareholder value, multinational companies have outsourced labor to lower-wage countries and shifted profits to subsidiaries in lower-taxed countries. If inversion mergers take hold, it will make matters worse. More from Fortune:

All of this threatens to undermine our tax base, with projected losses in the billions. It also threatens to undermine the American public’s already shrinking respect for big corporations

Here is a picture of how US after-tax corporate profits have grown over the decades:

Corp ATax profits 2014

Since the start of the Reagan era, except for the 2008 recession, it’s been a ride into the stratosphere for Corporate America. Corporations have successfully lobbied Congress for endless deductions and loopholes. From 2009 to 2011, the 280 most profitable companies paid just 18.5% in Corporate Taxes, about half the 35% statutory tax rate. In 1952, corporate taxes accounted for fully one-third of federal revenues, but in 2013 amounted to just under 10%.

And these guys think more is never enough. French economist Gabriel Zucman observes that:
• 20% of all corporate profits in the United States have moved offshore
• Tax avoidance costs the government one-third of the tax revenue it should be receiving from corporations

Zucman also found that $7.6 trillion of personal wealth is hidden in tax havens, which amounts to 8% of the world’s total personal wealth. He estimates the global tax revenues would increase by more than $200 billion if these tax avoidance practices were ended.

The issue is: (h/t Steve Pearlstein) Companies moving their tax jurisdiction want all the rights and privileges of being an American company without paying for the full complement of services that come along with doing business in America.

They want the security that a big military makes possible, one that allows them to operate in all of the advanced economies of the world. They want the world’s most enforceable patent system to protect their intellectual property. They want a fair and efficient judicial system to enforce contracts.

They want a well-educated workforce to design their products, often relying on basic research often done through an extensive network of government-funded institutes and laboratories. They want modern ports and highways and airports to ship products to market.

They require an efficient financial system to provide cheap and plentiful capital. They demand professional, credible regulatory agencies that can expeditiously evaluate products and ensure customers that they are safe and effective.

All of that takes lots of tax revenue. It has to include revenue from corporate income taxes that these firms think is their fiduciary duty to avoid.

It was bound to happen: The government that Corporate America bought for their exclusive use, just isn’t doing a good enough job, so the Corporatists are gonna leave.

Our tax systems must be reformed. We need to take the job of tax reform away from corporate lobbyists. We must make it harder for companies to use internal (“transfer”) pricing to avoid taxes. Companies should be made to book activity where it actually takes place. Barry Ritholtz mentions an idea in the Republican-sponsored Tax Reform Act of 2014 that “fixed” inversion: An annual tax of 8.75% on cash (and equivalents) held offshore, plus 3.5% a year on all other retained offshore earnings. The idea was to reduce the incentive to incorporate offshore by charging taxes on top of the charge by the other locality, be it Ireland or the Cayman Islands. It went nowhere.

Any new system needs to ensure that change results in corporations paying more in taxes with less collection/compliance expenses. The new system must be simpler than today’s.

As Jacques Leslie writes, “there is no economic, political or moral justification for tax evasion.”

 

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