Tag: Tax Breaks for Corporations

Lobbyists Are Hiring Democrats to Kill Tax Reform

The Daily Escape:

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

From the NYT:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Monday Wake Up Call – 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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Trump Gives More Tax Breaks to Corporations

The Daily Escape:

Sunrise at Delicate Arch, UT – 2019 photo by going_postal

While we were all celebrating New Year’s, the NYT published a story about how Trump’s Treasury Department quietly weakened elements of the 2017 Trump tax law, making it even friendlier to wealthy individuals and corporations.

As a result, the tax bills of many big companies are even smaller than what was anticipated when the bill was signed. This means that the federal government may collect hundreds of billions of dollars less over the coming decade than previously projected. The budget deficit has jumped more than 50% since Trump took office. It is expected to top $1 trillion in 2020, partly as a result of the tax law.

Lobbyists targeted two provisions in the original 2017 law designed to bring in hundreds of billions of dollars in revenue from companies that had been dodging US taxes by stashing profits overseas. From the NYT:

“Starting in early 2018, senior officials in President Trump’s Treasury Department were swarmed by lobbyists seeking to insulate companies from the few parts of the tax law that would have required them to pay more. The crush of meetings was so intense that some top Treasury officials had little time to do their jobs…”

Because of the way the bill was rushed through Congress, the Treasury Department was given extra latitude to interpret the law. Add the fact that the law was sloppily written, helped to make the corporate lobbying campaign a resounding success.

Treasury has issued a series of obscure regulations that carved out exceptions allowing many leading American and foreign companies to pay little or nothing in new taxes on offshore profits. The NYT says companies were effectively let off the hook for tens if not hundreds of $billions in taxes that they would otherwise have been required to pay under the 2017 law.

You may remember that the idea behind the Trump Tax Cut was that companies would get the tax cuts that they had spent years lobbying for, but the law would also fight corporate tax avoidance and the shipment of jobs overseas.

A few facts about the Trump tax cut: Republicans used a Congressional process known as budget reconciliation, which blocked Democrats from filibustering and allowed Republicans to pass the bill with a simple majority.

To qualify for that parliamentary green light, the net cost of the bill, after accounting for different tax cuts and tax increases, had to be less than $1.5 trillion over 10 years. But the bill’s cuts totaled $5.5 trillion. To close the gap between the $5.5 trillion in cuts and the maximum allowable price tag of $1.5 trillion, the package sought to raise new revenue by eliminating deductions and introducing new taxes.

The two key provisions are known by the acronyms BEAT (base erosion and anti-abuse tax) and GILTI (global intangible low-taxed income). Shortly after Trump signed the tax bill, lobbyists from major American companies like Bank of America and General Electric as well as foreign banks, swarmed the White House in an effort to gut the BEAT and GILTI taxes.

Trump’s Treasury Department largely granted the lobbyists’ wishes, turning what was already a massive corporate handout into an even more generous gift to big companies and banks.

In the last 2 quarters of 2019, we saw massive corporate share buybacks. The richest families and corporations pocketed most of that money, with minimal re-investment into company assets, increased employee pay, or benefits.

The folks who didn’t get what they needed were the bottom 90% of Americans. Welcome to the plutocracy where billionaires whine about getting picked on, and the bottom 80% own just 7% of the nation’s wealth.

The mission of the Trump presidency is nearly complete. He’s packed the Supreme Court with reliable conservatives. He’s delivered the Randian wet dream of low corporate taxes while leaving most corporate tax loopholes in place.

Trump’s version of the Republican Party is in their end game: Bankrupting the government, privatizing government’s remaining services, and stealing the silverware on their way out the door.

We have entered the smash-and-grab portion of the GOP’s program. They care, but only marginally, if Trump is re-elected in 2020. Their work is done.

The narrative that our economy is the best ever, was enabled by a record federal deficit. When it’s time to protect Social Security, or provide better access to healthcare, the GOP will cry about the budget deficit that’s likely to be more than $1 trillion/year, from here to forever.

Normalized insanity is in full swing. Welcome to the asylum!

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Saturday Soother – Amazon Bails on NYC Edition

The Daily Escape:

Marijuana Museum, Amsterdam, Netherlands – 2017 photo by Wrongo

When Alexandria Ocasio-Cortez and Michael Bloomberg agree on something, it’s worth taking seriously, and neither wanted the Amazon deal with NYC. And this week, Amazon scuttled its plans to build its HQ2 in Long Island City, (LIC) Queens, New York City, citing opposition by “state and local politicians.”

Amazon’s abrupt announcement to withdraw from the deal came after it was roughed up at two City Council meetings along with enduring the indignity of having to contend with anti-gentrification protestors and union leaders.

There were two big problems that Amazon faced in LIC. First, they were getting a huge tax subsidy, about $2.8 billion. The tax subsidy looked even worse when we learned this week that Amazon nearly doubled its profits to $11.2 billion in 2018 from $5.6 billion the previous year and, once again, didn’t pay a single cent of federal income taxes.

It didn’t help that the state and city announced the massive subsidies when both are also contending with large budget deficits. NYC Mayor Bill de Blasio, citing a shortfall of $1 billion in revenues, told city agencies to cut their budgets by $750 million by April. And these cuts would have to be recurring.

This helped build outrage about the nearly $3-billion corporate welfare program for Amazon.

The second problem was gentrification in the LIC neighborhood. Immediately after the announcement, real estate prices zoomed, precisely when Manhattan prices were falling. The NY real estate industry was to be one of the primary beneficiaries of the HQ2 project, but local residents would be driven out of their neighborhoods.

Amazon has a poor track record in Seattle. They had fiercely opposed a local tax on large companies to fund housing for the homeless, and got it reversed one month after it had taken effect. Microsoft, after the tax law was scuppered, pledged $500 million to fund affordable housing for the low and middle income in the Puget Sound area, and encouraged other companies to make similar efforts.

Amazon didn’t join with Microsoft.

All is not lost. Amazon says it will still be expanding employment in NYC. And LIC has been a hot real estate/development market for several years, long before Bezos started playing his urban version of the Hunger Games. If the commercial construction in LIC over the past five years was happening in a second-tier US city, it would be equivalent to an entirely new business district.

A third problem was Amazon’s sense of entitlement. They expected zero push back, and their New York City campaign was inept. Amazon seems to have thought that since it had the governor and mayor in its pocket, all it had to do was show up for photo ops. The NYT points out Amazon didn’t even hire a native to grease the wheels:

“…the company did not hire a single New Yorker as an employee to represent it in discussions with local groups. Its main representatives traveled between Washington and Manhattan, and only one had moved into an apartment to work with community members and foster support.”

Amazon’s leaving was celebrated by Rep. Alexandria Ocasio-Cortez (D-NY), who represents the district. She complained about the “creeping overreach of one of the world’s biggest corporations“, and maybe that was the final straw for Bezos.

So props to AOC, and to the local politicians for standing up to this example of corporate welfare.

It’s possible that Jeff Bezos’s sudden change of heart was that he couldn’t stomach the idea of not being able to push around NYC the way he bullied Seattle into dropping its homeless tax. In NYC, he’d have to curry favor, feign interest in the concerns of locals, and make occasional contributions to the city.

Bezos may have felt all that was too high a price. But we should assume Amazon penciled out the deal, and didn’t like the result. For Amazon, it may have been a prudent business decision, artfully dressed up as a response to the political opposition the incentive package was facing.

Maybe, it’s no longer business as usual in America. AOC and other young people may not have money, but that doesn’t mean they can’t use power.

These corporate tax subsidy deals never add up for the cities that make them. Maybe people in other cities will learn from this NYC moment, and fight against the selling of our cities and towns to the uber-wealthy.

Now, it’s time to let go of Amazon, AOC, and Trump’s National Emergency. It’s time to get some Saturday Soothing.

Start by brewing up a vente cup of Roasting Rabbi Coffee, where the company slogan is: “Releasing the Holy Spark in Each Bean!” Try their Breakfast Blend.

Now settle into your most comfy chair and listen to Valentina Lisitsa play Liszt’s Hungarian Rhapsody No. 2, recorded live in May, 2010 in Leiden, Holland:

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

 

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It’s Time to Raise Taxes

The Daily Escape:

Autumn in Hunza Altit Valley Pakistan – 2017 photo by Nasr Rahman. This shows that beauty can exist in very difficult places.

In 1785, Thomas Jefferson called for a geometric progression in taxes on assets of property holders as a way of lessening inequality. People with more assets would pay much higher taxes. Today, we’re still in search of policies that will do the trick. From The Fiscal Times:

Democratic Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez have sparked intense debate this month by proposing higher taxes on the rich, with Warren calling for a wealth tax and Ocasio-Cortez proposing a 70% top marginal tax rate.

But, Senate Republicans are moving in the opposite direction. Three GOP senators reintroduced legislation to permanently repeal the federal estate tax. The 2017 GOP tax overhaul has already reduced the number of estates subject to the tax by roughly doubling the value of assets that can be excluded from the tax. For 2019, this tax will only be paid by 1,700 families, but that’s all too much for Republicans.

Axios just reported on what Americans think about taxes:

Polling has found tax increases on the wealthy to be popular. A survey earlier this month by The Hill and HarrisX found that 59% of registered voters, including 45% of Republicans, support increasing the top income tax bracket to 70%. A Fox News poll released last week found that 70% of voters favor tax increases on families making over $10 million a year and 65% favor tax hikes on incomes over $1 million annually. Paying taxes is a complicated and controversial issue. What is not controversial is the need for people to take advantage of tax services that can help ensure they pay the right tax and thus appease the ever-lurking IRS. Going to http://daveburton.nyc/tax-services-nyc/ will provide more detail on this.

Those numbers suggest that a complete repeal of the estate tax might be about as popular as the polar vortex.

This shows how vast the gulf is between Republicans and Democrats on taxes. A poll by Axios, along with SurveyMonkey, ironically presented at Davos, showed that 70% of Americans think the economic system is skewed toward the wealthy and the government should do more to fix it. It further showed respondents are ready to vote for a 2020 candidate who agrees.

  • 58% of people surveyed say that “unfairness in the economic system that favors the wealthy” is a bigger problem than “over-regulation of the free market that interferes with growth and prosperity”
  • Among 18-24 year-olds, that gap is a chasm: 76% to 21%
  • Among those 65 and older, it’s a very narrow 51% to 46%
  • 89% of Democrats agree
  • 68% of independents agree
  • But 77% of Republicans say over-regulation of the free market is a bigger problem than economic unfairness
  • A huge majority of Democrats (90%) said they would be excited to vote for a candidate who promises to reform the economic system, with 71% of independents saying the same.

(SurveyMonkey’s online poll was conducted January 16 through 18, 2019 among a national sample of 2,277 adults.)

After WWII, America had very high marginal tax rates, and one result was corporate income was reinvested in the company, rather than given to top management or shareholders. Why give 70% of every dollar to the government?

Back then corporations, in exchange for limited liability, assumed they had fiduciary duties to the public and to their employees as well as shareholders. But the Right got behind the doctrine that a corporation’s only duty was to their shareholders. CEO’s became significant shareholders through stock options.

Then, Reagan and Bush lowered taxes on corporate and personal income, and dividends.

Our basic political issue in America has become: “Does the economy exist to serve the nation, or does the nation exist to serve the economy?”

Our affirmative vote must be for the economy to serve the nation. Over the past 40 years, we have reduced taxes for high earners and corporations. We’ve added loopholes that subsidize corporations, but our need for infrastructure spending hasn’t declined, and our military spending has grown dramatically.

Over the past forty years, the share of income taxes paid by corporations has declined. It is now only 9% of US government tax revenues. It was about 24% in 1960.

We’ve financed the tax cuts for high earners and corporations with ever growing budget deficits. The golden age for these policies must end now.

We need to go back to the days of socially responsible capitalism, not the predatory capitalism we have today. High marginal income tax rates will help. In addition, taxing dividends at the same as ordinary income is a good idea.

Let’s raise the capital gains tax above its current 20% rate.

Let’s find a Constitutional way to tax wealth as Elizabeth Warren suggests. Add a very small transaction tax on sales of stock on all public markets.

It’s time to move past the politics of “What can America do about inequality without corporations and rich people actually giving anything up?”

This isn’t an anti-corporate, anti-wealth assault, it is a necessary corrective to bad tax policy from the 1970s to today.

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Tax Abatements Are Killing School Budgets

The Daily Escape:

Egmont National Park, NZ – photo by vicarious_NZ

A new report shows that US public schools in 28 states lost at least $1.8 billion in tax revenues last year as a result of tax incentives granted to corporations. The study analyzed the financial reports of 5,600 of the nation’s 13,500 independent public school districts.

Good Jobs First examined the first full year of reporting under a new accounting standard for school districts, adopted by the Governmental Accounting Standards Board (GASB), the body that sets accounting rules for all states and most localities. The new rule, GASB Statement No. 77 on Tax Abatement Disclosures, requires most state and local governments to report annually on the amount of revenue they’ve lost to corporate tax abatements.

This is extremely important, since most local schools are very dependent on revenue from property taxes, but they rarely have influence over corporate tax abatements granted by their towns, and/or the cities or counties where they are located.

And local voters have had no way to see how much they are forced to pay in additional taxes that were lost to enrich the pockets of corporate employers.

Good Jobs found that the 10 most affected states could have hired more than 28,000 new teachers if they were able to use the lost revenues. Or, they could have avoided higher home property taxes, or provided their teachers with better resources, or higher pay.

States and cities have long used abatements and other tax incentives to lure companies, or to keep them from leaving, and/or to encourage them to expand locally. Often, those companies make their choice of location based on the quality of local schools and colleges.

These abatement deals are made by local politicians and are meant to boost local economic development. Their proponents say the lost tax revenue is worth it, because they grow the local economy. But it is difficult to know whether the benefits outweigh the burdens.

And until GASB 77, it has been impossible to see just how much a school system may have lost because of a company’s tax break. The new rule is especially helpful in understanding local schools finances, because it requires the reporting of revenue losses even if they are suffered passively by the school system as the result of decisions made by another body of government.

Of the five districts that lost the most, three are in Louisiana. Together, they lost more than $158 million, or $2,500 for each student enrolled. The School District of Philadelphia, which only last year regained local control from the state after climbing out of a deep fiscal crisis, lost the second most revenue at $62 million.

Overall, nearly 250 school districts lost at least $1 million each, and in four districts, tax abatements reduced classroom resources by more than $50 million.

But most school districts have not yet complied with Rule 77, which was implemented in 2015. Good Jobs First estimates that another $500 million of subsidies and abatements are currently unreported.

Most of us believe that our governments are supposed to govern in the interests of the “general welfare,” that when voters put people in positions of power, based on the legitimacy of our electoral process, is the limit of our responsibility as voters.

We accept that somebody has to say what the rules are, and then enforce them.

But in our neoliberal economic times, voters have to remember that our governments often act as wholly owned subsidiaries of the 1%. It takes suspension of belief to accept that our republic, ruled as it is by an oligarchy, is working for the general welfare of all of our citizens.

Why do we think that, our “governments”, all of which are subject to capture and ownership by the few, are going to somehow provide decency, comity, or fairness to all of us?

We need to abandon the article of faith that the free market, one without government oversight, promotes the best economic outcome for all of us.

Today’s inequality says the opposite.

We need a new vision of the role of government. But it isn’t really a “new” vision. It is simply a return to insisting on the “promotion of the General Welfare for all” as the paramount object of government.

Here’s another thought from Gordon Wood, in his book, Creation of the American Republic:

In a republic each individual gives up all private interest that is not consistent with the general good, the interest of the whole body. For the republican patriots of 1776 the commonweal was all encompassing—a transcendent object with a unique moral worth that made partial considerations fade into insignificance.

The last outcome that American revolutionaries wanted was to be ruled by oligarchs. But, here we are.

We need to reform our capitalism.

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Monday Wake Up Call – December 3, 2018

The Daily Escape:

Boston Public Library – photo by joethommas

The NYT’s David Brooks:

We’re enjoying one of the best economies of our lifetime. The GDP is growing at about 3.5% a year, which is about a point faster than many experts thought possible. We’re in the middle of the second-longest recovery in American history, and if it lasts for another eight months it will be the longest ever.

So everything’s good, no? Not really. More from Brooks: (emphasis by Wrongo)

Researchers with the Gallup-Sharecare Well-Being Index interviewed 160,000 adults in 2017 to ask about their financial security, social relationships, sense of purpose and connectedness to community. Last year turned out to be the worst year for well-being of any since the study began 10 years ago.

And people’s faith in capitalism has declined, especially among the young. Only 45% of those between 18 and 29 see capitalism positively, a lower rate than in 2010.

Brooks’ conclusion? It’s not the economy, we all just need more community connections.

His is another attempt to dress up the now-failing neoliberal economics. Things look good today from some perspectives, but our economy is crushingly cruel from others. Brooks seems to think that millions of Americans are struggling to pay their rent or mortgage, education loans, health care insurance or buy groceries because they have failed to master the art of networking in their neighborhoods.

Alienation is behind the rise of Trumpism, and the rise of populism across the world. In that sense, Brooks is correct, but the leading cause of people’s alienation is economic inequality.

And the leading cause of economic inequality is corporate America’s free rein, supported by their helpmates in Washington. Last week, Wrongo wrote about the exceptional market concentration that has taken place in the US in the past few years. He suggested America needs a revitalized anti-trust initiative. In The Myth of Capitalism, authors Jonathan Tepper and Denise Hearns write:

Capitalism without competition is not capitalism.

For decades, most economists dismissed antitrust actions as superfluous, so long as consumers were not the victims of price-gouging. Monopoly capitalism is back, and it’s harmful, even if a company’s core product (like Google’s and Facebook’s) is free to consumers. As we wrote last week, there’s excessive corporate concentration in most industries, including air travel, banking, beer, health insurance, cell service, and even in the funeral industry.

All of this has led to a huge and growing inequality gap. That means there is little or no economic security for a large and growing section of the American population. People see their communities stagnating, or dying. They feel hopeless, angry, and yes, alienated.

One consequence is that we’ve seen three years of declining life expectancy, linked to growing drug use and suicides. We seem to be on the edge of a social catastrophe.

But our real worry has to be political. People could become so desperate for change that they are willing to do anything to get it. The worry then, is that few vote and a minority elects a strong man populist leader, simply because he/she tells them what they want to hear. That leader can then go out and wreak havoc on our Constitutional Republic.

After that, anything could happen.

Despite what Brooks thinks, we don’t have a crisis of connections. It’s a crisis of poorly paying jobs, job insecurity, and poverty. When people look at their economic prospects, they despair for their children. Doesn’t it matter that in America, health care, education, and transportation all lag behind other developed countries?

The unbridled ideology of free markets is the enemy. Our problem isn’t that individual entrepreneurs went out and took all the gains for themselves, leaving the rest of us holding the bag. It’s more about how neoliberal economics is used both by government and corporations to justify an anti-tax and anti-trust approach that has led to extreme wealth and income concentration in the top 1% of Americans.

The reality is that the nation’s wealth has become the exclusive property of the already prosperous.

We need to wake up America! We have to stop for a second, and think about how we can dig out of this mess. When America bought in to FDR’s New Deal programs 75 years ago, we entered an era we now think back on nostalgically as “great”.

And it isn’t enough to talk about how we can look to Sweden or Norway as economic models. Both have populations of under 10 million, and our society is far less homogeneous than theirs.

We need a uniquely American solution to this problem. It will involve reforming capitalism, starting with tax reform, and enforcing anti-trust legislation.

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It’s Past Time To Make Changes To Our Economic System

The Daily Escape:

2011 Art piece by Steven Lambert

Does capitalism work for you? Well, you certainly work for capitalists. The real question is whether capitalism still provides economic security to all of us.

Steve Lambert, the artist who designed the sign, engaged with people across America over a three-year period about whether capitalism was still working. He learned that people were split about 50/50 on the premise:

People usually first react to the piece by falling back on the comfort of abstractions and repeating popular myths. For example, the true/false dilemma is much easier to resolve when the only alternatives to capitalism are presumed to be failed communist dictatorships. It’s also much easier to pretend that the only “true” definition of capitalism is the kind of free-market extreme idolized by thinkers like Ayn Rand and Friedrich Hayek

Or thinkers like Paul Ryan, Mitch McConnell and Donald Trump. Lambert learned that people generally agreed with the concept, assuming “you are willing to work hard, or work smarter”:

I’ve always found the formulation “work hard, work smart” disturbing. When you invert the expression, it implies: if capitalism doesn’t work for you (that is, if you’re poor, out of work or have a demeaning job), it’s your fault. To put it more bluntly, you are lazy and stupid.

If we ignore the fact that until recently, wages have stagnated for decades, and that what most people earn in a lifetime is insufficient to cover a modestly comfortable retirement, maybe you can say that capitalism is working.

We have been told that federal budget deficits impair our ability to grow the economy, or to put food on our individual tables. In fact the opposite is true. This idea makes us believe that our ability to earn a living requires some degree of suffering by other Americans.

As Claire Connelly says: (emphasis by Wrongo)

“We can’t afford it” has been the proverbial comforter of opponents of the welfare state harking back to the Clinton / Blair days….This argument has been used as an emotional crutch for people who don’t want to admit that they’re comfortable with homelessness and unemployment….If their bottom line is stable.

This lie sets us against each other, implying that the well-being of everyone else is a direct threat to our own. And who wins? The beneficiaries of the newly lowered taxes, corporate America and its management teams. More from Connelly:

Do we really want to live in a world….Where most people will be lucky to earn minimum wage, or wait for months to get paid. If at all. A world where we are not entitled either to a job, or an education, or affordable health care or a social safety net?

We are likely to see a $1.3 Trillion budget pass both houses of Congress this week. It is deficit spending run wild. Wrongo knows that both parties believe that deficits don’t matter, and to a great extent, he agrees.

But these deficits are larger than they had to be, due to the massive corporate and wealthy individual tax cuts the Republican House and Senate just passed. And it’s not only the size of the deficits, it’s the mis-allocation of funds by our neo-con overlords.

This is what capitalism has delivered for America: More than 45 million of us (14.5%) live in poverty. In 2016, another 49.5 million Americans were age 65 and older, and half of them (24.75 million) had yearly income of less than $23,394.

That adds up to about 70 million (22%) of Americans.

One idea that is gaining attention is a Jobs Guarantee program. The Center on Budget and Policy Priorities (CBPP) recently released a paper arguing for a national jobs guarantee through a national infrastructure bank. The CBPP plan envisions an infrastructure bank that would fund vital projects and ensure that jobs are well-paid. The government would use this job-creating ability to expand jobs in sectors where the market won’t currently invest, like a national high-speed internet network.

Government guarantees of employment aren’t radical. They aren’t communism, or socialism. We did it before with the New Deal. It reinforces traditional American values around work, and it builds the tax base by taxation on the jobs created. Here’s a final quote from Steve Lambert:

My favorite response to the sign was from a 17-year-old high school student in Boston. She said: “Capitalism can’t work for everyone. If it did, it wouldn’t be capitalism.”

This is where the conversation needs to go: We have to change an economic system that fails so many.

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What Will Dems Do When The GOP Says: “The Deficit Matters”?

The Daily Escape:

Big Ben being cleaned. In order to clean the four clock faces, every 5-7 years, skilled climbers hang down from the belfry on ropes, and they clean the front of each clock face. There is one removable panel of glass on each face, which is removed during the cleaning so that the clock maintenance staff can talk to the cleaners while they’re working. (“you missed a spot?”) Hat tip to Wrongo’s friends at the Goodspeed Opera House!

Yesterday we pointed out that there is a very large program that the country needs to fund if we are to maintain our position in the global superpower competition. The issue at hand is the stunning thought that we might lose up to 75 million jobs to automation in the next 13 years, and that we need to train the out-of-work unfortunates for new jobs in a different economy.

It’s highly unlikely that we would need to train that many, but it could be 25 million Americans. And we have no idea where the money would come from to accomplish that. After all, the Republicans now plan to reduce tax receipts bigly, thus adding to the deficit and thereby, to the total debt of the country.

We know that as soon as the new tax cuts begin accruing to their patrons, the GOP will start talking about reducing the budget deficit by cutting non-military expenses. Ron Brownstein conceives the Republican tax plan correctly:

Gaius Publius observes: (brackets and editing by the Wrongologist)

As they did in the 1980s, Republicans are laying a “deficit trap” for Democrats. As they did before, they’re blowing up the budget, then using deficit [fear] to force Democrats to “be responsible” about cutting social programs — “because deficits matter.”

In the 1980s Republicans ran up the deficit, then insisted that Democrats work with them to raise taxes on the middle class to over-fund the Social Security (SS) Trust Fund. This converted SS from a pay-as-you-go system that increased revenues as needed via adjustments to the salary cap, to a pay-in-advance system. That allowed any excess SS money to be loaned back to the government, partially concealing the large deficits that Reagan was running up.

Today, Republicans are expanding the deficit again, and are already starting to talk about deficits to argue for cuts in what they call “entitlements” — Medicare, Medicaid, and eventually Social Security, even though Social Security can be self-funding.

Fear of deficits is the go-to Republican ploy to try to maim or kill the FDR and LBJ-created social safety net. To the extent that Democrats are willing to accept the GOP’s argument that both parties need to be responsible to decrease the deficits, they will support cuts in social services. Even Obama was willing to consider doing just that in the name of “bipartisanship”. More from Gaius:

The reality — Deficits aren’t dangerous at all until there’s a big spike in inflation, which is nowhere near happening and won’t be near happening for a generation…

Do we want the US government to shrink the money supply year after year after year, by running budget surpluses, or do we want to grow the amount of money in the private sector, making more available for use by the middle class?  The trillions spent on the current GOP giveaway to the already-rich could have been given to college students in debt, or people still underwater in their mortgages since the Wall Street-created crash of 2008. It could have been used to build better roads, airports, seaports or a national high speed internet backbone.

What would be the effect of that re-allocation of money?

Back to Gaius Publius for the final words. Which of these three options would you rather the government choose:

  • Spend money on the already-rich?
  • Spend money on you and the country’s needs, ignoring the pleas of the already-rich?
  • Hoard as much money as possible in a vault and spend the least possible?

The first is the GOP’s current tax plan. The second is a plan for the many, an FDR-style economic policy. The third is the GOP’s wet dream, one that they will ask Democrats to help them accomplish once the already-rich have banked their share of our tax money.

Wrongo’s fear is that at some point down the road, a compromise will be offered up: Cuts to social programs in exchange for a repeal of some of the more onerous tax cuts. The only issue will be the extent of the cuts to social programs.

It will be celebrated as bipartisan sanity returning to Washington.

Our system is revolting. Why aren’t we?

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Monday Wake Up Call – December 4, 2017

The Daily Escape:

Old railroad tracks near Folsom, CA – December 2017 photo by Merrill Dodd

This will be Wrongo’s last column discussing the tax bill. Here is a chart describing the differences between the Senate and House tax bills:

Source: WSJ

The big question is will the tax bill really go through reconciliation, or can Paul Ryan convince House Republicans to vote for it essentially as is? The three factions Ryan has to deal with inside his own party might make a straight agreement a hard sell. Will a successful reconciliation happen? Odds seem to be in its favor. However, things could go sideways. There’s plenty in the bills to anger just enough of the three Republican House factions, and they’re more exposed to a potential 2018 wave election than the Senators. State and local tax deduction are a sticking point, and what about the deficit? It will be an interesting and stressful next few weeks.

Returning to yesterday’s David Stockman’s analysis: The standard deduction is doubled in both bills to $24,000 per household, costing $737 billion while changing the tax brackets from seven to four (in the House bill) costs $1.17 trillion.

When all the puts and takes are finished on the personal income tax side, what America gets from 2018-2027 is a $1.20 trillion net reduction in personal income taxes. But, as we showed in yesterday’s chart, dead people and rich people stand to benefit the most.

So, what’s left is a tiny $352 billion tax cut for rest of America’s 145 million tax filers over the entire next decade. On average, that’s about $242 per person per year!

Couldn’t $1.4 trillion been better spent on refurbishment of our infrastructure rather than in giveaways to corporations? Do corporations really need more government aid at a time when they are recording near-record profits, and hold huge cash reserves that they are not spending on hiring, wage increases or investment in the USA?

It’s long past time for America to wake up!! Whether you support the tax bill or hate it, it’s also past time to clean out the sewer that is Congress. It will take about six years of organizing, finding progressive candidates, and GETTING OUT THE VOTE, to deliver mostly new faces in DC.

We must break up the “old thugs club” that Congress has become. To help us wake up and start on political renewal, let’s listen to George Harrison’s “Taxman”. This was the Beatles’ musical complaint about how much they were paying in taxes in the UK. “Mr. Wilson” and “Mr. Heath” are mentioned in the lyrics. They are former British Prime Ministers Harold Wilson and Edward Heath, who contributed to writing English tax laws that at one point had a 95% marginal tax rate.

There are no high-def video recordings of the tune available online by the Beatles (it was released in 1966 on “Revolver”), so here is Joe Bonamassa performing “Taxman” live at Liverpool’s Cavern Club, in June 2016. It’s his bluesy take on the Beatles’ pop sensibilities:

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

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