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Congress Votes Tomorrow On Everything That Will Happen For The Rest Of Obama’s Presidency

Congress West Front Late last night, House GOP leadership announced a compromise bill that will (temporarily) end all the Congress-created crises by setting the federal budget and suspending the debt limit through the end of the Obama presidency.

The House is expected to vote on the bill tomorrow (Wednesday). A draft of the bill is available here.

What it doesn’t do, from the perspective of the Right Wing:

  1. It doesn’t try to force through the Keystone XL Pipeline.
  2. It doesn’t try to de-fund Planned Parenthood.
  3. It doesn’t try to repeal the Affordable Care Act.
  4. It doesn’t try to voucherize Medicare.
  5. It doesn’t try to privatize Social Security.

What it doesn’t do, from the perspective of the Working Class:

  1. It doesn’t rein in corporate giveaways to stockholders, such as dividends and buybacks. (Trillions of dollars that corporations could have used to create jobs, pay fair wages and make long-term investments.)
  2. It doesn’t end the tax preference for unearned income. (Most investment income is still taxed at about half the rate of wage income.) Ending this tax preference could end the budget deficit.
  3. It doesn’t eliminate the Social Security wage cap (which would strengthen Social Security, long-term).
  4. It doesn’t raise the minimum wage.
  5. In its current form, it doesn’t do much to reverse previous cuts to Food Stamps, veterans benefits, and other safety-net programs. It doesn’t mention the 2.1 million American workers who are long-term unemployed… or the 1-in-five American children who are living in poverty.

What it does do:

  1. It loosens the Sequester budget restrictions, both for defense and non-defense spending – and it also increases an off-budget military spending account.
  2. It completely rewrites the procedures governing IRS audits of business partnerships. (Call me cynical, but I’m guessing that part of the bill was written by somebody’s lobbyist.)
  3. It diverts some Social Security tax revenue into the Social Security Disability Trust Fund, and *privacy alert* it also creates a new information clearinghouse (presumably, to be used to detect fraud).
  4. It reduces payments to some Medicare providers and regulates the increase in Medicare supplement policy premiums.
    AND
  5. It renames the small House rotunda… in honor of the House Freedom Caucus.

It does some other things. Please take the time to read through the bill yourself – and encourage your Congressional representatives to do the same. Contact information for those representatives is available here.

————-

Having watched this impossibly deadlocked Congress — and its impossibly intransigent Right Wing

Personally, if this “grand compromise” happens, I don’t expect anything else to get through this Congress until President Obama leaves office.  (Remember, GOP extremists have been working to “submarine his presidency” since the very first day of his first term.)

Are You Tired Of Congress Manufacturing A Budget Crisis To Force Through Terrible Legislation?

Budget details: you couldn’t make this stuff up, if you tried

It’s not like Congress didn’t know they had to pass a federal budget.

It’s not like they didn’t have lots and lots of time to put an appropriations bill together, either before or after the elections.

It’s not like they didn’t know what happens when the money runs out. (Hint: not all that much, actually. Except that 800,000 federal workers are required to work without being paid.)

No, this Congress knew all too well what would happen. Since President Obama was elected, Congress has:

  1. had a budget crisis in March 2009
  2. had a budget crisis in September 2009
  3. had a budget crisis in September 2010
  4. had THREE budget crises in December 2010
  5. had TWO budget crises in March 2011
  6. had a budget crisis in April 2011
  7. had a budget crisis in August 2012
  8. had a budget crisis in September 2012
  9. had a budget crisis in March 2013
  10. had a budget crisis – and a government shutdown – in October 2013
  11. had a budget crisis in January 2014
  12. and had a budget crisis just three months ago.

(That’s a rough list. No guarantees of accuracy, I may have missed some. And it doesn’t include the debt-limit crises.)

And yet once again, this weekend, right now… Congress finds itself in a budget emergency.

And from listening to some of the politicians, you’d almost think no-one could have predicted this.

And with all their angst (“Emergency!” “Emergency!” “Can’t let the government shutdown again!”)…

… it would be really easy to overlook some of the so-called “details” of this spending bill. Details like:

  1. The so-called “Citibank” provision that would undo part of Dodd-Frank financial regulation, and allow big banks to rely on the FDIC to backstop risky derivative trades. (Read NHLN coverage here and here.)
  2. The Kline-Miller amendment, which would allow cuts to the earned retirement benefits of millions of retirees. AARP calls it a “secret attack by Congress” and a “last minute backroom deal.”   (Read the AARP alert here.)
  3. The (ahem) provision to help the GOP afford its next convention. According to the New York Times, “The secret negotiations that led to one of the most significant expansions of campaign contributions in recent years began with what Republican leaders regarded as an urgent problem: How would they pay for their presidential nominating convention in Cleveland in two years? It ended with a bipartisan agreement … that would allow wealthy donors to begin giving more than $1 million every election cycle to each party’s national committees.” (Wow. 2016 is going to be a record-breaking presidential campaign season.)
  4. The “Collins rider,” which would increase truck driver hours of service, and other provisions that would increase truck weight limits in Kentucky, Mississippi and Wisconsin. “None of these special interest [provisions] has been subject to any committee hearings, adequate safety review or cost/benefit analysis. However, all of them will have a profound impact on highway safety, deaths and injuries.” The bill will “eliminate the two nights off-duty for truck drivers to rest, while significantly increasing working and driving hours for truck drivers up to 82 hours a week when fatigue is already a well-known and well-documented highway killer.” (Read the Truck Safety Coalition alert here.)
  5. Provisions prohibiting the Fish and Wildlife Service from adding the sage grouse to the endangered species list. This one was apparently added “at the behest of grazing, mining, and oil and gas interests.” (Read more here.)

According to the Hill, Senate Majority Leader Harry Reid says the GOP added “nearly 100” special interest riders to the bill.

The five, above, are just the ones that have already attracted public attention.

Can’t help but wonder what ELSE is in that bill.

 

ANOTHER Taxpayer handout for the Big Banks?

What’s going on in Washington, DC this afternoon?  According to media reports, the House of Representatives is about to use the latest Congress-created crisis to give Big Banks a free insurance policy.

One Federal Reserve economist estimated that these types of guarantees are worth between $450 and $900 billion (yes, “billion” with a B) a year (yes, each year) to the financial industry.

Yes, I’m repeating myself again.  Here’s my #dejavu post from January 13, 2014:

Fat Chance - Banks Take Responsibility for the Financial Crisis by Michael Smith via Flikr

$53 trillion.

More than THREE TIMES the entire federal debt.

According to Saturday’s New York Times, that’s the amount of money currently held by US-based “too-big-to-fail” financial institutions.

“Too-big-to-fail” has been around for a while. It dates back to the Reagan administration’s takeover of Continental Illinois National Bank and Trust Company, which was then the seventh-largest US bank.

And it’s been a growing problem ever since.

Here’s why: “TBTF” distorts the economy. In theory, in a capitalist economy, there should be a relationship between risk and reward. In theory, people who can’t afford to lose their money will chose “safe” investments, even though they have a lower rate of return; and even those people who can afford to lose money will take fewer risks.

But that’s only in theory. In reality, TBTF has separated “risk” from “reward”. The financial industry is now operating on the belief that if the loss is big enough, the government will step in.

It’s sort of like insurance… only, the financial industry doesn’t have to pay for it.

A year and a half ago, one Federal Reserve Bank economist estimated the TBTF effect is worth between $450 and $900 billion a year.

“The existence of the implicit subsidy enabled these companies to become larger and more complex than otherwise would have been the case. TBTF institutions respond to the subsidy by increasing their risk through either engaging in riskier activities or increasing their leverage. While these actions may be privately optimal, the response to the TBTF subsidy is not socially optimal, as it can pose huge risks to the financial system.”

(Gotta love that economist-speak…“Not socially optimal,” indeed.)

Even since the 2007 Wall Street meltdown, financial institutions have continued to take advantage of their TBTF status. TBTF institutions are still getting bigger and taking more risks. Here’s how Forbes described the situation last year: “Banks today are bigger and more opaque than ever, and they continue to trade in derivatives in many of the same ways they did before the crash, but on a larger scale and with precisely the same unknown risks.”

And now, a half-decade after the bailout, the TBTF institutions are worth $53 trillion.

So why am I comparing the size of the financial industry with the size of the federal debt?

I was trying to figure out the current level of taxpayer exposure, in this “not socially optimal” arrangement. In other words: if the financial industry implodes again, how much government money is it going to cost us? And I figured the best way to figure that out was to look at what happened in the most-recent TBTF bailout.

As near as I could figure, from what’s easily available on the Internet: back before the 2007 meltdown, TBTF institutions were worth a total of about $2 trillion. The 2008 bailout bill appropriated $700 billion to deal with the crisis — or, roughly one-third of the total value of TBTF institutions, before they started to fail.

The federal budget was already running a deficit. That means: in order to fund the bailout, Congress had to borrow an amount equal to one-third of the pre-crisis value of those TBTF institutions (using my “as near as I can figure” estimate).

But those TBTF institutions are bigger now; and that means if they fail, any federal government bailout would need to be bigger, too.

TBTF are now worth $53 trillion. Do the math. If there is another Wall Street meltdown; and another bailout; and this next bailout also requires the government to borrow an amount equal to one-third of what TBTF institutions are worth now…

Well…one-third of $53 trillion is…almost exactly the current amount of the federal debt.

In other words, the next financial meltdown could double the national debt.

Are you scared yet?

“Negotiate” means talking about ALL options

Golly.  The GOP still hasn’t figured out what’s driving the federal debt?  Let’s try… lack of revenues.

Federal revenues, as a percentage of the country’s economy, are at the lowest point since Harry Truman was President.  (And that was before Congress enacted Medicare, and added Medicare payroll taxes to the federal revenue mix.)

Corporate taxes, in particular, are at record-low levels.  (Just look at the olive-green areas on this graph.)

Federal Revenue Sources as percentage of GDP

The GOP insists on “concessions” from President Obama, in exchange for not driving America’s economy totally off the cliff.

They are insisting on cuts to Social Security and Medicare before they will consider acting on the debt limit.  “My goal here is to have a serious conversation about those things that are driving the deficit and driving the debt up,” according to House Speaker John Boehner.

But will they discuss restoring revenues, as a way of cutting the deficit?  Not a chance, the GOP says.

Wow.

Is Speaker Boehner really contemplating a “conversation”?  (Or is he just expecting the Democrats to surrender?)

————

See the data I used in my graph here.

Translating from TeaPartyese: What “negotiate” really means

Stahlwille ratchet head (1/2 SQ)Don’t let them fool you.

When GOP Congressmen say they “just want to negotiate” – what they’re really saying is “we’re going to have it our way”.

And when they talk about “compromise” – they’re really talking about “ratcheting it down even further.”

You know how a ratchet works, right?  When you turn it, the screw can only go one way.  And the Tea Party’s position is: government can only get smaller.

They’re yelling about the federal deficit – and accumulated federal debt – but the only “solution” they’re willing to entertain is to cut spending.  Have you heard anybody suggest raising revenues, lately?

The fact is: as a share of the nation’s economy, federal tax revenues are at almost-record lows. Yes, they were lower, back when Harry Truman was President – but that was before Medicare was enacted in 1965.

Federal Tax Revenues as Percentage of GDP

And it looks like the GOP may have already won the federal budget game.

Remember 2011, when House Budget Committee Chairman Paul Ryan came out with his budget“$4 trillion of cuts over decade

Remember how radical that budget seemed, back then?  How far to the right?  How extreme the cuts appeared?

Now, take a closer look at the “continuing resolution” passed by the Democratically-controlled Senate last week, in a last-ditch effort to avoid the government shutdown.

Yeah, the same “continuing resolution” that the House GOP won’t send to an up-do-down vote, without further concessions.

Funding levels in that “continuing resolution” are about 10% less than what Chairman Ryan proposed, back in 2011.

And it came from the Democrats.

And it’s still not enough for the GOP.

Ratchet, ratchet, ratchet.

—————————————

Read more about how the Senate’s continuing resolution compares to the Ryan budget here.

See the tax revenue data that my chart is based on here.

 

 

 

Want to keep the government afloat? Here’s the list of House GOP demands


Just like the old Ginzu Knife commercials… “But wait, there’s more!”

Yes, House GOP leaders are insisting on a one-year delay of Obamacare (aka, the Affordable Care Act) as a condition of resolving this latest federal fiscal fiasco.

But that’s not all they’re looking for.

As compiled by the New York Times, here’s the list of House GOP leaders’ other demands:

…fast-track authority to overhaul the tax code, construction of the Keystone XL oil pipeline, offshore oil and gas production and more permitting of energy exploration on federal lands… roll back regulations on coal ash, block new Environmental Protection Agency regulations on greenhouse gas production, eliminate a $23 billion fund to ensure the orderly dissolution of failed major banks, eliminate mandatory contributions to the new Consumer Financial Protection Bureau, limit medical malpractice lawsuits and increase means testing for Medicare, among other provisions.

Does anybody (other than Fox News and a few hundred Internet trolls) still think the House leadership is trying to “compromise” and resolve this latest Congress-created crisis?

 

It’s Baaack! GOP puts US economy at risk (again) over the Keystone Pipeline

Trans Canada Keystone Oil Pipeline by Shannon Patrick via FlikrJust like an unwanted dinner guest that you can’t convince to leave, the Keystone Pipeline project is still on the GOP’s legislative agenda.  Actually, it’s now at the top of the GOP’s legislative agenda.

Read the news stories: Republican leaders have apparently given up on efforts to rein in their Tea Party legislators.  Last Friday, the House voted – for the 42nd time – in their futile attempt to repeal Obamacare.  Next Monday, the federal government is probably going to close down – because Congress can’t bring itself to pass annual Appropriations bills.  Jobs bills – and legislation to repair long-neglected roads and bridges – are gathering dust on Representatives’ shelves.  Immigration reform isn’t going anywhere.  Common-sense gun reform?  Yeah, right.  (About 8,400 Americans have been killed in the nine months since Newtown.  Crisis?  How many people have to die before Congress considers it a crisis?)

But no matter what else they’ve given up on, Republican leaders are still determined to force through TransCanada’s pipeline project.  Sometime in the next month or so, Republicans plan to use debt-ceiling legislation to bypass the administrative review process and authorize construction of the pipeline by Congressional fiat.

No, it’s not the first time the GOP has used fiscal emergencies to try to push the Keystone project through.  Back in December 2011, the Republicans traded about $30 billion in federal debt for an expedited review process (which resulted in the project being rejected).  Since then, House Republicans have inserted Keystone into four other pieces of legislation, including the federal budget.

But why does Congress even care about Keystone?  TransCanada’s pipeline is nothing more or less than a construction project built by and benefitting a private corporation.  Sort of like… if Walmart wanted to build another gazillion-square-foot distribution center.  (Except that a new Walmart distribution center would probably create more than 35 permanent jobs.  Yep, that’s the number of permanent jobs that Keystone is expected to create: just 35.)  So why is Congress getting so involved in the project permitting?

One more time: Keystone is a construction project of a privately-owned corporation.   (Wondering exactly who owns that corporation?  According to Morningstar’s shareholder records, it looks like a whole lot of TransCanada stock is owned by foreign banks.)

One more time: WHY are the Republicans insisting that TransCanada be allowed to build this pipeline?

And whatever happened to “fiscal responsibility”?  Do Republicans really want our government to default on its bills?  That’s the scenario they’re setting up, by tying the debt-limit increase to construction of this private pipeline.

—–

You can read (experience?) the GOP’s latest press release about Keystone here.

Read NHLN’s “Why Is the House GOP Obsessed with the Keystone Pipeline” here.

Starting in Detroit… next stop: Social Security

Frederick Bancroft, prince of magicians: the wizard's enchantments, performing arts poster, ca. 1895Buried on the PBS website, there is a blog post that ought to strike fear into the heart of every working-age American.

“Detroit Today, Washington Tomorrow” takes dead aim at the Social Security system, using the same “inflate the numbers” messaging strategy that Kevyn Orr and Gov. Rick Snyder have been using lately in Detroit.

What’s the strategy?

  1. Just pick the biggest number that you can find, and use it to scare the bejeezus out of people.
  2. Once you’ve got folks focused on that huge number, it’s easy to convince them that “oh, we’re so sorry! But Detroit can’t afford to pay the retirement benefits we’ve been promising all these decades.”
  3. Nevermind that all those Detroit workers have been paying into the system, all these decades, and planning their futures based on the promises that were made.
  4. Just keep everyone’s eyes focused on that really huge number – and they won’t even think about questioning your claim that “oh, so sorry! We can’t afford it!”

It’s the rhetorical equivalent of old-fashioned magic tricks.  And just like those old-fashioned magic tricks, it will work so long as people don’t pay attention to what’s really going on.

In Detroit, they’re hiding a $326 million accumulated deficit under the rhetorical handkerchief of $18 billion in total outstanding debt.  They’re basically saying: “don’t look at that smaller deficit number (caused by cutbacks in state revenue-sharing) – look at this huge number over here!  Look at how much Detroit is supposed to pay bondholders back, over the next 30 years!  Look here, Detroit can’t afford to pay back $18 billion right now!  (Nevermind that it’s not supposed to be paid back, for decades yet.)  Look here, if we can’t afford to pay back $18 billion, then we should declare bankruptcy and get rid of the debt (that we owe to our public employees).  We just can’t afford to keep our promises!”

Can’t you just hear the calliope music?   (If not, here’s a YouTube to help get you into a properly gullible mood.)

Now, read that PBS post by Boston University professor (and presidential candidate) Larry Kotlikoff.

  1. All of a sudden, our federal debt isn’t just $12 trillion (the number that outrages Republicans, as long as nobody suggests increasing taxes to pay it back).  According to Professor Kotlikoff, “the true measure of our debt – the one suggested by economic theory – is the fiscal gap, which totals $222 trillion.”
  2. Now, keep looking at this number over here – it’s really, really huge.  According to Professor Kotlikoff, “Given the $222 trillion fiscal gap … current policy is clearly not sustainable. Making it sustainable requires either an immediate and permanent 64 percent increase in all federal taxes or an immediate and permanent 38 percent cut in all spending or some combination of tax increases and spending cuts.”
  3. Nevermind all those decades that workers have been paying into the Social Security system.  Again, here’s Professor Kotlikoff: “If anything, the Social Security benefits, and not the Treasury bond payments, should be recorded as official debt.”
  4. Keep folks paying attention to that really big number.  Professor Kotlikoff borrows the authoritative voice of former Secretary of State George Shultz to finish his performance: “Our country doesn’t have a lot of elder statesmen to guide us. But this tough ex-marine knows our country is broke, knows our children are threatened, and knows we’ve been hiding the truth.”

Yep, that’s where things are headed.  Detroit today, Washington tomorrow.

They’ve been trying to “reform” Social Security since Barry Goldwater ran for President.

And they’re still trying.

And they’re about to have the biggest Congress-created crisis yet.

  • Read about January’s Fiscal Cliff crisis here and here.
  • Read about the March Sequestration crisis here and here.

There is another “perfect storm” of crises coming up in the next two months: the current federal budget will expire at about the same time that the Treasury runs out of debt limit “headroom” (again, thank our federal and postal service employees, whose retirement contributions provide this reprieve!).

What sorts of magic tricks do you think they’re going to try, then?

Detroit today, Washington tomorrow.

My recommendation?  Remember Professor Kotlikoff’s patter, and keep your eyes on the magicians’ hands.

*********

Read the LTE in response to this post.

Fund the Government?
House GOP protects corporate interests, instead

budget_cutsThe House has passed a bill to keep the federal government from shutting down on March 27th.

According to Appropriations Committee Chairman Hal Rogers, the bill:

  1. provides $2 billion more than the President requested for non-war Defense funding – as well as an additional “$87.2 billion for Overseas Contingency Operations (OCO) for Defense activities related to the Global War on Terror.”  It also includes $521 million more than the President requested for defense technologies research and development.
  2. includes “a provision allowing additional funding to ensure the safe and secure operation of Federal Prisons.”
  3. requires “Immigration and Customs Enforcement to sustain the mandated capacity of 34,000 detention beds.”
  4. extends the current pay freeze for federal employees.

Want to play connect-the-dots?

  1. Corporate profits of defense contractors are almost back to their pre-recession high.  Yet the defense industry “mobilized in a major way to stop the cuts to the Pentagon budget. The main thrust of the offensive has been a huge public relations campaign aimed at convincing Americans that the cuts would devastate defense contractors and the broader economy, causing the loss of about a million jobs.”  Connect the dots?   Chairman Rogers’ bill included defense funding levels that were higher than the President requested.  (For a sampling of how private contractors have wasted tax dollars, read the June 2009 Interim Report to Congress here.)
  2. The private prison industry didn’t actually feel the recession.  Contracting with the federal Bureau of Prisons is a growing business: up by almost 14% between 2010 and 2011.  Now check out the lobbyists: Corrections Corporation of America employed 33 different lobbyists last year.  (Geo Group had only four lobbyists; but one of them used to be Special Assistant for Legislative Affairs for President George W. Bush, so he probably knows a few people.)  Connect the dots?   Chairman Rogers’ bill provides “budget security” for federal prisons.
  3. And then there’s immigration.  Ever notice how – even though seven out of 10 Americans want there to be an easier path to citizenship – that idea hasn’t actually gotten very far in Congress? Ever wonder why Congress set a minimum number of ICE “detention beds”?  Just follow the money.  Private prisons spend $45 million on lobbying and rake in $5.1 billion for immigrant detention.  The industry invests in campaign contributions to key legislators.   Connect the dots?  Last month, sequestration cuts prompted ICE to release low-risk detainees from custody, dropping the number of detainees to less than 31,000.   Chairman Rogers’ bill requires ICE to resume paying for all 34,000 detention beds.  (And BTW, the cost of a detention bed is comparable to many hotel rooms.)
  4. And then there’s the pay freeze for federal workers.  (Are we ever going to have an economy that works for the 99%?)  Here’s the reality that most of us have known our entire working lives: productivity has skyrocketed, while our wages have remained relatively flat.  Growth of real hourly compensation for production/nonsupervisory workers and productivity, 1948–2011. Economic Policy Institute
    Ever since Richard Nixon was President, economic growth has been transformed into corporate profits rather than increased wages.  How does the 1% keep that trend going?  By pitting workers against each other.  By telling us to consider ourselves lucky to even have a job.  By breaking union contracts, cutting benefits and implementing pay freezes.  This move is straight out of the ALEC playbook.  Connect the dots?  Chairman Rogers’ bill extends the federal employee pay freeze and, by maintaining the sequester, mandates unpaid furlough days – guaranteeing that federal workers will be losing ground on wages, just like the rest of us.

Yep, the House GOP still thinks they were elected to protect corporate interests.  Nope, they still don’t care how their budget will affect America’s families.  Bottom line: this budget reflects the priorities of the House GOP.

Where your treasure is, there your heart will be also.”

(Where can hungry five-year-olds find a good lobbyist?)

Another stalemate?
Or a chance to save the economy?

The days are ticking by, as our federal government heads toward sequestration (March 1st) and a possible shutdown (March 27th).

House Republicans have drawn the same line in the sand that they drew – and tried to maintain – at the end of last year. They have pledged allegiance to Grover Norquist: “No new taxes.” They would rather cut food stamps than cut military spending – but they would also rather cut the military than increase taxes. Read today’s NY Times story here.

Now’s a good time to step away from the right-wing rhetoric and take a closer look at some actual facts.

Each year since 1992, the IRS has published “information from the Top 400 individual tax returns.” The latest “Top 400” publication covers the years 1992 through 2009. (Remember 2009? According to economists, the 2007 recession ended in June 2009. Even though most of us are still dealing with the effects of that “longest and most painful downturn since the Great Depression.”)

Top400 AGIThe “Top 400” statistics clearly show what’s happening at the top of the economic scale. And despite the recession, and after accounting for inflation, those at the top are doing just fine: in 2009, the top 400 had income almost three times higher than in 1992.

(Yes, in 2009, the Top 400 taxpayers had an average income of more than $123 million. Wouldn’t it be nice if everyone’s income was three times higher than it was in 1992?)

Top400 Tax RateThe US has traditionally had a “progressive” income tax structure: those with more income pay taxes at a higher rate. But that’s not what has been happening.

(In 1992, the Top 400 paid taxes at an average rate of 26.4%. By 2009, the Top 400 average tax rate was only 19.9%. What happened over those 17 years? More money, lower tax rate for the Top 400. While the country’s economy came to a screeching halt.)

Top400 Dividend IncomeOne of the most revealing statistics from that IRS report is the amount of income the Top 400 takes as dividends rather than salaries. Since 1992, even accounting for inflation, the amount of dividend income has increased by 600%. In 2009, as the recession was bottoming out, the Top 400 took home an average of $16 million each in dividend income.

What’s the big deal about that? Unfortunately, the IRS doesn’t release statistics about how much dividend income the Top 400 receive from the same companies they control. But…

Remember what Mitt Romney taught us about America’s economy? How – rather than reinvesting corporate profits in new hires or capital improvements – many executives and investors have been wringing dividends out of their companies? (And often, like Sheldon Adelson, spending money on political influence?)

Remember that FedEx paid an estimated $8.5 million in dividends to CEO Fred Smith last year? Wonder how else that $$ could have been spent? (Read “FedEx and the Real Reason Why There’s No Jobs” in Forbes here.)

Yes, the fiscal cliff negotiations increased the tax rate on dividends from 15% to 20% – but that’s still significantly less than the tax rate on salaries. Which means CEOs are still going to prefer taking home compensation through dividends, rather than salaries.

But each dollar paid to the CEO in dividends costs the company (and the economy) a whole lot of money that could have been reinvested. Going back to Fred Smith as an example, his 15 million shares in the company represent only a fraction of the outstanding stock. For Mr. Smith to receive $8.5 million in dividends, personally, the company has to pay out well over $100 million in total dividends – money that could have been invested in new hires, or new planes, or new facilities (or improved employee benefits).

The low tax rate for dividends is a perverse economic incentive. It discourages hiring. It discourages reinvestment and long-term corporate planning. It discourages growth. It encourages concentration of wealth at the top of the economic scale.

Someone once said “don’t ever let a good crisis go to waste.”

As we head toward (and through) sequestration and shutdown threats, maybe we can hope. Maybe these latest Congress-created crises can have a happy ending.

Maybe whatever political “compromise” is eventually reached will include more changes in dividend taxation.

Maybe the country can end this vicious cycle of wringing profits out of the economy. Maybe the country can go back to growing our entire economy, not just the personal incomes of the top 400.

It’s going to be an interesting couple of months. Fasten your seatbelts for another bumpy ride.

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