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If Congressman Ryan Could Save $161 Billion A Year, Would He? The Answer May Shock You

DSC_9969Tax Credits or Spending? Labels, but in Congress, Fighting Words

The New York Times has a story about Washington lobbyists’ effectiveness in convincing Congress to pass tax breaks that benefit the wealthy.

Just one of those tax breaks – capital gains and dividends – costs an estimated $161 billion a year.  That would pay not just for the Sequester cuts, but also for all the additional cuts that House Budget Committee Chairman Paul Ryan wants to make in next year’s federal budget.

No surprise, the top 1% get 75% of the benefit of that particular tax break.  (The bottom 60% of taxpayers get only 1% of the benefit.)

Another way to look at it?  The amount the 1% gets from the unearned income tax break – just in a single year – would pay for 10 years of Paul Ryan’s cuts to Medicare.

Read the story here.  Dig into the graphic here.

If you haven’t already, read Sunday’s post about corporate tax breaks.

Wondering why you should take the time to learn about this?  The next few budget battles are going to come down to questions of revenue versus cuts, and corporate welfare versus Social Security and Medicare.  Basically, it’s going to be a question of whose interests our government will serve:  the people who can afford to hire lobbyists? Or the very tired and distracted middle class?

The House GOP is still marching to the same drummer they have been following since 2001.  Nothing much is going to change in Washington, unless we the people work to change it.

The one video every Republican, Democrat and Independent must see!!!


More than 200 people rallied at the Portsmouth Naval Shipyard yesterday to rally against the budget cuts known as “sequestration”.

At the same time they were rallying, Congress passed a bill to make most of those cuts permanent.

That bill – the “continuing resolution” to fund the federal government for six months – also rescinded a long-planned increase in pay for federal workers. Read Congress Adds Insult to Injury!

The continuing resolution was crafted to protect military contractors from the effects of sequestration – at the expense of federal employees, including Portsmouth Shipyard workers. Read more about Sen. Kelly Ayotte’s defense of defense contractors here.

As Portsmouth Shipyard worker John Joyal told the crowd yesterday:

The men and women at that shipyard over there – every single day, they put their politics aside, their gender aside, their religion aside, their ideological beliefs aside, you name it, they put everything aside to go perform the people’s business.

“That flag right there does not belong to the right-wing of the GOP of our Congress, that flag belongs to the American people. What the US Congress needs to do is, they need to grow up, put their differences aside, go into a room and perform the people’s business just like the people on this island do, every single day.

There are other options. Ending special corporate tax breaks would pay for the sequester cuts twice over. Ending tax breaks on unearned income would pay for the sequester cutsplus everything the House GOP wants to cut from next year’s federal budget.

Is this the best six-month budget that our Congress can come up with?

Sequestration to cost State of New Hampshire
more than $6 million in federal funding

The White House has released fact sheets showing state-by-state impacts of the automatic budget cuts known as “sequestration”, which are scheduled to go into effect on Friday. This year alone, state and municipal governments in New Hampshire will lose:

  • almost $3.3 million in federal funding for k-12 education
  • almost $1.8 million in federal grants for environmental protection, including fish and wildlife grants
  • more than $1 million in other funding for health programs, job training, justice programs and meals for seniors.

About 1,000 civilian Department of Defense employees will be furloughed, reducing their pay (and the amount they can spend in local businesses) by about $5.4 million. And other federal employees based in New Hampshire will also be furloughed.

Read the New Hampshire fact sheet here.

Domestic Discretionary Spending

During the past few Congress-created crises, federal spending has already been cut by over $1.4 trillion – bring domestic discretionary spending to its lowest level as a share of the economy since the Eisenhower era.

GOP House leadership refuses to do anything except cut spending even more. Read “The Republicans Make an Offer on Sequestration” here.

The Democrats’ plan is to defer the sequester with a mix of tax revenues and more-targeted spending cuts. Read more in the Washington Post here. In that mix: $54 billion would be raised by ensuring that that most millionaires pay at least 30 percent of their income in taxes. But that proposal was immediately dismissed by GOP Senate leadership – and we all know the GOP’s record at filibustering legislation they don’t like.

At this point, most observers expect sequestration to go into effect as scheduled. Remember who created this crisis, when you see the trickle-down effect on state programs and local school districts.

Next crisis date to watch? March 27th, when the current budget resolution expires and the federal government faces shutdown.

The Republicans Make an Offer on Sequestration

GOP House members have clarified their position on what they’re willing to “compromise” in order to avoid sequestration.  From today’s NY Times:

Republicans say they are willing to instead get some savings from programs not covered by Congress’s annual spending bills, like food stamps, Medicaid and children’s health insurance.

Read that one more time.  Food stamps, Medicaid and children’s health insurance.

What the Republicans aren’t willing to compromise on is “more revenue” from those at the top of the economic scale.  No more revenue from the 1%.  No more revenue from the 0.001%.  No more revenue from the Top 400.

Remember these two charts?
Top Tax Rates 1952-2008
Top 400 Taxpayers Dividend Income

Hey folks, it’s Lent.  It’s winter, and still a long way to go until spring.  A good season to look more closely at what our various faiths teach us about our obligations to our fellow men.

Matthew 25:34-36 Then the king will say to those at his right hand, “Come, you that are blessed by my Father, inherit the kingdom prepared for you from the foundation of the world; for I was hungry and you gave me food, I was thirsty and you gave me something to drink, I was a stranger and you welcomed me, I was naked and you gave me clothing, I was sick and you took care of me, I was in prison and you visited me.”

Are you Catholic?  “The equal dignity of human persons requires the effort to reduce excessive social and economic inequalities. It gives urgency to the elimination of sinful inequalities.”  Read more from the Catechism here.

Lutheran?  “Human impoverishment, excessive accumulation and consumerism driven by greed, gross economic disparities, and the degradation of nature are incompatible with this reign of God.”  Read the full statement here.

Methodist?  “As a church, we are called to support the poor and challenge the rich. To begin to alleviate poverty, we support such policies as: adequate income maintenance, quality education, decent housing, job training, meaningful employment opportunities, adequate medical and hospital care…”  Read the full statement here.

Southern Baptist?  “We should work to provide for orphans, the poor, the abused, the old, the weak, and the sick.”  Read more here.

Episcopal? Anglican? Evangelical Lutheran?  “Now is the time to work for justice as well, to advocate for more substantial long-term solutions that will create an anti-poverty agenda which we can all support. We will continue to encourage members of our congregations to meet immediate needs but also ask them to join together and pressure our governments to focus seriously on reducing poverty. We must continue to advocate for decent employment and to enhance our social safety net — and to ensure that all have the opportunity to access both.”  Read the joint Pastoral Letter here.

Jewish?  “Our Rabbis taught: ‘If all the sufferings and pain in the world were gathered on one side of a scale, and poverty was on the other side, poverty would outweigh them all.’ Jewish tradition recognizes poverty as the single greatest cause of human suffering. It calls on us to respond to the needs of the poor with singular urgency.”  Read the full essay here.

Muslim?  “But he who is a greedy miser and thinks himself self-sufficient/And gives the lie to the best/We will indeed make smooth for him the path to Misery/Nor will his wealth profit him when he falls headlong (into the Pit).”  Read more about the Qur’an and poverty here.

Sequestration looms.  The Congressional stalemate threatens our nation’s economy.  And what’s that list of things that GOP House members are willing to “compromise” on?

Food stamps, Medicaid and children’s health insurance.

For shame.

 

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.

Adding ‘Headroom’ to the Debt Limit? Thank our Federal Employees and Postal Carriers

US CapitolA few days ago, Treasury Secretary Timothy Geithner told Congress that the federal government would reach its debt limit at the end of this year.  As of January 1st, Secretary Geithner will be taking “extraordinary measures” to buy another two months’ time  for Congress to resolve its self-created fiscal cliff/debt limit crisis.

What are those “extraordinary measures”?  Almost all of them involve using the retirement funds of federal employees and postal workers to create artificial “headroom” under the debt limit.  You can read the details here.

Create your own fiscal crisis… then use it as justification to borrow from employees’ retirement funds (while complaining that long-promised retirement benefits are “not affordable”).  That’s what politicians tried to do here in New Hampshire, back in the early 1980s.

We’re having déjà vu all over again, watching the same scenario play out on the national stage all these decades later.

As of Tuesday, federal and postal employees’ retirement funds will become “headroom” under the debt limit.  Maybe the extra two months will give Speaker Boehner time to reconsider the GOP’s  allegiance to the ultra-rich.  Maybe it will give Congress time to fix the crisis it created.

In the meantime: to all those federal employees and postal carriers out there, “Thanks for the headroom!”

Read more about political attacks on federal employees here.

Read more about political attacks on the US Postal Service here.

 

The Magical Math of Boehner’s Congress: tax cuts don’t ‘cost’ anything

House Speaker John Boehner
Another thing to remember, as you’re watching the Fiscal Cliff standoff:

When John Boehner was first elected Speaker of the House of Representatives, he changed the Rules.

Yes, the actual Rules that the House uses to structure debate on pending legislation.

One of those changes tells you a lot about Boehner’s priorities.

Boehner decreed that the House would not consider any additional federal spending without an identified “offset”.  For example, in order to increase spending on Medicaid, the House would have to “offset” that spending through cuts to other programs (for example, by cutting Food Stamps).

BUT – Boehner decided that tax cuts would be exempt from this. Under Boehner’s Rules, Congress could pass any tax cut proposal without having to “offset” – or even consider! – the revenue cost of the legislation.  [And yes, the Bush tax cuts are specifically mentioned, and specifically exempted from any Congressional consideration of their cost.]

In other words, under Boehner’s Rules, Congress will not add a dime to the deficit through increased spending.

But Congress can increase the deficit by any amount, as long as the money is being “spent” on tax cuts.

Yes, for more than a decade, our country has been borrowing to pay for the Bush tax cuts.  And under Boehner’s Rules, Congress can increase the deficit as much as it wants – as long as the borrowed money is paying for tax cuts, not spending.

Boehner’s “Magical Math” sheds a different light on the Fiscal Cliff “negotiations”, doesn’t it?

Fiscal Cliff: Who is “entitled” to what?

Something else to remember, as you’re watching news coverage of the Fiscal Cliff negotiations:

The tax rates that GOP Congressional leaders are trying so hard to defend are relatively recent – and the public has never supported them.

Washington Post Poll September 11 2001Just months after the first round of tax cuts was passed, in 2001, a Washington Post poll found that 57% of Americans wanted to roll back the tax cuts in order to preserve the federal budget surplus. (Yes, we had a surplus, back then.)

There’s more:

President Bush’s budget director had just warned congressional Republicans that “it was likely the government would tap the Social Security surplus this year, contradicting what he had been saying only a few weeks earlier.”

That same Washington Post poll found that “an overwhelming 92 percent of those surveyed said they opposed using Social Security funds” for things other than retirement benefits.

That was in 2001. Two years later, it was clear that the first round of Bush tax cuts hadn’t “jump-started” the economy – so the White House pushed through another round. This time, the bill had so little support it almost didn’t pass the Senate. GOP stalwarts John McCain, Lincoln Chafee and Olympia Snowe all voted against it. The Senate split 50-50 – and Vice President Dick Cheney cast the deciding vote.

That’s right… Dick Cheney was responsible for passing the tax cuts that House Speaker John Boehner is now trying so hard to defend.

“Entitlements”?

In recent weeks, Speaker Boehner has been talking about tax cuts for the wealthy as if they’re somehow sacred. He doesn’t seem to care what he has to sacrifice, to protect those high-income taxpayers.

Speaker Boehner is insisting on cuts to “entitlement programs” such as Social Security, Medicare and Medicaid – before he will agree to any fiscal cliff “compromise”.

And if taxes are going to be raised – well, guess who Speaker Boehner expects to pay the price? Here’s Senate President Harry Reid’s analysis of Speaker Boehner’s latest proposal, earlier today:

“Their proposal would raise taxes on millions of middle-class families,” Reid said on the Senate floor. “Their plan to raise $800 billion in revenue by eliminating popular tax deductions and credits would reach deep into pockets of middle-class families.”

Speaker Boehner wants to cut “entitlements”?!

The working families of America have paid into the Social Security system for decades, expecting to get benefits back when we retire.

High-income taxpayers owe their low tax rates to former Vice President Dick Cheney.

Who, exactly, should be entitled to what?

Read more about the fiscal cliff here.

Looking Over the Fiscal Cliff

Congress returns to Washington DC today – but “fiscal cliff” negotiations aren’t expected to resume until next week.

The delay may allow Congressional GOP leaders to bring a different position to the bargaining table.

Immediately following Election Day, GOP leadership seemed stuck in their “no new taxes” campaign rhetoric.

Since then, several prominent Republicans have questioned the wisdom of sticking with Grover Norquist’s infamous “pledge”.

Over the decades, Norquist’s “pledge” has not been a fiscally-conservative position.  It works like a ratchet wrench: things can only go in one direction; taxes can only go down.  And taxes have gone down – considerably – since Norquist started agitating.

Right now, the federal tax burden – tax revenues as a percentage of the economy – is at one of the lowest points in modern history.

Much of the decline was caused by cuts to corporate taxes.

Next week’s “fiscal cliff” negotiations need to be framed by this reality.  Particularly in a down economy, Congress can’t just cut its way to a balanced federal budget.  (They have tried that in Europe; it’s not solving anything.)

America’s working families know that you can’t balance the budget if revenues keep declining.  We’ve tried to keep our own books balanced despite declining wages.  Too many families have ended up doing just what the federal government has done: borrow money to make ends meet.  And that doesn’t work out very well, over the long term.

As the “fiscal cliff” negotiations continue, keep an eye on your Social Security and Medicare benefits.  It’s just like what happened with the NH Retirement System: the politicians want to cut our benefits, after we spent decades paying into the system.

Right now, even the politicians who are forswearing Norquist’s “pledge” are insisting on “entitlement reforms” in exchange for “new revenue”.  But that’s a false choice.  They are simply trading one way of ratcheting-down taxes for another.

Returning tax revenues to their previous (pre-Norquist) levels would go a long, long way toward solving our country’s debt crisis.

 

[Tax revenues shown above do not include Social Security, Medicare or other retirement program revenues.  Data is from Table 2.3 of http://www.whitehouse.gov/sites/default/files/omb/budget/fy2013/assets/hist.pdf.]

Congress Gets Ready To Throw The Federal Workforce Under The Bus!

As the lame duck session is about to begin Federal workers in every department are concerned.  Concerned is to nice a word, they are scared sh*tless! Why because they only conversation that is happening right now in Washington DC is about how they have to cut the Federal Budget.

Many of the GOP are pushing a plan created by Senator Alan Simpson and Former White House Chief of Staff Esrkine Bowles.  The Simpson-Bowles plan would save the government money.  However it is not enough to balance the budget or not stop our mounting debt.   The Simpson-Bowles was not adopted or sent to the US House for a vote do to the fact that the ‘fiscal commission’ could not agree on it.

The Bowles-Simpson commission needed 14 of the 18 votes. It failed on an 11-7 vote, with four Democrats and three Republicans, including (Paul) Ryan, voting no.

While Simpson-Bowles also has drastic reforms to other programs like Social Security healthcare I want to focus on the Federal workers.  Here are a few highlights of the Simpson-Bowles plan as written by Kellie Lunney at GovExec.com

Extended pay freeze: The panel recommended a three-year civilian pay freeze across government. The commission estimated the freeze would save $20.4 billion in 2015. The plan also freezes lawmakers’ pay. Obama and lawmakers extended the current two-year pay freeze at least until the end of March, when the continuing resolution expires. Obama wants to give feds a 0.5 percent pay bump when Congress passes a budget next year. But that assumes that one, Congress will pass a budget and two, lawmakers won’t vote to extend the current federal pay freeze.

Smaller government workforce: The Simpson-Bowles report recommends shrinking the government rolls by 10 percent by hiring two new workers for every three employees who leave service. The commission claims such a reduction would save $13.2 billion in 2015.

Increase employees’ health care contributions: The panel suggested adopting a voucher plan and slowing the growth of federal contributions to the Federal Employee Health Benefits Program.

Review military and civilian pension systems: Simpson-Bowles recommended creating a task force to look at changing the pension system for feds and eligible retired service members. One possibility the commission suggests is increasing the amount feds contribute to their pensions. It’s worth noting that Obama and several lawmakers also support making feds pay more for their defined retirement benefit.

So to recap, they have created a plan that starts by cutting workers pay. Mind you these are the same workers who have not seen a pay raise in over three years already.

They want to increase their workload by reducing the number of people to do the job.  So the lines at your local Social Security office are not going to be getting shorter any time soon.  Make employees pay more for health insurance.

They are planning on using the same failed logic and create a voucher program for the Federal Employees Health Plan. This is similar to the plans they are suggesting for Medicare and Social Security that sound great but fail the reality check.

Lastly they are going to stick it to our bravest men and women.  The same men and women who fought to preserve our way of life and the Government that is now trying to hose them.  Changing the retirement system right before or just after someone retires is absolutely wrong.

Congress is once again looking to take from the workers to pay for their mistakes.  They need to stop using the Federal workers as their own personal piggy banks and start working together to find real solutions, not temporary bandaids that hurt workers.  Real solutions start with changes on every level. Increasing revenue, making discrete and calculated cuts not broad base hack jobs, and working together to make these decisions.

People always say we should run the government more like business, well Enron was once a successful business once too.

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