“GOP VALUES” — How The GOP Shows Favoritism to Unearned Income over Hard Work

Horatio Alger

Something else I don’t understand about Republican dogma…

GOP rhetoric seems to idealize the virtues of hard work:  “Pull yourself up by your bootstraps.” “Just get a job.”  “Quit freeloading.” It’s like they actually believe the Horatio Alger myth.

But look at our federal tax structure, and the changes Republicans have forced through since Ronald Reagan.   There is no reward for hard work.  Instead, our current tax system is tilted strongly in favor of those who already have money.  Investment income — unearned income — is now taxed at about half the rate of wage income.

Flashback to the 2011 debt-ceiling crisis: “Even an architect of the Bush tax cuts, economist Glenn Hubbard, tells Rolling Stone that there should have been a ‘revenue contribution’ to the debt-ceiling deal, ‘structured to fall mainly on the well-to-do.’ Instead, the GOP strong-armed America into sacrificing $1 trillion in vital government services – including education, health care and defense – all to safeguard tax breaks for oil companies, yacht owners and hedge-fund managers. The party’s leaders were triumphant: Senate Minority Leader Mitch McConnell even bragged that America’s creditworthiness had been a ‘hostage that’s worth ransoming.’ ”

Now, let’s look at the impact that this VERY ODD tax preference has had on the US economy.

What happens, when our tax system rewards investment income, rather than actual work?

  1. Private equity “investors” use acquired corporations to borrow money – and then use that borrowed money to pay themselves dividends.  “Investment”?  Not hardly.  The acquired corporations go belly-up when they can’t pay pack the debt, leaving hundreds (or thousands) of workers unemployed.  Read “What Mitt Romney Taught Us about America’s Economy.”
  2. CEOs take more compensation as dividends, rather than wages.  Even accounting for inflation, top-tier taxpayers took home six times more dividends in 2009 than in 1992.  “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).”
  3. Some of those CEOs “invest” that money in politics.  And the cycle repeats itself.

“Pull yourself up by your bootstraps”??!? Bootstraps are getting very hard to find, these days.

(But please don’t shop for them at Walmart.  The corporation’s “Lowest Prices” policy has had a devastating effect on the US economy.  “Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.”   Meanwhile, Walton family members – who receive about half of all dividends paid by Walmart – are doing just fine.)

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

Keystone Pipeline by Shannon Patrick via Flikr

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 $3 trillion 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.

State “Shared Taxes” Cuts have been Drowning Detroit: is Grover Norquist laughing yet?

norquist_drown_government

norquist_drown_governmentThe Bankruptcy Court judge overseeing Detroit’s “restructuring” is moving really, really fast.

And – at least so far – he’s following the schedule proposed by “Emergency Manager” Kevyn Orr and the law firm Jones Day.

  • Read more about Kevyn Orr here.
  • Read more about Jones Day here.

This Friday, August 2nd, the judge is expected to rule on Orr’s motion that a hand-picked “Committee of Retirees” be allowed to make decisions on behalf of the more than 20,000 retired city employees.

How’s this shaping up?  It looks a lot like what just happened in Stockton, California – where a similar committee just accepted $5.1 million as full “payment” for future medical benefits estimated to be worth hundreds of millions of dollars.

And now that steamroller is headed straight for all those people who spent their lives working for the citizens of Detroit.

One of the many, many things that are wrong with this situation is: how completely the mainstream media has swallowed the spin offered by Michigan’s Republican Governor, Rick Snyder.

First, blame the unions.  (The Wall Street Journal’s “How the Unions Killed Detroit” is here.)

Next, blame “60 years of decline” – particularly the decline of the [unionized] auto industry.  (Watch Gov. Snyder on NBC’s Meet the Press here.)

Then, inflate the numbers.  All of a sudden, they’re not talking about annual deficits – not even the total accumulated annual deficits – they’re talking about “total debt”.   That includes bonds for the Water and Sewer systems.  For renovations to the Convention Center.  For the city’s Building Authority, and its Downtown Development Authority.  Its Transportation and Parking Funds.

Yeah, when you add it all up, that looks like a lot of debt.  But municipalities traditionally borrow the costs of capital projects, usually for terms of 20 to 30 years.  Just like most middle class families don’t pay cash when they buy a house.

But that “$18 billion” total debt number sure makes it seem like Detroit can’t possibly avoid bankruptcy, and can’t afford to keep its promises to its workers.

Great spin.

But what do Detroit’s auditors say?  Quoting directly from the city’s 2012 Comprehensive Annual Financial Report:

The City has an accumulated unassigned deficit in the General Fund of $326.6 million as of June 30, 2012, which has resulted from operating deficits over the last several years.                                                                         

$326 million… $18 billion… Gotta admit: Rick Snyder sure knows how to spin things.

Let’s look at Detroit’s problem from another direction, for a minute.  Let’s consider – just for a minute – that maybe Detroit doesn’t have “a spending problem”, maybe it has a revenue problem.

The reality is, all around the country, municipalities depend on state revenue-sharing to make their budgets work.  Those of us who lived through New Hampshire’s Bill O’Brien years know this all too well.  State tax cuts and budget cuts “trickle down” and hit municipalities where it hurts.

For Detroit, state “shared taxes” used to provide 16% of city revenues.  That means one out of every six dollars that Detroit budgeted came from the State of Michigan.

Then GOP right-wingers declared war on our government.

Look at how different Detroit’s revenues would have been, if the amount of “shared taxes” had stayed the same as it was when George Bush became President:

Detroit Shared Taxes

Data from Detroit Combined Annual Financial Reports available at http://www.detroitmi.gov/Departments/Finance/tabid/86/Default.aspx

An interesting math exercise: if the state had continued to pay the same amount of “shared taxes” as it did in 2001, Detroit would have received $4.1 billion in additional revenue over the years.  (And maybe the city wouldn’t have had to borrow quite so much to finance capital projects…?)

Just in FY2012, Detroit would have received $470 million more in “shared taxes” revenue – if the State had still been sharing revenue like it did in 2001.

And that would have been more than enough to wipe out the $326 million in accumulated operating deficits that Detroit’s auditor cited in the 2012 CAFR.

So maybe Detroit’s financial problems weren’t caused by the unions – or “60 years of decline.”  Maybe it’s not a “spending problem” – maybe it’s a “revenue problem”.

Maybe the problem is that the extreme wing of the GOP declared war on government back in 2001… and they’re still planning to “drown it in the bathtub.”

 

 

Why is the House GOP obsessed with the Keystone pipeline?

donkeyhotey

Republican ElephantSo… President Obama met with the House GOP yesterday, trying to find common ground on the federal budget.

And after the meeting, what were the headlines about?  The Keystone XL pipeline.

Say, what?  Our economic recovery is at stake.  There are huge decisions about what sort of government we will have – one that benefits the rich and powerful, or one that takes care of the aged and poor?   Austerity or growth?  Contractors or entitlements?  Deficit reduction or stimulus?

And the headlines are about a private company’s proposal to build an oil pipeline?  Gotta wonder.

Remember December 2011?  Desperate times for tens of millions of Americans who were out of work.  Finally, at the last minute, there was a political compromise:  “An Act to extend the payroll tax holiday, unemployment compensation, Medicare physician payment, provide for the consideration of the Keystone XL pipeline, and for other purposes”.

For policy wonks, that bill was a fascinating political compromise.  In exchange for an expedited permitting process for this one private construction project, all costs associated with the bill were exempted from statutory “PAY-GO” requirements.  In plain English, that means Congress added all of the bill’s costs to the federal debt without any consideration about how to pay for them.

So, how much did that bill cost?  Best estimate, based on an earlier version of the bill, is about $3 trillion.  Step back and look at that political “compromise” from the perspective of an old-fashioned, fiscally-conservative Republican: $3 trillion of debt was traded for the expedited permitting of a single private construction project.

Waiting for the punch line?  Grover Norquist is their lobbyist. He has been using his position at Americans for Tax Reform to push for the project’s permitting – in whatever bill he can use to get it through Congress.

The merits of the project?  Depends on who you ask, what source you trust.  When Cornell University researchers looked at the data submitted to the State Department, its researchers found that “the project will create no more than 2,500-4,650 temporary direct construction jobs for two years… based on the figures provided by TransCanada… the new permanent US pipeline jobs number as few as 50.”

So, who exactly is going to benefit?  Here’s one guess about the three companies whose stockholders stand to benefit the most.

Having watched that huge “political compromise” back in December 2011, I’m guessing yesterday’s headlines mean that the pending budget and government shutdown bills are going to end up as interesting political compromises, too.

If you aren’t familiar with Mr. Norquist, read more here.

Another stalemate?
Or a chance to save the economy?

Top400 AGI

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.

Yep, They’re Still Trying to Privatize the Post Office.

Photo Brian Kersey / Getty Images

Photo Brian Kersey / Getty Images

Yesterday, a Washington, DC “think tank” — originally chartered by Congress — announced it would “conduct an independent study of how the quasi-government agency could cede much of its operation to private companies.”  Read the Washington Post article here.

Trouble is, this isn’t exactly an “independent” review.  The study is being “made possible by a contribution from Pitney Bowes”.

And it’s based on a “White Paper” authored by a group including: a Cato Institute economist; the Deputy Postmaster General under President George W. Bush; and a lobbyist for the Direct Marketing Association, who was hired “to head lobbying efforts aimed at reforming the U.S. Postal Service.”

Golly.  The suspense.  Wonder what this “non-profit think tank” is going to recommend doing to the Postal Service?  [Remember, the Republican Party Platform calls for "Restructuring the U.S. Postal Service for the Twenty-First Century."]

Their report is due out in March.  Yes, right when the next Congress-created economic crisis is scheduled to hit.

Read more about Grover Norquist’s lobbying to dismantle the Post Office here.

Read about House Budget Committee Chairman Paul Ryan — and his wife — here.

Read all NHLN coverage of the USPS here.

Looking Over the Fiscal Cliff

Tax Receipts 1952-2012

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.]

Remember What Happened after Katrina

Remember this mobile billboard, used in protests after Hurricane Katrina?

Grover Norquist and his allies are still trying to “shrink government.”

  • Ovide LaMontagne wants to “shrink government.”
  • House Speaker William O’Brien wants to “shrink government.”
  • Charlie Bass wants to “shrink government.”
  • Frank Guinta wants to “shrink government.”
  • Mitt Romney and Paul Ryan want to “shrink government.”

But where would we be now – a year after Hurricane Irene – without a government that could repair roads and replace bridges?

How long would it have taken to get electricity restored, after Irene, without all the state employees and municipal workers who worked 12-hour shifts every single day for weeks, to get the roads open so the linemen could do their jobs?

Those residents trapped by the rising Saco River – what might have happened to them, if there had been no emergency workers to rescue them?

Our government is supposed to be “of the people, by the people, for the people.”

When President Lincoln was speaking at Gettysburg, he wasn’t talking about just the top 1%.  He wasn’t talking about the 53% of people that Mitt Romney believes are worthy of his attention.  (Remember the $50,000-a-head fundraiser video?  The full transcript is available here.)

President Lincoln was talking about all the people.  A government for all the people.

That’s your choice, this election year.  Candidates who want to “shrink government” versus candidates who –like President Lincoln – believe in a government for all people.

As Hurricane Sandy’s winds swirl across the eastern United States, think about the difference between our government’s response to Hurricane Katrina and to Hurricane Irene.

Think about what type of government you want to have, the next time a hurricane hits.

 

Photo by Rob Goodspeed

 

 

WHY IS GROVER NORQUIST LOBBYING TO DISMANTLE THE POSTAL SERVICE?

In a recent lobby report of 22 pages of various lobby activities including Agriculture, Banking, Budget appropriations, Communications/Broadcasting/Radio/TV, Computer Industry, Defense, Energy/Nuclear, Financial Institutions/Investments/Sec, Health Issues, Labor Issues/Anti- trust/Workplace, Pharmacy, Small Business, Taxation/ Internal Revenue Code, and strangely Postal, Grover Norquist is listed as a paid lobbyist. These are all areas that Grover Norquist is being paid as a professional lobbyist.It boggles the mind to accept the fact he is involved in every aspect of our lives.

Who the hell is he? He is the founder of Americans for Tax Reform who is responsible for the “shrink government until you can drown it in a bathtub” adage. He opposes all tax increases as a matter of principle. As stated by former Republican Senator Alan Simpson, co-chairman of the National Commission on Fiscal Responsibility and Reform, Norquists’ position is “no taxes, under any situation, even if our country goes to hell”!

As a nonprofit organization, Americans for Tax Reform is not required to disclose the identity of its contributors. ATR is financed by direct mail and other grassroots fundraising efforts. According to CBS News, “a significant portion appears to come from wealthy individuals, foundations and corporate interests.

As of late 2011, 238 of 242 House Republicans and 41 out of 47 Senate Republicans had signed ATR’s “Taxpayer Protection Pledge”, in which the pledger promises to “oppose any and all efforts to increase the marginal income tax rate for individuals and business; and to oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.

Norquist has connections into the dark side of politics. According to a 2011 memoir by former lobbyist Jack Abramoff, Norquist was one of Abramoff’s first major Republican party contacts. Norquist and Americans for Tax Reform were also mentioned in Senate testimony relating to the Jack Abramoff Indian lobbying scandal which resulted in a 2006 guilty plea by Abramoff to three criminal felony counts of defrauding of American Indian tribes and corrupting public officials. Records released by the Senate Indian Affairs Committee allege that ATR served as a “conduit” for funds that flowed from Abramoff’s clients to surreptitiously finance grass-roots lobbying campaigns.

So, how does an anti-tax organization fit into the dismantling of the Postal Service by being a paid lobbyist in support of S. 1789, a senate bill that will destroy the Postal Service in two years when the Postal Service in fact uses no tax payer money. What’s Grover’s skin in this game? Uh, lemme guess, he is a paid shill by Corporate America to take down this Governments infrastructure piece by piece including any regulation that would be a hindrance to the Corporations “bottom line”. Oh, that explains it. It’s all so painfully clear now.