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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.

GOP House members still in a “fighting” mood?
Could be very costly.

Last person leaving, please dock the doors
Hoping for bipartisan cooperation, now that the election is over?  Think again.

The weekend before the inauguration, Republicans gathered in Williamsburg to discuss strategies for “fighting” the President.  Just a week later, former Vice Presidential candidate Paul Ryan was telling a gathering of conservatives that “Republicans control both the House and most of the statehouses.  So we have to oppose the president and the Senate on some fronts—and engage them on others…”

Does that sound like cooperation to you?

Looks like it’s going to be an interesting next few months.  Two dates to mark on your calendar:

  • On March 1st, the sequestration cuts are scheduled to go into effect.  Cutting government services through these automatic, across-the-board cuts is expected to send the economy back into recession.  One example:  according to a study commissioned by the airline industry, the FAA’s share of the sequestration cuts is about $1 billion a year.  That cut would reduce the nation’s air traffic between 5% and 10%, and the country would lose between 66,000 and 132,000 jobs related to air transportation.  The irony?  The economic losses would cause tax revenues to drop by as much as $1 billion a year.  (Hmmn… $1 billion in tax revenues lost because of a $1 billion spending cut.  Not a whole lot of deficit-reduction going on, is there?)
  • On March 27th, the “continuing resolution” that funds federal government will expire.   That means a possible “government shutdown”According to Politico, a majority of GOP House members “are prepared to shut down the government to make their point. House Speaker John Boehner ‘may need a shutdown just to get it out of their system,’ said a top GOP leadership adviser.”

What happens if the government shuts down?  Federal employees who are deemed “essential” are still required to go to work – they just don’t get paid until after Congress approves a bill to pay them.  The last time there was a significant government shutdown, almost a half-million federal employees were required to work without pay for three weeks.

The economic damage went far beyond the family finances of federal employees.  The crisis also caused 11 states to suspend unemployment insurance, due to lack of federal funds.  Veterans’ services were suddenly unavailable (including counseling, vocational rehabilitation, and pension and education payments).  The crisis affected the oil industry, leaving more than 10,000 barrels a day untapped while companies waited for federal reviews.  The tourism industry suffered millions of dollars in losses each day of the shutdown, because passports and visas were not processed.   The housing industry suffered when $800 million worth of mortgage loans were delayed.  The crisis halted cleanup of 609 toxic waste sites.  It left hundreds of thousands of children in limbo, waiting for foster care or adoption.

And that was only a partial government shutdown.  Most of the government still had funding, during that shutdown.  (Just imagine what may happen on March 27th!)

There’s a moral here, folks.  Government services are integral to our nation’s economy.

Is there any hope that Congress could learn that lesson, in the next month or so?  Or is the GOP going to insist on doing economic damage, “just to get it out of their system”?

 

Do Not Believe The Myths Surrounding The ‘Grand Bargain’

Let’s get serious about our future.

Over the last nine months every politician on both sides was saying we need to do something about the deficit, the budget, to preserve Social Security and Medicare for all.  “This is about our grandkids”.  Some even liked to say that our “children would be inheriting our debt”.  Those are great talking points because they created a message based on fear and propaganda not facts.

The AFL-CIO has been working with many allied organizations to help people understand the facts around some of the issues facing America and Congress in the coming month.

Everyone is talking about taxes! ‘We need to tax the rich.’ ‘We need to extend the middle class tax cuts.’ ‘We need to extend the tax cuts for all, especially to the job creators.’  What is the truth behind these statements?

The truth is America has a budget problem.  We spend more that we take in. This creates deficit.  While many politicians are still trying to lay blame to how we got here, I have already moved on.  We need a balanced approach to solving this budget problem.  We need to make strategic cuts and revenue increases.  That’s right — I am asking for an increase in taxes, that is if you are one of the people who make $250,000 a year or more. If you are, then paying a few extra dollars in taxes is not really going to hurt you, is it?  Making those ends meet every month is a lot easier when you have $20,000 a month coming in.

[mantra-pullquote align=”right” textalign=”right” width=”40%”] Ending the ‘Bush Era Tax Rates’ would also reduce our budgetary shortfalls by “1 Trillion dollars over ten years”.[/mantra-pullquote]

The first way to help fix our deficit and budget problem is to END THE BUSH TAX CUTS!  That is right, we let the “temporary” tax cuts expire.  These tax cuts were supposed to increase job creation. What actually happened was they created a huge hole in our deficit and led to the worst financial depression in 60 years.  I know what you’re saying, ‘those tax cuts are going to hurt small businesses and the job creators’.   You would be wrong.  The truth is that only “only 2.5% of small business owners make more than $250,000 per year, and these include 237 of the 400 wealthiest people in the country.”  Ending the ‘Bush Era Tax Rates’ would also reduce our budgetary shortfalls by “1 Trillion dollars over ten years”.  Wasn’t the entire “super committee” created to find one trillion in debt reduction?

The real question is, how do we convince the ‘Norquist’ tax dodgers that in order to save our economy and Social Security/Medicare programs, we have to raise taxes on the top 2%?  This is being referred to as the ‘Grand Bargain’.   Republicans want to make cuts to Social Security and replace Medicare with a voucher in order to preserve the tax rates for those above $250,000.   That is right: the GOP is going to bargain away the benefits promised to 62 million Americans to preserve a tax rate for 6.2 million Americans! This does not make any sense at all.

[mantra-pullquote align=”left” textalign=”left” width=”33%”] According to the Trustees, Social Security can pay 100% of promised benefits until 2033. [/mantra-pullquote]

People say that ‘Social Security is going bankrupt’.  This is another myth that many on the right keep using. The fact is “Social Security is not going broke. It will always be able to collect payroll tax revenue to fund benefits. According to the Trustees, Social Security can pay 100% of promised benefits until 2033. Without any changes at all, Social Security can pay three-fourths of promised benefits indefinitely after that.”  If you are still not convinced, there is one simple change to Social Security that will solve the issue forever: just eliminate the cap.

Right now, people who make over $110,000 hit the Social Security cap, and don’t have to make any further contributions.  Eliminating the cap is an idea that was supported by President Obama and proposed by Sen Bernie Sanders (I-VT).

[mantra-pullquote align=”left” textalign=”left” width=”33%”]Fact: Increasing the retirement age from 67 to 69 amounts to a 13% cut in benefits.[/mantra-pullquote]

One more myth that needs to be mentioned is the outright lie that ‘if we increase the eligibility age of Social Security there will be no loss in benefits’. The fact is “Increasing the retirement age from 67 to 69 amounts to a 13% cut in benefits.”

One of the other ‘bargains’ that Congress is bartering with is cuts to Medicare.  Medicare provides millions with affordable healthcare options and benefits for those who have none.  Congressional Republicans are proposing cuts and “adjustments” to “make Medicare last longer.”  This is another myth.  They are using the same model that corporations are using to shift the cost burden to the worker. Making the workers pay more for the same benefit reduces the bottom line.

[mantra-pullquote align=”right” textalign=”right” width=”33%”] “Turning Medicare into a voucher … (beneficiaries) will have to pay an average of $6,500 a year more”
-Robert Riech[/mantra-pullquote]

Many of the right wing media like to say that ‘Medicare (like all government programs in their opinion) is wasteful and inefficient’. The AFL-CIO would beg to differ: “Medicare has lower costs than private insurance and has done a better job of controlling health care cost growth for the last 40 years.”  Even famed author and public policy expert Robert Reich agrees that what the Republicans are trying to do to Medicare is wrong. “Turning Medicare into a voucher whose value doesn’t keep up with expected increases in healthcare costs — thereby shifting the burden onto Medicare beneficiaries, who will have to pay an average of $6,500 a year more for their Medicare insurance.”

Anything that Congress does to the Medicare plan has (or will) have a direct effect on you.  If they increase the premium, that is more you must pay in the program up front. If the increase the co-pays, that is more that you have to pay out of pocket before the insurance kicks in. If they place a cap on benefits, then if you exceed that cap – well, you’re pretty much screwed.

This ‘Grand Bargain’ and ‘Fiscal Cliff’ discussion is a disaster waiting to happen.  The country re-elected President Obama because we believed that the wealthy need to pay a little more to help reduce our deficit.  America rejected the idea that we need to continue to reduce taxes on the ultra-wealthy and corporations. We need our President to hold strong to his statements made during the campaign.  Do not let Congress change Social Security or Medicare in any way, and do not let them walk out without ending the ‘Bush Era Tax Cuts’ to top two per-cent.

Do not be fooled by the myths and propaganda.  The truth will set you free.

 

What happened on Wall Street Today?

Many of us with 401(k)s were watching today’s stock market slide.  Today’s drop was the biggest one-day loss in more than a year.

What happened?  Here’s how the Wall Street Journal explains it:

“With the two houses of Congress split between Democrats and Republicans, investors are fearful of a contentious battle over taxes and the deficit that could take the U.S. government to the brink of another crisis. Political brinkmanship on deficit reduction helped trigger a downgrade of the U.S. government’s credit rating by Standard & Poor’s in August 2011.”

“This time, the concern is the ‘fiscal cliff,’ scheduled tax increases and spending cuts set to take place on Jan. 1 unless Congress reaches a compromise to avert the policy changes. The split houses of Congress, and continued partisan rancor, have fueled worries that legislators may not reach a compromise until the last minute, if at all.”

Read the full article here.

“Partisan rancor”?!?  Wait. Wasn’t that the one thing voters of all stripes complained about, in yesterday’s exit polls?

It didn’t take long for the gridlock to resume — not even 18 hours!  House Speaker John Boehner has already ruled out any compromise that includes tax increases on the rich.  Read “Republicans lay down battle lines over fiscal cliff” here.

Why can’t the national GOP take a clue from California, where the just-passed Proposition 30 will increase taxes on the wealthy for the next seven years?  The ballot measure prevents $6 billion in cuts to the state budget, mostly in public school funding.

New Hampshire still has a Republican Senator, Kelly Ayotte.  If you have a 401(k) and you’re concerned about what’s happening to your retirement savings, you can call her and suggest the Republican Party should become something other than “The Party of ‘No’.”  (Or, rather, “The Party of ‘No Tax Hikes on The Wealthy’.”)

Sen. Ayotte has offices in Manchester (603-622-7979), Nashua (603-880-3335), Berlin (603-752-7702) and Portsmouth (603-436-7161).

 

Do you have Two Minutes to save 6 Million Workers???


We have seen a slight decrease in our nations unemployment numbers over the past few months.  The national rate still hovers around the 9% mark.  For some these past few years have been extremely difficult.  For those who were able to find work, in most cases it was less pay and no benefits.  They were the lucky ones.  For many they had to rely on unemployment insurance from the government.  Millions of workers are now hanging on for dear life, and the only thing that is helping is their Unemployment Insurance (UI).  A 49 year old mother from Philadelphia named Dawn Deane said “The Unemployment Insurance is helping me manage and maintain my mortgage, utilities, and car payments—helping us just barely stay above water,” says Deane.  “Without it, I’d just have nothing while I look for new work—not even heat, electricity, or a phone.  And if it got cut off, I would fall behind on my mortgage, probably face foreclosure, have my car repossessed, and end up applying for welfare (2).” As if finding work was not hard enough now,  Congress is about to cut them off completely.  On Dec 31st of this year nearly two million Americans will no longer be able to receive this life saving assistance from the Government.  

Here are a few facts from the National Employment Law Project:

   Of these 1.8 million workers, more than 430,000 were laid off as recently as July and will reach
the end of their state benefits in January without the prospect of any federal relief, if Congress
fails to act.  Many more may join their ranks as state unemployment rates continue to climb.
   Nearly 650,000 workers in 33 states and the District of Columbia will face an immediate
“hard” cut‐off of their benefits in January, after struggling to find work and pay their bills for
over a year in most cases.  There is no phase‐out allowing these workers to collect the
remainder of their final 13 to 20 weeks of benefits.
   Since the data were first reported in 1948, the nation has never experienced the record
stretch of high unemployment and long‐term joblessness that now plagues the economy.  
Currently, the unemployment rate has been above 8.5 percent for more than 31 months, and
for nearly two years, over 40 percent of the unemployed have been out of work for more than
six months.  
   Due largely to the federal extension, in 2010, unemployment insurance kept 3.2 million
people (including nearly one million children) from falling into poverty.  Were it not for
unemployment insurance, the number of people falling into poverty would have more than
doubled in 2010.

These numbers are stagering.  Since this is the New Hampshire Labor News, lets talk about how this cut to unemployment insurance will effect New Hampshire cities and its workers.  On Jan 1, 2012  1,400 people in NH will loose their UI.  This may not seem like a lot of people however these people make a significant impact on our local economy.  In NH the average UI payment is only $264.03 per week.  I do not know where you live but in southern part of NH it is hard to find a livable apartment for less than $700 a month.   That would leave them with $300 a month for food and heat.  UI was never ment to be a sustainable way for people to live, it is only ment to help you from losing everything while you try to find work again.  All of the money people get from UI goes right back into our local economy. In fact, “the loss to NH communities could total $369,642 a week (1).  That is not chump change.  That is over 19.2 million dollars lost in the NH Economy.

Since 2009, 45% of laid off Americans have used the UI program. That is over 6 million people. Now the average time out of work is over 40 weeks.  That is nearly 10 months without a job. It is vitally important that we extend the UI program to help save our friends and neighbors who are reling on this program.  In turn we will help our local economy by keeping $300,000 a week flowing in to local stores and businesses.

This is where you can help.  Take Two Minutes and fill out this petition to urge House Speaker John Beohner to extend the Unemployment Insurance. Follow this link to take action.  You can also go here, to share your personal message of struggle and how UI helped you, or leave a message of support for those are reling on the Federal UI program.  One last thing to remember; “Recent research and two new state surveys strongly indicate that workers who are receiving unemployment insurance are more likely, not less, to stay in the labor market and actively seek work despite dim prospects for reemployment. (2)”


1) http://uistories.aflcio.org/files/fact_sheets/NH.pdf
2) http://www.nelp.org/page/-/UI/2011/NELP_UI_Extension_Report_2011.pdf?nocdn=1

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