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Proving Once Again That Tax Cuts For The Wealthy “Job Creators” Do Not Work, S&P Lowers Kansas’s Credit Rating

"Kansas Apologizes" by David Shankbone via Wikimedia Commons

Photo from October 30, 2010 “Rally to Restore Sanity” – by David Shankbone via Wikimedia Commons

For decades, the right-wing has held fast to its belief that tax cuts can fix the economy and end government deficits.

Nevermind that the idea — cutting taxes would somehow increase government revenues? — never made much sense.

They’ve kept the faith, despite all evidence to the contrary.

Myself, I think it’s long past time for the right wing to give up on this theory. I mean: at some point, shouldn’t people be able to accept the evidence, even if it goes against their beliefs?

I mean, even Republican leaders eventually gave up on it.

CBPP_effects_of_KS_tax_cutsBut two years ago, the Tea Partiers down in Kansas decided to try, try again… and Governor Sam Brownback signed “one of the largest tax cut bills in Kansas history.”

Even though many Republicans in the state legislature opposed it. (Republican Senate President Steve Morris told the press: “It is not good public policy.” He also called the tax plan backed by the tea party “very reckless.”)

Since then, there has been no evidence of any economic boom. “Since the tax cuts took effect at the beginning of 2013, Kansas has added jobs at a pace modestly slower than the country as a whole. The earnings and incomes of Kansans have performed slightly worse than the U.S. as a whole as well.” (Read more here.)

And yesterday, the chickens came home to roost. Standard and Poor’s lowered the state’s credit rating, because of the tax cuts.

“The downgrades reflect our view of a structurally unbalanced budget, following state income tax cuts that have not been matched with offsetting ongoing expenditure cuts in the fiscal 2015 budget,” said Standard & Poor’s credit analyst David Hitchcock in a release.

The rating agency gave the state a “negative” outlook on both ratings and projects that the state will face serious budget woes by the end of fiscal year 2015.

But Brownback still didn’t seem to get the message. “We need jobs and we have proven the way to that is through lower taxes,” he told the press – even after the ratings downgrade.

State Representative Jim Ward: “When presented concrete evidence of a fiscal crisis … he denies it exists. He blames the people who bring the data. You cannot live in a world where you reject all information that doesn’t feed into your ideology.”

Except… it looks like some people can.

Kids Or Corporations? Which Do We Value More?

Image by Rocksee (Flickr CC)

Image by Rocksee (Flickr CC)

From Pennsylvania, this story:

Governor Tom Corbett cut corporate taxes by $1.2 billion.  Then he cut nearly $1 billion dollars from the state’s education budget.  Then he acted shocked when schools from Philadelphia to Pittsburg were forced to close.

Then a child died.

From the AFT: “We don’t know if a school nurse could have saved this young boy. But we do know every child deserves a full-time nurse in his or her school. We do know all parents deserve to know that their child will be safe and his or her most basic needs will be tended to at school. We do know that all Philadelphia children deserve better.”

The boy wasn’t the first child who died.  Twelve-year-old Laporshia Massey died from asthma complications that started while she was at school.  Could her death have been prevented there had been a school nurse on staff?

Of course, Governor Corbett responded by attacking the teachers’ unions – without mentioning the budget hole created by his corporate tax cuts.

Yep, another politician who wants our teachers to make “sacrifices.”

(But not the corporations.  Somehow, they never ask the corporations to make “sacrifices.”)

But it’s not just Pennsylvania.

A friend of mine is an elementary school art teacher, whose classroom is out of supplies and whose budget is out of money.  How do you teach elementary school art without construction paper and glue sticks?

A middle school student complains about seeing her teachers outside of school.  “It’s really embarrassing when you run into your teacher in a restaurant,” she says.  “But it’s even more embarrassing when your teacher is your server at the restaurant.  Why can’t we pay teachers enough that they don’t need a second job to survive?”

All across the country we hear stories of states being forced “make the hard choices” when it comes to budgets.  They try to make us believe that they have no other choice than to cut programs to keep their budgets balanced.  They never mention the possibility of restoring revenues that were given away as tax cuts.

A strong public education is vital to our communities.  A strong education is the foundation of the American Dream.  Public schools provide the tools necessary to lift people up, to find good high paying work, and to get that little house with the white picket fence.  A strong public education system — which I believe should include higher education — is the key to countering America’s poverty problems, too.

But budget cuts have forced some schools to close completely, leaving children and their parents scrambling.  Teacher layoffs have led to larger class sizes, and less time to help students.  Budget cuts are forcing teachers and parents to supply schools with basic necessities like paper, pens, chalk, and paper towels out of their own pockets.

Cuts to school lunch programs mean that too many teachers are reaching into their own pockets to buy lunch for students who would otherwise go hungry.

Yet corporations keep their tax cuts.

The American Federation of Teachers and the National Education Association are on the front lines of this fight to protect and preserve our public education system.  AFT is running a new campaign entitled “reclaim the promise” that challenges people to stand up for public education.

Stand up and fight to ensure that children in all communities get access to a high quality education.

Stand up and say “NO” to the government leaders who would rather cut funding to schools than ask businesses to pay their taxes.

Stand up and say: “NO MORE hungry children.”

And “NO MORE children dead, without a school nurse around.”

 

(Special Hat-Tip to my friends Kevin Mahoney and Sean Kitchen at Raging Chicken Press for always keeping the light shining on the atrocity of Governor Corbett’s attack on public schools and public workers.)

Racing to Blame Public Workers for State Finances

Suffolk DownsAnd… they’re off, on a new round of attacks on public pension systems nationwide.

When you hear about this week’s Mercatus Center report on the financial condition of all 50 states… start by considering the source.  Mercatus is housed at George Mason University, so it has a veneer of academic credibility.  But here’s what SourceWatch has to say:

“The Mercatus Center was founded and is funded by the Koch Family Foundations. According to financial records, the Koch family has contributed more than thirty million dollars to George Mason, much of which has gone to the Mercatus Center, a nonprofit organization.”

The last time George Mason University really hit the headlines was in 2012, when a faculty economist authored a doomsday report about how horribly Sequester cuts would affect… the Defense Industry.

(Meanwhile, military contractors seem to be doing just fine.  Back in November’s budget compromise, Congress gave the Pentagon more than $1.3 billion for programs it didn’t want.  And according to Reuters, there’s not much oversight of all that money.  “The Pentagon … has not complied with a law that requires annual audits of all government departments. That means that the $8.5 trillion in taxpayer money doled out by Congress to the Pentagon since 1996, the first year it was supposed to be audited, has never been accounted for.”)

But I digress.

The thing that strikes me, about this week’s Mercatus report, is that once again it tries to blame public workers for whatever is wrong with state finances.

  • It doesn’t say a thing about corporate giveaways, such as Washington state’s recent biggest-in-US-history giveaway of $8.7 billion to Boeing.

According to a New York Times analysis, these so-called “economic incentives” add up to big money: “Oklahoma and West Virginia give up amounts equal to about one-third of their budgets, and Maine allocates nearly a fifth.”   But do these incentives actually work?  The Times couldn’t find any evidence.

  • It doesn’t say a thing about revenues.  Just try Googling “state tax cuts”.  Out in Wisconsin, Scott Walker’s going to cut taxes (even more than he already has).  Chris Christie wants to cut taxes (even more).  Dave Heineman, out in Nebraska, is going to cut taxes.  Even Andrew Cuomo is pitching tax cuts.

But, let me digress again.  Out there in Nebraska, they actually studied the “economic stimulus” effect of tax cuts.  Here’s what they found:  even accounting for the “stimulus effect”, a $100 million reduction in regressive sales/use taxes would have a “net revenue impact” of (negative) $79.45 million… while a $100 million cut in income taxes would have an impact of (negative) $93.58 million. That’s right, neither of these types of tax cuts would be good for the state budget; but one of them is much worse than the other.  So, guess which type of taxes Governor Heineman wants to cut (rather than expanding Medicaid).

  • It doesn’t say a thing about how Wall Street’s “robust recovery” has affected public pension funds.  After losing a TRILLION dollars between October 2007 and October 2008, public pension trust funds are finally beginning to recover.  Here in New Hampshire, last year, investment returns added $818 million to our Retirement System Trust Fund.  How big is that number?  The NHRS Trust Fund started the year with less than $6 billion.  It paid benefits totaling about $630 million.  Do the math yourself: last year, investment returns paid for every single penny of benefits… and still increased the Trust Fund.

So yeah, maybe you should take all those Mercatus Center headlines with a grain of salt.

Or a bushel.

As Amy Traub says: your mailman didn’t make the economy collapse.

And public employees aren’t responsible for the damage that has been done to their state budgets.  (We’re just the workers, remember?  It’s the elected officials who decide how many billions to give away to private corporations.)

NH Small Businesses Speak Out Against Fiscal Cliff

Every day we move closer to the so-called ‘Fiscal Cliff’.  The deadline that could instantly change the tax rates for every American.  Middle class Americans are being held hostage by the Republicans in the US House who refuse to raise the taxes on the ultra wealthy in order to reach a deal.

Many of the Republicans in Congress are concerned that tax increases on the ‘top 2%’ would end up hurting small businesses.  This is a complete fallacy.  ‘The Action’ in conjunction with other labor and community allies are encouraging Congress to reach an agreement to put ‘the middle class, over millionaires’.

Yesterday in a press conference in Concord small business owners came together to explain what the ‘fiscal cliff’ would mean to their businesses.  All of which agreed raising taxes on the middle class would hurt their businesses. Most of the concern from small business is that consumer spending would drop due to a higher cost of taxes.

Consumer spending is what drives our economy. It fuels our small businesses.  If the middle class does not have money to spend, or is afraid to spend it due to economic concerns, that is when small businesses are hurt.

In an interview with WBIN, Laurie Miller said “economy is turning a corner.”  She mentioned gas prices being lower and stock markets doing better.  Miller also send a message directly to our political leaders.  She said, “people need to get down and dirty and sit in a room and do what is best for this country instead of politics.”

I could not agree more.  Our elected officials are in Washington to represent us not corporations and personal agenda.  They should be acting on what is best for the country not 2% of the country.

The President and Speaker Boehner are set to meet over the weekend to try to resolve the ‘fiscal cliff’ before the sequestration cuts are triggered and the middle class tax cuts expire.

*  *  *  *  *  *  *

Be sure to check out all the interviews with NH small business owners who are urging Congress to take action before taxes go up on the middle class.

Sue McCoo, owner of the Capital Craftsman and Romance Jewelers

Laura Miller, owner of Imagination Village in Concord

Don Brueggeman, a manager at The Works Bakery Cafe

Lorrie Carey, owner of Marshall’s Flowers

Changing the Conversation – Earned Benefits are NOT Entitlements

(Photo by Robert Neff)

Social Security and Medicare are not “entitlements” – except in the sense that everyone should be entitled to the money (including interest) that they deposit in a bank account.

Our grandparents, parents and now you and I pay into these programs with every check we receive.  Pull out your paystub and look.  You will see deductions for FICA and for Medicare.  Why are these programs being included in conversations surrounding the “Fiscal Cliff”? 

For decades now, right-wing think tanks like the Heritage Foundation have been telling us we must “replace the culture of entitlements with one of mutual responsibility.”  But workers have always been responsible.  The only irresponsibility here belongs to Congress, who started borrowing from our fund  beginning in the Reagan years.

The Social Security Act of 1935 was a bipartisan accomplishment.  Politicians on both sides of aisle knew that disabled veterans returning from war, widows with dependent children and retirees to old to work, needed help.  This was not a government handout – it was a plan through which each employee would pay an income tax.  The money would be pooled together, and with interest, payments would be made to qualified recipients.

Why are some politicians trying to make us believe that Social Security is bankrupt?  The NH Sentinel Source.com reported in April 2011 that, “working Americans have paid so much in Social Security payroll taxes during the past three decades that they have built up a $2.6 trillion surplus in the account.”  Unfortunately, this account is now filled with “IOU’s” – and some politicians prefer to change the rules rather than looking at long-term solutions.

Senator Kelly Ayotte is one who believes that Social Security should be cut.  She voted for the Ryan Budet, which, according to the Kaiser Foundation, would harm 3.3 million people between the ages of 65-66.  This is not a reasonable answer or solution to the country’s fiscal situation.  Politicians should be protecting – not sacrificing – these programs that employees have paid into, all these decades.

It is up to all of us as American workers to ensure these programs will be there when we need them.  This begins with changing the conversation – and in particular, the wording.  Social Security and Medicare are not entitlements but Earned Benefits.  Our politicians must understand we will not give up on what is rightfully ours.

Using Retirement Funds to Balance the Budget


Up here in New Hampshire, we have some experience with politicians trying to use public workers’ retirement funds to balance the budget.

Back when Craig Benson was Governor, he wanted to use money from the public employee retirement system to balance the state budget.

But up here in New Hampshire, the public didn’t let him get away with that.  In 1984, Granite State voters amended our state Constitution to protect our employees’ retirement benefits.  New Hampshire Constitution Article 36-a [Use of Retirement Funds] provides:

“The employer contributions certified as payable to the New Hampshire retirement system … shall be appropriated each fiscal year … All of the assets and proceeds, and income there from, of the New Hampshire retirement system … shall be held, invested or disbursed as in trust for the exclusive purpose of providing for such benefits and shall not be encumbered for, or diverted to, any other purposes.”

Down in Washington DC, the federal government hasn’t been quite so careful.  Down in DC, public employee retirement funds are regularly used to balance the budget.

In fact, when the federal government hit the debt ceiling in May 2011, public employee retirement contributions were used to keep the federal government going for more than two months (until Congressional Republicans finally agreed to increase the debt limit).

At last report,

  • more than $800 billion of the federal debt was owed to the federal employees’ retirement system;
  • more than $600 billion of the federal debt was owed to military employees’ retirement programs;
  • more than $45 billion of the federal debt was owed to the Postal Service Retiree Health Benefits Fund.

State and local employees also own a significant chunk of the federal debt.  At last report, pension systems for state and local government employees held almost $190 billion in Treasury securities.

Adding it all up, the nation owes about $1.6 trillion to the various public employees’ retirement systems.  (That’s direct debt – not including unfunded liabilities.)

That’s only slightly more than what tax cuts for the wealthiest 5% have cost the Treasury since 2001.

Should we really be surprised that right-wing Republicans are trying so hard to “reform” public pensions?

The business lobbying group ALEC (“American Legislative Exchange Council”) has led the crusade.  “Taxpayers are no longer willing to bear the increasing cost of these plans… They are demanding reforms that will bring these plans into line with pension and OPEB benefits offered in the private sector.”  (What an interesting comparison!  Federal law generally prohibits private sector pension plans from loaning money to the company that sponsors the plan.)

As Chairman of the House Budget Committee, Rep. Paul Ryan followed ALEC’s lead – almost word-for-word.

Up here in the Granite State, we believe that government should fulfill the promises it has made to its employees.  We even amended our state constitution to ensure that public employees’ retirement funds would be used only to pay retirement benefits.

It’s time for the country to stop using public employee retirement funds to pay the cost of extending tax cuts for the wealthy.

It’s time for Congressional Republicans to stop trying to weasel out of their obligations to federal employees.

It’s time to keep the country’s promises.  (Now that’s a conservative value.)

——————————————————————–

Wait!  That $45 billion borrowed from the Postal Service Retiree Health Benefits Fund deserves a closer look.

The Post Office is losing money.  Most of that deficit is being caused by Congressionally-mandated payments to the Postal Service Retiree Health Benefits Fund.   That mandate dates back to the Postal Accountability and Enhancement Act of 2006.

Guess what else happened in 2006?  Just months before Congress decided to have the Postal Service pre-fund retiree benefits (and loan that money to the US Treasury), the country had hit the debt ceiling, and had borrowed from the federal employees’ retirement system to pay the bills.

(No, by the time 2006 rolled around, the Bush tax cuts hadn’t “jump started” the economy or started to erase the federal debt.  So Congress used federal employees’ retirement contributions as a Rainy Day Fund.)

Kind of convenient, isn’t it?  The country needs to borrow money, and suddenly there’s a new Fund to borrow from.

Only now, that Fund is drowning the Postal Service in debt.

More Tax Cuts? Or Keep Social Security?

 

Something to keep in mind while you are watching tomorrow night’s debate between Joe Biden and Paul Ryan:

Back in 2001, then-President George Bush pushed through a package of “temporary” tax cuts that mostly benefited the wealthy.  Joe Biden voted against the tax cuts.  Paul Ryan voted in favor of them.

At the time, conservative pundits said the temporary tax cuts would generate 1.6 million new jobs by 2011 – and that would generate enough federal revenue to pay back the entire federal debt.  (You can read the 2001 Heritage Foundation report here.)

Instead, the tax cuts contributed to record-setting federal deficits.

In 2003, President Bush pushed through a second package of “temporary” tax cuts, which again mostly benefited the wealthy.  And again, Joe Biden voted “nay”; and Paul Ryan voted in favor.

A year later, the new jobs hadn’t materialized.  “Supply-side economics” hadn’t cut the federal debt.

But that didn’t stop the tax-cutters.  Instead, they pushed to have the “temporary” tax cuts made permanent.  Here’s the Associated Press report from February 13, 2004:

Federal Reserve Chairman Alan Greenspan said Thursday that Congress should make President Bush’s tax cuts permanent and cover the $1 trillion price by trimming future benefits in Social Security and other entitlement programs.

Social Security?!!?

During the Bush presidency, Social Security was “running a surplus.”  More money was coming in through payroll taxes than was being paid out in retirement benefits.  And the federal government borrowed every single penny of that surplus.

Today, the Social Security Trust Fund is the single largest creditor of the federal government.  Over $2.7 trillion of the federal debt is owed to the Social Security Trust Fund.  And that’s about the same amount as the 10-year cost of extending the Bush tax cuts for the wealthiest 5%.

That’s what you should keep in mind during tomorrow night’s debate: this election is coming down to a choice between tax cuts for the rich and financial security for the rest of us.

Social Security has stopped running a surplus, now that the Baby Boomers are retiring. Will the federal government honor its IOUs to working families?  Or will the $2.7 trillion in federal debt get washed off the books by the proposed Romney-Ryan “reform” of Social Security?

Union members know what it’s like to see pension benefits vanish.  It’s become all-too-common for corporations to use bankruptcy court to get “relief” from their pension obligations; American Airlines is just one example.  More than 4,000 corporate pension programs are now in the trusteeship of the federal government.  (You can download the list — representing more than 2 million American families! —  here.)

Most of us have been paying into the Social Security system for decades.  We don’t want to see our benefits disappear through a Romney-Ryan “reform” of the Social Security system.  (One more reason why we don’t want to elect a President who will “manage” the federal government as if it were a corporation.)

Tax cuts for the wealthy didn’t create jobs in 2001.

More tax cuts didn’t create jobs in 2003.

Tax cuts in 2013 won’t create jobs, either – but they may cost us our Social Security benefits.

Please remember that, as you watch Joe Biden and Paul Ryan in the Vice Presidential debate tomorrow night at 9:00 pm.

 

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