Wealth and sacrifice: Warren Buffett says the "mega-rich" should pay more in taxes

By Michael J.W. Stickings

Warren Buffett's op-ed in today's Times is getting a lot of attention -- and deservedly so. Basically, he argues that the "mega-rich" haven't been asked to sacrifice anything, particularly with respect to taxes, even in this time of supposed "shared sacrifice":

Our leaders have asked for "shared sacrifice." But when they did the
asking, they spared me. I checked with my mega-rich friends to learn
what pain they were expecting. They, too, were left untouched.



While the poor and middle class fight for us in Afghanistan, and while
most Americans struggle to make ends meet, we mega-rich continue to get
our extraordinary tax breaks.

Indeed, Buffett says that the income tax he paid last year amounted to only 17.4 percent of his taxable income. That's astonishingly low -- reflective of a tax system that isn't only not progressive but that is designed specifically to benefit the rich above all.

And he actually asks for his taxes to be raised:

I know well many of the mega-rich and, by and large, they are very
decent people. They love America and appreciate the opportunity this
country has given them. Many have joined the Giving Pledge, promising to
give most of their wealth to philanthropy. Most wouldn't mind being
told to pay more in taxes as well, particularly when so many of their
fellow citizens are truly suffering. 

I would like to think this is true. Surely the likes of Bill Gates and other of the more progressive mega-rich wouldn't mind paying more in taxes -- within reason, of course. Some, no doubt, would object, but, even then, would it really matter if they had to pay a bit more? They'd still be mega-rich. Taxation wouldn't take the "mega" away. They'd still have way more money than the rest of us.

But for those making more than $1 million — there were 236,883 such
households in 2009 — I would raise rates immediately on taxable income
in excess of $1 million, including, of course, dividends and capital
gains. And for those who make $10 million or more — there were 8,274 in
2009 — I would suggest an additional increase in rate.



My friends and I have been coddled long enough by a billionaire-friendly
Congress. It's time for our government to get serious about shared
sacrifice. 

Buffett is an admirable man with some admirable ideas, and what he proposes here makes a ton of sense -- just like letting the Bush tax cuts for the rich expire. Raising these rates would go a long way towards fixing America's fiscal mess.

Certainly, asking the mega-rich to make a few sacrifices really isn't too much to ask -- and, again, it's not like this would be a huge sacrifice, even if Republicans will scream at any such attempt to raise taxes, claiming that the "job creators" are being vilified. At a time when even a Democratic president is putting Social Security and Medicare on the chopping block, when cuts to key entitlement programs for the poor are likely to be part of any bipartisan "deal," and when middle class families are facing increasing difficulty making ends meet, the mega-rich should indeed contribute their fair share.

Republicans can scream all they want. Warren Buffett has more credibility than the whole lot of 'em.

Paul Ryan's newfound interest in revenues (or, what a difference a day makes)

By Richard K. Barry

Is it possible that the S&P downgrading of U.S. debt will be the one thing to convince Republicans that some form of revenue growth, i.e., tax increases, must be a part of their plan for deficit reduction?

Clearly the GOP in Washington has been adamant that the only approach they will consider is to slash and burn government programs while completely ignoring even a serious discussion about the revenue side. And so far they've had real success, as evidenced by the debt ceiling deal.

But then S&P came along and said, apparently with the kind of authority that the business minded Republicans feel uncomfortable ignoring, that revenues have to be in the mix.

In the S&P report there were several mentions of the damage being done to the economy by Republicans unwillingness to consider revenues.

With regard to the debt ceiling deal, S&P said the following: 

• The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy. 


• It appears that, for now, new revenues have dropped down on the menu of policy options. 


• The act contains no measures to raise taxes or otherwise enhance revenues. 


• The majority of Republicans in Congress continue to resist any measure that would raise revenue.

And, as ThinkProgress reports:

Standard & Poor's indicates that they could improve their rating for the U.S. if "the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards," as the Administration is advocating.

It is perhaps not surprising then that House Budget Chairman Paul Ryan (R-WI) is now saying that he is open to revenue increases as part of a deal to reduce the deficit, which would be a significant change for the Republicans, who have so far been insistent that they would not support revenue increases.



As part of the debt ceiling negotiations, President Obama proposed several plans that would have cut $4 trillion in spending, but that would also have included modest revenue increases. Every time, the Republicans refused to go along.



In the short term, Republicans have been able to criticize Obama in the abstract, saying that it has been his poor stewardship that has lead to the S&P downgrade. But given the fact that S&P is laying much of the blame at the feet of the GOP for their rigidly ideological rejection of tax increases, the tide may be turning. The GOP may be starting to understand that the facts will clearly suggest they must shoulder much of the blame.



The American people expect politicians to work together for the best outcomes. As hard as the S&P report may have been for Obama this past weekend, the fact that Paul Ryan blinked on the topic of revenues may mean that the current logjam is busting open a bit.



Many of us have been screaming that Tea Party economics is not just bad for equity and fairness and social justice, but that it is also bad for the country's economy as a whole. So, Tea Partiers, if you don't want to listen to us, maybe you'll want to listen to S&P, who may be a lot harder to dismiss as a bunch of socialists out on the campaign trail.



They seem to have gotten Paul Ryan's attention.



(Cross-posted at Lippmann's Ghost.)

Debt and taxes

By Carl 



It never ceases to amaze me, the ability of the uberrighteous to shoot themselves in the foot: 

Greenspan said he expected more turmoil on Wall Street.



"Considering the momentum in which the market went down over the last week, it's very unlikely — if history is any guide — that this isn't going to take a while to bottom out. So the initial reaction, in my judgment, is going to be negative," Greenspan said of S&P’s downgrade.



Treasury Secretary Timothy Geithner tried to reassure investors in a Sunday night interview but conceded he could not predict the reaction.



"It's hard to know what'll happen in this context," Geithner said on CNBC. "But, again, I think that everyone can be confident, both here and around the world, that treasuries are the most — these days — the most liquid — the strongest place to put your money at a time like this."

He said S&P "has shown really terrible judgment" and "a stunning lack of knowledge about basic U.S. fiscal budget math."

Actually, Mr.
Secretary, I think the S&P has this just right. After all, it's a
temporary arrangement that will have to be revisited sooner than you
expect, since the Federal tax on gasoline expires next month and budget
projections included that in the debt ceiling agreement. It is very
likely that tax will be at least scaled back if not eliminated, thanks
to the Teabaggers. You can't say this. S&P can.

We get the government we deserve. We are officially a banana republic.

A lot of fingerpointing went on this weekend, but ultimately, the blame rests in two places: The Bush administration and the Teabaggers.

After all, the only significant spending the Obama administration passed was the $787 billion stimulus package, a thickly-wrongheaded attempt to shore up the banking system when that banking system was responsible for the mess we found ourselves in AND will suffer now from the debt ceiling debacle, as interest rates will ratchet up.

Better he should have spent the money here, at home, on works projects designed to get people permanent jobs. There's so much we can use idle labor for, from replacing the national grid to upgrading bridges and tunnels, to just cleaning the damned streets. Jobs = income = spending = more jobs. It's not a hard calculation to make, and given how the banks rebounded better than expected...

How the Bush administration fits into all this? Well, the national debt in 2001 was somewhere around $6 trillion. It's now $14 trillion. Obama can rightly be blamed for $1 trillion or so (let's credit -- debit? -- him with the unnecessary extension of the Bush tax cuts, too), leaving... carry the one... $7 trillion dollars that Bush spent without the income to show for it.

Republicans: they do spend big.

The Teabagger mantra with respect to the debt ceiling was basically nihilist from the get-go: burn it down, let God sort it out.

All we have ever had to do was to roll back the Bush tax cuts, restore the Clinton tax rates (proven job creator, that) and history would have been happy and marked this as a remarkable time when the US yet again ducked a bullet. The idea of minimalist government is so ludicrous, so stupid, so moronic, that I seriously believe the "libertarians" who propose this ought to be locked away in a cage and put on display in the Coney Island freak show.

(Cross-posted to Simply Left Behind.)

Flat tax flounders

By Carl 

Inherent in the current sooper sekrit budjit soopercommittee Congress is setting up in response to the budget crisis, a re-write of the tax code is inevitable.

The time has come for an overhaul of the tax code, to be sure. Right now, taxes on the rich are the lowest they have ever been since Herbert Hoover was president (You'll notice the bookend of terrible unemployment and low taxes on the wealthy, too.) The effective tax rate on the wealthiest one percent (i.e., the rate the wealthy actually pay in total, after deductions, deferrals and exemptions) is the lowest it's ever been.

In turn, deductions that are available to the middle class that promote what had been good public policy (for example, the mortgage interest deduction in order to encourage home ownership) have become warped and twisted to such an extent that they actually create bad public policy. The recent collapse in the housing market is a terrific example of too much of a good thing, in terms of taxes. It only occured after the right to deduct the first $125,000 off the gain on the sale of a home, which had been limited to senior citizens as a one-time-only deal, was expanded to include practically the sale of any residence.

The alternative minimum tax (AMT), originally devised to ensure that the wealthiest pay a fair share of their income in taxes, has become a bane of the middle class. It was never indexed when first implemented in 1986 (at the $30,000 threshold for individuals, $40,000 for a married couple) and only peaks this year at $48,450/$75,000. It drops again next year to $33,750/$45,000. The AMT penalizes people who live in expensive states with high taxes, people who own homes (it phases out the mortgage interest deduction,) and/or have children, and people who like to give money to charity to lower their tax burdens.

It is, in other words, effectively a flat tax of 26% (28% if your income is over $175,000).

Which leads me to today's topic: the flat tax.

Now, given that there are so many "libertarians" who would call for a flat tax in the midst of this rigamarole, I thought it would be a useful prophylaxis to examine why it's a bad idea.

First and foremost, the flat tax is highly regressive, penalizing the poor while subsidizing the wealthy. On it's face, it seems fair (this is part of why many have euphemistically called it a "fair tax"). After all, dollar one gets taxed at, say, 10%, dollar one hundred at 10%, dollar one million at 10%. The guy making a million pays $100,000 in taxes. The guy making $100 pays $10.

Flip the numbers, though. The guy making $100 is left with $90 to buy food, clothing, shelter. The guy making a million is left with $900,000 to buy the same things. Granted, the millionaire is likely to buy more expensive stuff, but here's the thing: he has a choice as to how much he can spend, but not how little. It's that last part, how little to spend, that comes into play.

The guy left with $90 has to meet a threshold to feed, house and clothe himself. Let's say that will cost him, in total, $80. He's left with $10, and must make a choice what to do with the rest of his money: put it away for retirement, splurge on a movie, save it for a rainy day. The guy making a million, also spending that $80, is left with $899,920 to just go nuts.

How is this subsidizing the wealthy? Glad you asked. Unless you want to assume private roads and private infrastructure, the government is going to be the one who wires the community, who paves the roads, who builds the subways. You'll notice the poor soul can't afford a car and walks to work, yet his taxes are paying for things he can't possibly avail himself of, much less benefit from.

A guy making a million bucks is part of a population that is less than one half of one percent of the whole. Good thing, too, because it will take 10,000 people making $100 bucks to equal his income (and to be fair, his tax liability).

None of whom can benefit from the spending that he benefits from.

So it's regressive in terms of the actual taxation, but also regressive in terms of the benefits derived from that taxation. The poor will receive less from the government than the rich under a flat tax system, by definition.

Too, the income tax helps mask another annoying fact of the American tax code, which is that other taxes are highly regressive: sales taxes, property taxes, excise taxes, tolls on highways, mass transit fares, all have to be paid by rich and poor alike in direct proportion to the value of the benefit obtained, which means the rich skate by yet again on the backs of the poor.

There are other reasons the flat tax is a ludicrous proposition. For one thing, it discourages savings, since that would become effectively a double tax: you're taxed on the wages and the interest earned on the money you've socked away. It discourages investment in businesses, for similar reasons. It discourages saving for retirement, since the income that is building towards that is taxed now.

Some might argue, well, Social Security would be off the table. OK, except that the employer portion is taxable at the corporate level (since we're flat taxing all income, no restrictions) so you're double taxing the same money. Revenue is fungible. It doesn't matter how it's apportioned.

Plus, you'd have to raise Social Security taxes to cover the now-heavily-reliant population. And that means wages would now be double taxed even more heavily (you pay SSI and Medicare tax on gross income. You pay income taxes on gross income).

In other words, a flat tax would kill the few American businesses still left.

Lower the corporate tax rate to compensate? American corporations already pay a marginal rate that's among the lowest in the world, and the effective tax rate of the corporatocracy is (based on the Fortune 500) about 18%. So if anything, a flat tax would raise taxes on corporations. Not a bad thing, in my book, but you can bet your bottom dollar ExxonMobil would disagree vehemently, and continue to offshore money.

Proponents of the flat tax point to the success it's had in other countries (Montenegro and the bankrupt Iceland, neither of which is an economic model I'd choose to follow in any other respect), conveniently forgetting that no state that currently has a flat tax had to transition from a progressive taxation to the flat tax.

And in many of these countries, adding in the equivalent of the Social Security tax raises their tax levels *higher* than many if not most states with progressive rates.

It seems to me the Clintonian shibboleth about welfare -- "mend it, don't end it" -- applies to the progressive tax system, too.

(Cross-posted to Simply Left Behind.)

The right-wing obsession with President Obama's "obsession" with raising taxes

By Michael J.W. Stickings

We're hearing it all the time from Republicans these days: Obama's "obsessed" with raising taxes. It's the same old tired partisan bullshit, of course, and a blatant lie, but the uninitiated, those unaware of how Republicans do their thing, might be excused for thinking, upon hearing this over and over again, that the president is maniacally trying to transform America into some sort of retro-Scandinavian dystopia, Scandinavia before right-wing neo-liberalism arrived on the scene.

Take James Pethokoukis, for example. In his latest smearfest of a post at Reuters, Pethokoukis opens, as usual, by stacking the deck against reasonable debate and an appreciation of the facts:

It's the great mystery of the debt ceiling debate: Why is President Barack Obama so darn adamant about raising taxes?

Really, that's "the great mystery"? Well, I suppose it's no mystery why Republicans, even those who should know better (and probably do) have caved in to the Tea Party and are pulling the country towards financial, fiscal, and economic catastrophe.

But how exactly is Obama "so darn adamant"? Dismissing progressives altogether, not to mention his party's base, the president has responded to the debt ceiling crisis by playing aggressively to the center. He has put Social Security, Medicare, and Medicaid on the table, much to our chagrin. He continues to negotiate with a Republican Party that refuses to compromise and that is essentially holding the process -- and the country -- hostage. Indeed, he appears to have positioned himself not as some sort of Big Government leftist (not that such leftists even exist anymore in the Democratic Party, or on the American left at all, they're just straw men created by the Republicans to scare people) but rather as a moderate Republican, as the sort of Republican who used to run the GOP. If this were the '90s, Obama, at least on economic policy, would be very much at home there.

Even now, even with Republicans doing poorly in the polls over the debt ceiling crisis, even with Republicans divided and on the run, even after he turned the tables and backed them into a corner, gaining the upper hand, Obama continues to push for a Grand Bargain that includes massive spending cuts and only relatively small revenue increases (mostly by closing tax loopholes, not by actually raising taxes). The so-called Gang of Six re-emerges yesterday with a $3.7 trillion deficit-reduction package, a package that while bipartisan is Republican in terms of its priorities, a package that if passed may not actually benefit him politically, and Obama showers it with praise.

Now, maybe Obama is being so kind to it because he knows it will never pass the GOP-led House of Representatives, and so maybe he's still just trying to appeal to independents by presenting himself as open to compromise and serious about getting something meaningful done -- and so when the package goes nowhere he can let Republicans take the fall for sinking it. But he's been pretty consistent on the policy and at no point has he even come close to appearing obsessed with raising taxes. Not now, not before, not ever.

If anything, Obama is just being responsible. He knows full well, even if Republicans do not (and Pethokoukis does not), that the only way to solve America's deficit/debt problem over the long term is to increase revenue. And that can be done in part by closing loopholes and letting the Bush tax cuts, and particularly the Bush tax cuts for the wealthy, expire. Though of course it was Obama who agreed with Republicans last fall to extend the tax cuts.

Pethokoukis also accuses Obama of violating Keynesianism by calling for tax increases. Well, I agree that the focus should be on economic stimulation (deficit spending) instead of deficit-cutting, but, again, Obama hasn't called for anti-stimulative tax increases. If anything, Obama wants more stimulus.

Obama's tax obsession becomes understandable when you realize the long game he's playing: Big Taxes to fund Big Government. Decade after decade. See, it's an almost universal belief among left-of-center journalists, economists, policymakers and politicians that Americans must pay higher taxes in coming years to cover the medical expenses of its aging population – not to mention all sorts of brand new social spending and green "investment." Dramatically higher taxes. On everybody. And if we have a debt crisis, maybe those tax increases come sooner rather than later.

This makes no sense at all. Across the board, taxes are at an extremely low level. Raising them slightly -- for example, by letting the Bush tax cuts expire -- would only mean a return to Clinton-era levels. And that was hardly an era of Big Government Socialism. In fact, it was a rather successful era for the economy. And if Obama's agenda is really all about "Big Government," what are we to make of his willingness to cut core entitlement programs? Is it all about health care? About, say, funding a government-controlled single-payer system? How could it be, given that the Affordable Care Act, while extending coverage to tens of millions, proposes only a reformed market-based approach to health insurance? Green investment? Please. Obama isn't even talking cap and trade anymore, and that, too, is a market-based approach to reducing greenhouse gas emissions, one that Republicans used to support (just as they used to support what's in the Affordable Care Act).

Okay, enough. I think you get the point. (If you don't, you need help.) Pethokoukis is just regurgitating the same old lies, the Obama-as-tax-loving-Socialist meme that has no basis whatsoever in reality.

If you really want to talk about obsession, look no further than these anti-Obama smearmongers on the right. They just keep repeating themselves, and looking increasingly desperate and stupid in the process.

Government shutdown 2.0: The debt ceiling

By Nicholas Wilbur 

It's getting down to the wire. The eleventh hour. Crunch time.

If Democrats and Republicans don't make a deal on the debt ceiling by August 2, the Earth will explode. The U.S. will default on its debts. Interest rates will rise. Rep. Eric Cantor will make a killing on his stock investments against the U.S. economy. And who knows, Ann Coulter might not look like a barfly in her next book-jacket photo, Jon Stewart might sign a contract with Fox News, Rep. Barney Frank might go back into the closet, and Marcus Bachmann might come out.

Golfing Buddies: Obama & Boehner
Source: Charles Dharapak/Associated Press

Nobody knows for sure how bad it would be if America defaulted, but everyone who's trained in the economic arts to have an educated opinion about such things seems pretty well convinced it wouldn't rank very far behind "vicious shark attack" on the summer fun scale. And isn't that odd? Doesn't President Obama have an apocalypse czar for this sort of thing?

The fact that nobody knows the exact consequences of a default says something about the likelihood of Congress not increasing the debt ceiling. Maybe it's just me, but this seems oddly reminiscent of the media frenzy surrounding the government shutdown threats in March and April of this year, when Republicans demanded a "historic" $100 billion in spending cuts to the 2011 budget.

Remember that? All the hype about the effects a shutdown would have on society – the unsettling mental images of senior citizens rotting in their own filth because they didn't get their Social Security checks on time to pay the nurse, little kids burning American flags in protest of Yellowstone campground closures, foreigners rioting in the streets (of their home countries?) because their VISA applications weren't processed? It was going to be chaotic. And then, suddenly, it wasn't.

It didn't happen. The Republicans who'd threatened to shut down the government if Obama and Co. didn't defund Planned Parenthood and NPR and the health-care reform law and the EPA, they eventually compromised, threw in the towel on the Tea Party's demands for radical policy riders, and settled on a budget deal that satisfied everyone, more or less.

Leaders from both parties boasted about the agreement, the shared sacrifice, "the biggest annual spending cut in history."

Facing threats of a primary election challenge from the Tea Party, House Speaker John Boehner (R-Ohio) had to confute his right-wing critics who claimed he was a spineless "Republican in Name Only" (RINO). And he did. He secured "historic" budget cuts and proved himself a socialism slayer, a fiscal hawk, and a trusted advocate of the small government ideal that is foundational to the Republican Party.

"This has been a long discussion and a long fight," he said, "but we fought to keep government spending down because it really will, in fact, help create a better environment for job creators in our country." The "fact" about a better job creating environment didn't pan out exactly as planned, but he heralded the deal as a victory for the GOP, because it was, and he promised to continue fighting for even more spending cuts in the future, which he has.

President Obama got what he needed from the deal as well. He was the lead negotiator of a compromise bill that was both fiscally and socially responsible. "Reducing spending while still investing in the future is just common sense," he said. He demonstrated his leadership skills by negotiating what amounted to a short-term stimulus bill, and he upheld his promise to govern from the middle – an appeal to both independent voters and the moderates who comprise the majority of the Democratic establishment. Once again, he looked like the adult sitting at the kids table. 

They avoided a government shutdown, and something tells me Congress won't let the country fall into default, either, if only because nothing has changed since the April budget deal.

Raising the debt ceiling isn't uncommon, not since Reagan anyway.
Source: TheAtlantic.com

The same Tea Party leaders continue to threaten RINOs with primary-election challenges. The same Democratic president continues his pursuit to convince the nation that he's not the radical left-wing socialist Fox & Friends accuse him of being. And the same anti-Washington blowback is at stake if the two parties fail to reach an agreement.

Will there be significant spending cuts? Probably, at least compared to what Republicans managed to finagle from Obama last time around. (The non-partisan Congressional Budget Office reported after the budget agreement was approved that the $78 billion in alleged spending cuts actually resulted in a net increase in government spending – to the tune of about $3.2 billion.)

Will the country crumble under the pressure of such austerity measures? Probably not, as Obama and the leaders of the Democratic Party understand much better than I do that appearing as the sane and level-headed party of political moderates means nothing in the eyes of the electorate if the spending cuts they so pragmatically negotiated end up causing a double-dip recession.

As Andrew Leonard predicted, the final product will likely involve "loophole closing, public-sector-employee squeezing, inflation-index finagling, and tax code juggling that allows Democrats to claim revenue increases while Republicans can pledge allegiance to the god of zero tax hikes."

But at the end of the day, the details of an agreement matter less than the politics of it. Boehner and the GOP need only look like hawks in the eyes of the extremists and the 67 percent of Republicans who identify as "conservatives." Obama and the Democrats need only appear as moderate and responsible peacekeepers who saved America from an economic apocalypse without giving away the farm in the process.

When each side agrees to the talking points, they will emerge from the negotiations and begin a joint press conference announcing in broad strokes the "historic" agreement to increase the debt ceiling before the August 2 deadline.

Because that's politics.

(Cross-posted at Muddy Politics.)

Republicans aren't normal, says David Brooks, who can't see just how deranged and dangerous they really are

By Michael J.W. Stickings

David Brooks is getting some credit for writing, in his July 4 column in the Times, that the GOP "may no longer be a normal party":

Over the past few years, it has been infected by a faction that is more of a psychological protest than a practical, governing alternative.

The members of this movement do not accept the logic of compromise, no matter how sweet the terms. If you ask them to raise taxes by an inch in order to cut government by a foot, they will say no. If you ask them to raise taxes by an inch to cut government by a yard, they will still say no.

The members of this movement do not accept the legitimacy of scholars and intellectual authorities. A thousand impartial experts may tell them that a default on the debt would have calamitous effects, far worse than raising tax revenues a bit. But the members of this movement refuse to believe it.

The members of this movement have no sense of moral decency. A nation makes a sacred pledge to pay the money back when it borrows money. But the members of this movement talk blandly of default and are willing to stain their nation's honor.

The members of this movement have no economic theory worthy of the name. Economists have identified many factors that contribute to economic growth, ranging from the productivity of the work force to the share of private savings that is available for private investment. Tax levels matter, but they are far from the only or even the most important factor.

But to members of this movement, tax levels are everything. Members of this tendency have taken a small piece of economic policy and turned it into a sacred fixation.

In other words, the GOP has been taken over by Grover Norquist and his anti-tax and essentially anti-government agenda. Rather than seek compromise, working with President Obama and the Democrats to achieve some sort of bipartisan deal on the debt ceiling and more generally on the budget, even a deal that actually gives them a lot of what they want (what with Obama playing the old-fashioned moderate Republican and Democrats unwilling (or unable) to stand firm, they dig themselves ever deeper into their extremist right-wing ideology.

Brooks is right about this.

But he is wrong -- and he writes this in the very first paragraph -- that "Republicans have changed American politics since they took control of the House of Representatives," "[putting] spending restraint and debt reduction at the top of the national agenda, "[sparking] a discussion on entitlement reform," and "[turning] a bill to raise the debt limit into an opportunity to put the U.S. on a stable fiscal course."

He's wrong on all three counts.

First, Republicans are only pretending to talk about fiscal restraint and debt reduction. They aren't serious about either, which is why they reject compromise. What they really want is to lower taxes, and specifically taxes on the wealthy, both individual and corporate. Wunderkind Paul Ryan, who has become, with the media's enabling/blessing, the voice of this supposed sanity, is actually little more than a a plutocratic libertarian, an Ayn Rand devotee who is all about tax cuts, and hence all about continued, and worsened, fiscal insanity.

Second, Republicans aren't serious about entitlement reform unless what that means is chopping entitlement programs into oblivion. Ryan isn't proposing Medicare reform, he's proposing the end of Medicare as we know it, the end of Medicare as the American people want it to be. Americans clearly reject Social Security privatization, another key item on the Republican agenda, and they reject Ryan's Medicare plan as well.

Third, Republicans aren't using the debt ceiling debate, such as there is one, to put the country on the path to fiscal stability, they're essentially holding the American economy hostage in order to get what they want. There is no debate about the debt ceiling. It must be raised. If not, we might just as well sit back and watch the apocalypse unfold. Much of the economy would collapse, as the country would no longer be able to pay off its debts. It would be incredibly irresponsible, but Republicans prefer to play political chicken. And they're not serious about fiscal stability, which requires bipartisan effort. We know this because they don't even want to be at the bargaining table.

So, yes, fine, Republicans aren't normal anymore. Most of us knew that a long, long time ago -- Brooks is hardly saying anything new. But Brooks himself refuses to see or just can't see Republicans for what they really are. They're not just abnormal, they're deranged and dangerous, descending deeper and deeper into madness. And they're trying to take America down with them.

(photo)

Pawlenty's tax plan is an utter disaster

By Michael J.W. Stickings

Tim Pawlenty, sucking up to both Grover Norquist and the Tea Party and once more trying to prove his right-wing bona fides (as he has on social issues), released his economic "vision" yesterday.

Pawlenty is a serious, sensible man, you say? Surely not.

All his ridiculous plan envisions is massive fiscal irresponsibility, economic catastrophe foisted upon future generations. He's clearly not a deficit hawk, despite his pledge to balance the budget, which is, to put it mildly, unrealistic, but then, of course, neither is Paul Ryan. All this is about is cutting spending conservatives don't like and cutting taxes even more, widening the revenue gap even further, all to score cheap political points with the anti-tax fanatics who run the GOP.

Just how bad is the plan? Here's Michael Linden, Director of Tax and Budget Policy at the Center for American Progress Action Fund, guest-blogging at Think Progress:

Pawlenty called for:

– Cutting the top individual income tax rate down to 25 percent;

– Having just two income tax brackets, 10 percent and 25 percent;

– Eliminating all taxation on capital gains, dividends, and estates;

– Cutting the corporate tax rate down to 15 percent

These proposals, taken together would bestow a massive tax cut on the wealthiest people in the country. They would also reduce overall federal revenues to a such a low level that even if Pawlenty's draconian, radical spending targets were achieved, deficits and debt would still soar out of control.

All together, Pawlenty's tax proposal would generate an average revenue level of just 13.6 percent of GDP from 2013-2021. That translates to a tax cut of $7.8 trillion, and that's on top of $2.5 trillion cost of extending all of the Bush tax cuts...

Pawlenty also says that he will balance the budget, and cap spending at 18 percent of GDP. Unfortunately for Pawlenty, his tax plan leaves him about $8.4 trillion short. Given that reality, he can either embrace a huge middle-class tax increase, or give up his claims to a balanced budget. If he doesn’t make up that revenue, deficits and debt will skyrocket, even if he does slash spending back to levels not seen in half a century. 

Given how well this fits into the Paul Ryan orthodoxy of the GOP, I'm sure this "vision" will meet with applause from Republicans, to the extent that anyone's actually paying attention to Pawlenty, what with so much of the attention on Sarah Palin these days, not to mention Ryan himself.

Pawlenty has been a bit of a joke so far in the campaign, but he's trying really hard to be the candidate who appeals broadly across the party (unlike Romney), from the more "moderate" establishment to the Tea Party and the various other right-wing elements that are really the party's new mainstream. It's far from clear how successful he'll be, or not, but he's certainly saying the right things, which is why he's widely regarded as one of the favourites to win the nomination despite his poor poll numbers so far.

Of course, he's also desperate for attention. Maybe this "vision" -- however irresponsible, however much it would be an unmitigated disaster, if ever realized -- will give him a bit of a bump. It is, after all, what Republicans love to hear, and what they so firmly believe in.

The New York 26th special election and what it means for the budget debate

By Richard K. Barry

It's been fun to watch Republicans scramble over the past week to downplay the importance of the Medicare issue in Democrat Kathy Hochul's upset victory in the special election for New York's 26th Congressional District. For the record, Hochul won with 47% of the vote over GOP candidate Jane Corwin, who got 43% and Tea Party candidate Jack Davis, who got 9%.

My favourite conservative spin has been the claim by Erick Erickson at REDSTATE that the results had everything to do with local New York politics and little or nothing to do with Medicare or Paul Ryan's budget plan. In the Wall Street Journal, Karl Rove also did his best to suggest that we shouldn't read too much into the results as any sort of supposed referendum on Medicare. Let's face it. These guys need to believe this, else they have a problem.

Yes, there was some vote splitting due to Jack Davis' third party candidacy, although it is always difficult to know where a third party candidate's votes would go had they not been in the race. Would they be split amongst other contenders, or would they just have stayed home?

The bottom line is that Republican Chris Lee won the seat back in November, a mere seven months ago, by a margin of 73.6% to 26.4%. Everyone knows that special elections are indeed special, but those are some pretty big honkin' numbers and you typically would want to look for a defining issue to help you understand what happened when a district flips so decidedly.

So aside from who actually won and who lost, let's not forget that the Democratic vote from 2010 went up by about 20% and the aggregate conservative vote went down by about 20%. Big numbers indeed in a district that has been a stable "keep" for Republicans.

But this is all old news.

Here's some new stuff. A poll has just been released by Democracy Corp indicating that disapproval of Republican House members is in fact surging. They write:

Republican leaders and conservative pundits have spun Democrat Kathy Hochul's upset win in New York's 26th Congressional District as exceptional - with peculiar ballot line, Tea Party independents, quality of the candidates, and Democratic message discipline. But our national poll completed Wednesday (May 25) shows that New York's 26th is not alone. It is an advanced indicator of a sharp pull back from Republicans, particularly those in the House.

Disapproval of the Republicans in the House of Representatives has surged from 46% in February to 55% in April and to a striking 59% now. Disapproval outnumbers approval two-to-one; intense disapproval from three-to-one. For the first time in more than a year, the Democrats are clearly even in the named Congressional ballot - an 8-point swing from the election. This period captured the introduction of the Republican budget plan and vote by the House - and voters do not like what they see.

There are really just a few basic truths in politics and it is remarkable how clueless Republicans have been in understanding one of them. I am almost embarrassed to repeat it, it's just so obvious, but here it is: A lot of people like the idea of lower taxes and a reduction in services as long as they don't think that it will be "their" services, "their" programs, "their" entitlements that will be cut.

When the voters in the NY-26th started to clue in that a very identifiable and important program was on the chopping block, they didn't like it. And if Democracy Corp's poll is any indication, voters in western New York are not alone.

Simple, simple, simple.

Here is where all of this goes for me: Voters need to get real about the kinds of programs, services and entitlements they think our collective public action should provide (that means government) and start to think about how we pay for it, including plans to increase much needed revenue (that means taxes).

It's one measure of how successful conservatives have been in framing the budget debate that we seldom hear quoted the sage comment by early 20th century Supreme Court Justice Oliver Wendell Holmes, Jr. that "taxes are the price we pay for a civilized society."

It's easy to spin one lonely special election; let's hope this starts us on the way to reframing the budget debate across the entire country. That would be courageous.

(Cross -posted to Lippmann's Ghost)

Et tu, Mitch? (or, how Mitch Daniels has a health-care problem)

By Michael J.W. Stickings

I noted yesterday that Republican desperation is driving the Draft Mitch Daniels movement.

Faced with an embarrassingly bad presidential field, Republicans are doing what they often do, which is look for a savior to rescue them from the abyss, and that savior, it seems, or so they seem to think, is Daniels.

The problem, I also noted, isn't just that Daniels lacks a dynamic personality and engaging charisma but that he's got some blemishes on his record that just won't fly with the Tea Party grassroots base of the GOP, nor perhaps with the social conservatives who continue to wield influence in the party.

He called for a truce on social issues in Indiana, for example, and, even more damaging, once proposed raising taxes. He might as well have been Osama bin Laden's accountant.

Well, there's more -- and it just gets worse. As The Huffington Post is reporting, Daniels has accepted Affordable Care Act money and has supported universal health coverage and... (pause for effect)... an individual mandate. He might as well have set fire to the flag, urinated on its ashes, and defecated upon the very idea of freedom.

But wait. There's still more:

Back in 2003, mandates were very much a conservative idea, making support for them by Daniels -- let alone fellow 2012 Republican presidential candidates Mitt Romney or Newt Gingrich -- either mundane or expected.

But there are other similarities between the health care policies Daniel's passed as governor and those that constitute President Obama's signature legislation. Both, for instance, require insurance companies to allow children to remain on their parents' accounts past traditional ages for college graduation -- Daniels allows dependent coverage up to age 24, Obama up to 26. Both required Medicaid programs to expand eligibility to individuals and families above the poverty level.

Like Obama, Daniels also put a premium on updating hospital records and information sharing. According to a February 21, 2005, Indianapolis Business Journal article, he "ordered the state Department of Health to come up with a regulation that requires every hospital to implement an error reporting system and provide data to the department, which will post it on the Internet." Separately, both Daniels and Obama increased taxes on cigarettes as a means of generating revenue for health care coverage elsewhere (and discouraging smoking).

So there you have it. Daniels, like Romney, has a huge health-care problem that he simply won't be able to overcome.

He hasn't even entered the race yet, but I think it's fairly safe to say he's toast. So much for the Great Republican Savior of 2012.

Michele Bachmann compares taxes to the Holocaust

By Michael J.W. Stickings

Asked Bachmann: "The question comes down to this: what will you say to that next generation about what you did to make sure that wouldn't be their fate?"

Seriously. 

This woman is insane.

Supreme Court gets around "establishment of religion" prohibition by allowing tax credits for religious tuition

By Michael J.W. Stickings

And so the right-wing Supreme Court continues to erode the First Amendment:

The Supreme Court on Monday let stand an Arizona program that aids religious schools, saying in a 5-to-4 decision that the plaintiffs had no standing to challenge it.

The program itself is novel and complicated, and allowing it to go forward may be of no particular moment. But by closing the courthouse door to some kinds of suits that claim violations of the First Amendment's ban on government establishment of religion, the court’s ruling in the case may be quite consequential.

Justice Elena Kagan, in her first dissent, said the majority had laid waste to the doctrine of "taxpayer standing," which allows suits from people who object to having tax money spent on religious matters. "The court's opinion," Justice Kagan wrote, "offers a road map -- more truly, just a one-step instruction -- to any government that wishes to insulate its financing of religious activity from legal challenge."

The decision divided the court along the usual ideological lines, with the three other more liberal members -- Justices Ruth Bader Ginsburg, Stephen G. Breyer and Sonia Sotomayor -- joining the dissent.

The Arizona program gives taxpayers there a dollar-for-dollar state tax credit of up to $500 for donations to private "student tuition organizations." The organizations are permitted to limit the scholarships they offer to schools of a given religion, and many of them do.

The question comes down to whether a tax credit is essentially the same as a government expenditure -- in this case with respect to government financial support for religious institutions (if not for a specific religion). Justice Kennedy, writing for the conservative majority, said no, but I'm really not sure there's a substantive difference. As Justice Kagan wrote: "Taxpayers experience the same injury for standing purposes whether government subsidization of religion takes the form of a cash grant or a tax measure." And so what the Supreme Court is saying -- or, rather, its majority -- is that government subsidization of religion, through organizations that are not religion-neutral, is constitutional.

As BooMan notes, this is all "rather clever." Handing out tax credits instead of direct subsidies (which even this court might object to) is a way for conservatives, and for conservative states like Arizona, to circumvent the First Amendment's "establishment of religion" prohibition. It's theocracy through the back door, and, because "standing" was taken away from you, there isn't a damn thing you can do about it.

Things Republicans say about job creation that aren't true

By R.K. Barry 

Yesterday I wrote that no matter how tired progressives get saying the same things over and over again, no matter how tired they get refuting the lies of Republicans, they should carry on and fight the good fight because many people, who perhaps don't always pay enough attention, need to hear the the truth as often as possible.

Recently I have become a big fan of former Labor Secretary Robert Reich, who has a teaching gig at UC Berkeley these days and also blogs on political and economic issues. I find Reich the consummate teacher in the way he lays out his arguments and exposes nonsense for what it is.

One of the greater challenges in politics, I find, is that economic theory is so hard for most people to understand, and some theories that seem to make sense are flat out wrong, things like, if we just slash taxes on corporations, that will necessarily create more jobs. Yeah, well, not so much. Not if there isn't enough demand out there because people don't have sufficient income to buy stuff. Anyway, I'll let the good professor explain.

Here are a few untruths Republicans like to trot out, with rejoinders supplied by Professor Reich:

• "Cutting taxes on the rich creates jobs." Nope. Trickle-down economics has been tried for thirty years and hasn't worked. After George W. Bush cut taxes on the rich, far fewer jobs were created than after Bill Clinton raised them in the 1990s.

• "Cutting corporate income taxes creates jobs." Baloney. American corporations don't need tax cuts. They're sitting on over $1.5 trillion of cash right now. They won't invest it in additional capacity or jobs because they don't see enough customers out there with enough money in their pockets to buy what the additional capacity would produce.

• "Cuts in wages and benefits create jobs." Congressional Republicans and their state counterparts repeat this lie incessantly. It also lies behind corporate America's incessant demand for wage and benefit concessions – and corporate and state battles against unions. But it's dead wrong. Meager wages and benefits are reducing the spending power of tens of millions of American workers, which is prolonging the jobs recession.

• "Regulations kill job." Congressional Republicans are using this whopper to justify their attempts to defund regulatory agencies. Regulations whose costs to business exceed their benefits to the public are unwarranted, of course, but reasonable regulation is necessary to avoid everything from nuclear meltdowns to oil spills to mine disasters to food contamination – all of which we've sadly witnessed. Here again, we're hearing little from the President or Democratic leaders.

If cutting taxes on rich people, cutting corporate income taxes, cutting wages and benefits, and deregulation don't create jobs, then a lot of middle class people are probably going to be voting against their own best interests come 2012 and in the interests of others who don't really need the help. Just sayin'.

(Cross-posted at Lippmann's Ghost.)

General Electric pays no taxes

By Michael J.W. Stickings 

You might want to sit down for this one. The Times is reporting that General Electric pays zero corporate taxes in the U.S.:

General Electric, the nation's largest corporation, had a very good year in 2010.

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.

Yes, quite extraordinary -- and, needless to say, deeply troubling.

And yet Corporate American continues to complain about how horribly it's being treated, how difficult it is to make a buck, how anti-business Obama is?

I'm not saying GE does nothing for America. It employs a lot of people, obviously, and it contributes a great deal to society, both for better (e.g., medical equipment) and for worse (e.g., weapons). And, yes, it has its not insubstantial philanthropic activities as well.

But getting away with paying essentially no corporate taxes whatsoever -- and being allowed to do so, given the "maze of [legal] shelters, tax credits and subsidies" it another other companies exploit for the sake of their own bottom lines at the expense of the public good -- is pretty despicable, not least at a time when so many people are struggling just to make ends meet, just to pay the bills and put food on the table.

Can you blame GE? Well, business is business, and business, at least in America, where it is not expected to have much of a social conscience, is about the bottom line, about making as much profit as possible. Let's not fool ourselves into thinking otherwise, into thinking that what's good for business is good for America. It isn't, at least not always, or even mostly.

But this is certainly a sign of what's wrong with Corporate America and with the system that allows it to rape and pillage -- figuratively speaking, to an extent -- without any regard for the consequences, to benefit from a society that allows it to profit with reckless abandon without having to pay for anything in return.

Think about that as you're doing your taxes and as you feel the merciless taxman breathing down your neck. If you were GE, you'd be in the clear, with your money safely stashed away "offshore."

But you're not. You are who you are, and you're screwed.

Taxing the super rich like it's 1959

By R.K. Barry

Robert Reich, who was Secretary of Labour in the Clinton Administration from 1993 to 1997, has a very interesting blog on the current state of affairs that contains any number of useful observations. 

I recently came across one of his posts, which laid out some rather compelling facts about the grossly uneven distribution of wealth in America and how it is that we have come to be in a situation where we can't pay for the things that any civilized society really should be able to fund.

No great surprise, but nearly everyone in America has bought into the idea that we need to radically reduce expenditures rather than give any thought at all to increasing revenues through taxation, specifically by taxing those who can most afford it – the super rich.

We have heard this before, but the numbers, as I say, are compelling.

I do recommend that you read Reich's post in its entirety, but here are a few interesting bits:

Today's typical 30-year old male (if he has a job) is earning the same as a 30-year old male earned three decades ago, adjusted for inflation.

The bottom 90 percent of Americans now earn, on average, only about $280 more per year than they did 30 years ago. That's less than a 1 percent gain over more than a third of a century. Families are doing somewhat better but that's only because so many families have to rely on two incomes.

This may not sound catastrophic, but, and here's the rub, the American economy is more than twice as large now as it was thirty years ago. So, Reich asks, where does all the money go? And the obvious answer is: to the top:

The richest 1 percent's share of national wealth has doubled – from around 9 percent in 1977 to over 20 percent now. The richest one-tenth of 1 percent's share has tripled. The 150,000 households that comprise the top one-tenth of 1 percent now earn as much as the bottom 120 million put together.

In so many ways, I have to say that I don't care what one's politics are. This is just wrong. 

But you might think that with the economy growing so rapidly over the past 30 years, those benefiting the most would be called upon to kick in a bit more. You would be wrong. The power of the super rich has been such that they have been able to make just the opposite happen:

From the 1940s until 1980, the tax rate on the highest earners in America was 70 percent or higher. In the 1950s, it was 91 percent.

Under Ronald Reagan the top rate dropped to 28 percent. Under Bill Clinton it rose to 39 percent and then under George W. Bush dropped to 36 percent (which is, of course, where the Republicans want to keep it).

Reich goes on to talk about big slashes to estate taxes and capital gains taxes, but you get the picture.

To add insult to injury, Reich makes the point that even before the current economic downturn the middle class's share of the nation's total income had shrunk while their tax burden had grown as they paid bigger chunks of their income in payroll taxes, sales taxes, and property taxes than they did before.

A lot of right wingers want to talk about common sense. Well, it makes no sense to me that public services and programs that the middle class and poorer Americans count on are poised to get the axe while this gross, and relatively new, uneven distribution of wealth in America does incredible damage to the fabric of the country.

The obvious point that Reich makes is that we need to hike taxes on the super rich -- not that this is going to happen any time soon.

No, we are going to continue to vilify public sector employers and big government in general. We are going to let big money buy all the means of mass communication and politicians it needs to convince everyone that what we really need is smaller government, which is just another way of saying that people, a growing number of people, will simply have to do without what they need to live a decent life.

A more equitable scheme of taxation would go a long way to solving the problems we are told can only be solved by massive cuts, but that would simply seem to make too much sense.

I'll give Professor Reich the last word:

Do this and we can afford to do what we need to do as a nation. Do this and you prevent setting the middle class against itself. Do this and you restore some balance to a distribution of income and wealth that's now dangerously out of whack.

Amen.

(Cross-posted at Lippmann's Ghost.)