Bush tax cuts and the decline of U.S. as a serious world power

http://www.mcclatchydc.com/2010/12/30/105931/commentary-bush-tax-cuts-and-the.html

Commentary: Bush tax cuts and the decline of U.S. as a serious world power

By Dennis Jett | McClatchy Newspapers

The lame ducks had not even flown the coop before the assessments of the 111th Congress started to pour in. After months of partisan bickering and foot dragging, the achievements in the final days of the legislative session were truly impressive.

There are two feats that have been generally unrecognized by the Washington’s chattering class however. Both deserve acknowledgment because they will affect the country’s future more than anything else this session of Congress accomplished.

The legislators affected the course of history by ensuring two future events will occur — the reelection of President Obama and the decline of the United States as a serious world power. That may seem counter-intuitive given that the leader of the Republicans in the Senate, Mitch McConnell, said not too many weeks ago that ensuring the President did not get a second term was his highest priority.

McConnell only needed to glance at the potential Republican candidates for 2012 to discover why he had to forego that dream. While all the party’s presidential aspirants use their platforms on Fox News to ignite the Republican base, they repel pretty much everyone else. More ominous is the fact there will be little chance to oust the incumbent if the economy continues to improve. There is one statistic that will determine that &mash; the unemployment rate. If it is significantly lower than it is now, he will win. If it is not, he won’t.

McConnell could have refused to do anything to help the economy and prayed for a double dip recession severe enough to sweep his party into the White House. Republicans are about to take ownership of the other House, however, and can’t avoid some responsibility for prolonged economic stagnation without there being negative implications for the Republicans in Congress. “Just say no” would therefore be no more effective a strategy than it was in the war on drugs. So McConnell and company signed off on tax cuts that will probably stimulate the economy enough to determine the outcome of the election in the President’s favor.

The tax cuts will also ensure the decline of the United States. Republicans insisted that all those poor starving people with seven figure annual incomes and above could not possibly be asked to pay more. Given the generous provisions of the estate tax, apparently not even dead multimillionaires can be expected to ante up. To ensure tax cuts for such people, the Republicans held hostage the long-term unemployed and their favorite props for photo ops — 9/11 first responders.

The cuts that resulted will not only balloon the deficit, but will also require dismantling a good bit of government at the state and federal level. Education will be hollowed out and infrastructure left to decay as the United States becomes increasingly indebted to other countries and unable to compete in the global marketplace. Future debates on public policy will be forced to focus on how much to gut Social Security and Medicare.

Are the cuts justified by the weight of the tax burden? Studies done by the Organization for Economic Cooperation and Development demonstrate otherwise. The 34 countries in the OECD comprise the developed democracies of what used to be called the First World and a few successful developing countries from those in the Third World.

These studies show taxes as a percentage of Gross Domestic Product in the U.S. are at their lowest level since at least 1965 and are the lowest in the OECD except for Mexico and Chile. At the same time, income inequality and poverty are higher in the U.S. than any other country in the OECD except Mexico and Turkey. As for the accusations that socialism is sweeping the land, only in Korea does the redistribution of income by government have a smaller effect.

The griping about taxes will continue nonetheless. The ability of Americans to have a rational discussion on the subject was long ago put to death by Ronald Reagan’s sound bites. Government became evil and greed became a virtue.

No country can be great if its citizens are unwilling to pay for it. No country will remain great if it neglects the health and education of those citizens who lack lobbyists. The tax cuts may have assured the President’s reelection, but they also ensure America will grow more separate and unequal, not unlike the proverbial banana republics. As a result the U.S. will slowly slip from the leader of the First World to an honorary member of the Third, unless Americans stop believing their exceptionalism stems only from their virtue and requires no sacrifice.

ABOUT THE WRITER

Dennis Jett, a former U.S. ambassador to Mozambique and Peru, is a professor of international affairs at Penn State's School of International Affairs.

McClatchy Newspapers did not subsidize the writing of this column; the opinions are those of the writer and do not necessarily represent the views of McClatchy Newspapers or its editors.

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http://www.nytimes.com/2011/11/25/opinion/we-are-the-99-9.html

by Paul Krugman

(Dr. Krugman lays some great one-liners on us in this article.-ed)

November 24, 2011

We Are the 99.9%

By PAUL KRUGMAN

“We are the 99 percent” is a great slogan. It correctly defines the issue as being the middle class versus the elite (as opposed to the middle class versus the poor). And it also gets past the common but wrong establishment notion that rising inequality is mainly about the well educated doing better than the less educated; the big winners in this new Gilded Age have been a handful of very wealthy people, not college graduates in general.

If anything, however, the 99 percent slogan aims too low. A large fraction of the top 1 percent’s gains have actually gone to an even smaller group, the top 0.1 percent — the richest one-thousandth of the population.

And while Democrats, by and large, want that super-elite to make at least some contribution to long-term deficit reduction, Republicans want to cut the super-elite’s taxes even as they slash Social Security, Medicare and Medicaid in the name of fiscal discipline.

Before I get to those policy disputes, here are a few numbers.

The recent Congressional Budget Office report on inequality didn’t look inside the top 1 percent, but an earlier report, which only went up to 2005, did. According to that report, between 1979 and 2005 the inflation-adjusted, after-tax income of Americans in the middle of the income distribution rose 21 percent. The equivalent number for the richest 0.1 percent rose 400 percent.

For the most part, these huge gains reflected a dramatic rise in the super-elite’s share of pretax income. But there were also large tax cuts favoring the wealthy. In particular, taxes on capital gains are much lower than they were in 1979 — and the richest one-thousandth of Americans account for half of all income from capital gains.

Given this history, why do Republicans advocate further tax cuts for the very rich even as they warn about deficits and demand drastic cuts in social insurance programs?

Well, aside from shouts of “class warfare!” whenever such questions are raised, the usual answer is that the super-elite are “job creators” — that is, that they make a special contribution to the economy. So what you need to know is that this is bad economics. In fact, it would be bad economics even if America had the idealized, perfect market economy of conservative fantasies.

After all, in an idealized market economy each worker would be paid exactly what he or she contributes to the economy by choosing to work, no more and no less. And this would be equally true for workers making $30,000 a year and executives making $30 million a year. There would be no reason to consider the contributions of the $30 million folks as deserving of special treatment.

But, you say, the rich pay taxes! Indeed, they do. And they could — and should, from the point of view of the 99.9 percent — be paying substantially more in taxes, not offered even more tax breaks, despite the alleged budget crisis, because of the wonderful things they supposedly do.

Still, don’t some of the very rich get that way by producing innovations that are worth far more to the world than the income they receive? Sure, but if you look at who really makes up the 0.1 percent, it’s hard to avoid the conclusion that, by and large, the members of the super-elite are overpaid, not underpaid, for what they do.

For who are the 0.1 percent? Very few of them are Steve Jobs-type innovators; most of them are corporate bigwigs and financial wheeler-dealers. One recent analysis found that 43 percent of the super-elite are executives at nonfinancial companies, 18 percent are in finance and another 12 percent are lawyers or in real estate. And these are not, to put it mildly, professions in which there is a clear relationship between someone’s income and his economic contribution.

Executive pay, which has skyrocketed over the past generation, is famously set by boards of directors appointed by the very people whose pay they determine; poorly performing C.E.O.’s still get lavish paychecks, and even failed and fired executives often receive millions as they go out the door.

Meanwhile, the economic crisis showed that much of the apparent value created by modern finance was a mirage. As the Bank of England’s director for financial stability recently put it, seemingly high returns before the crisis simply reflected increased risk-taking — risk that was mostly borne not by the wheeler-dealers themselves but either by naïve investors or by taxpayers, who ended up holding the bag when it all went wrong. And as he waspishly noted, “If risk-making were a value-adding activity, Russian roulette players would contribute disproportionately to global welfare.”

So should the 99.9 percent hate the 0.1 percent? No, not at all. But they should ignore all the propaganda about “job creators” and demand that the super-elite pay substantially more in taxes.

How Did You Grade the Lame Duck Session?

By Olivia LaRosa
December 22, 2010

Recently, I have been amusing myself by posting to the Wall Street Journal online community regarding select Questions of the Day. Today, the WSJ asked us how we graded the Lame Duck congressional session. I gave it a "D" for bad political theater. The only decent work of the session was passing the START treaty and repealing "Don't Ask, Don't Tell." What an embarrassing policy!

In response to: He continues to lead the country from the far left and will push just as hard as he can in this direction as long as he is in office. The notion that President Obama is more centrist than Nancy Pelosi and Harry Reid is ludicrous - though a useful fiction for him. They are all cut from the same socialist cloth.

I replied: I find myself boggled by people who still think that the lowest taxes support the best society. Taxes are the price we pay for civilization. (I gave the lame ducks a D.) The goods that you have, the education you received, the roadtrips you take, the fire department nearby, and so on, were at least partially subsidized by the taxes that your parents and grandparents paid. Furthermore, most of the stories told about how lowering taxes will help the US aren't quite what actually happens. Please take a look at this article for examples.
The 9 Biggest Conservative Lies About Taxes and Public Spending
http://www.alternet.org/story/149265/the_9_biggest_conservative_lies_about_taxes_and_public_spending

And in answer to the same man who asserted that Obama was a socialist, I talked about the TWO political axes: right-left, and authoritarian-libertarian. You can take the fun quiz too!

I am far left. I know so because I took a test at http://www.politicalcompass.org. I score at -10, -9.875. I am a libertarian socialist. People get confused about political orientation because we think that there are only two directions to go; left, or right. That constitutes one political axis. There is another, though. It is the authoritarian/libertarian axis. Obama is no more of a socialist than say, Evan Bayh or Bill Clinton. His political acts place him in within the right/authoritarian corner of the political compass. So, it makes no sense to call Obama a socialist or a Marxist when he clearly isn't either one. Here's another example: people can be left/authoritarian like Mao Ze Dong or Joseph Stalin. Or they can be right/authoritarian like Hitler, Mussolini, Hosni Mubarak, Benjamin Netanyahu, Hugo Chavez, etc. Ron Paul is the most prominent example of a right/libertarian. Take the fun quiz and see for yourself where you stand, alongside major historical figures.

~~~~~

In response to this post:

One of the biggest conservative lies is that money simply grows on trees. Taxes can be lowered to zero and the economy will benefit. Borrow from the Chinese to pay for huge deficit spending and pay off the bonds by printing money (quantitative easing). The result will soon be hyperinflation.

Conservatives don't seem to care. But some people do, like many Tea Party activists, who seem to realize what a downward spiral our country's in.

I replied: The Tea Party knows that something's wrong, but they don't know what it is. They have been captured by bumper-sticker politics. If the answers are simple, then we are not talking about the problems of human beings. Sad to say, the Tea Party movement simply plays into the hands of the political agenda of transnational corporations. The political agenda of transnational corporations is to corrupt governments for the sake of profit, as their charters provide. I wish that the Tea Partiers would interrogate their basic assumptions. We need GOOD government, not what we have now. It's impossible to manage a nation of 300 million people without decent people managing the day-to-day business of keeping America together. You don't get that result by ranting about bureaucrats or term limits. You get that result by educating folks on what it really takes to run a pluralistic democracy.

What if the Top One Percent Owned More than 1/2 of all Corporate Assets?

This is not a future scenario, folks. Already happened. And we wonder why we have no control over our government?

Read more here about its effects.
Progress Action Now commentary


http://www.nytimes.com/2006/01/29/national/29rich.html?_r=1&oref=slogin

January 29, 2006
Corporate Wealth Share Rises for Top-Income Americans
By DAVID CAY JOHNSTON
New government data indicate that the concentration of corporate wealth among the highest-income Americans grew significantly in 2003, as a trend that began in 1991 accelerated in the first year that President Bush and Congress cut taxes on capital.

In 2003 the top 1 percent of households owned 57.5 percent of corporate wealth, up from 53.4 percent the year before, according to a Congressional Budget Office analysis of the latest income tax data. The top group's share of corporate wealth has grown by half since 1991, when it was 38.7 percent.

In 2003, incomes in the top 1 percent of households ranged from $237,000 to several billion dollars.

For every group below the top 1 percent, shares of corporate wealth have declined since 1991. These declines ranged from 12.7 percent for those on the 96th to 99th rungs on the income ladder to 57 percent for the poorest fifth of Americans, who made less than $16,300 and together owned 0.6 percent of corporate wealth in 2003, down from 1.4 percent in 1991.

The analysis did not measure wealth directly. It looked at taxes on capital gains, dividends, interest and rents. Income from securities owned by retirement plans and endowments was excluded, as were gains from noncorporate assets such as personal residences.

This technique for measuring wealth has long been used in standard economic studies, though critics have challenged that tradition.

Among them is Stephen J. Entin, president of the Institute for Research on the Economics of Taxation in Washington, which favors eliminating most taxes on capital and teaches that an unintended consequence of the corporate income tax is depressed wage rates. Mr. Entin said the report's approach was so flawed that the data were useless.

He said reduced tax rates on long-term capital gains may have prompted wealthy investors to sell profitable investments. That would show up in tax data as increased wealth that year, even though the increase may have built up over decades.

Long-term capital gains were taxed at 28 percent until 1997, and at 20 percent until 2003, when rates were cut to 15 percent. The top rate on dividends was cut to 15 percent from 35 percent that year.

The White House said it did not believe that the 2003 tax cuts had much influence on wealth shares. It also said that since wealth is transitory for many people, a more important issue is how incomes and wealth are influenced by the quality of education.

"We want to lift all incomes and wealth," said Trent Duffy, a White House spokesman. "We are starting to see that the income gap is largely an education gap."

"The president thinks we need to close the income gap, and he has talked about ways in which we can do that," especially through education, Mr. Duffy said.

The data showing increased concentration of corporate wealth were posted last month on the Congressional Budget Office Web site. Isaac Shapiro, associate director of the Center on Budget and Policy Priorities in Washington, spotted the information last week and wrote a report analyzing it.

Mr. Shapiro said the figures added to the center's "concerns over the increasingly regressive effects" of the reduced tax rates on capital. Continuing those rates will "exacerbate the long-term trend toward growing income inequality," he wrote.

The center, which studies how government affects the poor and supports policies that it believes help alleviate poverty, opposes Mr. Bush's tax policies.

The center plans to release its own report on Monday that questions the wisdom of continuing the reduced tax rates on dividends and capital gains, saying the Congressional Budget Office analysis indicates that the benefits flow directly to a relatively few Americans.

On Tax Breaks

By Olivia LaRosa - November 30, 2005

You cannot help poor people by giving rich people money. I have never heard one person who got a tax break say, "Oh my gosh! Now I can put my neighbor to work."

The fact is: 35 years ago, corporate tax revenues amounted to about 50% of the total income tax revenues each year. Now, its about 5%. And all of the Bush tax breaks are not permanent yet.

They claim that they only want to pay their fair share. Looks to me like they think their fair share is a big fat zero.

I keep making a proposal to every tax resister I meet, on the right and the left. People on the right seem uncomfortable about it.

There's how it goes. We give the flat tax people their flat tax, regressive and punitive to the less well off as it is. The catch is: taxpayers get to check a box that states whether they want their taxes to go to the military or social programs and infrastructure.

I think its a great idea. I think that if implemented, we would see some REAL political action. People could vote with their money.