Category Archives: Starve the Beast

Class Warfare — Taxes Hitting Mid/Lower Classes the Hardest

Thanks to Occupy Wall Street the inequalities in our tax system have been at the forefront of our politics. The Republicans are contending that the “job creators” should not have to pay more in taxes and that in fact, if you take into account the state and local taxes, they pay anywhere from 40 to 60% of all tax revenue. The Institution of Taxation and Economic Policy have come out with a state by state breakdown (find your state here) showing who actually pays the most in taxes. They breakdown what the bottom 20%, mid 60%, and the top 20% pay. Not surprisingly every state confirms what the Democrats have been telling us, thanks to the Bush tax cuts, our nation’s rich pay the least.  

ITEP reports: 

Ten states—Washington, Florida, Tennessee, South Dakota, Texas, Illinois, Michigan, Pennsylvania, 

Nevada, and Alabama—are particularly regressive. These “Terrible Ten” states ask poor families—those in the bottom 20% of the income scale—to pay almost six times as much of their earnings in taxes as do the wealthy. Middle-income families in these states pay up to three-and-a-half times as high a share of their income as the wealthiest families. “Virtually every state has a regressive tax system,” noted Gardner. “But these ten states stand out for the extraordinary degree to which they have shifted the cost of funding public investments to their very poorest residents.”

The state with the worst disparity is Mississippi. Their study shows that in the category of Sales and Excise Taxes the bottom 20% whose income is less than $16,000/year pay 8.5% of their income while people earning $39,000 to $70,000 pay 5.6%. The wealthiest in Mississippi earning over $319,000 a year pay JUST 1.2%. When calculating total taxes paid the bottom 20% pay 10.8%, people earning $39,000 to $70,000 pay 9.6%, and the top 1% pay just 6.3%.  

There is class warfare going on, but just in case you were unclear who was waging that war, it is the very wealthy and their Republican figureheads. Cutting entitlement programs like Pell Grants, Medicare, and Social Security, which obviously helps the middle and lower class in our society, while simultaneously cutting taxes on the wealthy and corporations does not work….FACT! We have numbers on our side. We have history on our side. Anyone who tries to convince you otherwise is outright lying.

Bill Maher On The Wealth Gap In America

You know that whole trickle-down economics theory that Republicans love to push, well in the words of Bill Maher “America’s rich aren’t giving you money, they are taking your money.” I have written many posts on the income inequality in our country, but recently I came across a video segment with Bill Maher giving a monologue on this very topic. No one can explain it better than him. 

No Jobs For You – Thanks To The Grand Ol’ Party

GOP has successfully filibustered President Obama’s jobs bill. It seems their jobs, jobs, jobs mantra was just talk because since they took over Congress they have yet to pass a bill that would create jobs.

In fact, the most recent budget proposal passed by Republicans, the Paul Ryan Budget, would have had the opposite effect of creating jobs, instead losing 1 million jobs (not to mention turning Medicare into a voucher program). The plan illustrates core party principles.

The Republican budget 

Ends Medicare as we know it, kicking low income and middle class retirees into the Kafkaesque and inefficient private insurance market.  

Tears gaping holes in public investments in education and lifelong learning, efficiency enhancing infrastructure and energy modernization, and science research and technological R&D that create jobs today, “crowd-in” private investment, and provide a foundation for long-run sustained economic growth.  

Offers tax cuts to U.S. billionaires paid for by raising taxes on the middle class and shredding social protections for those hit hardest by the economic downturn, the most efficient policies to boost jobs and economic growth in the short-term.  

All told, the Republican budget would kill an estimated 1 million jobs. The budget, however, wasn’t the only indication of the GOP’s priorities. GOP’s jobs agenda presents a litany of bills that in fact provide explicit subsidies for corporate oil, coal, and gas producers.

President Obama’s Job Plan

The GOP’s budget juxtaposed with Obama’s budget truly show where the loyalties lie in each party. Here is a list of some of the things Republicans decided to vote against (full budget here): 

Build 
As part of a six-year, comprehensive surface transportation bill at $35 billion per year, the Budget creates hundreds of thousands of jobs in the short term with a $50 billion up-front investment; establishes a National Infrastructure Bank to support projects of national importance; and brings access to high-speed rail to 80 percent of Americans within 25 years. 

Consolidates 60 duplicative, often earmarked programs into five. Investment will only be made if bipartisan financing is found to ensure that it does not increase the deficit. 

Builds a next-generation, wireless broadband network to bring high-speed Internet access to 98 percent of Americans, and establish an interoperable network for public safety.  Plan is fully paid for, and the sale of spectrum provides nearly $10 billion for deficit reduction. 

Educate 
Maintains maximum Pell Grant award, helping 9 million students afford college.  Paid for with more than $100 billion in savings, including eliminating year-round Pell and graduate student in-school loan subsidy. 

Reforms K-12 school funding by supporting high standards, encouraging innovation, and rewarding success. 

Consolidates 38 K-12 programs into 11 that emphasize competition and evidence of what works, while also eliminating 13 education programs outright. 

Expands the Race to the Top concept to early childhood education, school districts, university funding, and job training. 

Prepares 100,000 new science, technology, engineering, and math teachers. 

Key Budget Facts 
The Budget includes more than $1 trillion in deficit reduction – two-thirds of it from cuts — and puts the nation on a path toward fiscal sustainability so that by the middle of the decade, the government will be paying for what it spends and debt will no longer be increasing as a share of the economy. 

The President meets his pledge to cut the deficit he inherited in half by the end of his first term. 

Five-year non-security discretionary spending freeze will reduce the deficit by over $400 billion over the next decade and bring this spending to the lowest level since President Eisenhower sat in the Oval Office. 

10-year Deficit Reduction: $1.1 trillion, excluding war savings and not extending 2001 and 2003 tax cuts for high-income earners. Two-thirds are from spending cuts.  2011 Projected Deficit: $1.645 trillion, 10.9 percent of GDP; 2012 Projected Deficit: $1.101 trillion, 7.0 percent of GDP; 2015 Projected Deficit: $607 billion, 3.2 percent of GDP; 2017 Projected Deficit: $627 billion, 3.0 percent of GDP. 

I have said it before and I will say it again, the Republicans want to make the economy worse leading up to the 2012 election (Starve The Beast) to give them the best chance to win back the White House and try to gain control of both Houses. You will recall Senator McConnell telling National Journal’s Major Garrett, “The single most important thing we want to achieve is for President Obama to be a one-term president.” 

This is what is at stake in 2012. What principles do we as Americans stand for? I guess we will find out next year.

Trickle Down Economics – Economic Policy of Republicans

Republicans have said we cannot tax the “job creators” and in fact need to cut their taxes even further, and for the past decade they have made sure that the millionaires, billionaires and corporations pay as little to no taxes as possible. Over the past decade their income level and corporate profits have risen to historic levels. 

At the same time Republicans created 3 million jobs. The Wall Street Journal reported the total number of jobs at the start of the Bush presidency was 132.5 million and at the end was 135.5 million. Payroll expansion was just 2.3%. 

Their economic policy of trickle down economic hasn’t worked. The data coming from annual Statistics of Income tables on Wednesday shows this. This is a fact and the numbers reflect this. This cannot be debated. 

  • In 2009 total income was down 15.2 percent since 2007.  
  • Average income in 2009 fell to $54,283, down $3,516, or 6.1 percent in real terms compared with 2008, the first Internal Revenue Service analysis of 2009 tax returns showed. Compared with 2007, average income was down $8,588 or 13.7 percent.  
  • Average income in 2009 was at its lowest level since 1997 when it was $54,265 in 2009 dollars, just $18 less than in 2009.  
  • Average income in 2009 was at its lowest level since 1997 when it was $54,265 in 2009 dollars, just $18 less than in 2009. The data come from annual Statistics of Income tables that were updated Wednesday.  
  • No income tax was paid by 1,470 of the 235,413 taxpayers earning $1 million or more in 2009, compared with the 959 taxpayers with million-dollar-plus incomes who paid no income taxes in 2007. 
  • Average wages fell sliding $1,106 to $48,917 from $50,023 in 2007.

A person may choose to want to protect corporations and the wealthy from taxes shifting the burden to middle and low-income earners, but they cannot factually state that trickle down economics works in creating jobs. It is in black and white. Numbers do not lie.

The Precipice Of Economic Failure

Do Republicans really care if the economy takes a tumble? Do they care if families are unable to send their kids to college, if public schools are unable to adequately teach our children, if the shrinking middle class have wages that are stagnant on top of the fact that healthcare costs are increasing, college tuitions and food prices are sky rocketing and having an effect of lowering wages even more? 

No. Their stance on this debt ceiling debate is proof positive (not to mention Eric Cantor’s portfolio is increasing on the fact that the debt ceiling hasn’t passed). Washington Post columnist Eugene Robinson put it best.

There’s no dispute about where we need to go. The question is what path to take.

Clearly, the federal government cannot continue spending at a rate of 25 percent of GDP while taking in revenues that equal less than 15 percent of GDP, as is the case this year. We would reach the point where debt service crowds out health care, education and other priorities dear to progressives’ hearts. Major investments the nation desperately needs to make — for infrastructure and energy research, for example — would be impossible. Decline would be inevitable. 

The way to avoid this dystopian future is to bring spending and revenues more into balance. Yes, there will be some pain and sacrifice. But it is not necessary — nor is it wise — to heap a disproportionate share of the burden onto the backs of the poor, the elderly and the battered middle class.

Economists around the United States of both parties are all in agreement that the GOP’s stance of only cutting entitlements without raising revenue does nothing but hurt this economy. In order to turn this economy around, we need to employee people who are then able to spend money, which in turn will help businesses and help create more jobs.

Their plan for resolution to our financial crisis, cut as many government jobs as possible, cut our social safety net (Medicare, Medicaid, and Social Security) is not the right plan.  

The fact is, corporate tax rates that are being protected by GOP, and the loop holes used by the wealthiest in this country to skirt around the IRS and pay virtually no taxes is where we need to look. 

The nominal corporate tax rate of 35 percent is a joke, since big corporations don’t actually pay that much; those loopholes, too, could be eliminated. Then we could look at measures that would have broader impact — say, hiking or eliminating the income cap for Social Security payroll contributions. 

The point is that it doesn’t take much imagination to get within shouting distance of $2 trillion in deficit reduction over 10 years — looking at the revenue side alone. That’s half of the $4 trillion that both Republicans and Obama have set as a target. 

There would have to be an equal amount of spending cuts. But what sense does it make to begin with the small slice of the pie — less than 20 percent — that is being called “discretionary” spending? It’s just not possible to find enough savings there. 

Also, Eric Cantor’s plan for all cuts without revenue increase is counterintuitive. In Steven Benen of Washington Monthly’s latest op-ed he writes how this plan is wrong for our economy.

The more pressing problem with Cantor’s contention is that it’s largely Keynesian — and Cantor hates Keynesian economics. Jon Chait had a good item on this. 

[I]f you think the state of the business cycle should influence your fiscal policy, then you should oppose any spending cuts at all, and the tax cuts you support should be as progressive as possible. Alternatively, if you’re worried about the incentive effects of tax cuts on business and the rich, then you don’t care about whether unemployment is high or low at any particular moment. Cantor’s position, which is the universal Republican position, is pure nonsense by absolutely any standard, including the most conservative standard. 

That’s even aside from the fact that nobody is proposing an immediate tax hike. Democrats are perfectly happy to phase in any tax increase slowly. Cantor’s argument is nonsense economics piled on top of a factual misrepresentation.

Most of Cantor’s arguments are.

Regardless, Chait’s point is an important one. Why does Eric Cantor oppose any and all tax increases? Because, as he sees it, the economy is weak, and if there are tax increases, it would take money out of the economy and put into the Treasury. That would be wrong, Cantor believes, because we want that money in consumers’ hands, generating economic activity. 

In the next breath, Cantor then argues that he also wants spending cuts, taking money out of the economy and putting it into the Treasury.

Do you see the disconnect? Well, you probably do, but the Majority Leader doesn’t.

Let’s put this another way: the policy reasoning that tells Eric Cantor that tax increases are a bad idea is the same policy reasoning that makes sweeping budget cuts a bad idea, too.

The fact is Republicans are sending us down a path of economic despariety. The median income of middle and lower classes have stagnated and with their proposed cuts will further reduce incomes and make things like college for our children an impossibility.

Only a select few are feeling the effects right now, but I hope it will not come for the majority of Americans to feel these repercussions before we realize the disastrous path our choices have taken us down.

Eric Cantor, the Debt Ceiling, and his Conflict of Interest

Last week during the party of six debt ceiling talks Eric Cantor abruptly left the negotiations. Since then, there have been real fears that a compromise will not be made, which economists are predicting could cause our economy to sink into a depression.

This week it has come to light that Eric Cantor has a very big conflict of interest. It seems he is invested in a fund that stands to make profits if the debt ceiling does not get raised. 

Cantor is invested in a fund called ProShares Trust Ultrashort 20+ Year Treasury EFT. Per the Washington Street Journal, they reported “the fund aggressively “shorts” long-term U.S. Treasury bonds, meaning that it performs well when U.S. debt is undesirable (A short is when the trader hopes to profit from the decline in the value of an asset.).”

Jonathan Easley of Salon reported:  

The fund hasn’t significantly spiked yet because many investors believe Congress will eventually raise the debt ceiling. However, since Cantor abruptly called off debt ceiling negotiations last Thursday, the fund is up 3.3%. Even if an agreement is ultimately reached before Aug. 2, the fund could continue to benefit between now and then from the uncertainty. (One tactic some speculators are using is to “trade the debt ceiling debate” — that is, to place short-term bets on prices as they fluctuate with the news out of Washington.)

Would an Economic Collapse Benefit the GOP?

My answer is yes and I will tell you why. Over the last two years leading up to the 2010 election, their main complaint (meaning GOP and the Tea Party) has been government is too big. The only way to grow the economy is to get rid of government waste, i.e., Medicare, Medicaid, Social Security, and funding for things like education. 

In my previous posts I have written about their plan on how to do this, which is called Starve the Beast. They want to create such an economic disaster through cutting of taxes personal and corporate so low that the economy can’t continue on its present course.

They have been very successful in their goal. Through the last decade, which began with a surplus, they cut taxes on the wealthy, slashed corporate tax rates to the point some are paying net negative (actually receiving refunds from the IRS), instituted Medicare Part D that was unfunded and was a huge give away to big PhRMA, on top of fighting 2 wars that were not paid for. 

Judging by Republicans actions in the last few weeks over the debt ceiling debate, it is my belief that they feel they would benefit by pushing talks to the last minute and creating turmoil in our financial system, which would result in rising interest rates on America’s debt.

This would put our economy in such a bind that it would create a scenario where our government could no longer continue Social Security payments, Medicare and Medicaid benefits, and cause already financially burden local municipalities who are already dependent on government subsidies to collapse and default on pension payments for retired government workers (which has already occurred in some areas that were already struggling). 

I wonder if this scenario does come to pass, would the Tea Party followers and social conservatives finally get it. When their parents are no longer able to reside in their own homes because of lack of government benefits or no longer have access to vital healthcare or be eligible to go to residential facilities or nursing homes, will it finally sink in who Republicans really work for?