Reposted from the AFL-CIO NOW Blog
While congressional Republicans are heavily focused on cutting Social Security, Medicaid and Medicare benefits and other harmful budget cuts that threaten the 98%, a better approach is to eliminate loopholes that allow the wealthiest 2% of Americans and Wall Street to pay much less than their fair share of taxes. Focusing on loopholes keeps money in the hands of working families, which helps the economy grow without increasing hardship and economic insecurity for working people.
Many current loopholes just aren’t fair. Take, for example, what Think Progress calls the “Mitt Romney Loophole.” People like Mitt Romney who manage investment funds get paid in two ways. Part of their income is a management fee that is taxed as ordinary income, currently at a top rate of 39.6%. But fund managers also get a cut of the profits of the investments, which is taxed as a capital gain, with a top tax rate of only 20%. The typical investment manager takes a management fee of 2% and gets a 20% cut of the profits, meaning they avoid paying the normal tax rate on the vast majority of their income, something working families are not able to do. As Think Progress explains:
This loophole is one of the main reasons that Mitt Romney paid a tax rate of just 13.9 percent on income of more than $20 MILLION. Meanwhile, millions of middle-class workers pay a much higher rate on their much, much lower salaries.
Closing this loophole would not only make our tax code fairer and more progressive, it would help raise revenue to protect vital programs and leave room in the budget for investments to grow the middle class. Closing just this one loophole that often benefits the ultra-wealthy would raise $21 billion over 10 years.
Photo by Gage Skidmore on Flickr
Tags: Corporate Accountability, deficit, Medicare, Mitt Romney, Retirement, social security, taxes
The budget plan that Budget Committee Chair Rep. Paul Ryan (R-WI) has put forward for the House Republicans is truly stunning. It takes the war on America’s middle class not to the next level but about three levels down the road.
There’s something we should start with, though, when we think about this budget. And that’s where we are now. Mark Sumner points us to this graph:
That’s the deficit, and that big orange stripe, the one getting wider by the year, is how much of the deficit the Bush tax cuts are creating.
Not only are billionaires already piling up ever larger heaps of cash under the shelter of the Bush cuts, the deregulation that drove the economy into instability only accelerated the disparity in wealth. Bailed-out Wall Street is again handing out record bonuses, while Main Street is dealing with the effects of budget cuts. The cost of belt-tightening is being borne by the poor and middle class, while the ultra-wealthy increase their dominance.
The nation had a record surplus in 2000. What’s happened since then is not an increase in social programs, EPA funding, or any of the other things on the chopping block in the current budget deal. What’s happened is a massive funneling of cash to the top. Unless that’s reversed, it will be impossible to staunch the flow of red ink.
Any serious fiscal policy will be one that, at a minimum, rolls back the Bush cuts. Any policy that hopes to put the nation on the road to long-term stability must look to repair the damage that’s been done by four decades of fruitless handouts to the wealthy.
But here’s what the Ryan budget does:
Ends Medicare guarantee for seniors – EPI:
The budget resolution eliminates Medicare as we know it, shifting costs onto seniors.
Raises health care costs for seniors – CBO:
Under the proposal, most elderly people would pay more for their health care than they would pay under the current Medicare system.
Gives tens of billions of dollars in tax subsidies to Big Oil – Center for American Progress:
House Budget Committee Chair Paul Ryan’s (R-WI) proposed FY 2012 budget resolution is a backward-looking plan that would benefit big oil companies at the expense of middle-class Americans. It retains $40 billion in Big Oil tax loopholes while completely eliminating investments in the clean energy technologies of the future that are essential for long-term economic growth.
Cuts education for children and raise college costs for nearly 10 million students - Center for American Progress:
This means a significant cut to federal kindergarten-through-12th-grade education funding is in his sights… In addition to cuts to K-12 education, the Ryan plan would also cut Pell Grants by returning them to pre-stimulus levels. This is a cut of more than $800 in each student’s maximum Pell Grant award, which would impact millions of young Americans who depend on critical financial assistance in order to attend college.
Makes tax cuts for the wealthiest permanent, adding $1 trillion to the deficit – Paul Krugman:
The Tax Policy Center finds that the Ryan plan would cut taxes on the richest 1 percent of the population in half, giving them 117 percent of the plan’s total tax cuts. That’s not a misprint. Even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.
It’s practically impossible to comprehend the devastation Rep. Ryan and his party are trying to inflict on working people—and devastation that’s inflicted on working people is devastation to the nation as a whole.
Half in Ten has a quiz about this budget. Take it and see how much you know about where we are and where this would take us.
Tags: deficit, economy
That’s what people want. Jobs. Not repeal of the Affordable Care Act, not deficit reduction, not cutting Social Security. Jobs.
- When asked to select what they believed were the two most important economic problems facing the country right now, 41 percent said “high unemployment” and 33 percent said “outsourcing of jobs,” the latter capturing the deep worry that America and American corporations are not able or willing to create American jobs. Another 18 percent focused on wages not keeping up with the cost of living. Just 25 percent chose “the budget deficit is big and growing” as one of the top two problems.
- Just 17 percent think the priority of the new Congress should be repealing health care. What respondents did say the Congress should prioritize over the next two years is economic recovery and new jobs (46 percent), protecting Social Security and Medicare (34 percent) and “making sure that our children receive an education for these times (27 percent).
- While deficit reduction is very important, voters want to see a growth strategy. When respondents were offered a choice between brave deficit reduction and a jobs plan to reduce the deficit and achieve growth, they rallied to the later, 58 to 35 percent, with 42 percent strongly embracing growth over austerity. On a scale of zero (cool) to 100 (warm), respondents registered support for a plan to invest in new industries and rebuild the country over the next five years (57 warm and 16 cool). They also supported, but not as strongly, a plan to dramatically reduce the deficit over the next five years (52 warm and 20 cool).
- Elected officials have no mandate to cut Social Security—and the voters have no appetite for it: 56 percent of respondents oppose the recommendation of the White House bipartisan deficit commission to raise the retirement age to 69 by 2075.
- On the surface, 56 percent of respondents support a deficit commission goal of $4 trillion in deficit reduction by 2020. But a nearly identical bloc (54 percent) hate the plan itself. When they hear the details of the plan, without any rhetoric, they turn dramatically against it.
- A sizeable majority, 52 to 43 percent, oppose the planned $100 billion dollars in budget cuts House Republicans have proposed for this year that would reduce spending on education, student loans, energy and the environment. Also, by a two-to-one margin, voters disapprove of Republican positions that add to the deficit (such as the repeal of health care reform and making permanent tax cuts for the wealthy).
Tags: deficit, Health Care, Jobs, unemployment
Kim reported this morning on the tax cuts and unemployment insurance compromise struck by President Obama and Republican leadership. Here’s a round-up of a few more reactions to it, good and bad.
David Leonhardt suggests that “the deal amounts to a second stimulus bill.”
Adam Serwer writes:
The $900 billion deal to extend all of the Bush tax cuts represents a substantial retreat for the president on a major campaign promise, a major victory for the Republican Party, and, let’s face it, complete obliteration of the notion that the deficit matters politically as anything other than a blunt instrument to wield against the welfare state. The deficit is an absolute emergency when it comes to making sure all Americans have health care, but an afterthought when it comes to cutting taxes for the wealthiest Americans.
So, was this worth it? I’d still say no, although it’s better than what I expected over the weekend. It still greatly increases the chances of the Bush tax cuts being made permanent — especially because the front-loading of the stimulative stuff actually worsens Obama’s 2012 electoral prospects.
Overall, enough sweetener has been added to diminish, but not eliminate, the bitterness of the disappointment.
The long-term unemployed are on the verge of dropping off the political radar entirely. This potential agreement would probably seal their hopeless fate. A 13-month extension of the current tiers is likely the last we’ll get for the unemployed out of this government.
Who gets what? For Republicans, that’s easy: a two-year extension on all Bush-era tax rates, regardless of income. Making matters slightly worse, the White House also agreed to include a deal on the estate tax, raising the exemption to $5 million per person and a 35% maximum rate, and a two-year extension on a capital gains top rate of 15%.
But then there’s the flip-side. The president secured a 13-month extension of aid for the long-term unemployed, reportedly his top priority. The deal also includes a reduction in the Social Security payroll tax, which will give workers a boost in their paychecks; an expanded earned-income tax credit; the continuation of a college-tuition tax credit; and new opportunities for businesses to write off the cost of some equipment purchases.
Obama was able to secure help for the middle class and the unemployed; Republicans were able to keep breaks for the wealthy. In other words, both sides got to fight for their natural constituencies.
I was talking to one well-known writer-activist last night who said he thought it was odd that the UI extension was being “shrugged off” by so many. I agree. I think a lot of the online bloggery outrage is being fueled by people who don’t have a visceral understanding of what it’s like to be at the end of your financial rope. (Class matters.)
With this president, with these Republicans, at this time, I think this is approximately as good as it can get. There will be changes before the deal is approved (it would be swell, for instance, if Bernie Sanders held out for the 99ers), but this is about what it’ll look like.
And for the people who can breathe, knowing they can survive for another 13 months, that’s a good thing.
Tags: deficit, taxes, unemployment, unemployment insurance
Whether the question is the unemployment crisis or the deficit, growing the economy is the answer.
If the economy grew one half of a percentage point faster than forecast each year over the next two decades — no easy feat, to be fair — the country would have to do roughly 40 to 50 percent less deficit-cutting than it now appears, based on my reading of budget data from the economists Alan Auerbach and William Gale.
So arguably the single best way to cut the deficit is to make sure that any deficit-cutting plan does not also cut economic growth. Ideally, it will lift growth.
There are two main ways to do so. First, we shouldn’t plunge ourselves back into another economic slump by raising taxes and cutting spending too quickly. President Franklin Roosevelt made that mistake in 1937, and this time (one hopes) the country won’t be able to rely on war mobilization spending to undo the error.
In the short term, we should actually spend more. “Some politicians and economists present a false choice: reduce unemployment or stabilize the debt,” argues a new bipartisan deficit plan that will be released Wednesday, the second such plan to come out in the last week. As Alice Rivlin, a Democrat who oversaw the writing of the plan with Pete Domenici, a Republican, put it: “We can do both. We can put money in people’s pockets in the short run and trim government spending in the long run.”
Tags: deficit, unemployment
The 2001 and 2003 Bush tax cuts, which were passed under reconciliation by Republicans so they only needed 51 votes in the Senate, benefited wealthier Americans the most. Those tax cuts for the wealthy had little stimulative effect on the economy, turned federal budget surpluses into deficits and exacerbated the income inequality between the top 2 percent and everybody else.
All the Bush tax cuts are now set to expire next year. While there is widespread support for extending those cuts directed at helping lower-income and middle-class Americans, the debate is on over the tax cuts for those at the top of the income scale.
Now, a leading economist and former Federal Reserve Board vice chairman, Alan S. Blinder, wants to end of the Bush tax cuts for the wealthy and direct the huge budget savings toward programs including extended unemployment insurance, fiscal aid to states and job-creation programs.
Blinder, an economics professor at Princeton, penned a recent Op-Ed on the subject in the Wall Street Journal.
Apparently unbothered by the consistency hobgoblin, some of the Republican deficit hawks also want to make the 2001-2003 Bush tax cuts permanent, rather than letting them expire on schedule at the end of this year. Yet their major argument is classic Keynesian thinking: Letting tax cuts expire is tantamount to raising taxes—which is the opposite of what you want to do when the economy is weak. A few days ago, Sen. Jon Kyl (R., Ariz.) even went so far as to declare it OK to raise the deficit to finance tax cuts, but not to pay unemployment benefits.
Let the upper-income tax cuts expire on schedule at year end. That would save the government an estimated $75 billion over the next two years. However, it would also diminish aggregate demand a bit. So, instead of using the $75 billion to reduce the deficit, spend it on unemployment benefits, food stamps and the like for two years. That would surely put more spending into the economy than the tax hike takes out, thus creating jobs.
How much more? Getting a numerical estimate requires the use of a quantitative model of the U.S. economy. In recent testimony before the House Budget Committee, Mark Zandi of Moody’s Analytics used his model to estimate that extending unemployment insurance benefits has almost five times as much “bang for the buck” as making the Bush tax cuts permanent.
Based on his estimates, the budgetary trade I just recommended would add almost $100 billion to aggregate demand over the next two years—without adding a dime to the deficit. That translates to about 500,000 more jobs each year.
Blinder reiterated those assessments Wednesday, and indeed went even further, saying he thought at the time that the Bush tax cuts for upper income Americans were like “piling on” — worsening the effects of income inequality. On a conference call with reporters, Blinder said of the tax cuts for the rich “it would have been better if they hadn’t been enacted.”
Letting the top income tax cuts expire, he said, would allow us to use the additional funds for things that would stimulate the economy more directly, such as unemployment insurance, food stamps and jobs programs, while also lowering deficits long-term.
“Not all budgetary dollars are created equal,” Blinder said. “Some have a bigger bang for the buck.” He estimates the stimulative effects on GDP of a dollar used for unemployment benefits or food stamps to be $1.60 to $1.70, while all the Bush tax cuts would account for about half that much — and far less for just the tax cuts for the wealthy.
Blinder and Mark Zandi of Moody Analytics also released a detailed study this week which estimated that without the combination of monetary and fiscal stimulus measures taken since late 2008, job losses would have exceeded 16 million, more than twice the 8 million lost in the recession.
Still, Blinder said the economy is currently weak enough to require additional fiscal and monetary stimulus. That’s the context for him urging the end of the Bush tax cuts for individuals making more than $200,000 and couples making more than $250,000 a year — and directing the first two years of new revenues to programs like unemployment insurance, food stamps and state aid.
I asked Professor Blinder if he thought the private sector needs a public jobs stimulus. “Absolutely,” he replied, saying he favors creating a temporary “WPA-type public jobs program,” one which he said would also “kick start the private sector hiring process.”
Yesterday’s conference call was organized by the Center on Budget and Policy Priorities which has also urged an end to the Bush tax cuts for the wealthy, estimating that would free up nearly $90 billion in the first two years.
Tags: Bush tax cuts, deficit, Jobs, stimulus, unemployment
Bloomberg has a massive new poll (conducted by Selzer & Company, margin of error 3.1) covering tons of economic issues, including the BP oil spill and financial reform.
“Which of the following do you see as the most important issue facing the country right now?”
Unemployment and jobs comes in first, at 41%. The federal deficit and government spending, despite the full court press by many politicians and pundits, comes in a distant second at 26%.
The government doesn’t seem to want to treat the economy as an emergency, but asked “What is your attitude about today’s economic environment,” just 23% said they were “getting back to normal,” and 16% said they were “seeing opportunity and taking more risks,” while 54% said they were “still hunkering down.”
That’s how people feel they themselves are doing. Asked if the U.S. economy was starting to get better, staying the same, or getting worse, just 28% said it was starting to get better, while 36% said it was staying the same (which, pro tip: that’s not good) and 35% said it was getting worse.
And if those answers don’t make the point, the poll asked directly “Many economists say the US emerged from the recession last year. Which of the following best reflects your opinion?”
71% said that “Regardless of what economists say, it still feels like we are in a recession.”
This economy is in an emergency. No matter how many different ways you ask the question, that’s still what you’re going to hear from working people.
Tags: deficit, Jobs, unemployment
What Matt Yglesias said. A thousand times what Matt Yglesias said.
1) There have been two presidents who were members of the modern conservative movement, Ronald Reagan and George W Bush, and they both presided over massive increases in both present and projected deficits.
2) The major deficit reduction packages of the modern era, in 1990 and 1993, were both uniformly opposed by the conservative movement.
3) When the deficit was temporarily eliminated in the late-1990s, the mainstream conservative view was that this showed that the deficit was too low and needed to be increased via large tax cuts.
4) Senator Mitch McConnell says it’s a uniform view in his caucus that tax cuts needn’t be offset by other changes in spending.
5) The deficit reduction commission is having trouble because they think conservative politicians won’t vote for any form of tax increase.
In sum, there are zero historical examples of conservatives mobilizing to make the deficit smaller. What is true is that most conservatives oppose increases in non-military spending when those increases are proposed by Democratic presidents. A minority of conservatives are more consistent opponents of increases in non-military spending. But the key element of conservative fiscal policy is that tax revenue as a percent of GDP should be made as low as possible. This isn’t a goal they pursue that stands in some kind of balance with concern about the deficit, it’s the only goal they pursue.
Conservatives just don’t care about the deficit. When they say they do, they are not telling the truth.
They do not care about the deficit when an energy bill would reduce it, when improving student loans would reduce it, when health care reform would reduce it, when reducing military spending would reduce it, when allowing tax cuts for the wealthiest to expire would reduce it. They do not care.
Ben Armbruster at Think Progress calls out Republican Senator Jon Kyl as a deficit fraud for wanting to extend the Bush tax cuts for the wealthy without paying for their $678 billion deficit price tag. Kyl, of course, has been a leader of the Republican obstruction of any economic stimulus, including extending unemployment insurance, citing fake deficit concerns.
But today on Fox News Sunday, Kyl threw his concerns about the deficit out the window when discussing tax cuts. Kyl said Congress should not allow the Bush tax cuts to expire, but when host Chris Wallace asked, “How are you going to pay the $678 billion to keep Bush tax cuts for the wealthy?” Kyl wouldn’t answer. And in fact, he went so far as to say tax cuts should never have to be paid for:
WALLACE: We’re running out of time, so how are you going to pay $678 billion just on the tax cuts for people making more than $250,000 a year?
KYL: You should never raise taxes in order to cut taxes. Surely congress has the authority and it would be right, if we decide we want to cut taxes to spur the economy, not to have to raise taxes in order to offset those costs. You do need to offset the cost of increased spending. And that’s what republicans object to. But you should never have to offset cost of a deliberate decision to reduce tax rates on Americans.
For all their yammering about deficits and debt, what’s become crystal clear is that Republicans use the deficit issue when they want to block plans to create jobs and improve the economic conditions for working families and the unemployed, but when it comes to propping up the wealthy they’re all for government intervention and deficits be damned.
Still, I would imagine that Kyl will be among the most vocal objectors when the bill to provide emergency funding for extended unemployment insurance finally hits the Senate floor again. Kyl and his fellow deficit frauds have thus far blocked that bill from reaching a floor vote, despite the backing of a clear Senate majority. As a result, more than 2 million jobless workers have had their benefits cut off, a number that could reach 3.2 million by the end of July.
Fighting the deficit fraud gang effectively means exposing their fraud at every turn — something Senate Democrats should be doing more aggressively. But it also means that real, practical policies to improve the economic outlook for Main Street America need to be advanced in the context of how they can actually reduce our long term debt.
And there are a host of progressive policies that would actually improve the deficit. Check out the Deficit Calculator developed by the Center for Economic and Policy Research (CEPR).
Click here or on the image below to go to the interactive calculator.
For example, if the Federal Reserve were to buy and hold $2 trillion of long-term U.S. Treasury securities, it would help provide financing for economic stimulus while reducing the debt by $3.1 trillion.
Reducing the size of U.S. forces in Iraq and Afghanistan to 30,000 by 2013 would reduce the debt by $1 trillion.
Enacting a real public health insurance option, as well as negotiated Medicare drug prices and public-funded drug trials would lower the debt by $2.5 trillion.
And a marginal tax on financial speculation would reduce the debt by $2.1 trillion over ten years, and raise an estimated $140 billion a year in new revenue.
More than two dozen specific policy options are included, along with helpful background descriptions and options for sharing results.
CEPR notes that the Flash program is needed to run the calculator.
Tags: debt, deficit, Jobs, unemployment
Deficit deficit deficit. For all the talk about the deficit in the media, by members of Congress, and inside the Beltway in general, you’d think it was all anyone cares about. As we’ve said time and time again here, that just ain’t so. The vast majority of recent polling shows that people care a lot more about jobs than they do about the deficit, for instance. And Working America’s field team tells us that the people they talk to rarely bring up the deficit as a concern.
Yet it’s a battle we have to keep fighting—a battle, that is, against the people trying to make it the political issue of the year. Here’s another crop of stories of deficit reality and deficit myth. The biggest myth, of course, is that one I mentioned about people being really upset about the deficit.
Then we hear about how any spending that helps working people would raise the deficit, and working people don’t want to do that, right? (Myth alert.) Reality: Might unemployment benefits shrink the deficit? Answer, yes, they might.
Oh, but that’s the thing: Lots of things would absolutely shrink the deficit while putting people to work, improving our infrastructure, and leaving us with a cleaner environment. But the things that would actually shrink the deficit aren’t the things that the people who run around yammering endlessly about said deficit want to do, so we don’t hear about it that much. Why? Because building the economy will shrink the deficit. And that’s not what these people—let’s call them like they are: Republicans and a few Democrats beholden to corporate interests—want to do. They want to cut Social Security and give tax cuts to the rich. So when it comes time to give those tax cuts to multimillionaires, somehow we don’t hear so much about the deficit as when an actual deficit-reducing proposal like student loan reform is on the table.
Tags: deficit, unemployment