Corporate Tax Cuts Don’t Stimulate Job Growth
Prevailing conservative wisdom dictates that businesses need tax cuts—and investors need capital gains tax cuts—to get the economy moving. But two very well-executed articles on wages and taxes published recently suggest that targeting tax cuts at business executives may do little to improve the dismal unemployment picture.
The Washington Post offers a startling analysis of income disparity, noting that the gap between the very rich and the rest of us has grown dramatically in the past few decades, reaching current levels that have not been seen since the Great Depression. In 2008, the Post reports, the top one-tenth of one percent of earners took in more than a tenth of the personal income in the United States. But the moneyed class is not dominated by professional athletes or big-name artistic performers or even hedge fund managers, the Post found. Instead, it is due to a big increase in executive compensation, even as real wages for some of their workers have dropped:
The top 0.1 percent of earners make about $1.7 million or more, including capital gains. Of those, 41 percent were executives, managers and supervisors at non-financial companies, according to the analysis, with nearly half of them deriving most of their income from their ownership in privately-held firms. An additional 18 percent were managers at financial firms or financial professionals at any sort of firm. In all, nearly 60 percent fell into one of those two categories.
The New York Times has a fascinating story that serves as an unwitting companion piece to the Post story. Corporate executives, the paper reports, are clamoring for a tax holiday to encourage them to bring their offshore profits back to the United States. And the money in question is big, the Times notes: Apple has $12 billion in offshore cash, while Google has $17 billion, and Microsoft, $29 billion. The companies with money sitting offshore argue that if the federal government were to offer them a huge tax break—say, a one-year drop from 35 percent to 5.25 percent—the businesses would bring the money home and operate as a private-sector economic stimulus.
However, the Times notes:
(T)hat’s not how it worked last time. Congress and the Bush administration offered companies a similar tax incentive, in 2005, in hopes of spurring domestic hiring and investment, and 800 took advantage. Though the tax break lured them into bringing $312 billion back to the United States, 92 percent of that money was returned to shareholders in the form of dividends and stock buybacks, according to a study by the nonpartisan National Bureau of Economic Research.
Who needs a tax cut, then? The U.S. economy is very much consumer-driven; companies aren’t hiring, many business owners say, because people aren’t buying. The past behavior of corporations that have received huge tax cuts has not necessarily been to use the money to hire more people; the Bush-era tax cuts have been in place for a decade, and the unemployment rate is still 9.1 percent. And executive compensation has grown. Executives may feel entitled to earn more and more if their companies are doing well and expanding. But without customers, those companies will go bust.
By: Susan Milligan, U. S. News and World Report, JUne 20, 2011
Mitt Romney Is Unemployed: Freeloading Former Government Employee Seeks Handout
Mitt Romney is just like you: He doesn’t have a job. And that’s hilarious!
Mitt Romney sat at the head of the table at a coffee shop here on Thursday, listening to a group of unemployed Floridians explain the challenges of looking for work. When they finished, he weighed in with a predicament of his own.
“I should tell my story,” Mr. Romney said. “I’m also unemployed.”
According to Jeff Zeleny, the room full of unemployed people laughed at this, which would make it the first recorded instance of someone laughing at something Mitt Romney intended to be funny.
But should they have laughed at poor Mitt Romney? Like so many Americans, the longer Mitt Romney has gone without a job, the worse his chances of finding new employment have become. There are not very many openings in his chosen field, and he has no other marketable skills. Poor Mitt Romney is in many respects a modern-day “forgotten man.”
Should Mitt Romney just rest on his laurels, waiting for some government handout? No! In fact, his insistence on getting another job in government is exactly what is preventing him from swallowing his pride and taking any work that is available. He’s too good to work at Walmart now? He should stop looking to Washington for a solution to his problem, get some part-time minimum wage work, and consider going back to school. There are many fine for-profit institutions that offer night courses for adults just like him.
Mitt Romney needs to pick himself up by his bootstraps and quit complaining.
By: Alex Pareene, Salon War Room, June 16, 2011
Mitt Romney: The Anti-Jobs Candidate
My friend Peter Daou had an item the other day, noting the potency of the Republican presidential frontrunner’s message: “Romney is a threat because he can focus on a dead simple message: ‘I’m a successful businessman, I’ll create jobs and fix the economy.’”
That’s exactly right. Mitt Romney, at least this latest version of him, has an entire campaign rationale that fits comfortably into a tweet. Better yet, it’s a message that voters are eager to hear.
Ed Kilgore had a related piece on this the other day, summarizing the argument that Romney and his backers are likely to push aggressively: “Romney has an extensive corporate background, looks the part of a CEO, and without question, he would prefer an issues environment focused on anything other than health care reform or the cultural issues on which he’s never inspired trust among conservatives.”
Romney doesn’t want to talk about health care or the fact that he was a pro-choice moderate who supported gay rights and gun control. Indeed, he would just as soon hope people forget he was even a governor. This is Businessman Mitt, running as a less ridiculous version of Herman Cain.
Kilgore’s argument is that this message is simple and straightforward, but it probably won’t help him in a competitive Republican primary. That’s compelling, but my take is a little different: I think Romney’s biggest problem is that the message brings to the fore his key weaknesses — Romney’s record on jobs is atrocious.
Stephen Colbert devoted a terrific segment to this the other day, highlighting Romney’s “real claim to business fame,” which is “founding a private equity company called BainCapital.” The embed won’t fit the column length of the redesigned website, but here’s heart of Colbert’s take:
“You see, Romney made a Mittload of cash using what’s known as a leveraged buyout. He’d buy a company with ‘money borrowed against their assets, groomed them to be sold off and in the interim collect huge management fees.’ Once Mitt had control of the company, he’d cut frivolous spending like jobs, workers, employees, and jobs. Just like America’s sweetheart, Gordon Gecko. […]
“Because Mitt Romney knows just how to trim the fat. He rescued businesses like Dade Behring, Stage Stories, American Pad and Paper, and GS Industries, then his company sold them for a profit of $578 million after which all of those firms declared bankruptcy. Which sounds bad, but don’t worry, almost no one worked there anymore.
“Besides, a businessman can’t be weighed down with a bleeding heart, as one former Bain employee put it, ‘It was very clinical…. Like a doctor. When the patient is dead, you just move on to the next patient.’ See? Mitt Romney is like a doctor! [On screen: Dr. Kevorkian]”
And this is the part of Romney’s record he’s most proud of. Romney slashed American jobs as if his career depended on it — and it did.
Complicating matters, during Romney’s only service in public office, his state’s record on job creation was “one of the worst in the country.” Adding insult to injury, “By the end of his four years in office, Massachusetts had squeezed out a net gain in payroll jobs of just 1 percent, compared with job growth of 5.3 percent for the nation as a whole.”
How bad is Romney’s record? During his tenure, Massachusetts ranked 47th out of 50 states in jobs growth.
Yes, Romney has a simple message: “I’m a successful businessman, I’ll create jobs and fix the economy.” It also comes with an equally simple response: “Mitt Romney is the anti-jobs candidate.”
By: Steve Benen, Contributing Writer, Washington Monthly-Political Animal, June 12, 2011
Kicking The Unemployed When They Are Down
Recent highly publicized national jobs reports showing private-sector gains being offset by public-sector losses have drawn attention to the macroeconomic costs of the austerity program already underway among state and local governments, and gaining steam in Washington. But the effect on the most vulnerable Americans–particularly those out of work–is rarely examined in any systematic way.
At The American Prospect, Kat Aaron has put together a useful if depressing summary of actual or impending cutbacks (most initiated by the states, some by Congress) in key services for the unemployed and others suffering from economic trauma. These include unemployment insurance, job retraining services, and family income supports. In some cases, federal funds added by the 2009 stimulus package are running out. In others, the safety net is being deliberately shredded.
A recent report from the Center for Budget and Policy Priorities notes that the most important family income support program, TANF (the “reformed” welfare block grant first established in 1996) is becoming an object of deep cuts in many states, precisely at the time it is most needed:
States are implementing some of the harshest cuts in recent history for many of the nation’s most vulnerable families with children who are receiving assistance through the federal Temporary Assistance for Needy Families (TANF) block grant. The cuts will affect 700,000 low-income families that include 1.3 million children; these families represent over one-third of all low-income families receiving TANF nationwide.A number of states are cutting cash assistance deeply or ending it entirely for many families that already live far below the poverty line, including many families with physical or mental health issues or other challenges. Numerous states also are cutting child care and other work-related assistance that will make it harder for many poor parents who are fortunate enough to have jobs to retain them.
This is perverse precisely because such programs were once widely understood as “counter-cyclical”–designed to temporarily expand in tough economic times. Not any more, says CPBB:
To be effective, a safety net must be able to expand when the need for assistance rises and to contract when need declines. The TANF block grant is failing this test, for several reasons: Congress has level-funded TANF since its creation, with no adjustment for inflation or other factors over the past 15 years; federal funding no longer increases when the economy weakens and poverty climbs; and states — facing serious budget shortfalls — have shifted TANF funds to other purposes and have cut the TANF matching funds they provide.
This retrenchment, mind you, is what’s already happening, and does not reflect the future blood-letting implied by congressional Republican demands for major new cuts in federal-state safety net programs–most famously Medicaid, which virtually all GOPers want to convert into a block grant in which services are no longer assured.
If, as appears increasingly likely, the sluggish economy stays sluggish for longer than originally expected, and both the federal government and states continue to pursue Hoover-like policies of attacking budget deficits with spending cuts as their top priority, it’s going to get even uglier down at the level of real-life people trying to survive. If you are unlucky enough to live in one of those states where governors and legislators are proudly hell-bent on making inadequate safety-net services even more inadequate or abolishing them altogether, it’s a grim road ahead.
By: Ed Kilgore, Democratic Strategist, June 10, 2011
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