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
Loose Lips: Romney Miscasts Economy In GOP Debut
In rhetorical excesses marking his entry in the presidential campaign, Mitt Romney said the economy worsened under President Barack Obama, when it actually improved, and criticized the president for issuing apologies to the world that were never made.
A look at some of the statements by Romney on Thursday in announcing his bid for the Republican nomination and how they compare with the facts:
ROMNEY: “When he took office, the economy was in recession. He made it worse. And he made it last longer.”
THE FACTS: The gross domestic product, the prime measure of economic strength, shrank by a severe 6.8 percent annual rate before Obama became president. The declines eased after he took office and economic growth, however modest, resumed. The recession officially ended six months into his presidency. Unemployment, however, has worsened under Obama, going from 7.8 percent in January 2009 to 9.1 percent last month. It hit 10.1 percent in October 2009.
A case can be made for and against the idea that Obama’s policies made the economy worse than it needed to be and that the recession lasted longer than it might have under another president. Such arguments are at the core of political debate. But Obama did not, as Romney alleged, make the economy worse than it was when he took office.
ROMNEY: “A few months into office, he traveled around the globe to apologize for America.”
THE FACTS: Obama has not apologized for America. What he has done, in travels early in his presidency and since, is to make clear his belief that the U.S. is not beyond reproach. He has told foreigners that the U.S. at times acted “contrary to our traditions and ideals” in its treatment of terrorist suspects, that “America has too often been selective in its promotion of democracy,” that the U.S. “certainly shares blame” for international economic turmoil and has sometimes shown arrogance toward allies. Obama, whose criticisms of America’s past were typically balanced by praise, was in most cases taking issue with policies or the record of the previous administration, not an unusual approach for a new president — or a presidential candidate. Romney’s actual point seems to be that Obama has been too critical of his country.
But there has been no formal — or informal — apology. No saying “sorry” on behalf of America.
ROMNEY: “Three years later, foreclosures are still at record levels. Three years later the prices of homes continue to fall.”
THE FACTS: Although foreclosures remain high, the number of U.S. homes that were repossessed by lenders fell in April, compared with March and a year ago, according to the foreclosure listing service RealtyTrac Inc. Romney’s claim about home prices, though, is supported by the Standard & Poor’s/Case-Shiller 20-city monthly index. It found home prices in big metro areas have sunk to their lowest since 2002. Since the bubble burst in 2006, prices have fallen more than they did during the Great Depression.
ROMNEY: “Instead of encouraging entrepreneurs and employers, he raises their taxes, piles on record-breaking mounds of regulation and bureaucracy and gives more power to union bosses.”
THE FACTS: Romney ignores ambitious tax-cutting pushed by Obama. The stimulus plan early in his presidency cut taxes broadly for the middle class and business. He more recently won a one-year tax cut for 2011 that reduced most workers’ Social Security payroll taxes by nearly a third. He also campaigned in support of extending the Bush-era tax cuts for all except the wealthy, whose taxes he wanted to raise. In office, he accepted a deal from Republicans extending the tax cuts for all. As for tax increases, Obama won congressional approval to raise them on tobacco and tanning salons. The penalty for those who don’t buy health insurance, once coverage is mandatory, is a form of taxation. Several large tax increases in the health care law have not yet taken effect.
ROMNEY: “The expectation was that we’d have to raise taxes but I refused. I ordered a review of all state spending, made tough choices and balanced the budget without raising taxes.”
THE FACTS: Romney largely held the line on tax increases when he was Massachusetts governor but that’s only part of the revenue story. The state raised business taxes by $140 million in one year with measures branded “loophole closings,” the vast majority recommended by Romney. Moreover, the Republican governor and Democratic lawmakers raised hundreds of millions of dollars from higher fees and fines, taxation by another name. Romney himself proposed creating 33 new fees and increasing 57 others — enough to raise $59 million. Anti-tax groups were split on his performance. The Club for Growth called the fee increases and business taxes troubling. Citizens for Limited Taxation praised him for being steadfast in supporting an income tax rollback.
By: Calvin Woodward and Jim Kuhnhenn, Associated Press, Yahoo News, June 3, 2011
The White Working Class: The Most Pessimistic Group In America
Almost no one noticed, but around George W. Bush’s reelection in 2004, the nation crossed a demographic milestone.
From Revolutionary days through 2004, a majority of Americans fit two criteria. They were white. And they concluded their education before obtaining a four-year college degree. In the American mosaic, that vast white working class was the largest piece, from the yeoman farmer to the welder on the assembly line. Even as late as the 1990 census, whites without a college degree represented more than three-fifths of adults.
But as the country grew more diverse and better educated, the white working-class share of the adult population slipped to just under 50 percent in the Census Bureau’s 2005 American Community Survey. That number has since fallen below 48 percent.
The demographic eclipse of the white working class is likely an irreversible trend as the United States reconfigures itself yet again as a “world nation” reinvigorated by rising education levels and kaleidoscopic diversity. That emerging America will create opportunities (such as the links that our new immigrants will provide to emerging markets around the globe) and face challenges (including improving high school and college graduation rates for the minority young people who will provide tomorrow’s workforce).
Still, amid all of this change, whites without a four-year college degree remain the largest demographic bloc in the workforce. College-educated whites make up about one-fifth of the adult population, while minorities account for a little under one-third. The picture is changing, but whites who have not completed college remain the backbone of many, if not most, communities and workplaces across the country.
They are also, polls consistently tell us, the most pessimistic and alienated group in American society.
The latest measure of this discontent came in a thoughtful national survey on economic opportunity released last week by the Pew Charitable Trusts’ Economic Mobility Project. If numbers could scream, they would probably sound like the poll’s results among working-class whites.
One question asked respondents whether they expected to be better off economically in 10 years than they are today. Two-thirds of blacks and Hispanics said yes, as did 55 percent of college-educated whites; just 44 percent of noncollege whites agreed. Asked if they were better off than their parents were at the same age, about three-fifths of college-educated whites, African-Americans, and Hispanics said they were. But blue-collar whites divided narrowly, with 52 percent saying yes and a head-turning 43 percent saying no. (The survey, conducted from March 24 through 29, surveyed 2,000 adults and has a margin of error of ±3.4 percent.)
What makes these results especially striking is that minorities were as likely as blue-collar whites to report that they have been hurt by the recession. The actual unemployment rate is considerably higher among blacks and Hispanics than among blue-collar whites, much less college-educated whites.
Yet, minorities were more optimistic about the next generation than either group of whites, the survey found. In the most telling result, 63 percent of African-Americans and 54 percent of Hispanics said they expected their children to exceed their standard of living. Even college-educated whites are less optimistic (only about two-fifths agree). But the noncollege whites are the gloomiest: Just one-third of them think their kids will live better than they do; an equal number think their children won’t even match their living standard. No other group is nearly that negative.
This worry is hardly irrational. As Massachusetts Institute of Technology economists Frank Levy and Tom Kochan report in a new paper, the average high-school-educated, middle-aged man earns almost 10 percent less than his counterpart did in 1980. Minorities haven’t been exempt from that trend: In fact, high-school-educated minority men have experienced even slower wage growth than their white counterparts over the past two decades, calculates Larry Mishel, president of the liberal Economic Policy Institute.
But for minorities, that squeeze has been partially offset by the sense that possibilities closed to their parents are becoming available to them as discrimination wanes. “The distinction is, these blue-collar whites see opportunities for people like them shrinking, whereas the African-Americans [and Hispanics] feel there are a set of long-term opportunities that are opening to them that were previously closed on the basis of race or ethnicity,” said Mark Mellman, a Democratic pollster who helped conduct the Pew survey.
By contrast, although it is difficult to precisely quantify, the sense of being eclipsed demographically is almost certainly compounding the white working class’s fear of losing ground economically. That huge bloc of Americans increasingly feels itself left behind–and lacks faith that either government or business cares much about its plight. Under these pressures, noncollege whites are now experiencing rates of out-of-wedlock birth and single parenthood approaching the levels that triggered worries about the black family a generation ago. Alarm bells should be ringing now about the social and economic trends in the battered white working class and the piercing cry of distress rising from this latest survey.
By: Ronald Brownstein, Political Director, The Atlantic, May 27, 2011
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