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“Who Says Crime Doesn’t Pay?”: The Bottom Line Is Crime Can Actually Pay — If It’s Big Enough

Hey, can we all just stop complaining that our government coddles Wall Street’s big money-grubbing banks?

Sure, they went belly-up and crashed our economy with their frauds, rigged casino games, and raw greed. And, yes, the Bush and Obama regimes rushed to bail them out with trillions of dollars in our public funds, while ignoring the plight of workaday people who lost jobs, homes, businesses, wealth, and hope. But come on, Buckos, have you not noticed that the feds are now socking the bankers with huuuuuge penalties for their wrongdoings?

Wall Street powerhouse Goldman Sachs, for example, was recently punched in its corporate gut with a jaw-dropping $5 billion for its illegal schemes.

Wow, $5 billion! That’s a stunning amount that Goldman Sachs has agreed to pay to settle federal criminal charges over its shameful financial scams that helped wreck America’s economy in 2008. That’s a lot of gold, even for Goldman Sachs. It’s hard to comprehend that much money, so think of it like this: If you paid out $100,000 a day, every day for 28 years, you’d pay off just one billion dollars. So, wow, imagine having to pull Five Big B’s out of your wallet! That’s enough to make even the most arrogant and avaricious high-finance flim-flammer think twice before risking such scams, right? Thus, these negotiated settlements between the Justice Department and the big banks will effectively deter repeats of the 2008 Wall Street debacle… right?

Actually, no.

The chieftains of the Wall Street powerhouse say they are “pleased” to swallow this sour slug of medicine. It’s not because they’re contrite and eager to make amends.  Wall Street bankers don’t do contrite. They are pleased (even thrilled) because this little insider secret: Thanks to Goldman’s backroom dealing with prosecutors, the settlement is riddled with special loopholes that could eliminate nearly $2 billion from the publicized “punishment.”

For example, the deal calls for the felonious bank to put a quarter-billion dollars into affordable housing, but generous federal negotiators put incentives and credits in the fine print that will let Goldman escape with paying out less than a third of that. Also, about $2.5 billion of the settlement is to be paid to consumers hurt by the financial crisis. But the deal lets the bank deduct almost a billion of this payout from its corporate taxes — meaning you and I will subsidize Goldman’s payment. As a bank reform advocate puts it, the problem with these settlements “is that they are carefully crafted more to conceal than to reveal to the American public what really happened here.”

Also, notice that the $5 billion punishment is applied to Goldman Sachs, not the “Goldman Sackers.” The bank’s shareholders have to cough up the penalty, rather than the executives who did the bad deeds. Goldman Sachs’ CEO, Lloyd Blankfein, just awarded himself a $23 million paycheck for his work last year. That work essentially amounted to negotiating the deal with the government that makes shareholders pay for the bankers’ wrongdoings — while he and other top executives keep their jobs and pocket millions. Remember, banks don’t commit crimes — bankers do.

One more reason Wall Street bankers privately wink and grin at these seemingly huge punishments is that even paying the full $5 billion would only be relatively painful. To you and me, that sounds like a crushing number — but Goldman Sachs raked in $33 billion in revenue last year, so it’s a reasonable cost of doing business. After all, Goldman sold tens of billions of dollars in the fraudulent investment packages leading to the settlement, so the bottom line is that crime can actually pay — if it’s big enough.

 

By: Jim Hightower, Featured Post, The National Memo, May 4, 2016

May 5, 2016 Posted by | Big Banks, Corporate Crime, Financial Crisis, Wall Street | , , , , , , , | Leave a comment

“At The Top Of The To-Do List For 2017”: Here’s What Will Happen On Taxes If A Republican Is Elected President

The Tax Policy Center has released an analysis of Marco Rubio’s tax plan, which, like their analyses of Jeb Bush’s plan and Donald Trump’s plan, shows that it would result in a staggering increase in the deficit if it were implemented — $6.8 trillion in Rubio’s case, compared to an identical $6.8 trillion for Bush and $9.5 trillion for Trump.

The problem is that it’s awfully hard to wade through all these details and numbers, grasp the distinctions between them, and determine which one you find preferable.

The good news is, you don’t have to.

That’s in part because the differences between the various Republican candidates’ plans are overwhelmed by what they have in common. But more importantly, it’s because if one of them becomes president, the tax reform that results will reflect not so much his specific ideas as the party’s consensus on what should be done about taxes.

So to simplify things, here’s what you can expect if a Republican is elected president in November:

  1. Income tax rates will be cut
  2. Investment tax rates will be cut
  3. The inheritance tax will be eliminated
  4. Corporate income tax rates will be cut
  5. Corporations will be given some kind of tax holiday to “repatriate” money they’re holding overseas

And that’s basically it. Yes, there will be hundreds of provisions, many of which could be consequential, but those are the important things, and the things almost all Republicans agree on.

Let’s keep in mind that this is the policy area Republicans care more about than any other. There are pockets of conservatives for whom the details of defense policy are important, and others who care a lot about education, and even a few who care a lot about health care. But all of them want to cut taxes. They may get passionate talking about how much they want to repeal the Affordable Care Act, or how tough they’ll be on border security, or how they’ll totally destroy the Islamic State. But if a Republican is elected in 2016, it is a stone-cold guarantee that changes to the tax code will be at the top of the to-do list for 2017.

That doesn’t mean, however, that the tax reform we get will be exactly what that president promised during the campaign. For instance, Ted Cruz is proposing what’s essentially a Value Added Tax (VAT). But he won’t get that passed even with a Republican Congress, because it’s controversial within the party.

That’s critical to understand. It isn’t as though congressional Republicans, who have been waiting to do this for years, will just take the new president’s plan and hold a vote on it. Instead, they’re going to hammer out a complex bill that reflects their common priorities. It will be a product of the party’s consensus on what should be done about taxes, a consensus that has been forming since the last time they cut taxes, during the George W. Bush administration.

You can make an analogy with the ACA. By the time 2008 came around, Democrats had arrived on a basic agreement on what health care reform would look like. That isn’t to say there was no disagreement within the party. But the outlines had been agreed to by the most powerful people and the wonks within the party: expand Medicaid for those at the bottom, create exchanges for people to buy private insurance, offer subsidies to those in the middle. That’s why the plans offered by Barack Obama, Hillary Clinton, and John Edwards in that election all followed that outline, and that’s what the Democratic Congress eventually produced.

The things that I listed above are the essential tax consensus of the GOP at the moment. Some people would add or modify some elements — Rubio, for instance, would completely eliminate investment taxes while others would merely reduce them, but he would also expand the child tax credit. But the outline is the same, particularly in its effects. Here’s how we can summarize those:

  1. Poor and middle-class people will pay a little less in taxes
  2. Wealthy people will pay a lot less in taxes
  3. Corporations will pay a lot less in taxes
  4. The deficit will explode

Republicans, who profess to care deeply about deficits, will claim that their tax plan won’t actually cost anything (or will cost very little), because when you cut taxes, you create such a supernova of economic growth that the cost of the cuts is offset by all the new revenue coming in. This is sometimes referred to as a belief in the “Tax Fairy” because it has as much evidence to support it as a belief in the Tooth Fairy. It is a fantasy, but their continued insistence that it’s true requires us to address it.

You don’t need a Ph.D. in economics to remember the history of the last quarter-century. Bill Clinton raised taxes, and Republicans said the country would plunge into recession and the deficit would balloon; instead we had one of the best periods of growth in American history and we actually got to federal budget surplus. Then George W. Bush cut taxes, and Republicans said we’d enter economic nirvana; instead there was incredibly weak job growth culminating in the Great Recession. Barack Obama raised taxes, and Republicans said it would produce economic disaster; instead the deficit was slashed and millions of jobs were created.

So we don’t actually have to argue about whether the Republican tax plan will increase the deficit, because the theory behind it has been tested again and again, and the results are obvious. If they cut taxes as they’d like, maybe the deficit will go up by a trillion dollars, or five trillion, or eight trillion. We don’t know exactly how much it will go up, but we know it will go up.

As far as Republicans are concerned, dramatic increases in the deficit are a reasonable price to pay to obtain the moral good of tax cuts. If you think I’m being unfair, ask them whether they believe Bush’s tax cuts were a mistake. They don’t.

You can agree or disagree. But you don’t have to wonder what will happen if a Republican is elected. There may be other plans that president will be unable or unwilling to follow through on, but I promise you, cutting taxes is one thing he absolutely, positively will do. And we don’t have to wonder what it will look like. We already know.

 

By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, February 12, 2016

February 13, 2016 Posted by | GOP Presidential Candidates, Tax Cuts, Tax Reform | , , , , , , , , | Leave a comment

“Elections Have Consequences”: Don’t Let Anyone Tell You Otherwise

You have to be seriously geeky to get excited when the Internal Revenue Service releases a new batch of statistics. Well, I’m a big geek; like quite a few other people who work on policy issues, I was eagerly awaiting the I.R.S.’s tax tables for 2013, which were released last week.

And what these tables show is that elections really do have consequences.

You might think that this is obvious. But on the left, in particular, there are some people who, disappointed by the limits of what President Obama has accomplished, minimize the differences between the parties. Whoever the next president is, they assert — or at least, whoever it is if it’s not Bernie Sanders — things will remain pretty much the same, with the wealthy continuing to dominate the scene. And it’s true that if you were expecting Mr. Obama to preside over a complete transformation of America’s political and economic scene, what he’s actually achieved can seem like a big letdown.

But the truth is that Mr. Obama’s election in 2008 and re-election in 2012 had some real, quantifiable consequences. Which brings me to those I.R.S. tables.

For one of the important consequences of the 2012 election was that Mr. Obama was able to go through with a significant rise in taxes on high incomes. Partly this was achieved by allowing the upper end of the Bush tax cuts to expire; there were also new taxes on high incomes passed along with the Affordable Care Act, a.k.a. Obamacare.

If Mitt Romney had won, we can be sure that Republicans would have found a way to prevent these tax hikes. And we can now see what happened because he didn’t. According to the new tables, the average income tax rate for 99 percent of Americans barely changed from 2012 to 2013, but the tax rate for the top 1 percent rose by more than four percentage points. The tax rise was even bigger for very high incomes: 6.5 percentage points for the top 0.01 percent.

These numbers aren’t enough to give us a full picture of taxes at the top, which requires taking account of other taxes, especially taxes on corporate profits that indirectly affect the income of stockholders. But the available numbers are consistent with Congressional Budget Office projections of the effects of the 2013 tax increases — projections which said that the effective federal tax rate on the 1 percent would rise roughly back to its pre-Reagan level. No, really: for top incomes, Mr. Obama has effectively rolled back not just the Bush tax cuts but Ronald Reagan’s as well.

The point, of course, was not to punish the rich but to raise money for progressive priorities, and while the 2013 tax hike wasn’t gigantic, it was significant. Those higher rates on the 1 percent correspond to about $70 billion a year in revenue. This happens to be in the same ballpark as both food stamps and budget office estimates of this year’s net outlays on Obamacare. So we’re not talking about something trivial.

Speaking of Obamacare, that’s another thing Republicans would surely have killed if 2012 had gone the other way. Instead, the program went into effect at the beginning of 2014. And the effect on health care has been huge: according to estimates from the Centers for Disease Control and Prevention, the number of uninsured Americans fell 17 million between 2012 and the first half of 2015, with further declines most likely ahead.

So the 2012 election had major consequences. America would look very different today if it had gone the other way.

Now, to be fair, some widely predicted consequences of Mr. Obama’s re-election — predicted by his opponents — didn’t happen. Gasoline prices didn’t soar. Stocks didn’t plunge. The economy didn’t collapse — in fact, the U.S. economy has now added more than twice as many private-sector jobs under Mr. Obama as it did over the same period of the George W. Bush administration, and the unemployment rate is a full point lower than the rate Mr. Romney promised to achieve by the end of 2016.

In other words, the 2012 election didn’t just allow progressives to achieve some important goals. It also gave them an opportunity to show that achieving these goals is feasible. No, asking the rich to pay somewhat more in taxes while helping the less fortunate won’t destroy the economy.

So now we’re heading for another presidential election. And once again the stakes are high. Whoever the Republicans nominate will be committed to destroying Obamacare and slashing taxes on the wealthy — in fact, the current G.O.P. tax-cut plans make the Bush cuts look puny. Whoever the Democrats nominate will, first and foremost, be committed to defending the achievements of the past seven years.

The bottom line is that presidential elections matter, a lot, even if the people on the ballot aren’t as fiery as you might like. Don’t let anyone tell you otherwise.

 

By: Paul Krugman, Op-Ed Columnist; Opinion Pages, The Conscience of a Liberal, The New York Times, January 4, 2015

January 5, 2016 Posted by | Economic Policy, IRS Tax Tables, Obamacare, Tax Revenue, Taxes on the Wealthy | , , , , , , , | 1 Comment

“The Angriest And Least Moral”: Republicans Going For Broke On The Angry 20-30%

Texas governor Greg Abbott had choice words for President Obama and his plan to use executive power to expand gun safety laws:

“Obama wants to impose more gun control. My response? COME & TAKE IT.”

Grover Norquist went farther, comparing Obama to Darth Vader. So what is the President planning to do, exactly, that makes him some combination of Persian Emperor and Sith Lord? Mostly, expand background checks and clarify a federal rule or two:

The Post said Obama would use executive authority in several areas, including expanding background-check requirements for buyers who purchase weapons from high-volume dealers…

Thousands of guns are sold yearly by dealers who fall between licensed dealers and occasional sellers who do not need a license. Clarification could define which sellers need to meet rules and do background checks. Alcorn said.

It’s worth remembering in this context that a full 88% of Americans support stronger background checks for gun purchases–including 79% of Republicans. This is not a contentious issue except to a very small percentage of Americans who consider owning unchecked and unregulated arsenals a sacred right (while insisting that access to healthcare is not.)

But this isn’t unusual. Seventy percent of Americans support comprehensive immigration reform, for example. That’s not particularly contentious, either, except to America’s most bigoted elements.

63% of Americans support raising taxes on the rich and on large corporations to reduce income inequality. Only 31% oppose, with the rest uncertain. Again, this isn’t a terribly problematic issue in a normal democracy where supermajorities rule the day.

Republicans, however, are increasingly trapping themselves into a strategy that doubles down on the angriest and least moral 20-30% of the population. They do have the advantage of knowing that demographic votes more reliably and consistently than the other 70-80% of the public. It’s true that many of these voters, especially the ones with the deadly arsenals, are incredibly passionate about their views and will not only vote but work hard to encourage others to vote their way as well.

But it’s also true that this particular demographic is declining in number. And in the long run a political party cannot succeed by continuing to court an ever slimmer set of out-of-touch voters, particularly in a high-turnout election.

Nothing in this analysis is new, of course. But it’s worth noting that this year is different in the degree to which the GOP has placed its bet on the rump 20-30%, the virulence with which it is doing so in its rhetoric, the obvious disadvantages it is working with in polling not just on the issues but also with candidate head-to-head matchups, and the rapid decline of the very voter base on which it is depending.

Yes, the GOP will probably do quite well in the House for the next few years. Yes, it will continue to control large numbers of mostly rural and Southern states.

But electoral gravity cannot be defied forever. Tipping points turn into breaking points. And it’s going to be very ugly when the worst fifth of America’s population realizes that it really isn’t the silent majority anymore, and just how few friends it has left.

 

By: David Atkins, Political Animal Blog, The Washington Monthly, January 3, 2015

January 4, 2016 Posted by | Greg Abbott, Gun Control, Gun Dealers | , , , , , , , | 2 Comments

“A Rerun Of What His Brother Tried”: Jeb Bush’s Tax Plan Shows Republicans Can’t Learn From Economic History

Jeb Bush released the first details of his tax plan today in a Wall Street Journal op-ed, so we finally learn the secret that will produce spectacular growth, great jobs for all who want them, and a new dawn of prosperity and happiness for all Americans. Are you ready?

It’s…tax cuts for the wealthy! If only we had known that this amazingly powerful tool was available to us all along!

To be fair, not everything in Bush’s tax plan is targeted at the rich — there are some goodies in there for other people as well. But it’s pretty clear that in addition to wanting to revive the Bush Doctrine in foreign affairs, Jeb is looking to his brother’s tax policies as a model for how we can make the economy hum, I suppose because they worked so well the first time.

While many of the details are still vague, here are the basics of what Bush wants to do. He would reduce the number of tax brackets from its current seven down to three, of 10 percent, 25 percent, and 28 percent. This would represent a huge tax cut for people at the top, who currently pay a marginal rate of 39.6 percent. He also wants to eliminate the inheritance tax and the alternative minimum tax (both paid almost entirely by wealthy people), and slash corporate taxes. On the other end, he’d raise the standard deduction and expand the Earned Income Tax Credit, which helps the working poor. He would also eliminate the carried interest loophole, which allows hedge fund managers to pay lower rates on their income.

“We will treat all noninvestment income the same,” he says, which is a reminder that investment income, which is mostly gained by wealthy people, would still be treated more favorably than wage income, which is what working people make.

As Dylan Matthews notes, Bush’s plan is something of a compromise between the supply-siders and flat-taxers who think that cutting taxes on the wealthy is literally the only thing necessary to spur the economy, and the “reform conservatives” who would give the wealthy some breaks but put more of their effort toward changes affecting the middle class. But the biggest problem with Bush’s plan may not so much the particulars, but the fact that he believes that making these changes will “unleash” the American economy.

We’ve had this debate again and again in recent years, and every time, events in the real world prove Republicans wrong, yet they never seem to change their tune. When Bill Clinton’s first budget passed in 1993 and raised taxes on the wealthy, Republicans said it would cause a “job-killing recession”; what ensued was a rather extraordinary economic boom and the first budget surpluses in decades. When George W. Bush cut taxes in 2001 and 2003, primarily for the wealthy, they said that not only would the economy rocket forward into hyperspace, but there would be little or no increase in the deficit because of all that increased economic activity. What actually happened was anemic growth and dramatically increased deficits, culminating in the economic catastrophe of 2008. When Barack Obama raised taxes, Republicans said the economy would grind to a halt; instead we’ve seen sustained job creation (despite weak income gains).

The lesson of all this, to any sane person, is that changing tax rates, particularly the top marginal income tax rate, has little or no effect on the economy. Yet Jeb Bush wants us to believe that his plan will produce sustained growth of 4 percent or more — something no president since Lyndon Johnson has managed — with what is essentially a rerun of what his brother tried.

He’s hardly alone in this belief. Indeed, with the bizarre exception of Donald Trump, all the Republican candidates put tax cuts that would benefit the wealthy at the center of the their ideas for helping the American economy. So why can’t they learn from history?

The answer is that for conservatives, cutting taxes on the wealthy is less a practical instrument to produce a healthy economy than it is a moral imperative. When they talk passionately about the crushing burden taxation imposes on the “job creators,” those noble and virtuous Americans whose hard work and initiative (even when it comes in the form of waiting for their monthly dividend checks) provide the engine that moves the nation forward, you can tell they believe it deep in their hearts. If cutting the top marginal rate hasn’t delivered us to economic nirvana before, well they’re sure it will eventually. And even if it doesn’t, it’s still the right thing to do.

There are some cases where partisans will alter their philosophical beliefs in response to real-world evidence; for instance, right now, many Republicans are reexamining what they used to think about criminal justice and the utility of get-tough policies. But taxes occupy a singular place in the conservative philosophical hierarchy, so much so that many elected Republicans literally take an oath swearing never to raise them for any reason. Fourteen of the seventeen Republican presidential candidates have sworn that oath (though Bush is one of the three who hasn’t).

After all that has happened in the last couple of decades, it’s clear that there is literally no conceivable economic event or development that would dent the Republican conviction that cutting taxes for the wealthy is, if not the only thing that can help the economy, the sine qua non of economic revival. Maybe it’s too much to expect them to learn from history.

 

By: Paul Waldman, Senior Writer, The American Prospect; Contributor, The Plum Line Blog, The Washington Post, September 9, 2015

September 14, 2015 Posted by | Economic Growth, Economic Policy, Jeb Bush | , , , , , , , | Leave a comment

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