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“The Entitlement Of The Very Rich”: Gutting Social Security And Medicare Far More Unthinkable Than Not Reauthorizing Ex-Im Bank

The very rich don’t think very highly of the rest of us. This fact is driven home to us through fluke events, like the taping of Mitt Romney’s famous 47 percent comment, in which he trashed the people who rely on Social Security, Medicare, and other forms of government benefits.

Last week we got another opportunity to see the thinking of the very rich when Jeffrey Immelt, the CEO of General Electric, complained at a summit with African heads of state and business leaders that there is even an argument over the reauthorization of Export-Import Bank. According to the Washington Post, Immelt said in reference to the Ex-Im Bank reauthorization, “the fact that we have to sit here and argue for it I think is just wrong.”

To get some orientation, the Ex-IM Bank makes around $35 billion a year in loans or loan guarantees each year. The overwhelming majority of these loans go to huge multi-nationals like Boeing or Mr. Immelt’s company, General Electric. The loans and guarantees are a subsidy that facilitates exports by allowing these companies and/or their customers to borrow at below market interest rates.

As a practical matter, whether the bank is reauthorized or not will have no noticeable impact on the economy. If the government took away the subsidy on this $35 billion in exports, it would probably lead to a decline of between 10 and 30 percent in these exports ($3.5 billion to $10.5 billion), while costing Boeing, GE, and the rest some of their profit margin on the portion they continued to export.

The loss of exports would be in the range of 0.2 percent to 0.5 percent of total exports or 0.02 percent to 0.06 percent of GDP. (This assumes that none of the exports include imported parts, which is obviously not the case.) In short the impact on the economy of ending the subsidies from the Ex-Im Bank would be almost invisible.

If the folks pushing for the Ex-Im Bank reauthorization were really concerned about jobs created through trade, we could generate far more jobs with even a modest decline (e.g. 1 percent) of the dollar against other currencies. This would make our exports cheaper to people in other countries and would reduce the price of domestically produced goods relative to imports, thereby leading consumers to purchase more U.S. made goods.

While ending the Ex-Im Bank would have little impact on trade and jobs it would be a big deal to Mr. Immelt’s company and presumably to Mr. Immelt’s compensation. Therefore it is not surprising that he might find it “just wrong” that we should even have to argue about it.

For some additional context, it is worth noting that Mr. Immelt is one of the members of the Peter Peterson initiated group, Fix the Debt. In that capacity he has gone around the country arguing for the need to cut Social Security and Medicare benefits. So we have someone who makes $25 million a year, at least in part from taxpayer handouts, who runs around the country complaining about retired workers getting $1,300 a month from Social Security, whining because he has to argue to continue the handouts he receives.

It would be nice if Immelt were just another crazed one percenter who had no credibility outside of his country club, however this is not the case. It was not an accident that Mr. Immelt was at this summit. He is a highly respected business leader and apparently is close enough to president Obama to have been made head of his Council on Jobs and Competitiveness.

The reality is that the Immelts of the world are able to put muscle behind their sense of entitlement because politicians need their campaign contributions to be credible candidates. For this reason, they are almost certain to secure the reauthorization of the Ex-Im Bank, which has the support of most of the leadership of both parties.

The rest of us just have our votes. But if the public has a clear understanding of the agenda of the Immelts of the world, and their political allies, it will be better positioned to protect the entitlements that workers depend on and have paid for. Gutting Social Security and Medicare should be far more unthinkable than not reauthorizing the Ex-Im Bank.

 

By: Dean Baker, Co-Director, CEPR; The Hufington Posst Blog, August 12, 2014

 

 

 

August 17, 2014 Posted by | Medicare, Social Security | , , , , , , | Leave a comment

“The Winds Are Shifting”: How Corporate America Is Losing The Debate On Taxes

If there is one clear loser in President Obama’s budget this year, it’s U.S. multinationals.

With six new ideas designed to plug some major leaks in the tax code, the 2015 budget proposes a total of more than $276 billion in higher taxes on overseas earnings for U.S. multinationals over the next decade, about $120 billion more than last year’s budget. (A sample of the policy just to give you an idea of how deep in the guts the administration is going: “Create a new category of Subpart F income for transactions involving digital goods or services.”)

So much for the White House’s attempts to strike common ground with big company chief executives, who have been howling for years about paying too much in taxes with the federal corporate tax rate at 35 percent. The companies have also poured money into an endless parade of coalitions with names like ACT, RATE, WIN, TIE AND LIFT.

The trouble with the executives’ complaints is that many companies don’t pay nearly the 35 percent rate. GE, for instance, in its most recent annual filing said it paid an effective tax rate of 4.2 percent. (See this graphic we ran last year showing taxes paid by companies in the Dow 30.) These firms insist that the high rate is merely forcing them to find complex ways to lower their tax bills.  But with this budget, it’s clear the administration isn’t buying it.

“The problem is not an international tax system that unacceptably handicaps U.S. businesses,” said Ed Kleinbard, a professor at the University of Southern California’s Gould School of Law who has done extensive research on the way companies shuffle their income overseas to lower their tax bills. “Instead the problem is an international tax system both in the United States and other countries that U.S. multinational firms have demonstrated they are highly skilled at gaming.”

The president’s budget is the latest sign for corporate tax lobbyists that the winds are perhaps shifting against them. Last month’s tax reform plan from House Ways and Means Chairman Dave Camp (R-Mich.) also included a number of ideas unpopular with business, including a bank tax. His section on international tax reform was somewhat more generous to big firms, giving them a lower rate on overseas earnings with anti-abuse measures that Kleinbard says don’t go far enough.

Of course, expectations are low that either the president or Camp’s policies will ever make the leap to reality. But after spending hundreds of millions of dollars on lobbyists, corporate America is not exactly seeing its worldview reflected in these blue prints.

 

By: Jia Lynn Yang, WonkBlog, The Washington Post, March 5, 2014

March 10, 2014 Posted by | Corporations, Tax Code | , , , , , , , | Leave a comment

“Throwing Their Own Under The Bus”: CEO’s With Massive Retirement Fortunes Push Social Security Cuts

With budget negotiations on the horizon, a buzz is building around Social Security, from Elizabeth Warren and other Democrats calling for an expansion of benefits to The Washington Post arguing that seniors must be sacrificed for the good of the “poor young.”

Two of the biggest players in the debate are largely behind the scenes: Business Roundtable and Fix the Debt, corporate lobbies that use deficit fear-mongering to sell benefit cuts. These groups are made up of CEOs of America’s largest corporations—people with retirement accounts that are more than 1,000 times as large as those of the average Social Security beneficiary.

Each of the 200 executives of Business Roundtable has retirement savings averaging $14.5 million, according to a new report from the Institute for Policy Studies and the Center for Effective Government. That’s compared to the $12,000 that the median US worker near retirement age has managed to put away. Once Business Roundtable CEOs start drawing Social Security themselves, they’ll be cashing a monthly check that is sixty-eight times larger than an ordinary retiree’s, ensuring that they’ll never bear the burden of the cuts they’re advocating.

“I find it hypocritical to see CEOs sitting on massive retirement fortunes of their own saying that the solution to the country’s fiscal challenge is to put an even greater burden on retirees, many of whom already struggling,” said Sarah Anderson, director of the Global Economy Project at IPS and one of the report’s authors.

One of those CEOs is David Cote, the vice-chair of Business Roundtable and a member of the steering committee for Fix the Debt. After eleven years at Honeywell where he’s now the chief executive, his retirement assets are worth $134.5 million. That means that as a retiree he’ll draw a monthly pension of nearly $800,000.

Cote is a deficit hawk, and claims to be worried about the long-term stability of Social Security. A member of the Bowles-Simpson commission and President Obama’s debt committee, Cote has called for $3 to $4 trillion in spending cuts over the next decade, “especially when it comes to entitlements.”

To make some of those reductions via cuts to Social Security, Business Roundtable has proposed raising the retirement age to 70, restricting benefit growth and changing the way inflation is calculated in a way that amounts to a benefit cut for seniors. (Read George Zornick on why this change, called Chained CPI, is a bad deal.) At the same time, Business Roundtable and Fix the Debt are calling for more corporate tax breaks.

“If Congress approves of proposals like ones that Business Roundtable are pushing, we could see severe cuts that could mean the difference between any kind of dignified retirement and absolute poverty,” Anderson said. Two-thirds of retired Americans rely on Social Security for the majority of their income, and more than 40 percent would be in poverty without those benefits.

These CEOs aren’t just trying to short the average American retiree; they’re throwing their own under the bus. While raising alarm about the federal debt, Business Roundtable CEOs have run up massive deficits in their employees’ pension funds. According to the report, ten companies led by members of Business Roundtable have shortfalls in their employee pension funds of between $4.9 and $22.6 billion. The largest of those belongs to General Electric, run by Business Roundtable and Fix the Debt member Jeffrey Immelt, the prospective beneficiary of a $59.3 million retirement fund.

GE stopped offering traditional pension plans for new employees in 2011, forcing workers to switch to 401(k) plans. Many other companies have shifted the burden of retirement savings to their employees in this way in recent years, and that’s been a significant driver of the retirement crisis. Just 18 percent of workers can expect traditional pensions today, compared with 38 percent in 1985. Instead of getting a fixed check, retirees are at the mercy of the market—making the assurance of Social Security benefits even more essential. But Business Roundtable continues to put the responsibility for the retirement crisis on retirees themselves. “[T]rue retirement security will be achieved only if Americans save more,” reads the group’s 2013 CEO Growth Agenda.

Saving more is an increasingly unworkable solution for the millions of workers whose wages and benefits are being undercut by some of the same CEOs directing them to do so. As the report lays out, many of the most effective ways to strengthen Social Security involve asking more of executives, not employees. Eliminating the cap on wages subject to Social Security taxes (currently set at $113,700) would eliminate 95 percent of the projected shortfall for seventy-five years, according to the Congressional Research Service. That’s three times the deficit reduction achieved by raising the retirement age to 70. Subjecting stock-based compensation to Social Security taxes would raise billions more.

Don’t expect to hear about those proposals from Business Roundtable, however. “I do think that it is a real weakness of these corporate lobby groups, that they’re making the public face of the agenda to cut Social Security these CEOs that are sitting on massive nest eggs of their own,” said Anderson. “It undercuts their credibility and influence in these debates, and I’m hoping it will make it difficult to achieve the cuts they’re proposing.”

 

By: Zoe Carpenter, The Nation, November 19, 2013

December 1, 2013 Posted by | Corporations, Social Security | , , , , , , , | 1 Comment

“War Against Reality”: Neutron Jack Welch And The Jobless Numbers Conspiracy

Opening yet another front in their endless war against reality, right-wing conspiracy-mongers have moved on from polling data to federal unemployment statistics, apparently because – like the political polls they’ve disputed in recent weeks — the latest jobless number is not sufficiently damaging to President Obama.

Shortly after the Bureau of Labor Statistics released its September unemployment numbers on Friday morning, showing that the jobless rate fell last month from 8.1 percent to 7.8 percent, outraged expressions of doubt began to appear on the Internet.

Nobody cited any substantive evidence to support allegations that the BLS had suddenly “cooked” its data to promote the president’s re-election, of course. Evidence isn’t required or expected in Fox Nation.

What sustained at least momentary interest in this new “truther” flurry, however, was a Twitter effusion from Jack Welch, the former General Electric chairman, who described the BLS number as “unbelievable” and complained that “these Chicago guys will do anything” because Obama “can’t debate.” (He later admitted to Chris Matthews on MSNBC’s Hardball, “I have no evidence to prove that [the White House influenced the BLS], ” adding disingenuously that “I just raised the question.”)

Although Welch is superficially a credible figure — indeed, still an idol in certain quarters of American business — he is also a particularly enthusiastic and volatile Romney surrogate. “Neutron Jack,” as he used to be known, admires Romney deeply, perhaps because both have become symbols of “corporate greed, arrogance, and contempt for workers.” His tweet about the BLS was a political expression, not an expert assessment, and invites skepticism. But Welch certainly is familiar with dubious numbers and political manipulation.

Several years after he retired from General Electric in 2001 — where his legendary managerial successes brought him accolades as the “CEO of the century” in the business press — the Securities and Exchange Commission opened an investigation of the company’s accounting practices. What the SEC eventually uncovered were long-running schemes to inflate earnings, reminiscent of Enron.

While nobody held Welch personally accountable, the violations that cost the conglomerate $50 million in fines occurred on the watch of the chief financial officer he had appointed in 1998. Other accounts of questionable business practices at GE date back much further.

More pertinent than GE’s accounting misadventures is Welch’s controversial role in the 2000 election, when he became known as an outspoken supporter of George W. Bush. (Considering the dismal history of the Bush presidency, voters might think twice before taking Welch’s political advice this year.) At the time, GE owned NBC and its cable networks CNBC and MSNBC, and Welch was known to make his presence felt in the studios and newsrooms. Nobody at 30 Rock had the slightest doubt about Welch’s hatred toward President Clinton and the Clinton administration, or about his desire to see Clinton replaced by Bush.

On Election Night, as witnesses later told Rep. Henry Waxman, Welch came into the NBC newsroom while the network’s political staff tried to determine who had won the historically-close contest between Bush and Vice President Al Gore. In what news executives later acknowledged was a serious mistake, they called the election for Bush, following a trend started by Fox News, where a Bush cousin was running election coverage under the watchful eye of former Bush consultant and Fox boss Roger Ailes.

According to Waxman’s findings, Welch blatantly tried to influence the decision by NBC election producers to name Bush the winner, based on Florida numbers that were too preliminary and too close to support that call.

Witnesses said that Welch personally examined the raw election data and told the NBC director of election coverage, Sheldon Gawiser, that he believed Bush had won. When Fox called the election for Bush, Welch could be overheard asking Gawiser why NBC had not yet done the same. Not long after that alleged conversation, NBC announced that Bush had won.

NBC News strongly disputed Waxman’s stated concerns over undue influence by Welch. But an internal evaluation later “recommended that the network [should] sequester the election decision desk and protect its election analysts from “unnecessary interruptions.”

Welch himself dismissed the Waxman investigation as “pure crazy” — which is pretty much how economists and government experts are describing his BLS tweet.

But whatever Welch’s present attitude and past behavior, is there any real reason why he should doubt the BLS jobs data — compiled by a corps of dedicated civil servants (not political appointees), many of whom are Republicans, month after month and decade after decade?

The short answer is no.

But before closing this pointless episode, there is another bit of sordid irony involving a different Romney associate. There was once a White House that sought to manipulate BLS statistics for its own partisan purposes. Before the Watergate scandal toppled him from power, Richard Nixon was constantly frustrated by his inability to exercise political control over the agency’s professional civil servants. In his paranoia, Nixon blamed this “problem” on “the Jews” that he believed were running BLS and their animosity toward him – so he and Charles Colson instructed Fred Malek, one of their political stooges, to ferret out the Jews and get rid of them.

Their anti-Semitic plot failed, Nixon resigned to escape criminal prosecution, Colson went to prison for Watergate offenses, and Malek languished in disgrace. Eventually he recovered his reputation, got rich working for Marriott, and buddied up to the Romneys. Last April, he and his wife hosted a “birthday party” fundraiser in Washington for Ann Romney, at $1,000 a head.

So the Republican accusations about gaming the BLS statistics may simply be another case of projection. Perhaps they think Obama is doing it because they always wanted to.

 

By: Joe Conason, The National Memo, October 5, 2012

October 6, 2012 Posted by | Election 2012 | , , , , , , , , | 1 Comment

Want To Cut The Deficit? Restore Fair Taxes On Corporations And The Wealthy

If the deficit hawks in Congress are serious about righting our economic ship and reducing deficits in the federal budget and many state capitols, it would we worth listening to the voices rising from the streets suggesting a very different solution than more cuts in safety net programs, education, pensions, and worker’s rights.Greed at the upper echelons of our society is bankrupting our governments at every level. “Suggesting corporations and the wealthiest Americans pay their fair share,” writes Deborah Burger, “usually earns one the reproof of advocating class warfare. But class warfare when practiced by the elites is apparently perfectly acceptable. The average CEO who was paid $27 for every dollar earned by an employer 25 years ago – during which wages have mostly fallen or stagnated – now gets a ratio of about $275 to $1.”

This is not a budget fight, it’s a fight for the future of an America in which everyone should be able to retire in dignity, not worry about whether they can go to the doctor when they get sick, or whether there will still be schools for their kids.

How will we pay for it? By increasing the revenues from those who can most afford it, not by punishing those who have the least. By requiring corporations and the wealthiest individuals to pay their fair share, and stop blaming working people for an economic crisis created by Wall Street and exploited by their politician acolytes.

We’ve all heard the arguments. Pass more corporate tax breaks because that’s what makes the economy grow. Except it doesn’t.

Corporate profits per employee are at record levels. At $1.6 trillion, third quarter 2009 corporate profits were the highest ever recorded. Yet official unemployment still hovers near 9 percent, and the real jobless number is probably double that. Whatever big corporations are doing with their record profits, they are not hiring more workers.

Or the argument that our 35 percent corporate tax rate is one of the highest in the world. Except few if any major corporations pay anywhere near that amount. Half of foreign companies and about 42 percent of U.S. companies paid no U.S. income taxes for two or more years from 1998 to 2005, according to a recent Government Accounting Office study.

How do they accomplish this? Pages of corporate tax loopholes that render the supposed tax rate meaningless, loopholes not available to the average working family.

Who are some of those tax scofflaws? Bank of America and Citigroup, two of the financial institutions that, unlike workers did actually create the financial meltdown, paid no taxes in 2009. Boeing, just awarded a new $35 billion contract by the federal government to build airplanes, also paid no taxes between 2008 and 2010 despite recording $10 billion in profits those year, reports Citizens for Tax Justice.

Where’s the shared sacrifice from these corporate giants? Not from General Electric which, as the New York Times reported March 24, made $14.2 billion in profits in 2010, but paid no U.S. taxes, and was rewarded with the appointment of their top executive to head President Obama’s Council on Jobs and Competitiveness. Apparently paying no taxes is a model for how to be competitive.

Then there’s the wealthiest Americans who won a two year extension on tax breaks in December and also profited from the near elimination of estate taxes, at a time when the richest 5 percent of Americans control 23 percent of total income, compared to just 12 percent for the 40 percent at the bottom.

According to Merrill Lynch Global Wealth Management and Capgemini Consulting, there were about 3 million high net worth individuals and ultra high net wealth individuals in the US in 2009, those with investable assets, excluding primary residences and consumables, of from $1 million to $30 million.

Calculations by the Institute for Health and Socio-Economic Policy, research arm of National Nurses United, shows that a one-time wealth surcharge of 14% on those assets would more than pay for the $1.6 trillion budget deficit projection for 2011. Or, it would support about 33.8 million households at the national real median income level for 2008, pay for a year’s worth of AIDS medication for about 142 million patients, or create 34 million jobs at $50,000 per year.

In other words, we could more than balance our federal and state budgets without cutting Social Security or slashing pensions for public servants or depriving students of access to a decent education or far too many Americans of access to healthcare.

Turn off the Fox News echo chamber and you can hear the sounds of those calling for economic justice and a more fair tax system every day in the streets of Madison, Columbus, Indianapolis, and other cities across America. They have opened a door that will not be closed, and their voices are getting louder.

By: Deborah Burger, Originally published March 25, 2011, CommonDreams.org

March 27, 2011 Posted by | Congress, Corporations, Deficits, Economy, Federal Budget, Politics, States | , , , , , , | Leave a comment

   

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