Bush Tax Cuts Turn 10: Wall Street Celebrates, Americans Suffer
Break out the bubbly, because there will be celebrations today on Wall Street and in corporate boardrooms and mansions all across America. Why? Because today is the 10th anniversary of the big Bush tax breaks for bankers and billionaires and the businesses that bankroll their big-budget campaigns.
Today is an opportunity to ponder these questions: If the Bush tax cuts are so great, why has the economy been so bad since they became law 10 years ago? And how about this brain teaser: If the GOP theology of cutting taxes for the rich brings in more revenue, why is Democratic President Bill Clinton the only president in the last generation to leave a surplus behind for the next president?
In 1980, President George H.W. Bush called it voodoo economics. Bush 41 conveniently changed his position when he became Ronald Reagan’s running mate that year. But the first President Bush was right the first time. The idea that tax revenues will go up when you cut taxes has cast an evil spell over the U.S. economy going all the way back to Ronald Reagan. In 1981, the new GOP math became 1 + 1 = 3. With this kind of fuzzy math, it’s no wonder that President Reagan left behind a massive budget deficit.
George W. Bush may have had George H.W. Bush for a father, but Ronald Reagan was his role model. The latest incarnation of voodoo economics was the creation of the second President Bush. The tax cuts for bankers and billionaires that became law in 2001 quickly turned the Clinton surplus into the Bush budget deficit as big as Donald Trump’s ego. Voodoo is what Republicans do so well.
But Bush 43 did not stop there in handing out goodies to Wall Street. In 2008, the president asked his Treasury Secretary, Henry Paulson, the former CEO of Goldman Sachs, to bail out Goldman Sachs and other Wall Street investment firms to the tune of three quarters of a trillion dollars. Of course, President Bush never even considered an attempt to rescue the millions of working Americans who first lost their jobs and then their homes because of malfeasance on Wall Street.
Last month, the Center for Budget Priorities released a study that demonstrated that the two biggest reasons for the current budget deficit were the Bush tax cuts and the wars in Afghanistan and Iraq. So what do the Republicans do? Do they vote to cut Pentagon spending or end dole welfare for wealthy Americans? Of course they don’t. They gut Medicare. Genius!
Yesterday, Frank Patitucci, CEO and Chairman of NuCompass Mobility Service, called on Republican Speaker John Boehner to increase taxes on Americans making more than $1 million a year. Patitucci explained his position by saying businesses need a strong middle class to prosper.
But I don’t want to be a party pooper or rain on Wall Street’s parade, so party hardy, guys. Don’t scrimp on the Dom Perignon and the caviar. Santa Claus comes only once a year. Let’s worry about the GOP cuts in healthcare for seniors and nutrition programs for women and their infant children another day.
By: Brad Bannon, U. S. News and World Report, June 7, 2011
Walking Away From The Truth: GOP Playing With Matches On The Debt
Just ignore Tuesday’s vote against raising the debt ceiling, House Republican leaders whispered to Wall Street. We didn’t really vote against it, members suggested; we just sent another of our endless symbolic messages, pretending to take the nation’s credit to the brink of collapse in order to extract the maximum concessions from President Obama.
Once he caves, members said, the debt limit will be raised and the credit scare will end. And the business world apparently got the message. It’s just a “joke,” said a leader of the United States Chamber of Commerce, and Wall Street is in on it. Not everyone found it funny.
No matter how they tried to spin it, 318 House members actually voted against paying the country’s bills and keeping the promise made to federal bondholders. That’s an incredibly dangerous message to send in a softening global economy. Among the jokesters were 236 Republicans playing the politics of extortion, and 82 feckless Democrats who fret that Republicans could transform a courageous vote into a foul-smelling advertisement.
The games that now pass for governing in an increasingly embarrassing 112th Congress are menacing the nation’s future. It was bad enough when Republicans threatened to shut down the government to achieve their extreme and extremely misguided spending cuts, but that threat would have caused temporary damage. The debt limit is something else altogether. If the global credit markets decide that the debt of the United States will regularly be held hostage to ideological demands, it could cause significant harm to investment in long-term bonds and other obligations. That, in turn, could damage domestic credit markets and easily spark another recession.
To prevent this from happening, 114 Democrats in April asked for a “clean” vote without conditions. But Republicans were not about to set their hostage free. Knowing that the clean vote would not pass — and imposing a two-thirds majority requirement to ensure its failure — House Republicans gave the Democrats what they requested. They then voted it down, sending their reckless message to the world.
But there was no excuse for so many Democrats to go along with that message, including the leadership. Steny Hoyer, the minority whip, urged his members to vote no so they would not “subject themselves to a political 30-second ad attack” with all Republicans voting no. Apparently Mr. Hoyer did not trust voters to understand what a dangerous and dishonest game the Republicans are playing.
The exercise has prompted the White House to convene talks to discuss the Republicans’ scattershot demands, which have ranged from trillions in spending cuts to the outright dismantling of vital safety-net programs like Medicare and Medicaid. Democrats have hoped to get an increase in revenues out of any deal, but House Republican leaders emerged from a White House meeting on Wednesday spouting the usual discredited claims that higher taxes on the rich would impede job growth.
What Republicans seem unwilling to acknowledge is that the debt-limit debate is not about future spending. It is about paying for a deficit already incurred because of two wars and tax cuts approved by both Republicans and Democrats at the behest of a Republican president. Tuesday’s vote was a chance to do the right thing and educate the public on why it was necessary. Instead, too many lawmakers walked away from the truth.
House GOP Scoffs At The Fact That Taxes Are Lower Under Obama Than Under Reagan
President Obama met with House Republicans today at the White House to discuss ways to move forward on negotiations regarding the nation’s debt ceiling and the budget. During the discussion, talk evidently turned to taxes, and when Obama noted that taxes today are lower than they were under President Reagan, the GOP, according to The Hill, “engaged in a lot of ‘eye-rolling’“:
Republicans attending a White House meeting on Wednesday didn’t take kindly to President Obama telling them tax rates were higher during the Reagan administration. GOP members engaged in a lot of “eye-rolling,” according to a member who was on hand to hear Obama, who invited House Republicans to the White House for discussions on the debt ceiling. […]
“[The President] made a comment like the tax rate is the lightest, even more than (under former President) Reagan,” Rep. Lee Terry (R-Neb.) told The Hill following the meeting. House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) joked that during the meeting, “We learned we had the lowest tax rates in history … lower than Reagan!”
That House Republicans find this preposterous is symptomatic of the hold Reagan mythology has over them. After all, for seven of Regan’s eight years in office, the top tax rate was higher than the current 35 percent. In six of those years, it was 50 percent or more. And every year that Regan was in office, the bottom tax bracket was higher than the current ten percent.
For a family of four, the “average income tax rate under Reagan in 1983 was 11.06 percent. Under Clinton in 1992, it was 9.18 percent. And under Obama in 2010, it was 4.68 percent.” During Reagan’s time, income tax revenue ranged from 7.8 to 9.4 percent of GDP. Last year, it was 6.2 percent and is not projected to climb back to 9 percent until 2016. In fact, in 2009, Americans paid their lowest taxes in 60 years.
Republicans are very fond of saying that the U.S. has “a spending problem, not a revenue problem.” But the truth is that revenue has plunged due to the recession and to continued misguided tax cuts, and revenue needs to be raised to eventually bring the budget into balance. And Reagan knew that taxes were an important part of the budget equation. After all, he “raised taxes in seven of his eight years in office,” including four times in just two years.
By: Pat Garofalo, Think Progress, June 1, 2011
John Boehner’s Unreality Check On The Deficit
The news out of House Speaker John Boehner’s speech to the New York Economic Club was his demand for “cuts of trillions, not just billions” before the debt ceiling can be raised. Not just broad deficit-reduction targets, the Ohio Republican insisted, but “actual cuts and program reforms.”
That’s alarming enough. It is all but impossible to get this done in the available time. It certainly can’t be accomplished on Boehner’s unbending, no-new-taxes terms. And if the speaker truly believes that it would be “more irresponsible” to raise the debt ceiling without instituting deficit-reduction measures than not to raise it at all, we’re in a heap of trouble.
Even more alarming, because it has consequences beyond the debt-ceiling debate, is the incoherent, impervious-to-facts economic philosophy undergirding Boehner’s remarks.
Reporters naturally tend to ignore this boilerplate. Journalistically, that makes sense. Boehner’s economic comments were nothing particularly new. Indeed, they reflect what has become the mainstream thinking of the Republican Party. But that’s exactly the point. We become so inured to hearing this thinking that we neglect to point out how wrong it is.
My argument with Boehner is not that he believes in a more limited role for government than I do, not that he is more skeptical of government intervention and regulation, and not that he is more worried about the economically stifling implications of tax increases. Those are legitimate ideological differences. American politics is better off for them.
I’m talking about statements that are simply false.
“The recent stimulus spending binge hurt our economy and hampered private-sector job creation in America.”
Reasonable economists can disagree about the effectiveness of the stimulus spending and whether it was worth the drag of the additional debt, but no reasonable economist argues that it hurt the economy in the short term.
The Congressional Budget Office estimates the stimulus added, on average, about one percentage point annually to economic growth and reduced the unemployment rate by half a point between 2009 and 2011. And that’s the low-end estimate. The high-end numbers show the stimulus spending adding more than 2 percentage points annually to economic growth and cutting the unemployment rate by more than 1 percentage point.
The CBO is not alone. Economists Alan Blinder and Mark Zandi estimated in a July 2010 paper that without the stimulus spending, the unemployment rate would be 1.5 percentage points higher.
“The massive borrowing and spending by the Treasury Department crowded out private investment by American businesses of all sizes.”
Crowding out occurs when government spending drives up interest rates and makes borrowing unattractive to the private sector. As economist Joseph Minarik of the Committee for Economic Development explains, “When interest rates are on the floor, you can’t say federal government borrowing is crowding out business investment.” The lackluster investment climate reflects low consumer demand and underutilized capacity. You can’t be crowded out of a room you’re not trying to enter.
“The truth is we will never balance the budget and rid our children of debt unless we cut spending and have real economic growth. And we will never have real economic growth if we raise taxes on those in America who create jobs.”
Never? Under President Clinton, taxes were raised, primarily on the wealthy. During the eight years of his administration, the economy grew by an average of close to 4 percent.
“I ran for Congress in 1990, the year our nation’s leaders struck a so-called bargain that raised taxes as part of a bipartisan plan to balance the budget. The result of that so-called bargain was the recession of the early 1990s. It wasn’t until the economy picked back up toward the end of that decade that we achieved a balanced budget.”
Boehner blames the budget deal for tanking the economy, but the recession actually started in July 1990, two months before the agreement was reached. And that revived economy? It came despite the supposed dead weight of the Clinton tax increase.
“A tax hike would wreak havoc not only on our economy’s ability to create private-sector jobs, but also on our ability to tackle the national debt.”
During the early 1980s, taxes were cut and public debt ballooned, from 26 percent of GDP in 1980 to 40 percent by 1986. In 1993, taxes were increased (and spending cut); debt as a share of the economy fell, from 49 percent to 33 percent. In 2001 and 2003, taxes were cut. By the time President Obama took office, debt had climbed to 40 percent of GDP.
Listening to Boehner, I began to think the country suffers from two deficits: the gap between spending and revenue, and the one between reality and ideology. The first cannot be solved unless we find some way of at least narrowing the second.
By: Ruth Marcus, Opinion Writer, The Washington Post, May 10, 2011
Forget The Rich: Tax The Poor And Middle Class
Nothing is certain but death and taxes, it used to be said, but in the madcap times we live in, even they’re up for grabs.
No matter what proof the White House provides that Osama bin Laden indeed has had his bucket kicked — and at this point even al Qaeda admits he’s dead — there still will be uncertainty. Whether they ever release those damned photos or not, a lunatic few will continue to insist that Osama’s alive and well and running a Papa John’s Pizza in Marrakesh.
As for taxes, having to pay them is no longer a sure thing either, especially if you’re a corporate giant like General Electric, with a thousand employees in its tax department, skilled in creative accounting. You’ll recall recent reports that although GE made profits last year of $5.1 billion in the United States and $14.2 billion worldwide they would pay not a penny of federal income tax. Chalk it up to billions of dollars of losses at GE Capital during the financial meltdown and a government tax break that allows companies to avoid paying US taxes on profits made overseas while “actively financing” different kinds of deals.
It gets worse. In 2009, Exxon-Mobil didn’t pay any taxes either, and last year, they had worldwide profits of $30.46 billion. Neither did Bank of America or Chevron or Boeing. According to a report last week from the office of the New York City Public Advocate, in 2009, the five companies, including GE, received a total of $3.7 billion in federal tax benefits.
As The New York Times‘ David Kocieniewski reported in March, “Although the top corporate tax rate in the United States is 35 percent, one of the highest in the world, companies have been increasingly using a maze of shelters, tax credits and subsidies to pay far less… Such strategies, as well as changes in tax laws that encouraged some businesses and professionals to file as individuals, have pushed down the corporate share of the nation’s tax receipts — from 30 percent of all federal revenue in the mid-1950s to 6.6 percent in 2009.”
What’s greasing the wheels for these advantages is, hold on to your hats, cash. Over the last decade, according to the NYC public advocate’s report, those same five companies — GE, Exxon-Mobil, Bank of America, Chevron and Boeing — gave more than $43.1 million to political campaigns. During the 2009-2010 election cycle, the five spent a combined $7.86 million in campaign contributions, a 7 percent jump over their 2007-2008 political spending.
“These tax breaks were put in place to promote growth and create jobs, not bankroll the political causes of corporate executives,” Public Advocate Bill de Blasio said. “… No company that can afford to spend millions of dollars to influence our elections should be pleading poverty come tax time.”
And by the way, those campaign cash figures don’t even include all the money those companies funneled into the 2010 campaigns via trade associations and tax-exempt non-profits. Thanks to the Supreme Court Citizens United decision, we don’t know the numbers because, as per the court, the corporate biggies don’t have to tell us. Imagine them sticking out their tongues and wiggling their fingers in their ears and you have a pretty good idea of their official position on this.
Meanwhile, last week Republicans like Utah’s Orrin Hatch, ranking member of the US Senate Finance Committee, grabbed hold of an analysis by Congress’ nonpartisan Joint Committee on Taxation and wrestled it to the ground. The brief memorandum reported that in the 2009 tax year 51 percent of all American taxpayers had zero tax liability or received a refund. So why, the Republicans asked, are Democrats and others so mean, asking corporations and the rich to pay higher taxes when lots of other people — especially the poor and middle class — don’t pay taxes either?
Hatch told MSNBC, “Bastiat, the great economist of the past, said the place where you’ve got to get revenues has to come from the middle class. That’s the huge number of people that are there. So the system does need to be revamped… We have an unbalanced tax code that we’ve got to change.”
All of which flies in the face of reality. As Travis Waldron of the progressive ThinkProgress website explained, “The majority of Americans who do not pay federal income taxes don’t make enough money to qualify for even the lowest tax bracket, a problem made worse by the economic recession. That includes retired Americans, who don’t pay income taxes because they earn very little income, if they earn any at all.
“And while many low-income Americans don’t pay income taxes, they do pay taxes. Because of payroll and sales taxes — a large proportion of which are paid by low- and middle-income Americans — less than a quarter of the nation’s households don’t contribute to federal tax receipts — and the majority of the non-contributors are students, the elderly, or the unemployed.”
What’s more, ThinkProgress notes, “The top 400 taxpayers — who have more wealth than half of all Americans combined — are paying lower taxes than they have in a generation, as their tax responsibilities have slowly collapsed since the New Deal era.” In the meantime, “working families have been asked to pay more and more.”
So maybe death and taxes are no longer certain, but one thing remains as immutable as the hills. In the words of another golden oldie, there’s nothing surer — the rich get rich and the poor get poorer.
By: Michael Winship, CommonDreams.org, May 10, 2011
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