The Grand Old Party Today

Once again, the bastards failed to repeal the Affordable Care Act. A few Republican senators refused to go along with the herd. No doubt they’ll keep trying to kill it, no matter how many people suffer as a result.  

Until this latest repeal effort took precedence, Sen. Alexander, a Republican, and Sen. Murray, a Democrat, were working on a bipartisan set of improvements to the ACA. They were making progress, but the Republican leadership ordered Sen. Alexander to end the discussions. When the repeal effort quickly fizzled, the Democratic leadership called for Alexander and Murray to resume their work. Here’s what the Republican leader, Senator McConnell, said:

Senate Ds have 2 thoughts on how to fix #Obamacare 1. Do nothing 2. A fully gov-run system that would take away even more of their decisions 4:45 PM – 25 Sep 2017

McConnell stopped Alexander and Murray from working together on a set of mutually agreeable fixes to the ACA. Then he claimed the Democrats weren’t willing to work with the Republicans. He knew this was totally false, but said it anyway.

Now the Republicans have pivoted to what they’re calling “tax reform”. As usual, the changes they have in mind are skewed to benefit the rich:

The tax plan that the Trump administration outlined on Wednesday is a potentially huge windfall for the wealthiest Americans. It would not directly benefit the bottom third of the population. As for the middle class, the benefits appear to be modest.

The administration and its congressional allies are proposing to sharply reduce taxation of business income, primarily benefiting the small share of the population that owns the vast majority of corporate equity….

The plan would also benefit Mr. Trump and other affluent Americans by eliminating the estate tax, which affects just a few thousand uber-wealthy families each year, and the alternative minimum tax, a safety net designed to prevent tax avoidance [by people with high incomes].

The precise impact on Mr. Trump cannot be ascertained because the president refuses to release his tax returns, but the few snippets of returns that have become public show one thing clearly: The alternative minimum tax has been unkind to Mr. Trump. In 2005, it forced him to pay $31 million in additional taxes. [The New York Times]

In addition, the Republicans want to cut taxes for “pass-through” businesses from as high as 39% down to 25%. The Trump Organization just happens to be a pass-through business.

So there are at least three big changes that would almost certainly benefit the president and his family, assuming any of them pay income tax. Yet last night he had the nerve to deny it:

President Trump unveiled his long-awaited tax plan Wednesday during a speech in Indiana. He asserted without qualification that the proposal — still only roughly outlined — would be good for middle-class Americans and not the wealthy.

“Our framework includes our explicit commitment that tax reform will protect low-income and middle-income households,” Trump said. “Not the wealthy and well-connected. They can call me all they want; I’m doing the right thing.”

He then added: “And it’s not good for me, believe me.” [The Washington Post]

Meanwhile, our fellow citizens in Puerto Rico and the U.S. Virgin Islands are in a horrible situation, having been subjected to two major hurricanes, but the Republicans who control the government aren’t responding to the crisis as urgently as they did when Texas and Florida suffered similar but less serious problems. And the Midwest and Northeast have been experiencing an unprecedented heatwave — “Late-September heat wave leaves climate experts stunned. ‘Never been a heat wave of this duration and magnitude this late in the season’ reports NOAA” [ThinkProgress] — while the Republicans deny that global warming is real and are running yet another religious fanatic (who doesn’t believe in evolution and thinks homosexuality should be a crime) for a seat in the U.S. Senate.

Years ago, Republicans weren’t as bad as they are now. Back then, I wondered whether they were mostly selfish or mostly ignorant. Those are still factors, but what’s still known as the Grand Old Party has deteriorated to the point where mere selfishness and ignorance aren’t enough to explain its awfulness. The fundamental problem is that Republicans are immoral. They don’t observe norms of human behavior that the modern world requires: caring about the lives of strangers; intellectual honesty; respect for scientific inquiry; the willingness to cooperate for the common good; long-term thinking; promoting equality of opportunity.

There is no excuse for being a Republican today. The Grand Old Party has become evil and deserves to die.

Dollars and Poverty

Republican Congressman Paul Ryan, chairman of the House Budget Committee, is worried that the federal government spends too much money trying to help poor people:

“The question isn’t whether the federal government should help; the question is how,” Mr. Ryan said at [a committee] hearing on Wednesday. “How do we make sure that every single taxpayer dollar we spend to reduce poverty is actually working?” 

Can you imagine someone like Ryan ever wanting to make sure that every single dollar spent on the military is actually working? I can’t.

The quote above comes from a New York Times article called “Changed Life of the Poor: Better Off But Far Behind”. The article describes the economic situation facing the poor today: 

Two broad trends account for much of the change in poor families’ consumption over the past generation: federal programs and falling prices.

Since the 1960s, both Republican and Democratic administrations have expanded programs like food stamps and the earned-income tax credit….

As a result, the differences in what poor and middle-class families consume on a day-to-day basis are much smaller than the differences in what they earn.

“There’s just a whole lot more assistance per low-income person than there ever has been,” said … a senior research fellow at the conservative Heritage Foundation. “That is propping up the living standards to a considerable degree,” he said, citing a number of statistics on housing, nutrition and other categories.

[At the same time], the same global economic trends that have helped drive down the price of most goods also have limited the well-paying industrial jobs once available to a huge swath of working Americans. And the cost of many services crucial to escaping poverty — including education, health care and child care — has soared.

So, for example:

Tammie Hagen-Noey, a 49-year-old living in Richmond, Va., tapped at an iPhone as she sat on the porch of the group home where she lives… She earns $7.25 an hour at a local McDonald’s, and makes a little extra money on the side from planting small plots of land for neighbors….A few months ago, she sold her car for $500 to make rent.

Almost everybody could manage their spending better (even members of Congress) and that woman in Virginia presumably didn’t spend hundreds of dollars to buy the latest iPhone. Human beings get into all kinds of trouble, because of their own mistakes or through no fault of their own, and will continue to need help from the rest of us, even if every single dollar intended to help them doesn’t “work”. Republicans claim that cutting taxes and reducing regulations will create lots of better-paying jobs, allowing us to spend less on government assistance for the poor. What they’re really advocating is a race to the bottom, with more inequality, dangerous workplaces, pollution and unsafe food. Since we have to compete in a global economy, we’ll end up closer to the economic middle in future decades (nobody stays on top forever), but we shouldn’t race to become worse off.

The Plutocratic Party and Social Security

The latest Republican budget plan has a section on Social Security. Ordinarily, I wouldn’t have read it, but Michael Hiltzik, a business columnist for the Los Angeles Times, wrote an article called “Paul Ryan Rehashes An Old Social Security Lie”. 

The lie in question appears in the second paragraph below. I think it’s worth reading the surrounding paragraphs too (all of which appear on page 66 of the Republican’s budget document):

An all-too-common reaction to the fiscal problem in Social Security has been denial that a problem exists. It is claimed that the Social Security Trust Fund will remain solvent for at least a decade, at which point the government could theoretically cover any shortfall by raising taxes. Others downplay the necessity for change, contending that sustained economic growth could take care of the problem all by itself.

Neither is correct. First, any value in the balances in the Social Security Trust Fund is derived from dubious government accounting. The trust fund is not a real savings account. From 1983 to 2010, it collected more Social Security taxes than it paid out in Social Security benefits. But the government borrowed all of these surpluses and spent them on other government programs unrelated to Social Security. The Trust Fund holds Treasury securities, but the ability to redeem these securities is completely dependent on the Treasury’s ability to raise money through taxes or borrowing.

Social Security is currently paying out more in benefits than it collected in taxes–in other words, running cash deficits–a trend that will worsen as the baby boomers continue to retire. To pay full benefits, the government must pay back the money it owes Social Security. In testimony before the House Budget Committee, CBO Director Doug Elmendorf stated that:

“Well, again, Congressman, on a unified budget basis, taking account of just the tax revenues, the dedicated tax revenues, and the benefits, [Social Security] is contributing [to] the deficit now. If one instead looks at just the balance in the Social Security Trust Fund, that balance is, the annual balance is positive now, but will be negative within about a half dozen years.”

Given how difficult it is to predict the future, it isn’t clear exactly when Social Security would have trouble paying 100% of everybody’s promised benefits. As Ryan’s document says, however, the government could “theoretically” raise Social Security taxes at some point to make up the difference. The “theory” in this case is arithmetic.

Not everyone knows this, but as of 2014, Social Security taxes are only applied to the first $117,000 of a person’s income. Here’s what the Center for Economic Policy and Research says about raising that threshold and thereby putting more money into Social Security:

There have recently been several pieces of proposed legislation to raise or do away with the payroll tax cap. Sen. Bernie Sanders and Rep. Peter DeFazio have sponsored legislation that would raise the cap to income above $250,000 while Sen. Mark Begich and Rep. Ted Deutch’s proposal  would fully eliminate the cap, with a small portion of earnings above the current cap going toward benefits. If enacted, proposals like these could almost entirely close Social Security’s projected long-term funding gap without reducing benefits nor increasing taxes on the vast majority of American workers.

Of course, applying the Social Security tax to the highest incomes would also partly address the problem of economic inequality in America, a worthy goal in itself.

The statement in the second paragraph that “any value” in the Social Security Trust fund is “dubious” is the one that Michael Hitzlik called a lie (it’s good that reputable journalists are finally getting around to using that word). I’ve heard this claim before – that somehow the Social Security Trust Fund doesn’t have real money in it – but never understood how such a thing could be true. As Hitzlik explains, the Trust Fund holds almost $3 trillion (not billion, but trillion) worth of government bonds. In fact, as of December 31, 2013, the Department of the Treasury said these bonds were paying an interest rate of 3.626% and were worth 2,765,212,571 dollars (give or take a penny).

So why aren’t these bonds worth anything, according to the Republicans? Their idea seems to be that since the Trust Fund paid cash for those government bonds, and the government used that cash for various non-Social Security purposes like watering the White House lawn and paying Paul Ryan’s salary, the government has already spent the money in the Trust Fund. So it’s gone!

However, in the real world, when someone purchases a bond, whether the buyer is the Trust Fund or an individual investor, the bond pays interest (for example, 3.6%) and can eventually be redeemed (converted back into cash). That’s how investing in bonds works. Whatever the government did with the cash it got from the Trust Fund is irrelevant, so long as the government keeps paying interest and redeems its bonds when they mature.

The second “reason” they offer for saying all those bonds are worthless is that the government could stop paying interest on them and not redeem them when they mature. That’s what’s known as the U.S. government “defaulting” on its financial obligations.

As the Republicans say, the government’s ability to meet its obligations depends on raising revenue, either by taxing or borrowing (or selling stuff like national forests). But that’s what the government has been doing for more than 200 years. Is there any reason to think that the federal government will eventually become unable to pay its debts, including its debts to the Social Security Trust Fund? No, the United States is the richest country in the world. Investors all over the world, including foreign governments, believe our government’s bonds are very safe investments.

In fact, the only remotely likely scenario in which the government fails to pay its debts is if Republican extremists somehow manage to shut down the government again for an even longer period of time, which stops the government from levying taxes and selling more bonds! That’s what the Republicans recently threatened to do, many of them arguing that a government default wouldn’t be a very big deal. So on one hand, the Republicans claim to worry that the government won’t pay its debts to the Social Security Trust Fund, but on the other hand, they think it might be o.k. if the government didn’t pay its debts. (These people truly are amazing.)

The quotation above ends with the Republicans making the point that Social Security is running a deficit and the deficit is expected to get worse. That’s true, and that’s why raising the income cap would “theoretically” be a good idea. They then quote some testimony from the head of the Congressional Budget Office. I had to read that paragraph several times to see if it somehow supported the Republican contention that Social Security is in deep trouble. It doesn’t.

What the head of the CBO is saying is that Social Security is affecting the overall federal deficit now (since the government is paying what it owes to Social Security) and the Trust Fund itself will start running an annual deficit in about six years. What the Republicans don’t bother mentioning is that the Trust Fund is expected to have money in it until 2033 (and that’s if nothing is done in the meantime to put more money into the Trust Fund). Plus, even if the Trust Fund were to run out of money, Social Security would still pay about 75% of everyone’s promised benefit, since working people would still be paying Social Security taxes (reference here).

The Republicans go on to suggest limiting benefits for upper income Social Security beneficiaries (certainly a possibility) and hint that maybe the retirement age should be raised because people are living longer (which is a bad idea, because it wouldn’t save much money and lots of people – unlike politicians – can’t keep working or can’t find jobs by the time they reach 65 or so).

For all their fear-mongering, Ryan and his colleagues don’t offer a solution to this supposed crisis, except to suggest that the President go first by making some specific recommendations (which they can then use to attack him as an enemy of Social Security). The Republicans even suggest that benefits should be increased for low-income retirees (another good idea, but one more often made by us “tax and spend” Democrats). 

Michael Hiltzik thinks this budget document is evidence that Republicans don’t want the government to make good on its debt to Social Security:

When you hear people like Paul Ryan talk as though the country can’t afford to pay back the money by redeeming the bonds in the trust fund, what you’re hearing is the sound of the wealthy preparing to stiff the working class. If the income tax has to be raised to turn those T-bonds into cash for payment of benefits over the next couple of decades, that’s how the rich will be made to repay the people who lent them the money. Some people love to claim that the government has “stolen” the trust fund. The correct reply to that is: “Not yet.” But if Ryan has his way, yes, the money will be stolen. It’s up to you and me to make sure that doesn’t happen.

The idea would be, I guess, that if the Trust Fund doesn’t have any real money in it now, we won’t miss it when it’s gone. I’m not convinced that’s the Republican plan. But I’ve given up trying to understand whether people like Ryan are knaves (unscrupulous and dishonest) or fools or both. What’s clear is that their principal goal as politicians is to serve the needs of the wealthy. The surprising thing is that so many voters, in particular, the Tea Party types who don’t want the government messing with their Medicare or Social Security, continue to vote for the Plutocratic Party. 

For more on Social Security (if you can stand it), there was a recent article at Salon written by a so-called “Millennial”. He rejects what most of his generation believe: that Social Security will go bankrupt before the Millennials can collect any benefits. He also argues that it makes no sense to be a “social conservative and economic liberal”.

PS — Ryan Budget Gets 69 Percent of Its Cuts from Low-Income Programs

Them That Has, Gets

A well-known French economist, Thomas Piketty, has written a big book called Capital in the Twenty-First Century. It’s getting a lot of attention, because Piketty is an expert on wealth and income and he’s reached a disturbing conclusion: 

Modern economic growth and the diffusion of knowledge have allowed us to avoid the Marxist apocalypse, but we have not modified the deep structures of capital and inequality – or in any case not as much as one might have imagined in the optimistic decades following World War II.

When the rate of return on capital exceeds the rate of growth on output and income, as it did in the nineteenth century and seems likely to do again in the twenty-first, capitalism automatically generates arbitrary and extreme inequalities that radically undermine the meritocratic values on which democratic societies are based [1]

In other words, those relatively happy years in the 20th century, during which economic inequality declined in the developed world, was an aberration, the result of special circumstances. Global capitalism is now returning to its normal state: an extended Gilded Age in which the rich get richer, workers struggle, inequality grows and democracy suffers. It’s not a pretty picture, but it’s based on a great deal of historical data.

Piketty argues that “there are ways democracy can regain control over capitalism and insure that the general interest takes precedence over private interests” (for example, by instituting a tax on wealth), but that’s not going to be easy, since capitalists are so good at screwing with democracy.

They buy up and consolidate media outlets, make the majority of campaign contributions, hire armies of lawyers and lobbyists, fund political action committees, support “think tanks”, pay for advertising campaigns on “the issues” and keep the “revolving door” between government and business revolving. All of which contributes to low taxes on high incomes, minimal taxes on capital gains and large estates, corporations being treated as “people”, feeble campaign finance laws, weak labor unions, political gridlock, vote suppression, voter apathy and lots of average citizens thinking that the accumulation of vast wealth by a tiny minority is inevitable and/or good for the majority. 

If you’d like to read more about Capital in the Twenty-First Century, including some skeptical comments, take a look at this New Yorker article by John Cassidy. If you want to feel even more depressed, pissed off or motivated to work toward political reform, check out Paul Krugman’s less skeptical “Wealth Over Work” column at the New York Times.

If You’ve Got It, Flaunt It

A friend and I spent some time at the local arboretum yesterday. It’s a pleasant place to stroll around or sit on a bench discussing weighty matters or nothing at all.

Walking along one of the paths, we came upon this backyard view of somebody’s new house, apparently getting its finishing touches.

IMG-20131009-01170

What this country definitely needs is lower taxes on rich people. How can you afford to furnish such a place and pay your utility bills when the Federal government demands a punishing 15% of your long-term capital gains?

Class Warfare Is a Fact

An updated study by economist Emanuel Saez of U.C. Berkeley shows that the the top 1% of earners in the United States received more than 20% of the country’s total income in 2012, while the top 10% of earners received more than half of the country’s income. The share of income going to the wealthiest Americans is now at or near the highest levels on record since the government began keeping the relevant statistics and the federal income tax was created in 1913.

What’s even more remarkable, perhaps, is that the income of the top 1% went up nearly 20% in 2012, while the income of the remaining 99% rose only 1%. Since 2009, the wealthiest 1% have taken 95% of the income gains in our supposedly classless society.

We should remember these statistics when we hear Republican politicians, who pretend to be friends of the middle class, claim that lower taxes for the wealthy benefit everyone. It’s past time to raise taxes on the rich, invest in America’s infrastructure and start creating decent jobs again. Otherwise we’re going to continue to get economically screwed.

Note the year 1980 in this chart, when class warrior and demagogue supreme Ronald Reagan was elected President:

10economix-sub-wealth-blog480

http://takingnote.blogs.nytimes.com/2013/09/11/the-rich-got-richer/

Periodic Update from Krugman the Indispensable

Paul Krugman was right about Bush’s tax cuts and the Iraq War. He was right about the 2009 stimulus. He’s been right about Europe’s austerity program. I’m sure he’s right about this too:

“The latest projections [from the Congressional Budget Office] show the combined cost of Social Security and Medicare rising by a bit more than 3 percent of G.D.P. between now and 2035, and that number could easily come down with more effort on the health care front. Now, 3 percent of G.D.P. is a big number, but it’s not an economy-crushing number. The United States could, for example, close that gap entirely through tax increases, with no reduction in benefits at all, and still have one of the lowest overall tax rates in the advanced world.

But haven’t all the great and the good been telling us that Social Security and Medicare as we know them are unsustainable, that they must be totally revamped — and made much less generous? Why yes, they have; they’ve also been telling us that we must slash spending right away or we’ll face a Greek-style fiscal crisis. They were wrong about that, and they’re wrong about the longer run, too.

The truth is that the long-term outlook for Social Security and Medicare, while not great, actually isn’t all that bad. It’s time to stop obsessing about how we’ll pay benefits to retirees in 2035 and focus instead on how we’re going to provide jobs to unemployed Americans in the here and now.”

http://www.nytimes.com/2013/06/03/opinion/krugman-the-geezers-are-all-right.html