taxes

On This Week, Republican candidate John McCain defends his flip-flop on the Bush tax cuts: He opposed them because they weren't combined with spending cuts.

But he would push through his own tax cuts, even without spending cuts.

Straight talk? Ha!

And you have to hear him defend his embracing of his own controversial pastor's endorsement. More straight talk there, too. Yep.

Yes I mock, though I think the nervous liar's giggle was probably genuine.

Video.

[Memo to George: I note that McCain isn't wearing a flag pin, either. So why didn't you ask that, too, if it's such an important issue?]

President Bush today crowed over the "success" of having given the wealthy a pass on financing his rapidly growing national debt.

"Cutting your taxes worked," Bush said. "Unfortunately, the Democrats are still determined to raise your taxes, and if they gain control of the Congress, they can do so without lifting a finger."

Bush said taxes are a huge issue in the Nov. 7 election. He said the tax cuts orchestrated by his administration have left more money in the hands of workers, families and small businesses — money they have used to sustain a bustling economy.

Actually, the vast bulk of the GOP's tax cuts went to the GOP's "base": the millionaires and billionaires. Workers, families and small businesses got the crumbs of the tax relief cake ... if anything.

Tax Cuts for "the haves and the have mores"

When President Bush goats, "You're my base: the haves and the have mores," when talking to a roomfull of the wealthiest people in America — the Republicans' fundraising base — it's should be no surprise to anyone but the news media that average folks like you and me have not seen much upside from tax relief for the Donald Trumps and Paris Hiltons of the world.

Bush Tax Cuts Favor Wealthy:

People in the top 20 percent of incomes, averaging $182,700 a year, saw their share of federal taxes decline from 65.3 percent of total payments in 2001 to 63.5 percent this year, according to the study by congressional budget analysts.

In contrast, middle-class taxpayers — with incomes ranging from $51,500 to $75,600 — bear a greater tax burden. Those making an average of $75,600 had the biggest jump in their share of taxes, from 18.5 percent of all payments in 2001 to 19.5 percent this year.

Tax Burden Shifting off Wealthy onto Everyone Else

$197 Billion in Tax Cuts to Top 1% of US Taxpayers as Big as States’ Budget Shortfalls of $200 Billion

...The report identifies five main areas of shifting tax burden:

FEDERAL TO STATE — a 15% shift in tax burden between 2000 and 2003

PROGRESSIVE TO REGRESSIVE — at the federal level, a 17% decline in the share of revenue from progressive taxes and a 135% increase in the share of revenue from regressive taxes since 1962

WEALTH TO WORK — A tax cut on unearned income — such as inheritance or investment — of between 31% and 79%, but a tax hike on work income of 25% since 1980

CORPORATIONS TO INDIVIDUALS — a 67% drop in the share of federal revenues contributed by corporations and a 17% rise in individuals’ share

CURRENT TAXPAYERS TO FUTURE GENERATIONS — record deficits that shift the tax burden to our children and grandchildren

“When President Bush and Congress trumpet, ‘Here’s a tax cut', we say, ‘Taxpayer beware!’ said Chuck Collins, United for a Fair Economy co-founder. “Unless you are super-rich, it’s a tax SHIFT, not a cut. Non-wealthy taxpayers will pay for these tax cuts with increased state and local taxes or cuts in public services.”

Year-by-Year Analysis of the Bush Tax Cuts Shows Growing Tilt to the Very Rich

• Over the ten-year period, the richest Americans—the best-off one percent—are slated togwb0602a.gif - 10559 Bytes receive tax cuts totaling almost half a trillion dollars. The $477 billion in tax breaks the Bush administration has targeted to this elite group will average $342,000 each over the decade.
• By 2010, when (and if) the Bush tax reductions are fully in place, an astonishing 52 percent of the total tax cuts will go to the richest one percent—whose average 2010 income will be $1.5 million. Their tax-cut windfall in that year alone will average $85,000 each. Put another way, of the estimated $234 billion in tax cuts scheduled for the year 2010, $121 billion will go just 1.4 million taxpayers.
• ...
• As a result, freezing the Bush tax cuts at their 2002 levels would have little or no effect on 99 percent of the taxpayers, whose tax cuts are already mostly or completely “frozen.” Only the best-off one percent of the taxpayers will receive significant additional tax cuts if the rest of the Bush tax program continues to be implemented.

The Spiraling National Debt Threatens the Economy

Debating the tax cuts:

If the government still is running big budget deficits when businesses are trying to borrow money to expand, then companies could find themselves competing for funds with Washington, an effect economists call "crowding out."

According to a Federal Reserve study in May 2003, interest rates could rise a quarter percentage point for every projected one-point increase in the ratio of the federal deficit to gross domestic product. A big jump in interest rates would put the brakes on the economy by raising the cost of borrowing.

More recently, former Treasury Secretary Robert Rubin, the International Monetary Fund and other critics have warned big deficits could fuel higher interest rates and financial disruption.

The notion that what amounts to reckless credit-card spending on the part of Bush and the Republican Congress might actually not make good economic sense is something the Republicans don't want to hear. Instead, they continue to claim that if the wealthy are more well-to-do, then the rest of us will benefit. How is always vague. Bigger tips for waitresses? More demand for limousine drivers and shoeshine boys? More positions for nannies, maids and gardeners? Yes, giving the wealthy yet more tax advantages could definitely benefit the servant class.

But what about working families?

Slowdown is Here Already. Is the Remedy More of the Same?

And now, despite the escalating speculation of the investor class in the stock market, the economy is stalling:

The
Commerce Department reported Friday that economic growth during the July-to-September period clocked in at an annual rate of just 1.6 percent — a subpar performance that mostly reflected the deepening housing slump. Investment in homebuilding was cut by the largest amount in 15 years.

The cause? A record drop in the housing market:

Economic growth in the third quarter was well below Wall Street forecasts for a 2.2 percent increase and reflected a range of influences that combined to slow the economy.

The report showed a striking 17.4 percent annual rate of decrease in spending on new housing - the biggest decline in 15-1/2 years.

In addition, growth in business spending on inventories slowed to only a $50.7 billion rate, subtracting 0.1 percentage point from GDP growth, and the value of imported goods accelerated sharply to a 7.8 percent annual rate of increase in the third quarter, more than three times the second quarter's 1.4 percent increase.

If the economy is doing so well, why are so many families having their mortgages foreclosed and their homes taken away? Why can't people afford to live at the level they did just a few years ago?

By contrast, the GDP report showed business investment remained healthy and consumers picked up their spending pace.

Nonresidential investment, which measures business spending, rose at an 8.6 percent annual rate in the third quarter, close to double the second quarter's 4.4 percent. Consumer spending, which accounts for roughly two-thirds of national economic activity, increased at a 3.1 percent rate, up from 2.6 percent in the second quarter.

Yes, but where are these companies investing? Malaysia? India? China?

Meanwhile, how are consumers paying for all their spending? Credit cards? Borrowing against the homes they cannot sell?

Passing Debt on to Others (i.e., your children)

The National Debt has continued to increase an average of $1.62 billion per day since September 30, 2005!

Maybe it's time we measured economic vitality on more than Dick Cheney's investment portfolio.

For ostensibly being something of a political junkie, I'm a little embarrassed that I didn't know Byron Dorgan's name when he appeared on the NewsHour tonight:

Wages and salaries, as a percent of our GDP, is at its lowest level since they started measuring in 1947. That's probably not true for journalists or politicians; it's true for American families.

And this notion all these statistics people use -- I know the story about the nine guys sitting on a barstool, and Bill Gates walks in. On average, they're all now wealthy.

The fact is: There's a lot of trouble in this economy. You can't escape the fact that $2 billion a day in trade deficit we're ringing up every single day, the highest in history. It is not capitalism when we decide that we're going to have a product produced in China, with people living 100 to a room, in big, cinder brick rooms, and then working for $50 a month.

And, by the way, that's what's happening for the production of the iPod. We engineered iPod in this country; now, it's being produced for $50-a-month labor in rooms that house 100 people to sleep at night.

That's not capitalism; that's labor exploitation. And it's going on, not just with respect to textiles, not just manufacturing, it's going on in high tech. And that is not, in my judgment, what we fought for a century in this country to create.

He speaks to something of the false premise from which NY Times columnist Thomas Friedman argues when he says "the world is flat."

Labor exploitation. Not only are American workers suffering while jobs go overseas, but we're enabling the exploitation of workers in China, Malaysia, Indonesia and elsewhere.

There's an expression in the media business for people (who are mostly kids) who enter the media business willing to work for peanuts: grinders. Grinders are people who will work for beer money because they're so desperate to do the work. The professionals end up being undercut in the market and go out of business.

Okay, so that's the free market. What of it?

Well, the problem is that these grinders are working at a level that is not sustainable. Some may try raising prices, but they end up pricing themselves out of business, losing to other grinders. This isn't putting the nose to the grindstone. They grind themselves right into the grindstone.

It's not sustainable. In the end, fewer people are in business. Some well-to-do buyers then go into the underserved competent marketplace, while everyone else is left forced to go to the grinders, where if they're lucky they'll get something adequate, but more often end up with crap.

The right-wing ideologue will argue that this is as it's should be. But their religion doesn't make rational sense. It's just religion. The free market is a wild, volatile place, and embracing its outcome as somehow being a grand destiny is mere fatalism at its worst.

What I find refreshing about Senator Dorgan is that he avoids the precious-but-false Democratic rhetoric about "protecting jobs" -- another religious argument -- and he stays away from the tired Marxist arguments about class struggle. He's more clear-sighted than that, and more common sense in approach.

Next year, Americans will be driving some Chinese cars, because China's doing an automobile export industry. They're going to ship cars here. You know what? When their cars come to this country, they'll find a 2.5 percent tariff attached to their cars. By agreement, we've said any cars we sell in China, you can impose a 25 percent tariff.

A country with whom we have $200 billion trade deficit, we said, "You can apply a tariff that is 10 times that which we will apply." That is ignorant; it's destructive of our interest; it has nothing to do with protecting our country. And it seems to me denying those things is ignoring the obvious.

Let's decide how we raise America up. I'm not interested in building someone else's house with bricks from our foundation. Let's defend this country's interests and be a part of the global economy, yes, but defending our interests first.

If you want tired rhetoric, listen to more of Thomas Friedman.

Look, if horses could vote, we never would have had cars, all right?

Hmmm, actually I doubt horses loved being beasts of burden.

OK, you've got -- if you look at companies that outsource today -- and I'm sure there's exceptions either way -- companies that outsource, outsource to win. They outsource to beat their competition so they can grow and actually offer more better jobs here.

Sure, these sweat-shop owners are just dying to pay more money to Americans. Right.

If the world were as ugly and as bad, I think as the senator suggests, for us as Americans, how could our unemployment rate be only 5 percent, OK?

This gets back to the ridicious assertion by George Will that American workers' desperation for below-poverty-level jobs is a good thing.

've heard the diagnosis from the senator, but I haven't heard the prescription, OK, because I'm telling you, you put up walls -- we tried that before. It's called Smoot-Hawley, OK? That led to World War I.

Funny. I didn't learn that theory in my Modern European History class.

No wonder conservatives hate the New York Times. Between David Brooks and Thomas Friedman, the conservative voice there is an embarrassment.

Update: Thomas Friedman seems to be a little mixed up. Smoot-Hawley was passed in 1930, more than a decade after World War I. Says the State Department:

The Smoot-Hawley Tariff Act of June 1930 raised U.S. tariffs to historically high levels. The original intention behind the legislation was to increase the protection afforded domestic farmers against foreign agricultural imports. Massive expansion in the agricultural production sector outside of Europe during World War I led, with the postwar recovery of European producers, to massive agricultural overproduction during the 1920s. This in turn led to declining farm prices during the second half of the decade. During the 1928 election campaign, Republican Presidential candidate Herbert Hoover pledged to help the beleaguered farmer by, among other things, raising tariff levels on agricultural products. But once the tariff schedule revision process got started, it proved impossible to stop. Calls for increased protection flooded in from industrial sector special interest groups and soon a bill meant to provide relief for farmers became a means to raise tariffs in all sectors of the economy. When the dust had settled, Congress had agreed to tariff levels that exceeded the already high rates established by the 1922 Fordney-McCumber Act and represented among the most protectionist tariffs in U.S. history.

The Smoot-Hawley Tariff was more a consequence of the onset of the Great Depression than an initial cause. But while the tariff might not have caused the Depression, it certainly did not make it any better. It provoked a storm of foreign retaliatory measures and came to stand as a symbol of the ‘beggar-thy-neighbor’ policies (policies designed to improve one’s own lot at the expense of that of others) of the 1930s. Such policies contributed to a drastic decline in international trade. For example, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934. More generally, Smoot-Hawley did nothing to foster trust and cooperation among nations in either the political or economic realm during a perilous era in international relations.

Mr. Friedman, you're offering a false argument -- assuming you even have an inkling what you're talking about when you invoke Smoot-Hawley. We're talking about things like redressing grossly imbalanced trade tariffs (2.5% vs. 25%? That's a "flat world"? Bulloney!) and stopping the endorsement of sweat-shop and slave labor. And you say that evening out trade tariffs when we're a debtor nation is in any way akin to record-high trade tariffs established over 75 years ago (by a Republican president, no less) when America was an exporting nation? Huh?

Yes, let the world be flat! It sure as hell isn't right now.