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Chained CPI Helps Fund Corporate Tax Breaks and Trickle Down

10:49 am in Failed government by masaccio

Obama Finds Trickle-Down Inspirational


Jack Lew, the Treasury Secretary and former head of the Office of Management and Budget, testified before the Senate Budget Committee recently. His written testimony explains the priorities set by President Bipartisan, Barack Obama, who seems to think he was elected on the long-term Republican promise to balance the budget.

Lew tells us that Obama’s budget is based on his Grand Bargain offers to Speaker Boehner that couldn’t garner any Republican backing. Lew doesn’t explain why that should be a starting point for further capitulations. Lew mentions such balanced ideas as the Chained CPI. That’s the part where we slash at Social Security and raise taxes on the middle class by raising income tax brackets less than inflation. Lew explains the reason for this assault on the 99%: “The chained CPI is a more accurate measure of inflation in that it does a better job of reflecting the substitution of goods in response to relative price changes.” That is a lie.

The CPI is supposed to measure how much it costs to maintain your lifestyle. The Chained CPI measures the decline in your standard of living as you change your protein intake from an occasional piece of beef to Alpo. Lew thinks that’s not a problem because it’s all protein. And it’s not a problem for the administration’s rich clients, whose life-style is utterly unaffected by inflation. For the 99%, the Chained CPI assumes that you are just as happy with canned catfood as you were with fresh salmon.

Lew’s headline number is $580 billion in tax hikes. It dwarfs the impact of cutting Social Security, which is $130 billion. At the same time, we are increasing taxes by $100 billion by raising the brackets more slowly than actual inflation. So, we have an actual $680 billion in increased revenues. Let’s see what we do with those. You probably think it has something to do with helping the middle class, as Lew claims in the section labeled “Strengthening the Middle Class by Investing in the U.S. Economy”. That translates to More Trickle Down From President Bipartisan. He wants to increase funding for US agencies to promote trade, including the Trans-Pacific Partnership, and the Transatlantic Trade and Investment Partnership, the new NAFTAs, and will hurt even worse as we watch corporations erode our sovereignty. Then we recycle the money back to corporations that shift foreign production back to the US. We paid them to leave, through deductions available for moving out (which supposedly will be repealed), and now we pay them to return. But that’s not all the corporations won. Take a look at the budget, pp. 7-35, where you can see all the money going to corporations on its way to trickling into the pockets of the rich.

For the middle class there are some opportunities for training, and schools for four-year olds, an increase in the minimum wage (because the middle class now lives at the minimum wage), and help with recovery of child support. The end.

Here’s a quote from the budget:

The Administration believes in a balanced approach that cuts spending and reforms entitlements responsibly, but also raises revenue from tax reform that closes special interest loopholes and addresses deductions and exclusions ….

Let’s just skip the tax increases on the middle class and the destruction of their retirement benefits. Why do Lew and Obama think balance is a good thing? Did the people on Social Security and Medicare and Medicaid cause the Great Crash? Did they reap billions of dollars in benefits from the Reagan/Bush/Obama tax rate cuts? Did they steal from pension plans or from stock and commodities brokerage accounts? Did they manipulate LIBOR for their personal benefit? Did they launder money for drug cartels and terrorists? Did they need Get Out Of Jail Free cards from the fake prosecutors at the Department of Justice? Did anyone in the entire country vote for this guy thinking “Oh good, at last someone will make the tough decision to cut my Social Security and give the money to the rich and their corporations?”

I’m all for balancing the budget. Just do it on the backs of the oligarchs and corporations and their foundations and their offshore holdings of trillions and their professional minions who make it all possible. That’s fair and balanced.

Photo by wayne’s eye view under Creative Commons license

The Central Question Posed by the Great Crash

11:53 am in Economy, Financial Crisis by masaccio

The Great Crash posed one question for this country: who would bear the losses? Would it be the banks that caused the problems? The officers, directors and shareholders of those banks? Their careless counterparties? The investors who bought the fraudulent real estate mortgage-backed securities and the complex spin-offs? The owners of capital who threw money into hedge funds and other exotic investments expecting a geyser of money in return?

No. That group doesn’t lose money. They used their control over the government and the Fed to make sure that the losses would be passed on to the rest of us, pushing millions into or near poverty. The savers were trashed by the Fed’s zero interest rate policies. The national debt run up by tax cuts and wars gave the rich an opportunity to end the safety net and focus all of the efforts of government on protecting them and their interests. The rich are safe. The rest of us are in deep trouble.

The government threw money at banks with abandon, leaving incompetent failed executives in place. When it turned out that banks lied about the quality of the notes and mortgages transferred to the RMBS Trusts, the SEC and the Department of Justice refused to investigate, let alone prosecute.

Banks didn’t complete the transfer of those worthless notes and mortgages into the Trusts, so the IRS announced it wouldn’t enforce the requirements for pass-through non-taxable status. The servicing arms of those banks cheated and lied to courts around the nation about ownership, and when they got caught, they talked the government into a sleazy settlement that gives nothing to the people damaged by the frauds and allows the banks to continue to lie and cheat, if at lower levels.

This list could be expanded indefinitely, with the same outcome: the Fed, Congress and the White House have only done those things that protected the money of the rich, whether or not the settlement was consistent with the law or not.

It didn’t have to be this way. From the outset, there were things that could have been done that would have placed the losses where they belonged: on Wall Street and its criminal denizens and its careless clients. The bailouts could have come with constraints and requirements, firings, lawsuits, and indictments. The entire rotten structure could have been pushed into a form that would not threaten the lives and incomes of the middle class, a group whose responsibility for the problems was minimal in contrast to that of crooked lenders and swindlers.

No. Not in this country. Not in a nation ruled by oligarchs and a government in thrall to economic theories years after those theories revealed themselves as nonsense, or to the rich who endow those irrational theories with sanctity of revealed truth, or both. There was never a day when the primary or even subsidiary consideration was the middle class, or the rule of law, or even the pretend values of the free market. The only consideration from the outset was the protection of the rich.

Even two years later, the government showed no interest in raising taxes on the richest Americans. Both parties explained that they couldn’t raise taxes even on the rich in a recession, and that the only solution was cutting out unemployment benefits, lowering the minimum wage, slashing Social Security and Medicare, and removing people from Medicare and the shredded remnants of help for the worst off.

The current lousy economy is a result of deliberately chosen policies. The government could have chosen policies that would have protected the middle class at the expense of rich criminals and their clients and their hedge funds and their off-shore trusts and their tax-avoidance schemes, the people and entities that wrecked the economy. It didn’t.

It’s not that we don’t know what to do to make the economy work for the middle class. We do. The government and the elites and the rich won’t allow it. They go house to house, from Bangor to Bakersfield, saying to the inhabitants, What part of this sentence don’t you understand? You think we’re going to eat our losses? You think we don’t care about our money? Well. Suck. On. This.

Deficit Talking Points For America Speaks

2:52 am in Uncategorized by masaccio

America Speaks is holding public meetings to teach people about the deficit. I hope progressives and FDL people will attend. Here is a link to the locations.

Yesterday I put up talking points on Social Security here. In comments, letsgetitdone points out correctly that we aren’t driving the agenda, and the leaders will no doubt whip up the deficit hysteria with bogus figures and theories. Here are some basic talking points.

0. This stuff is complicated. Your goal is simply to put these ideas into play, to make people think. You are fighting uphill, because very few people understand these points, and because the leaders have been lying to people about these issues for years. Try to pound these in this order.

1 Government economics aren’t like household economics. Governments print money. Households don’t and can’t. The analogy is false. Reasoning with false analogies is fraudulent. If they argue back, point out that the Fed created trillions of dollars to rescue Citigroup, and Goldman Sachs. Make a note of any response you get on this and let me know.

2. There is no deficit crisis. If there were a crisis, we would know because the cost of borrowing money would be going up. Interest rates are very low and will not go up in the near future according to the Fed. If anyone talks about credit default swaps, point out that they are unregulated, there is no real market for them, and they are easily and legally manipulated.

3. Cutting safety net programs and raising taxes on the middle class in the middle of a terrible recession is cruel and vicious, and only a thug would do it. Same goes for cutting school teachers and police.

4. Cutting spending on socially useful programs in the middle of a great recession is just stupid economics, and everyone who took Economics 101 knows that.

5. If the deficit crisis is so bad, we should increase taxes on the wealthy. They got big tax cuts while we were running huge unnecessary and useless deficits. Those tax cuts are a loan, as competent economists like Krugman and DeLong and others have said. If the deficit is so horrible, it is time to call in those loans.

6. If the deficit crisis is so bad, we should increase taxes on the rich, they are the ones who caused the deficits and caused the Great Crash. They can afford to pay the taxes. We can’t.

7. Deficits which fund useful programs like infrastructure, research and education have long-run positive effects. Deficits to give huge tax cuts to the wealthy, or pay for wars or military spending in foreign countries or corn subsidies are bad. They leave nothing for the future. Cut those programs.

8. Be on the alert for trickle-down economics. For example, if you hear leaders of the meeting say that raising taxes on the rich means they won’t invest in productive enterprises, or anything similar, insist that this is the trickle-down theory, which is nonsense.

a) Say it hasn’t trickled down on me. Getting people to laugh at stupid is a good way to shut stupid down.

b) Here is a post that discusses the issue. Here is a Wall Street Journal piece titled Trickle-down Economics Fails to Deliver as Promised, reporting on a study from Harvard’s Kennedy School of Government.

c) The New York Times reports that private equity hedge funds are sitting on $500 billion because they can’t find good investments. That means that finding capital to create productive enterprises isn’t a real problem, the problem is misallocation of resources by the rich. Here’s a link.

Hold your ground. We are right about this, and they are wrong. They are trying to hurt the country, you are trying to stop them.

Put up a diary here and everywhere else you participate, and let us know what happened.