US Credit Rating

I was glad to hear about S&P threatening to downgrade the US credit rating.  It will force deeper cuts and the full expiration of the Bush tax cuts.  I can go back to the taxes under Clinton in a heartbeat...

Supreme Court gets around "establishment of religion" prohibition by allowing tax credits for religious tuition

By Michael J.W. Stickings

And so the right-wing Supreme Court continues to erode the First Amendment:

The Supreme Court on Monday let stand an Arizona program that aids religious schools, saying in a 5-to-4 decision that the plaintiffs had no standing to challenge it.

The program itself is novel and complicated, and allowing it to go forward may be of no particular moment. But by closing the courthouse door to some kinds of suits that claim violations of the First Amendment's ban on government establishment of religion, the court’s ruling in the case may be quite consequential.

Justice Elena Kagan, in her first dissent, said the majority had laid waste to the doctrine of "taxpayer standing," which allows suits from people who object to having tax money spent on religious matters. "The court's opinion," Justice Kagan wrote, "offers a road map -- more truly, just a one-step instruction -- to any government that wishes to insulate its financing of religious activity from legal challenge."

The decision divided the court along the usual ideological lines, with the three other more liberal members -- Justices Ruth Bader Ginsburg, Stephen G. Breyer and Sonia Sotomayor -- joining the dissent.

The Arizona program gives taxpayers there a dollar-for-dollar state tax credit of up to $500 for donations to private "student tuition organizations." The organizations are permitted to limit the scholarships they offer to schools of a given religion, and many of them do.

The question comes down to whether a tax credit is essentially the same as a government expenditure -- in this case with respect to government financial support for religious institutions (if not for a specific religion). Justice Kennedy, writing for the conservative majority, said no, but I'm really not sure there's a substantive difference. As Justice Kagan wrote: "Taxpayers experience the same injury for standing purposes whether government subsidization of religion takes the form of a cash grant or a tax measure." And so what the Supreme Court is saying -- or, rather, its majority -- is that government subsidization of religion, through organizations that are not religion-neutral, is constitutional.

As BooMan notes, this is all "rather clever." Handing out tax credits instead of direct subsidies (which even this court might object to) is a way for conservatives, and for conservative states like Arizona, to circumvent the First Amendment's "establishment of religion" prohibition. It's theocracy through the back door, and, because "standing" was taken away from you, there isn't a damn thing you can do about it.

Things Republicans say about job creation that aren't true

By R.K. Barry 

Yesterday I wrote that no matter how tired progressives get saying the same things over and over again, no matter how tired they get refuting the lies of Republicans, they should carry on and fight the good fight because many people, who perhaps don't always pay enough attention, need to hear the the truth as often as possible.

Recently I have become a big fan of former Labor Secretary Robert Reich, who has a teaching gig at UC Berkeley these days and also blogs on political and economic issues. I find Reich the consummate teacher in the way he lays out his arguments and exposes nonsense for what it is.

One of the greater challenges in politics, I find, is that economic theory is so hard for most people to understand, and some theories that seem to make sense are flat out wrong, things like, if we just slash taxes on corporations, that will necessarily create more jobs. Yeah, well, not so much. Not if there isn't enough demand out there because people don't have sufficient income to buy stuff. Anyway, I'll let the good professor explain.

Here are a few untruths Republicans like to trot out, with rejoinders supplied by Professor Reich:

• "Cutting taxes on the rich creates jobs." Nope. Trickle-down economics has been tried for thirty years and hasn't worked. After George W. Bush cut taxes on the rich, far fewer jobs were created than after Bill Clinton raised them in the 1990s.

• "Cutting corporate income taxes creates jobs." Baloney. American corporations don't need tax cuts. They're sitting on over $1.5 trillion of cash right now. They won't invest it in additional capacity or jobs because they don't see enough customers out there with enough money in their pockets to buy what the additional capacity would produce.

• "Cuts in wages and benefits create jobs." Congressional Republicans and their state counterparts repeat this lie incessantly. It also lies behind corporate America's incessant demand for wage and benefit concessions – and corporate and state battles against unions. But it's dead wrong. Meager wages and benefits are reducing the spending power of tens of millions of American workers, which is prolonging the jobs recession.

• "Regulations kill job." Congressional Republicans are using this whopper to justify their attempts to defund regulatory agencies. Regulations whose costs to business exceed their benefits to the public are unwarranted, of course, but reasonable regulation is necessary to avoid everything from nuclear meltdowns to oil spills to mine disasters to food contamination – all of which we've sadly witnessed. Here again, we're hearing little from the President or Democratic leaders.

If cutting taxes on rich people, cutting corporate income taxes, cutting wages and benefits, and deregulation don't create jobs, then a lot of middle class people are probably going to be voting against their own best interests come 2012 and in the interests of others who don't really need the help. Just sayin'.

(Cross-posted at Lippmann's Ghost.)

General Electric pays no taxes

By Michael J.W. Stickings 

You might want to sit down for this one. The Times is reporting that General Electric pays zero corporate taxes in the U.S.:

General Electric, the nation's largest corporation, had a very good year in 2010.

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

That may be hard to fathom for the millions of American business owners and households now preparing their own returns, but low taxes are nothing new for G.E. The company has been cutting the percentage of its American profits paid to the Internal Revenue Service for years, resulting in a far lower rate than at most multinational companies.

Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.

Yes, quite extraordinary -- and, needless to say, deeply troubling.

And yet Corporate American continues to complain about how horribly it's being treated, how difficult it is to make a buck, how anti-business Obama is?

I'm not saying GE does nothing for America. It employs a lot of people, obviously, and it contributes a great deal to society, both for better (e.g., medical equipment) and for worse (e.g., weapons). And, yes, it has its not insubstantial philanthropic activities as well.

But getting away with paying essentially no corporate taxes whatsoever -- and being allowed to do so, given the "maze of [legal] shelters, tax credits and subsidies" it another other companies exploit for the sake of their own bottom lines at the expense of the public good -- is pretty despicable, not least at a time when so many people are struggling just to make ends meet, just to pay the bills and put food on the table.

Can you blame GE? Well, business is business, and business, at least in America, where it is not expected to have much of a social conscience, is about the bottom line, about making as much profit as possible. Let's not fool ourselves into thinking otherwise, into thinking that what's good for business is good for America. It isn't, at least not always, or even mostly.

But this is certainly a sign of what's wrong with Corporate America and with the system that allows it to rape and pillage -- figuratively speaking, to an extent -- without any regard for the consequences, to benefit from a society that allows it to profit with reckless abandon without having to pay for anything in return.

Think about that as you're doing your taxes and as you feel the merciless taxman breathing down your neck. If you were GE, you'd be in the clear, with your money safely stashed away "offshore."

But you're not. You are who you are, and you're screwed.

Taxing the super rich like it's 1959

By R.K. Barry

Robert Reich, who was Secretary of Labour in the Clinton Administration from 1993 to 1997, has a very interesting blog on the current state of affairs that contains any number of useful observations. 

I recently came across one of his posts, which laid out some rather compelling facts about the grossly uneven distribution of wealth in America and how it is that we have come to be in a situation where we can't pay for the things that any civilized society really should be able to fund.

No great surprise, but nearly everyone in America has bought into the idea that we need to radically reduce expenditures rather than give any thought at all to increasing revenues through taxation, specifically by taxing those who can most afford it – the super rich.

We have heard this before, but the numbers, as I say, are compelling.

I do recommend that you read Reich's post in its entirety, but here are a few interesting bits:

Today's typical 30-year old male (if he has a job) is earning the same as a 30-year old male earned three decades ago, adjusted for inflation.

The bottom 90 percent of Americans now earn, on average, only about $280 more per year than they did 30 years ago. That's less than a 1 percent gain over more than a third of a century. Families are doing somewhat better but that's only because so many families have to rely on two incomes.

This may not sound catastrophic, but, and here's the rub, the American economy is more than twice as large now as it was thirty years ago. So, Reich asks, where does all the money go? And the obvious answer is: to the top:

The richest 1 percent's share of national wealth has doubled – from around 9 percent in 1977 to over 20 percent now. The richest one-tenth of 1 percent's share has tripled. The 150,000 households that comprise the top one-tenth of 1 percent now earn as much as the bottom 120 million put together.

In so many ways, I have to say that I don't care what one's politics are. This is just wrong. 

But you might think that with the economy growing so rapidly over the past 30 years, those benefiting the most would be called upon to kick in a bit more. You would be wrong. The power of the super rich has been such that they have been able to make just the opposite happen:

From the 1940s until 1980, the tax rate on the highest earners in America was 70 percent or higher. In the 1950s, it was 91 percent.

Under Ronald Reagan the top rate dropped to 28 percent. Under Bill Clinton it rose to 39 percent and then under George W. Bush dropped to 36 percent (which is, of course, where the Republicans want to keep it).

Reich goes on to talk about big slashes to estate taxes and capital gains taxes, but you get the picture.

To add insult to injury, Reich makes the point that even before the current economic downturn the middle class's share of the nation's total income had shrunk while their tax burden had grown as they paid bigger chunks of their income in payroll taxes, sales taxes, and property taxes than they did before.

A lot of right wingers want to talk about common sense. Well, it makes no sense to me that public services and programs that the middle class and poorer Americans count on are poised to get the axe while this gross, and relatively new, uneven distribution of wealth in America does incredible damage to the fabric of the country.

The obvious point that Reich makes is that we need to hike taxes on the super rich -- not that this is going to happen any time soon.

No, we are going to continue to vilify public sector employers and big government in general. We are going to let big money buy all the means of mass communication and politicians it needs to convince everyone that what we really need is smaller government, which is just another way of saying that people, a growing number of people, will simply have to do without what they need to live a decent life.

A more equitable scheme of taxation would go a long way to solving the problems we are told can only be solved by massive cuts, but that would simply seem to make too much sense.

I'll give Professor Reich the last word:

Do this and we can afford to do what we need to do as a nation. Do this and you prevent setting the middle class against itself. Do this and you restore some balance to a distribution of income and wealth that's now dangerously out of whack.

Amen.

(Cross-posted at Lippmann's Ghost.)

Boener blinks

By Carl 

Well, well, well... suddenly the Teabag has lost its flavor...

House Speaker John A. Boehner (R-Ohio) told a convention of religious broadcasters in Nashville on Sunday evening that a federal government shutdown was not appropriate and not what the electorate wanted.
His remarks were the latest sign that congressional leaders were backing away from the brink of a shutdown.

"Americans want the government to stay open, and they want it to spend less money," Boehner said. "We don't need to shut down the government to accomplish that. We just need to do what the American people are asking of us."

In other words, it's business as usual. That's going to piss off the Teabaggers mightily, many of whom believe the only way to restore sanity to the budget process is to shut the thing down.

The Republicans are in a tough spot, to be sure. This is a giant game of Steal The Bacon, and Obama and the Democrats know all they have to do is prevent the Republicans from bringing the pork back to their side and the game is won. In other words, the Republicans will have to make a proposal that truly makes the necessary cuts to the budget to bring some form of fiscal stability back. Obama's budget proposal was nothing but a gauntlet thrown down.

In order to truly reduce the size of government, three things have to happen. Unfortunately, all three of those things are guaranteed...well, two are. One is unproven... to stifle any economic recovery:

1. Defense spending has to be cut. Unfortunately, defense spending is the one guaranteed job creating program for the district in which the contract is awarded, including the contract for the F-35 engine, the biggest boondoggle in the current developing Pentagon arsenal, and oh by the way, built in Boener's home state of Ohio!
2. Social Security and Medicare have to be reined in somehow. Now, you can't cut current spending. Remember all those elderly Teabaggers with their "keep your government hands off my Medicare" signs? You can cap the cost of living adjustments (COLAs) by faking a zero inflation number, which is accomplished by using core inflation, which excludes food and energy costs, which are "too volatile" to be useful. Are you kidding me? In a day and age when stock traders have software that can suss out microscopic inefficiencies and exploit them for millions in profits, we can't find someone to write a fractal-based program that can include the two biggests costs to an American family?
3. Taxes must be raised. Now, no one is going to propose this without a healthy dose of political cover, because the Teabaggers will flip out, and you know what that means: no more GOP.

Of those three items, only taxes has been unproven to have much direct impact on economic growth. Indeed, one can make the case, as I often have, that the Clinton tax hike on the rich, while lowering taxes on the working and middle classes, actually created robust and exuberant economic growth that was struggling to even begin to break thru when he took office.

Defense spending and social programs that funnel money directly to taxpayers are vital cogs in the economic activity of this nation. Some defense spending clearly can be cut. The F-35 is an example of a program that no one, not even the Pentagon, really wants and is make-work to bolster the bottom lines of the Carlyle Group and Pratt & Whitney. Still, even these are minimal compared to what would happen to deficits should the economy make a startling comeback in the next few years.

It's hard to believe that, just ten years ago, we were running budget surpluses that would pay down the national debt eventually, only to have Republicans decide that deficits don't matter and that matter belongs in the pockets of Americans.

Well, it never made it there, did it?

(Cross-posted to Simply Left Behind.)

How the GOP is a party of words: Promises are promises are promises...

By Nicholas Wilbur

Transitions are always difficult. If you're a Republican, Change® is particularly tough to swallow – which is why the GOP spent the last two years projectile vomiting on anything that tasted like "Progress" and throwing filibuster tantrums whenever Congress debated a bill on Capitol Hill.

They swept the midterm elections, nonetheless, not with a strong record – or any record at all – but by riding the coattails of the anti-government prattle of the Tea Party patriots who flooded the mainstream media with sensational circus theatrics and apocalyptic prophesies of the country's imminent demise were Democrats to remain in power.

The seemingly sane but obviously stubborn Republicans teamed up with Tea Party candidates and capitalized on the nation's fears and doubts by crafting a national message so bold it could not be ignored, even by liberals, who, for good or ill, were transfixed. Traditional Republicans, as the media has since dubbed the non-Tea Partiers, touted a "repeal and replace" strategy to undo the alleged devastation wrought by the Obama Administration and his Democratic Party minions in Congress. The Teabaggers, as the left-wing media dubbed the ideological extremists, did their part by peppering the rhetoric with threats to amend the Constitution and deny citizenship to brown people, abolish the IRS, and defund the departments of interior, commerce and education that these Fox News junkies believed had become a black hole for taxpayer dollars. 

But Republicans knew they couldn't continue riding in the back of the leadership bus through 2011. With majority control of the lower branch of Congress, there was a sudden expectation that these new leaders would actually lead, that these new lawmakers would actually make laws. Bitching and whining and obstructing the legislative process at every turn would not suffice with majority status in "the people's house" of Congress. 

They had to appear, at least on the surface, that they were worthy of the government paychecks they received.

And so, after a year-long campaign focused on accusing Democrats of ignoring the main concern of the American people – job creation – Republicans got right down to business upon entering office. Sort of. 

They amended the House rules to require that all bills brought to the floor include a constitutional citation of lawfulness. They rescinded the already limited voting rights of delegates from D.C., Puerto Rico, American Samoa, and elsewhere. They required that all bills include spending cuts to offset any costs needed for implementation of the newly-proposed legislation (exempting, of course, tax cuts for the rich and their repeal of President Obama's health-care law). And they changed the House schedule to give every lawmaker one week off for every two weeks worked. 

That was just the beginning. 

As they settled into their new positions of power, Republicans showed their dedication to the financially strapped American working class by introducing... a bill to remove the polar bear from the endangered species list, a bill to abolish the IRS and eliminate the income tax, and another bill that would redefine rape. 

Having promised to cut $100 billion from the federal budget this fiscal year, Republicans drafted legislation to free up a whopping $61 million (yes, million) in the budget by abolishing public financing for presidential elections. Most recently, they voted on what amounts to an office memo, a skeletal outline, a very rough, very unspecific, and very ambiguous House Resolution that calls for $32 billion in cuts.

Not exactly landmark legislation. Not legislation at all, in most cases. In fact, the only significant piece of legislation proposed thus far by Republicans has been the health-care repeal bill, which, given its chances of becoming law, wasn't much of a bill at all. They spent the last year promising to "repeal and replace" the 2,000-plus-page law known by conservatives as "ObamaCare," but the "replace" portion of the promise was conveniently absent from the two-paragraph repeal bill passed in the House. As they knew it would, this faux legislation failed in the Senate.

So here we are one month into the new Congress, with Republicans still reeling from a landslide victory over Democrats in the midterm election, and what do we have to show for it? 

Nothing. 

And looking back, we should not be surprised. We all saw this coming. 

After "shellacking" Democrats in the midterm elections, Republicans returned to Washington intent on "saving millions of taxpayer dollars." They began this quest by attempting to eliminate grant funding for public radio. The $3.2 million in projected annual savings was pittance, they knew, and doomed to failure, as they eventually saw. But they tooted their horns and banged their drums nonetheless, eventually blaming liberals for offering government handouts to Not Pro Republican media outlets. Next in line: banning earmarks, another pittance estimated to save $16 billion a year. That fell flat when Republicans realized that banning earmarks meant they could no longer fund infrastructure projects in their home states. There were also targeted efforts to deny unemployment benefits, thwart the judicial "interference" in cases where employees are raped on the job, and kill a bill to award health care to 9/11 first responders. 

The last two months of the 111th Congress saw more of the same blind Republican opposition that had defined their presence in Washington, really, since Democrats won the majority in 2006. In the final days of 2010, Republicans followed up their backward opposition to the DREAM Act and the repeal of "Don't Ask, Don't Tell" by fighting vigorously against even the no-brainer nuclear arms treaty with Russia, New START. 

They railed against excessive government spending (without acknowledging their role in the unpaid-for prescription drug program, the Bush tax cuts, and the two wars that created a $1.3 trillion deficit by the end of Bush's second term), but then balked when it came time to identify specific spending cuts. Perhaps in their most egregious display of hypocrisy, Republicans threatened to shut down the government if President Obama and the Democrats didn't get on board with the GOP priority of extending Bush's tax cuts for another two years. 

It worked. The rich kept their disproportionate tax breaks, but the result didn't quite live up to the Republican Party's pledge to cut spending back to 2008 levels, as outlined in their "Pledge to America" campaign manifesto. Conversely, it cost about $100 billion more than the 2009 economic stimulus bill they so loathed. 

The empty promises, the lofty and impractical goals, the "repeal and replace" agenda that has thus far come up empty on both fronts – these have all proven mere strategies in a shell game of hallow rhetoric meant to brainwash taxpayers into thinking that their new leaders in Washington are well-deserving of the $174,000 (plus health care benefits) that we pay them for representing We the People.

The naysayers and witch hunters of anything smelling of liberalism have demonstrated that they are not patriots defending against Socialism as much as they are stalwart defenders of the Bush-era status quo. The people loved them for it throughout the last congressional session, they praised them for it throughout the campaign season, and they turned out in swaths to reward them for it at the ballot box on Nov. 2, 2010. Now a month into the 112th Congress, Republicans are enjoying their highest popularity rating in years.

Republicans interpreted the last election as a mandate against the progressive agenda. Voters, they said, showed unequivocally that they wanted whatever was the opposite of progress and change. 

This is about as close as it gets.

(Cross-posted at Muddy Politics.) 

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Background photo of John Boehner from National Journal.

Republican favorable/unfavorable chart from Gallup.