Yes, We Could Be Having A Serious Deficit Reduction Discussion?

At some point in the ongoing discussion about federal debts and budget deficits everyone needs to get serious.  Serious, that is, about doing that which will reduce our federal deficit spending.  Really serious, not as in “let’s wave a Debt Crisis Flag every three months to advance an agenda including the privatization of Social Security and the voucherization of the Medicare program.”

Let’s start with the obvious.  Social Security doesn’t add a dime to the national debt.  If the words of a progressive blogger won’t suffice, how about listening to former President Ronald Reagan?  (video here)  So, discussing “reforms” to the self funded Social Security program as a means to reduce the national debt is extraneous to any serious deficit reduction discussion.

One way to approach the privatization of Social Security is to change the frame of reference, such as altering the connotation of “entitlement” from some earned benefit to which we are entitled because we paid for it, to one which has a tinge of “welfare” about it.  Social Security is not a welfare program — it is an earned benefit.  People who have paid into it all their working lives have every right to expect to be getting something back.  Social Security is not a retirement program.  It is a program which seeks to prevent abject poverty for elders.   Nothing in the Social Security program prevents anyone from maintaining a self-contributory retirement account of any shape or form.   Indeed, the benefits from Social Security are low enough that retirement to the Gated Golf Paradise Of Your Choice can only happen if you have a self-contributory retirement savings program. Anyone suggesting that “entitlements” such as Social Security “have to be reformed” to ease the burden on the federal debt (1) doesn’t have a clue what they are talking about, and (2) is regurgitating anti-safety net talking points from radicals who want to privatize all retirement income programs to the benefit of Wall Street investment firms.

Medicare does have some issues.  The first, and most readily apparent, is that the Medicare Part D (prescription drug) segment is, and always has been, underfunded.  However, the really big monster under the Medicare bed is the increasing cost of health care in America.  When private health care corporations started buying up religious organization/private, state, and locally supported hospitals the profit motive surged in the sector.  Health care must now generate a profit.  Savings, which were once achieved for the purpose of reducing costs for local tax payers or donors to religiously based institutions, now accrue to the corporate bottom line — not to taxpayers, donors, or patients.

The second factor is technology.  We do have the best medical treatment providers in the world.  However, best often translates into “most expensive.” We have all manner of devices and gadgets and equipment and gear to save or sustain lives.  Our hospitals take it as their mission to save or sustain life, which is all well and good until the emotional meets the economical.  There are “death panels” in this country, but they aren’t governmental — they are familial, with families making ‘end of life’ decisions which horrifically in some instances are based on what the family can afford.   Frankly speaking, we don’t do a very good job of educating our citizens about advance directives.  Some conservatives set up a howl when they noticed the Affordable Care Act provided for paying physicians or other medical professionals who provided ‘end of life’ counseling for their patients — however, a little counseling might go a long way toward reducing the anxiety of hospital personnel and the trepidations of family members.  It could also provide some savings in the long run.

Returning to the Big Problem — the Medicare Part D component; we knew in 2003 that the Part D segment would  cost approximately $534 billion.  [Foster pdf] Simply put, “the drug benefit had no dedicated financing, no offsets and no revenue-raisers; 100% of the cost simply added to the federal budget deficit,..” [Forbes]  The part about “dedicated financing” is important.  While the Social Security trust funds have dedicated financing (payroll taxes) there were no provisions to increase the revenues available to finance the Part D enhancement.   There is something unappealingly ironic about the current GOP insistence on “entitlement reform” because “Medicare is broken,” when it was the GOP majority in 2003 that Broke the Program.

Ways to ‘reform’ the Medicare program have been suggested which do not require “voucherizing” the entire thing and sending seniors back to pounding pavement in order to find affordable health insurance plans.  We could consider means testing for the prescription drug benefit.  We might take under advisement lifting the earnings cap for payroll taxes from the current $110,000 level and dedicating a portion of the revenues toward the Part D program.  We could allow the Department of Health and Human Services to negotiate for prescription drug prices the way the Veterans Administration bargains for prescription drugs for VA hospitals and clinics.

If we are REALLY REALLY SERIOUS about ‘reforming’ Medicare then it would be helpful to get past the silly voucherization proposals, referred to as “structural reform” in Speaker Boehner’s response to the President, [Boehner pdf]  and get to the core of what makes health care expensive — we could talk about health care cost containment, dedicated financing for Medicare, and lifting the earnings cap.   We might also want to take a deep breath and see if the Affordable Care Act’s provisions, such as eliminating tax payer subsidies for profitable private Medicare Advantage insurance policies, could achieve some savings over the next decade.

However, it’s getting relatively obvious that the Republicans aren’t terribly serious about deficit (debt) reduction when their offers are strictly ideological (privatize and voucherize) and the proposals don’t address the monster of their own creation — the lack of financing for Medicare Part D.

Buzz Words and Generalities.   Speaker Boehner is offering (pdf) “pro-growth tax reform that closes loopholes and deductions while lowering rates.”   This phrasing is coming perilously close to the older verbiage: Waste, Fraud, and Abuse.  As if we could make up any gaps in program funding by simply cutting out the WFA.  Most anti-tax advocates cite the WFA as some massive potential figure which if reduced could cure all our fiscal woes.  When pressed to provide total figures associated with the largely mythical WFA these advocates provide outlier examples of welfare fraud, some particularly egregious Pentagon payments to contractors, and perhaps a bit of information from Internet e-mail chain letters.  The WFA numbers have yet to yield up the level of financing needed to close budget gaps in the Pentagon or any other government activity.

The arithmetic from “loopholes and deductions” doesn’t add up either.  The same sort of fantastical thinking is required to equate the WFA savings and the L&D revenues.  These mythological creatures are based on the same gossamer upon which anti-tax advocates conjure up the notion that an inordinate amount of the U.S. budget is allocated to foreign aid.  The average American has come to believe that foreign aid takes up 10% of the federal budget, when if fact it consumes only 1%. [NYM]

The Republicans also appear to be consuming their own rhetoric on savings associated with reductions in federal employee compensation.

“Cutting pensions and benefits for government workers is popular, but once again most Americans overestimate how much that costs the government. On average, Americans think the federal government spent 10 percent of its 2010 budget on pensions and retiree benefits; the OMB figures indicate the real number is about 3.5 percent.” [CNN]

The moral of this story is that if the amounts of spending on pensions and benefits, or the amounts that can be retrieved by closing loopholes and eliminating deductions, are grossly inflated, then the resulting policy and budget decisions will be widely off the mark.

Unfortunately, the same type of ideologically based proposals which are the core of Speaker Boehner’s “structural reforms” i.e. voucherization and privatization of Medicare appear to inform his suggestions about federal employee compensation, and another favorite GOP target, SNAP (food stamps.)

The program is already under assault from all sides, considering the appropriations being entertained in the agriculture bill.

The Senate’s version of the farm bill would reduce overall funding by $23 billion, with a reduction in food stamps of $4.5 billion over five years. The House Agriculture Committee is proposing to cut funding by $35 billion — with nearly half the overall cut coming from reductions in food stamps by $16 billion over five years. [Atlantic]

But there’s a problem here.  Food stamps have a beneficial effect on the national economy.

“Those who believe in cutting SNAP funding as a cost-saving measure should know that food stamps boost the economy — not put a strain on it. Supporters of federal food benefits programs including President George W. Bush understood this, and proved the economic value of SNAP by sanctioning a USDA study that found that $1 in SNAP benefits generates $1.84 in gross domestic product (GDP). Mark Zandi, of Moody’s Economy.com, confirmed the economic boost in an independent study that found that every SNAP dollar spent generates $1.73 in real GDP increase. “Expanding food stamps,” the study read, “is the most effective way to prime the economy’s pump.” [Atlantic]

If the object of the game is to increase federal revenues by generating a higher GDP along the formula proposing that a growing economy produces jobs, and more jobs yield more taxable income, and more taxable income means more revenue — then the GOP has the SNAP portion of the argument exactly backwards.  They are proposing to cut a program which actually generates more economic growth.   If one seriously believes that economic growth means more revenue and hence less indebtedness, then one can’t seriously advocate cutting programs which elevate levels of economic growth.

All Pain and No Gain.  The two sides don’t seem to be speaking to the same fiscal slope, cliff, gully, whatever.  From the Republican perspective the damage to the economy might be done by The Specter of Rising Taxes.  Those legendary Job Creators — who are now seeing record corporate profits while wages continue to stagnate — might not invest, and hence there will be no economic growth.  This is fundamental Supply Side Hoax thinking.  That it has been, and still is, a hoax is demonstrated neatly by this graph from the Federal Reserve Bank of St. Louis:

The blue line represents wages, the red line corporate profits.  If corporate well being were the driver of overall economic growth and  well being then why has the blue line been trending downward since 1970?  The answer is simplicity itself: Supply Side Economics is a Hoax of the First Water.

A deficit reduction plan predicated on ideology, urban legends, misunderstandings, and economic illiteracy isn’t SERIOUS.   That conclusion further advances the argument that the Republicans aren’t really serious about debt or deficit reduction, but merely see the issue as a flag to be waved in the van of their attack on the social safety net, a banner of privatization signaling their allegiance to Tea Party politics.

Six Talking Points about Fiscal Cliffs and Austerity Bombs

Senate Majority Leader Harry Reid (D-NV) has a message for the middle class this morning:

“Nevadans and Americans across the country agree that we can strengthen the middle class by adopting a balanced fiscal policy that requires millionaires and billionaires to pay a little more. In July, the Senate passed a bill to cut taxes for the 98% of Americans and 97% of small businesses making less than $250,000. House Republicans should stop trying to protect the wealthiest Americans from contributing their fair share and pass this bill immediately. Middle class Americans will have more opportunities to succeed when we level the playing field and make tax policy fairer.”  Senator Harry Reid (D-NV) 11/19/12″  (emphasis added)

In order to effectively expound on this message it is necessary to plant oneself firmly in the Reality Based World, and to dismiss some common misconceptions being promoted by the plutocrats and their GOP allies.

#1.  When the GOP says “your taxes will be raised” they are not talking to 98% of the American public who earn less than $250,000 in adjusted gross income annually.  The Obama Administration’s proposal is to allow the Bush Tax cuts to expire on earnings above $250,000; and to KEEP the Bush era tax rates in place for those individuals earning less than $250,000 in adjusted gross income annually.

#2. When the GOP says taxes will increase on small businesses, they are including those 3% of “small businesses” which are lobby shops, major law firms, large hedge funds, etc.  They are NOT speaking of the 97% of American small businesses which are small partnerships, single proprietorships, or small corporations which constitute the backbone of the American economy.

#3. Social Security and Medicare are called “entitlements” because they are earned benefits, which individuals have paid for and therefore are entitlements. These programs are not the problem, they are simply the target of choice from the Republican leadership which wants to cut Social Security and privatize Medicare.   These programs have NO place in budget negotiations concerning the reduction of the federal debt.

#4.  The legislation to which Senator Reid refers is S. 3412.  The terms of which can be generally summarized as:

“The Senate bill (S. 3412), passed on July 25, 2012, would extend current tax rates for lower- and middle-income persons, would increase tax rates on higher-income persons, would extend for one year (through 2013) certain tax provisions that expire at the end of 2012, and would patch the alternative minimum tax for one year only (2012).” [source]

#5.  “Harry and Louise” style ads from the Edison Electrical Institute (DefendTheDividend) notwithstanding,  S. 3412 and the Obama Administration proposals are  NOT an attack on retirement savings.  Remember the threshold levels:  “Individuals with incomes above these threshold levels, would have some of their itemized deductions and personal exemptions limited by phase-outs, would have a 20% rate on dividends and long-term gains, and would face tax rates of 33%, 36% and 39.6%“  [source]  The current rate for investors is 15%.

Who would  be affected by the Obama Administration’s tax proposals on capital gains?  Information from the Tax Policy Center is helpful.

Things to note — there are NO changes for those individuals in the bottom four income quintiles.  Only those individuals who are in the TOP income brackets (the top quintile, especially those in the top 1% or the top 0.1%) would be affected by the proposed changes in tax treatment of dividends.

#6.  There is NO correlation between low tax rates and economic growth. The non-partisan Congressional Research Service came to this conclusion after studying data from the last 65 years.

“The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie.

However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, the share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009. Tax policy could have a relation to how the economic pie is sliced—lower top tax rates may be associated with greater income disparities.”  [CRS pdf]

In short, the only economic feature impacted by a reduction in tax rates is income inequality.   Nothing says “Support The Plutocrats and Financialists” better than saying we can’t raise taxes on the top 2% without cutting earned benefit programs like Social Security and Medicare.

The Campaign for the Middle Class Isn’t Over

The candidates are no longer running ads, the campaigns have been shut down, BUT the campaign for the American Middle Class continues.  The next phase comes as the Congress debates how to reduce the national debt — brought to us by two wars fought “off the books,” ill considered tax rate reductions, and a nasty recession.  If the American Middle Class is to avoid the detonation of the Austerity Bomb (aka the Fiscal Cliff) then we need to:

(1) Let our Senators and Representatives know that without an increase in the tax rates for millionaires and billionaires the ARITHMETIC necessary to reduce the national debt doesn’t add up.

(2) Remind our Senators and Representatives that federal discretionary spending has already been cut by $840 billion to $916 billion over the next ten years [QS] in the Budget Control Act of 2011.

(3) Let our Senators and Representatives know that we understand merely closing a few loopholes in the tax code isn’t nearly enough to make a serious dent in the national debt.  If they are serious about debt reduction then “increasing revenues” can’t be a code phrase for “tinkering with deductions and loopholes.”

If millionaires and billionaires don’t want a national debt passed along to their children and grandchildren — it just might behoove them to help pay off some of it.

 

 

S. 3468: It’s Baaack…and shouldn’t be

Heads Up!  They’re back, again.  S. 3468 is yet another attempt by the financialists and related banking lobbyists to hamstring efforts to regulate the financial services sector.   It’s not like these interests have ever given up their campaign to revert to Business As Usual  such that the Wall Street Wizards can become yet another font of ill advised, incomprehensible, albeit highly profitable synthetic or otherwise manufactured financial products — You know, things like those adorable synthetic CDO’s which flooded the financial market with valueless toxic paper.

Here’s the CRS summary of the bill submitted by Senator Rob Portman (R-OH) on behalf of the banking sector:

Independent Agency Regulatory Analysis Act of 2012 – Authorizes the President to require an independent regulatory agency to: (1) comply, to the extent permitted by law, with regulatory analysis requirements applicable to other federal agencies; (2) provide the Administrator of the Office of Information and Regulatory Affairs with an assessment of the costs and benefits of a proposed or final significant rule (i.e., a rule that is likely to have an annual effect on the economy of $100 million or more and is likely to adversely affect sectors of the economy in a material way) and an assessment of costs and benefits of alternatives to the rule; and (3) submit to the Administrator for review any proposed or final significant rule.

Prohibits judicial review of the compliance or noncompliance of an independent regulatory agency with the requirements of this Act.

Translation: If any of the financial regulatory agencies, like the SEC, the OCC, the FDIC, or the CFTC wants to approve regulations which might have a “significant effect” on some bank’s bottom line, then the agency would have to present a “cost – benefit analysis,” and submit the rule for administrative (read executive branch) review.

There are some very cogent reason to be extremely skeptical about this bill.

#1.  It dramatically changes the relationship between the administration (executive branch) and the independent financial regulators.   The SEC, et. al. are supposed to be independent of the executive branch, which is why their leadership is subject to confirmation.  To require that the agencies present their proposed rules for executive approval inserts presidential politics directly into the rule making process.

Those who find the diminution of regulatory oversight disturbing will not be pleased with this proposal. Nor will those who decry the transference of yet more power to the executive branch.   There’s nothing here for either end of the political and ideological spectrum.

#2.  It invites endless litigation.  S. 3468 could be alternately named the Wall Street Attorneys’ Full Employment Act.  For those of us who believe that the interminable foot-dragging on CFTC regulations of the derivatives market has gone on long enough, this is entirely too much, [CFTC law] the Portman bill merely serves to add yet another bureaucratic roadblock before regulations can be finalized.  [Lieberman/Collins pdf]

#3. It prevents agencies from acting in a timely manner.  Again, inserting a secondary layer of “review” invites both executive interference and financial sector slow walking before any effective oversight of financial institutions can be effected.

#4. It is redundant.  All the agencies involved, with the single exception of the Federal Reserve, are already required to do formal cost-benefit analyses of proposals.  In case no one had noticed during the attempts to get the provisions of the Dodd Frank Act implemented that the banks have been availing themselves of these requirements to slow down the whole process — they have.  All this bill accomplishes is to slow the process down from a crawl to a drag.   Here’s why:

“The thirteen new analytic requirements this legislation could impose are only the beginning of the delays and burdens it would create. The mandated OIRA review of significant rules would take up to six months. In addition, the review process could force agencies to go back to the drawing board or do a re-proposal of the rule, which could add years to the regulatory process. While agencies could overrule an OIRA determination that a rule or a cost-benefit analysis was inadequate, such a step would render the regulation highly susceptible to court challenge. It would make industry attempts to overturn new rules in court almost inevitable. The increased risk of court reversal will discourage independent financial agencies from finalizing any regulation that receives a negative OIRA review.” [AFR pdf] (emphasis added)

In short, what we have here is a bill that simply refuses to die… and one which is unnecessary, unwarranted, and merely serves to benefit the financialists who don’t want oversight of their speculation in the Wall Street Casino.

Perhaps we might initiate newly elected Nevada Senator Dean Heller’s in-box with a few e-mails indicating that this is not a bill which deserves the support of 99.9% of the American public?

Playing Percentages With Grandma? Romney-Ryan Medicaid Budget Cuts in NV

The median annual household income in Nevada is $55,726. [Census]  The total population estimate for 2011 is 2,723,322 and of these approximately 12.5% are over 65 years of age.  Some simple arithmetic shows that about 340,415 Nevadans are over 65 years old.   So what?

The question is important because some of these individuals will need home care services to deal with infirmities, some will need assisted living to remain independent, and others will require institutional care, aka nursing facilities.

As we can see from the Kaiser Family Foundation graph above,  more Medicaid resources have been allocated for home and community based care since 1995.  Long term care, which prior to 1995 meant institutional care for the most part, is now 43% home/community based health care services.   The issue now becomes do we want to fund the Medicaid program at a level which will allow more low income  Nevada residents over the age of 65 to remain at home, or do we cut program services such that we cope with only the most medically fragile?

The family issue, for that household earning the $55,726 annually, is how to provide care for an elderly relative who requires medical assistance beyond the financial capacity of the family to provide but who doesn’t need institutional care?  There is no answer to this inquiry from the Romney/Ryan budget.

In fact, if as Senator Heller and some of his colleagues recommend,  we repeal the Affordable Care Act (Obamacare) and do what the Republican ticket suggests — transform the Medicaid program into a block grant scheme — we cut approximately 38% from Medicaid services. [KFF pdf]  If we drill down into state by state statistics, if Obamacare were repealed and the Ryan Budget was adopted our Medicaid program in Nevada stands to lose about 44% of its funding. [KFF pdf]

No one would (or should) be so callous as to suggest we slash funding for those with the most serious medical needs, especially those who need nursing facility care.  However, if we’re looking down the line at a 44% reduction in Medicaid funding for state services then the obvious cuts would come “at the margins.”

Who’s marginal?  Are low income single mothers with two dependent children under the age of 6 marginal?  Are low income elderly persons who can still function — albeit barely –  independently marginal?

The Medicaid program in Nevada* is an insurance program which pays servicers to perform some or all of the following tasks:

-Adult Day Care
-Assistance Shopping for Essentials
-Caregiver Respite
-Case Management
-Companion Care
-Homemaker
-Housekeeping
-Laundry
-Meal Preparation
-Personal Care
-Personal Emergency Response System (PERS)

* In order to qualify for the Nevada Home and Community Based Waiver as of 2012, the applicant’s monthly income must be less than $2,094.  Their countable assets must be valued at less than $2,000.

Now, how many families can afford privately financed adult day care, companion care, housekeeping help, meal preparation, personal care, and shopping assistance? On $55,726 a year?  On an income of approximately $2,000 per month?

The obvious conclusion is that perhaps the Republicans are advocating for Crowded Housing?  If they bemoan the fact that recent college graduates are staying home with parents in a tight economy, think how much more familial the entire living situation becomes when the grandparents — or Uncle Festus or Aunt Minerva — move in?  Especially when the elderly relatives are simply in need of the kinds of home or community based services likely to be declared marginal in cost cutting binges?

While this might all sound a little facetious, the fact is that most houses in the U.S. ( some 67%) have two or three bedrooms. [Census] Every parent’s dream for when the offspring depart, be it the new guest room, the man cave, the sewing room — whatever — fails when a no long total independent older relative needs a safe place to live.

A modicum of concern for middle income families who are struggling to maintain their standard of living might be in order.   If we can assist middle income families with the costs associated with the care of a low income elderly relative; if we can chip in a bit so that a low income  elderly person can remain independent as long as possible — then why is is necessary to cut 44% of the Medicaid program in Nevada so that millionaires and billionaires won’t have to revert to paying the income taxes they were paying back in the Clinton years –  39.6%.  (They are current paying 35%.   All this for 4.6%. )

Let’s guess that the hedge fund managers and Wall Street wizards won’t be decimated by a 4.6% tax increase, but a 44% reduction in Medicaid funding in Nevada will have a profound effect on the other 99.99%.

Wynn Joins the P.I.T.Y Party

Poor Steve Wynn — the Nevada gambling mogul isn’t getting the respect he deserves! To hear him tell it:

“I’ll be damned if I want him (President Obama) to lecture me about small business and jobs,” he told Ralston. “I’m a job creator. Guys like me are job creators and we don’t like having a bull’s-eye put on our backs.”

“I can’t stand the idea of being demagogued, that is being put down, by a president who hasn’t created any jobs and doesn’t even understand how the economy works,” he added.”  [LVSun]

Stephen Colbert had some well chosen words for this attitude, and offered a solution — the formation of the Protecting Industry Titans and Yachtsmen, or the P.I.T.Y. Party.  Evidently, Mr. Wynn is seeking membership.

The moguls like Wynn  certainly are getting touchy these days.   Mr. Wynn is sounding ever so much like hedge fund manager Leon Cooperman, from Freeland’s article, and Colbert’s satire:

Cooperman argued that Obama has needlessly antagonized the rich by making comments that are hostile to economic success. The prose, rife with compound metaphors and righteous indignation, is a good reflection of Cooperman’s table talk. “The divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them,” Cooperman wrote. “It is a gulf that is at once counterproductive and freighted with dangerous historical precedents.”  [New Yorker]

Excuse me for a moment — as a member of the 53% who did pay federal income tax in 2011, but whose vehicles must do without their own elevators, I have to ask: When did getting your itty-bitty feelings hurt preclude you from making sound business decisions in your own interest?

First, what happened in the recent recovery which might have exacerbated the sense that the 0.1% were raking in far more than might be expected for any small element in the overall economy?

Chrystia Freeland captured the trends in two paragraphs back in 2011:

“Before the recession, it was relatively easy to ignore this concentration of wealth among an elite few. The wondrous inventions of the modern economy—Google, Amazon, the iPhone—broadly improved the lives of middle-class consumers, even as they made a tiny subset of entrepreneurs hugely wealthy. And the less-wondrous inventions—particularly the explosion of subprime credit—helped mask the rise of income inequality for many of those whose earnings were stagnant.

But the financial crisis and its long, dismal aftermath have changed all that. A multibillion-dollar bailout and Wall Street’s swift, subsequent reinstatement of gargantuan bonuses have inspired a narrative of parasitic bankers and other elites rigging the game for their own benefit. And this, in turn, has led to wider—and not unreasonable—fears that we are living in not merely a plutonomy, but a plutocracy, in which the rich display outsize political influence, narrowly self-interested motives, and a casual indifference to anyone outside their own rarefied economic bubble.”  [Atlantic]

BUT, don’t mention any of this or they’ll get their feelings hurt?

Note that both Cooperman and Wynn perceive themselves as members of the focus group formulated Job Creators category.  If one remains hermetically sealed in one’s “rarefied economic bubble,” then this might be understandable.

Thus within the confined realm of their “narrowly self-interested motives,” excluding the needs of any around them, Wynn and Cooperman are free to indulge in the level of self pity necessary to excuse their opposition to paying a mite more in taxes to support the interests of any others. Or, that other 99%.

Secondly, “it’s all about me,” isn’t necessarily a good philosophical foundation for business practices.  Note the arrogance of Wynn’s articulation, “Guys like me are job creators and we don’t like having a bull’s-eye put on our backs.”    Mr. Wynn should know better.  What happened to his business in the wake of the Housing Bubble collapse?

Visitor volume, reported as 54,267,549 for Nevada in 2008 dropped to 49,731,901 in 2009.  It dropped to 49,684,782 in 2010 as the Recession deepened.  [NVRA]  Airport travel, convention attendance, visitor volume, all those statistics Nevadans watch carefully were down.  People de-leveraging from household debt, and especially those who lost jobs, don’t answer Nevada’s siren songs.  Those people are included in a group commonly called CUSTOMERS.

If too many customers are too financially strapped to play with our fancy lights and whistles money grabbing machines or to play at our flashy green tables then Mr. Wynn’s operations decline — back to the bad old days of the Bingo Parlor in Maryland?

Who doesn’t understand how the economy works?

If those who consider themselves the Elite excavate their own custom designed bunkers in which only their economic needs really count, and bombard the political system with their avaricious ideology, then it won’t be too long until the customers they require to sustain their operations evaporate.

Income inequality trends were in place prior to the Recession, as illustrated by this graphic from the Congressional Budget Office:

Income increased by 275% for those in the highest quintile, by 65% for the next highest group, by just under 40% for the next 60% of the income earners, and 18% for those in the bottom quintile. [CBO]

Notice that since 1982 the percentage of wealth accumulating to the top 1% of American income earners has increased, and increased rather dramatically since 2002.

Now it’s time to ask the obvious question:  If wealth accumulation trends continue, and it appears that they have during the recovery period –

“In 2010, average real income per family grew by 2.3% (Table 1) but the gains were very uneven. Top 1% incomes grew by 11.6% while bottom 99% incomes grew only by 0.2%. Hence, the top 1% captured 93% of the income gains in the first year of recovery. Such an uneven recovery can help explain the recent public demonstrations against inequality. It is likely that this uneven recovery has continued in 2011 as the stock market has continued to recover. National Accounts statistics show that corporate profits and dividends distributed have grown strongly in 2011 while wage and salary accruals have only grown only modestly.”  [Saez pdf] (emphasis added)

– then how do the ultra-rich intend to keep their businesses profitable?  Especially in Mr. Wynn’s case, the casinos being essentially entertainment retailing?

One of the time honored ways to determine if a business is in trouble is to see if it is gaining a larger share in a declining market.   Obviously, if a declining number of people have the financial capacity to spend their discretionary income on entertainment, then this doesn’t bode well for entertainment establishments.   Pursuing economic and taxation policies which precipitate further contraction in wealth accumulation among a majority of the population isn’t conducive to creating an expanding market for anyone’s products.  The President appears to have grasp this point, Mr. Wynn and Mr. Adelson perhaps not so much.

Job Creators

Moguls do not create jobs.  Moguls, and other businesses owners, hire people.   If they have a lick of sense they do not hire anyone they don’t need.  Another time honored rule of personnel management says:  If you don’t need Cousin Harry don’t hire him.  Nothing will drive any business into the ground faster than an inflated payroll — especially when it threatens to morph into the  family tree.

For the umpteenth millionth time — staffing levels should only be increased when the current employees cannot make or provide the goods and services demanded by the customers, with an acceptable level of customer service.

Demand is what creates jobs.  For all the self-congratulatory posturing of the economic elite, if no one is buying the vehicles, purchasing the furniture, or spending a night with the slot machines — there will be less demand and with less demand comes the natural restrictions on hiring.  The old Supply Side Hoax was never more than an artificial justification for greed.  It certainly isn’t the way to keep an economy growing.  The President understands this, some of the touchy moguls not so much.

Perhaps someone would like to procure one of Mr. Colbert’s Million Dollar Certificates, suitable for framing, telling Mr. Wynn that at least one person likes him?

Willard Mitt Romney: The Coloring Book Candidate

The Romney Strategy is beginning to evolve into something recognizable.  The problem is that it’s an amorphous shape that Etch-A-Sketches to fit any audience.  Think Progress offers a Magnificent Seven specific issues the Republican candidate won’t address.  There’s plenty of room to review some of  these points and to add more depth.

Ladies First: Governor Romney sidestepped when asked about supporting the provisions of the Lily Ledbetter Act [TP] but wait, there’s more.  During the flap about this dodge and weave the Romney campaign offered that the candidate “supports pay equity and is not looking to change current law.” [HuffPo] It’s important to note that the Ledbetter Act and the Paycheck Fairness Act are NOT the same thing — so, when candidate Romney was pressed on whether or not he would support the Paycheck Fairness Act he demurred, and responded with his attack line “The President should be more worried about jobs for women.” [HuffPo] And here we have the first page of our coloring book — Yes! the candidate is all for “pay equity” BUT maybe not for the Paycheck Fairness Act.

There’s another riddle to be teased out of the Romney commentary as well.  Romney charges that 92% of the job losses in this “dire economy” have been those of women.   Factcheck analyzed the number and found it wanting.  They even created their own chart:

Women’s jobs haven’t rebounded like those for men. Why is that?

 “If you look back to the start of the recession, many of the industries (construction and manufacturing) that were very hard hit initially were male-dominated,” said Margot Dorfman, CEO of the U.S. Women’s Chamber of Commerce, in an interview with FactCheck.org.

It wasn’t until later that jobs like retail and government jobs, particularly teaching jobs, began to take a hit, affecting women more, Dorfman said. Those jobs have been slower to recover.  [FactCheck] (emphasis added)

Those  job hits in government include teaching jobs lost when state and local funds weren’t available to maintain school staffing levels.   Thus, if candidate Romney were really serious about creating jobs for the women who were laid off then he’d be advocating plans to rehire teachers?  Uh, no.   According to the Department of Labor, women hold 68.6% of the jobs in the education sector, and 79% of the jobs in health and social services. [DoL spc rpt] Obviously, when teaching and health/social services jobs are cut women take the hit.

What did he have to say about education?  Is his “plan” something that would create  or save teaching jobs?

“… education has to be held at the local and state level, not at the federal level. We need get the federal government out of education. And secondly, all the talk about we need smaller classroom size, look that’s promoted by the teachers unions to hire more teachers. We looked at what drives good education in our state, what we found is the best thing for education is great teachers, hire the very best and brightest to be teachers, pay them properly, make sure that you have school choice, test your kids to see if they are meeting the standards that need to be met, and make sure that you put the parents in charge. And as president I will stand up to the National Teachers Unions… [Romney on Education] (emphasis added)

Not so much.  (a) Romney’s parroting the right wing line that the federal government has little if any interest in engaging in what has historically been a state and local concern.  This approach ignores federal contributions to Title I, special education, all the way around to school lunch programs and student loans.  If it’s a “state responsibility” then the federal government isn’t obliged to establish policy toward increasing the number of teaching jobs.  Sorry ladies.  (b) “We need to get the federal government out of education…”  (c) advocating for smaller class sizes is just a way for the unions to pressure school districts to hire more teachers?   Tell that to parents of a kindergartener in a class with 35 other kids. By the way, the right wing advocates have also charged that increasing the standards for teaching certificates is also a union plot to create artificial shortages of teachers and thereby to drive up wages.  (d) Ah, “school choice,” read: charters, vouchers, and other anti-public education schemes.  (e) “Put parents in charge,” of what?  Let’s guess it’s a “market based solution” in which parent have a “choice” of privately operated schools.  Romney’s comments establish his bona fides as a “coupon conservative.”  This doesn’t sound much like a program to increase jobs for women.

In short, candidate Romney really hasn’t said anything, he’s merely provided some short-hand sound bites about “pay equity” (good) but “Pay Check Fairness Act” (maybe not), and “jobs for women” (good) but increasing employment in education where women’s jobs are saved or lost (Union Plot!) and the federal government doesn’t have any reason to get involved (except to promote school vouchers and beef up the bottom lines of test publication corporations).  The audience is invited to fill in the gaps with  preconceived notions already framed about Romney’s candidacy.  He is, politically speaking, a very empty suit into which a voter’s inclinations can be conveniently poured — one size fits all. Color him in with whatever shades you like.

Dearth and Taxes:   The Romney taxation policy is a great void of unspecified promises and equally vague notions.   Heaven knows the Tax Policy Center tried to run an analysis and this is as far as they got:

“Governor Romney would permanently extend all the 2001 and 2003 tax cuts now scheduled to expire in 2013, repeal the AMT and certain tax provisions in the 2010 health reform legislation, and cut individual income tax rates by an additional 20 percent. He would also expand the tax base by cutting back tax preferences, but has supplied no information on which preferences would be reduced. Tax provisions in the 2009 stimulus act and subsequently extended through 2012 would expire. These include the American Opportunity tax credit for higher education, the expanded refundability of the child credit, and the expansion of the earned income tax credit (EITC). The plan would also eliminate tax on long-term capital gains, dividends, and interest income for married couples filing jointly with income under $200,000 ($100,000 for single filers and $150,000 for heads of household) and repeal the federal estate tax, while continuing the gift tax with a maximum tax rate of 35 percent.²

The plan would reduce the six current income tax rates by one-fifth, bringing the top rate down from 35 percent to 28 percent and the bottom rate from 10 percent to 8 percent. The accompanying repeal of the AMT would increase the tax savings from the rate cuts—without that repeal, the AMT would reclaim much of the tax savings.”

Only the most die-hard ideologues are still clutching the fabrication that reduced taxation yields increased revenue, so how does Governor Romney propose to pay for this?

The plan would recoup the revenue loss caused by those changes by reducing or eliminating unspecified tax breaks, thereby making more income subject to tax. Gov. Romney says that the reductions in tax breaks, in combination with moderately faster economic growth brought about by lower tax rates, will make the individual income tax changes revenue neutral compared with simply extending the 2001 and 2003 tax cuts. He also promises that low- and middle-income households will pay no larger shares of federal taxes than they do now. [TPC](emphasis added)

What tax breaks would be reduced or eliminated?  He won’t say.  He’s already admitted that the Congressional Budget Office can’t score the plan because the “details will have to be worked out with Congress.” [TP] The idea that “we’ll work out all the details later” is becoming a recurrent theme with the former Governor.  Witness the immigration issue, wherein he won’t say if he’d continue President Obama’s policy on undocumented youngsters, because he’ll work out a Really Big Plan with Congress later.

What the audience may be listening for is “I’ll reduce taxes,and everything will be all right when I work it all out with Congress.”    The general guidelines are a bonus to the 1%, as reported by CNNMoney:

“Assuming the Bush tax cuts are extended, the Romney plan would give the top 1% of earners an average tax cut of $150,000, a 7.8% reduction in their average federal tax rate, according to the Tax Policy Center.

Americans in the middle 20% of income-earners would get an average tax cut of $810, a 1.4% tax rate reduction.Those making $1 million or more would receive an average tax cut of $250,000, an 8.1% tax rate reduction, while the average American would get $2,800, a 3.5% rate drop.”

The generalized Romney plan would definitely lower the effective tax rate for those in the upper income brackets:

But, Gee! Tax Cuts for Everybody  sounds so nice in the focus groups.  And, we’ll pay for it all by closing those loopholes I won’t specify….when I work it out…with Congress….  Color in your candidate with the crayon of your choice.

One of the nice things about being a Coloring Book Candidate is that whenever someone opines about the impact of your policy directives there’s always a back door to say, “I didn’t really mean that, my opponents are just trying to mis-characterize my position.”

So, what are we supposed to do with the hints about specifically what deductions and loopholes our Coloring Book Candidate is going to adjust?

One hint: “Romney also reportedly said he would probably eliminate the second-home mortgage deduction for high-income earners, as well as deductions for state income taxes and state property taxes.”  [CBS]

Right on cue, when objections were raised to eliminating these deductions the Romney Campaign said, “… he was merely responding to questions offering suggestions during the fundraiser, ” and “During a conference call, aides said Romney he was simply throwing out ideas, not outlining policy when he said he would combine or eliminate many government departments, agencies and tax credits to help offset his proposal to slash all U.S. tax rates by 20 percent.”  [Reuters]

Wasn’t that easy?  Any time someone objects or points out the counter-productive elements of a proposal, the Coloring Book Candidate merely slides gently out the most convenient exit — “I was Just Sayin.”

Back in the Dark Ages of Black and White Television there was a children’s program called “Winky Dink and You,” and for something like 50 cents you could order a sheet of plastic ( that was supposed to stick to the screen via the good offices of static electricity) and a collection of Genuine Original Winky Dink crayons.  Episodes contained a segment wherein the Little Viewer was supposed to Connect the Dots to complete a picture advancing the story line.  Many parents were none too pleased with Little Viewers who did not bother to attach the plastic cover, and found it more efficient to just draw directly on the TV screen.

Modern day voters, some of whom may have memories (fond, or not so fond when the vinyl sheet wasn’t used or got lost) of Winky Dink, are now invited to revisit those days when a person could create the desired colored scene before them.   Mitt Romney’s campaign invites you to approach the television set and figuratively color in his policies with what ever crayon from your Winky Dink collection you prefer.  Like the crusted wax on the TV screen of old, adults may be required to come in later and clean up the mess.

From The Needy To The Greedy: NV GOP Reps. Support Ryan Plan

On March 29, 2012 the House of Representatives voted 228 to 191 on H. Con. Res. 112 “Establishing the budget for the United States Government for fiscal year 2013 and setting forth appropriate budgetary levels for fiscal years 2014 through 2022.”  That would be the Ryan Budget, and both Representative Mark Amodei (R-NV2) and Representative Joe Heck (R-NV3) voted with the Republican majority.  [roll call 151]

To the Greedy. Since the numbers don’t add up in the Ryan/Romney budget plan, the entire scheme depends upon the support of those who believe in Tax Cuts for the Rich, and austerity for the remaining 99%.   For those who would like an illustration of precisely what Amodei, Heck, Romney, and Ryan are proposing there’s a chart for that:

So, if you are a median income earner in Nevada ($53,082) under the Ryan/Amodei/Heck/Romney proposal you could reasonably expect a 1.9% after tax income gain.  This might be a good time to note that the annual inflation rate for 2011 was 3.2%.  [USinflat] However, if you are earning more than a cool million, then your after tax income gain should be about 12.5% under the GOP plan.

The Tax Policy Center (Urban Institute & Brookings Institution) ran the numbers and concluded that the Republican plan takes care of the Greedy very well, thank you very much.

The Christian Science Monitor concluded:

“TPC looked only at the tax reductions in Ryan’s plan, which also included offsetting–but unidentified–cuts in tax credits, exclusions, and deductions. TPC found that in 2015, relative to today’s tax system, those making $1 million or more would enjoy an average tax cut of $265,000 and see their after-tax income increase by 12.5 percent. By contrast, half of those making between $20,000 and $30,000 would get no tax cut at all. On average, people in that income group would get a tax reduction of $129. Ryan would raise their after-tax income by 0.5 percent.”

But, but, but… sputters the GOP talking point, “46% of the people don’t pay any income tax.”  Curious, the Republicans are publicizing the fact that a significant portion of American income earners aren’t making enough money every year to be considered liable for federal income taxation.   What the 99% do pay are payroll taxes — which they pay in higher proportions than the 1%’ers, and sales taxes — which are the most regressive form of taxation imaginable.  In short the GOP budget, which Representatives Heck and Amodei were pleased to support attends solely to the tax concerns of the economic elite.

From the Needy.  So, how do the Republicans intend to “reduce the deficit” by practicing austerity on the remaining 99% of the U.S. population?  Here’s part of the problem:

“Because Romney promises to protect current Social Security and Medicare recipients from cuts, he cannot get much savings from those programs by 2016. Combined, they are projected to make up about 44 percent of the budget that year. Interest costs, which cannot be touched, would make up an additional 9 percent of the budget, while Romney promises to add almost $100 billion to the Pentagon budget that year, based on his pledge that military spending reach 4 percent of GDP.”  [full article Salon Taylor]

So, what remains on the chopping block?  Ans: Programs designed and implemented to assist low and moderate income Americans, those same median income earners who aren’t going to see after tax income gains that are likely to exceed the rate of inflation.

Medicaid:  As of 2009 there were a total of 62,458,000 Medicaid recipients in this country. 5,433,000 of the recipients were in general hospitals, another 115,000 were receiving care in mental hospitals.  101,000 were mentally disabled.  1,644,000 were in nursing homes.  [SSA stats]    The simplistic “Gee Whiz” formula for reducing expenditures relies on assuming a reduction in the number of recipients and/or reducing the funding available for the program.

This is where the ideology is at variance with the reality:

“The rate of increase in Medicaid expenditures also declined over the last decade. A major contributor to Medicaid expenditure growth has been increases in enrollment caused by the two economic recessions experienced in the past decade and continued growth, almost 3 percent per year, in the disabled population. Medicaid spending growth on a per enrollee basis in the past decade was below 3 percent per year. Part of this relatively low growth rate is due to the changing composition of Medicaid enrollees— the number of lower cost adults and children grew faster than the aged and disabled. But states have also been very aggressive in cost containment efforts because they face declining revenues and have many competing priorities.”  [UrbanInst. pdf]

After the Little Wizards of Wall Street (aka Financialists) lost approximately $10.2 trillion in our national wealth in the wake of their Housing Bubble and CDO Bonanza circa 2008, [BusInsider] we’d expect to see a rising number of individuals eligible for Medicaid.   And, while the states were struggling to cope with the consequent declining revenues they were also trying to assist a growing number of “low cost” adults and children.   Perhaps a little sparkly anti-deficit dust sprinkled over the spreadsheets would work a bit of magic? Like Block Grants?

What if Medicaid funding came in the form of block grants to states?  Then the states could be “creative and flexible.”  Yes, and they could also look forward to being creative and flexible with continually declining revenues.

Ask local officials who deal with HUD block grants how “creative and flexible” they are being as they look at 12% cuts, and a Congress which shaved about $390 million from their revenues?  [Governing] A local official in Connecticut summed up the situation:

“CDBGs, Rodriguez said, have been under constant threat of federal budget cuts. He said at one point former President George W. Bush ’68 called for an end to the entire program until he faced overwhelming resistance from cities.

“The Block Grants is one of those grants that we always worry about because the federal government is always cutting it,” Rodriguez said. “It may actually go away, depending on what happens to Congress [in the 2012 elections].” [YaleDN]

The simplest way to think of the GOP proposal for health care services for the poorest among us is to note that of all the formats for federal funding the block grant is the easiest  to cut.

From what other sources might the Romney and his Republican cohorts make budget cuts in order to finance the extension of the Bush Tax Cuts for the top 1% and other tax breaks?

Former Governor Romney has “promised” 5% cuts in non-defense budget categories, so what would that include?  “At issue are these programs, just to name a few: health research; NASA; transportation; homeland security; education; food inspection; housing and heating subsidies for the poor; food aid for pregnant women; the FBI; grants to local governments; national parks; and veterans’ health care.” [Salon]

Somehow the “Support the Troops” Republicans managed to draft a budget proposal for the consideration of the House of Representatives without using the word: Veteran.   So, when we have about 45,000 members of our military services coping with wounds and injuries sustained in Iraq and Afghanistan, we have a Republican Party suggesting a cut of $11 billion from veterans care programs.  [VV] As Andrew Taylor opines in his Salon article, if the Romney campaign and other Republicans eschew cuts to VA programs, then the remaining federal functions would face deeper cuts.

Public Health and Safety.   Food – the amount of  regulated goods have increased by 200% in the last decade, but as of today we only inspect about 2% of food imports.  We import about 80% of our seafood from China and Thailand, countries with less stringent food safety laws that our own.   And now the GOP proposes to cut from 5% to 20% of the food inspection budget?  [News21] As one commenter put it, “You can’t fight bioterrorism with a tank.”  [The Hill]

Police and law enforcement – Senator Harkin was justifiably disappointed to note that the Republican version of a budget cut $118 million from federal funds to support local and state law enforcement. [Harkin] In FY 2011 the BJA processed 56 state and 1,348 law enforcement funding applications, and in FY 2012 made $295.58 million available to local and state officials for improvements in policing, and for other programs like the sex-offender registry and the Adam Walsh Child Protection and Safety Act. [BJA pdf]    However, in the interest of the 1% the GOP is willing to cut from 5% to 20% from the BJA programs which, “…. provides  states, tribes, and local governments with critical funding necessary to support a range of program areas including law enforcement, prosecution and court, prevention and education, corrections and community corrections, drug treatment and enforcement, planning, evaluation, and technology improvement, and crime victim and witness initiatives.” [BJA pdf]

Perhaps the most cynical, and assuredly the most economically irrational, of the GOP cuts would be to programs like food stamps (SNAP) and WIC.   Chad Stone explains:

“The $8 billion in SNAP cuts over the next year would do more damage to economic growth and job creation than any stimulus that the $46 billion in tax cuts could generate, according to standard “multiplier” or “bang-for-the-buck” estimates like those from the Congressional Budget Office (CBO) and Moody’s Analytics.

CBO ranks policies like SNAP and unemployment insurance (UI) as among the most effective ways to boost economic growth and job creation in a weak economy — and business tax cuts like those in the House bill as among the least effective.  That’s because SNAP and UI benefits go to low-income and struggling Americans who will spend virtually every additional dollar they get to pay bills and buy necessities, while the main problem businesses face is that too few customers are spending too little money — and that won’t be fixed by giving the businesses themselves a tax cut. “

Especially not effective if the tax cuts are designed to benefit those “small” businesses like hedge funds and lobby shops that are already doing well and yielding income to their owners and partners sufficient to put them in the +$1 million annual salary category.  Exactly how the House GOP explains a $46 billion reduction in the SNAP program as a “job creator” requires more imagination and intellectual gymnastics than a Cirque Du Soliel production.

But, never fear — protecting the tax breaks for millionaires and billionaires is, by Republican lights, ever so much more important that preserving Medicare as we know it, or preserving the health care services for the elderly, the children, or the disabled in poverty, or sustaining programs for Veterans, or enhancing public safety by supporting our local sheriffs, or making sure our food imports are inspected, or insuring our bridges are safe…

The Republican focus, as adopted by Rep. Ryan, and supported by Representatives Heck, Amodei, and by presidential candidate Romney is singularly narrow, and illustrates with astounding clarity how eager they are to sacrifice the needy for the noteworthy benefit of the greedy.

As Sure As Santa and Sleigh Bells: GOP Financialist Filibusters and the Protection of the 1%

Senate Majority Leader Harry Reid (D-NV) has announced his intention of moving a budget and an extension of the payroll tax holiday through the thoroughly filibuster clogged U.S. Senate. [LVSun]  There is nothing more certain, even the Christmas music in the Mall, than that both efforts will be filibustered by the Republican minority.

This is the point where this partisan blog asserts that Republicans might have room to complain about the failure to pass a budget for yea these many many days IF they could also explain why they have stalled and filibustered each attempt to do so.   If the stall and filibuster motif is continued during the debate over the payroll tax holiday the GOP may also be handing Senator Reid and his Democratic colleagues a lovely Christmas Gift.

Here’s the kicker: “The surcharge to offset the payroll tax holiday proposal would amount to about a 3.5 percent tax on earnings above a million dollars — too much, Republican leaders say.”  [LVSun] *also reported as 3.25%. [WaPo]

Cui Bono

The taxation issue couldn’t be more clear.  Reid’s suggestion would lower taxes on 99% of the people in the United States of America, and raise it for 0.2% of the U.S. population.   We can be more specific:

“The surtax would impact around 345,000 taxpayers, roughly 0.2 percent of taxpayers, or one in 500 of them. Those people would pay on average an additional 2.1 percent of their overall income, or just over 1/50th of that overall income, in taxes.

In a majority of states, only one-tenth of one percent, or one in 1,000 taxpayers, would pay this surtax.

And how many people would benefit from the payroll tax cut? According to the group, around 113 million tax filing units — either single workers or families that include more than one worker — would see their payroll tax cut extended. That’s a lot of people — well over 113 million workers, in fact.” [WaPo](emphasis added)

The Republicans have offered their standard assertions about the inefficacy of this policy.  (1) It is a tax on job creators. (2) It is a permanent tax hike to fund a temporary stimulus. (3) It would not be money “well spent.”  All three arguments are specious, elitist, or both.

qui totum vult totum perdit

The Myth of the Job Creator has become a catch phrase for GOP support for the interests of the Financialists on Wall Street.  Any increase in taxation, the Republicans argue, is a tax on the capacity of the wealthy to invest, and by investing to fund economic expansion, thereby creating jobs.   The first question must be: Are the job creators the ones being taxed?

The simple answer is NO.  Small businesses, defined as those which have 500 employees or fewer, are responsible for about 50% of all private sector employment, and have generated 65% of the net new jobs in the last 17 years. [SBA]  So, the second question becomes: Are the owners of these businesses likely to be the one affected by the proposed 3.5% (or 3.25%) tax increase?

Again, the best answer is NO.

“According to compensation survey administrator PayScale in 2010, the average income of small business owners varies widely depending upon their level of experience. For example, small business owners with less than one year of experience in running an organization earn an annual salary ranging from $34,392 to $75,076. Those with more than 10 years experience, on the other hand, earn upwards of $105,757 per year.” [SBizChron]

If we look at the overall “small business” landscape, the average small business owner’s income falls well below the million dollar mark.  How about looking at the average income by industry?

“The industry in which a small business operates also affects the average income of his owner. Some industries pay far more than others. For example, entrepreneurs who owned electrical contracting businesses make salaries that range from $49,910 to $114,000 each year. Child care providers, in contrast, make anywhere between $19,792 and $61,674 annually.” [SBizChron]

The average annual income is still well below the million dollar mark.  There are also visible gender differences in income.  Women who own small businesses earn an average income ranging from $31,380 to $71,140 per year.  [SBizChron]   Not too many millionaires here.

So, who is in the top 0.1% and would be affected by the increased tax?  “…For who are the 0.1 percent? Very few of them are Steve Jobs-type innovators; most of them are corporate bigwigs and financial wheeler-dealers. One recent analysis found that 43 percent of the super-elite are executives at nonfinancial companies, 18 percent are in finance and another 12 percent are lawyers or in real estate.”  [NYT]

And, were these Super Rich the “Job Creators?”  Once again, the answer is NO. “…for the rich, most of that income does not come from “working”: in 2008, only 19% of the income reported by the 13,480 individuals or families making over $10 million came from wages and salaries.”  [UCSC]  We can be a little more specific: “Most people in that rarefied group are there because of their investments, not their work. Of the $400 billion in income reported on those 13,480 returns, only 19 percent of it came from wages and salaries, much less than came from capital gains, even in such a bad year for stocks. “  [NYT] (emphasis added)

But, but, but… doesn’t the fact that most of the o.1% earned their income from capital gains demonstrate that they are investing, and therefore contributing to “economic expansion?”  Not. So. Fast.

When most people think of “investment” they think of channeling funds from areas of surplus to areas of shortage, like providing the money for a company to finance new plants and equipment.  As we’ve noted previously, this is a portion of the investment banking system which gives every appearance of having broken down.

The real small business owner is practicing capitalism.  He or she seeks “capital” from investors to stake new branch stores, or to purchase new equipment, or to otherwise expand the operation.  The real economic elite are practicing Financialism in which the financial markets exist primarily to serve themselves.  Capital in this context is raised for the purpose of speculating in securities and derivatives within markets that are economies of their own.  [Mitchell]  While investors were “seeking Beta” (a regression analysis based number describing the historical relationship between a stock’s price and the markets) supposedly to make rational stock picks, the economic result was a disconnect from the realities of the companies under consideration.  To make a long story short:  When investors are looking for “beta” or otherwise applying “capital asset pricing models,”  they aren’t looking at the long term interests of the firm, but at the short term earnings prospects for trading the firm’s stocks.

Not only does the potential vote in the U.S. Senate concern the interests of the 0.1 or 0.2% versus the interests of the remaining 99.8%, it also touches upon whether we are going to support the Capitalists (small business owners) or the Financialists (a detached investor class).

quod gratis asseritur, gratis negatur

The second Republican charge is that the proposal is a permanent tax hike for a temporary purpose.   This contention appears to assume that any temporary economic revival stimulated by increased consumer spending will eventually evaporate.  No argument is provided demonstrating that once consumer spending increases (or at least stabilizes) that increased demand will not generate increased economic growth.  Indeed, it seems that the apologists for the Supply Side Hoax have been looking at their economy as if it were a mirror reflecting their interests and not a window on national economic activity.

The final argument about “money not well spent” directly contradicts  past Republican pronouncements that “individuals know best how to spend their money.”  In this instance, the government is NOT taking payroll taxes in order to leave “more money in the pockets” of the 99% who will most likely take it and spend it — in a consumer based economy.  Perhaps we have a glimpse here of the ideological distance the GOP has traveled when in defense of the Financialists they are willing to abrogate one of their most common bits of rhetoric.

… quo errat demonstrator.

Monday Morning Roundup: Bits and Pieces

** There’s no small amount of irony in the fact that Wall Street Warrior Senator Dean Heller (R-NV) is assuming the role of The Little Guy in his Underdog Campaign to secure his Senate seat in 2012.  [Ralston LVSun] This, from the candidate who has secured $76,650 from from the Securities and Investment community, and another $43,000 from commercial banks. [OpenSecrets] And, yes, we know we’ll hear about Hobos again during this campaign season.  [Sebelius]

** The Nevada Progressive notes the Charade Parade is coming to an end as the Super-Committee winds down into a political puddle.   Contrary to the GOP cry that they “offered to close tax loopholes,” their proposals are another bucket of water carried for the wealthiest 1% in the U.S. (chart above)The changes proposed constitute yet another shift of the tax burden from the 1% onto the Middle Class.   The GOP’s last best offer was to call for $181 in cuts for every 1$ in revenue increases. [CBPP]

** ICYMI: The Sin City Siren has a helpful list of worthy charities that should get some attention during this Season of Giving. PLAN reminds us that the Silver State isn’t exactly generous when it come to taxing ourselves to provide mutually beneficial services: “Nevada is 49th on the Tax Foundation’s 2009 rankings of state and local tax burdens. There is no corporate income tax and no personal income tax (banned by the state constitution).    There is also a constitutional limitation on mining industry taxes, which allows the industry to pay less than 1% of its gross in mining taxes to the state general fund.”

** Speaking of uncharitable: NyeGateway spotlights GOP candidate Romney’s proposal that Nevadans going through the foreclosure process should ‘hit bottom.’

** The LDS Church is on record against the Water Grab from White Pine County. [LVSun] The Nevada GOP, which is against almost everything, has endorsed the candidacy of Barbara Cegavske for Congress. [NVAppeal subscription required] Nevada News Bureau has more on the new District 4 race.

** Ouch! Group says that those brand name prescription coupon could increase costs by $253 million in Nevada over the next ten years. [Nevada News Bureau]

** Nothing like putting the fox in charge of the hen house!  The Office of the Comptroller of the Currency has appointed a partner in “a foreclosure fraud factory” to review 4.5 million foreclosure cases. [ForeclosureFraud] Can we say “captured agency?”

** Angry Bear posts an interesting piece on functioning in the Kafka-esque world that is Bank of America.  Calculated Risk gives us good news and bad. The good news is that the supply of surplus housing is declining, the bad is that it’s not declining fast enough for relief in the construct industry to come before about 2015 at this rate.  The former CEO of the now defunct AIG is suing the government for $25 billion [Clusterstock] and I think the word I want here is “chutzpah.”

** Those who would like some serious wonkishness are invited to see “The Complete and Annotated Guide to the European Bank Run (or the Final Phase of Goldman’s World Domination Plan)” in the EconMonitor.