Blog

By Robert Reich
Former U.S. Secretary of Labor, Professor at Berkeley

Can we just keep things in perspective? On Tuesday, the President asked Republicans to join him in finding more spending cuts and revenues before the next fiscal cliff whacks the economy at the end of the month.

Yet that same day, the Congressional Budget Office projected that the federal budget deficit will drop to 5.3 percent of the nation’s total output by the end of this year.

This is roughly half what the deficit was relative to the size of the economy in 2009. It’s about the same share of the economy as it was when Bill Clinton became president in 1992. The deficit wasn’t a problem then, and it’s not an immediate problem now.

Yes, the deficit becomes larger later in the decade. But that’s mainly due to the last-ditch fiscal cliff deal in December.

By extending the Bush tax cuts for all but the top 2 percent of Americans and repealing the alternative minimum tax, that deal increased budget deficits by about $3 trillion above what the budget office projected last August.

The real deficit problem comes after that — when rising health care costs combined with 76 million decaying boomers will cost us all a fortune.

The answer is to move from fee-for-service health care to pay-for-healthy-outcomes, including lots of preventive care. This will almost certainly require a single payer instead of our balkanized health care system drowning in paperwork as each part of it bills and tries to collect from every other part.

Right now the central challenge is to reignite the economy — getting jobs back, improving wages, and restoring growth.

Deficit reduction moves us in the opposite direction. That’s because most consumers (whose spending is 70 percent of economic activity) are still losing ground, and businesses won’t expand and hire without more consumers. (more…)

Robert Borosage
Co-Director Campaign for America's Future

Republicans in Congress are intent on creating yet another manufactured budget crisis. This one is timed to come after bruising negotiations over the next weeks to avoid the deep, across-the-board cuts required by the sequester and the threat to shut down the government with the expiration of the continuing resolution funding government scheduled for March.

Now they intend to extend the debt ceiling for only four months, to insure another crisis in May; this one putting the full faith and credit of the United States at risk once more. They want the country to reel from the `fiscal cliff’ in December to another hostage negotiation in February and March to a third one in May.

This is an utterly irresponsible and economic destructive course of action. The deficit is already down 25 percent as a percent of the economy. It is falling faster than any time since the end of World War II. It will continue to fall unless the hostage taking exacts more cuts or creates more instability that drives our weak recovery back into recession. (more…)

By Dave Johnson
Fellow, Campaign for America's Future

A number of the DC elites are talking about changing the way Social Security checks are adjusted for inflation. This is a great idea, as long as any such adjustment measures the things the elderly actually spend money on. Let’s do it! Let’s change the way we adjust Social Security for inflation because inflation hits older people much harder.

Washington’s elites are all Very Seriously concerned that even though Social Security currently has a huge trust fund, the program might “go broke” many, many years in the future. (Never mind what this says about our country’s priorities — do we ever hear that the military budget will “go broke?”) This discussion of Social Security is for some reason so important to these Very Serious People that it overrides discussion of the climate emergency, the national jobs emergency, the crumbling infrastructure, and almost every other national problem except that our wealthy and corporations are taxed far too much. (Please click the links in this paragraph.)

To address this Very Serious problem of Social Security possibly running a bit short of funds way off in the future, the geniuses in DC are proposing to change the way the program’s payments are adjusted for inflation, bringing in something called “Chained-CPI.” Rather than get into how it works, I’ll sum it up. If they do this it means big cuts in what people receive in the future.

However, there is an actual problem with the way the program is adjusted for inflation and that is that the things the elderly have to spend money on have a higher inflation rate than the rate used for the program’s adjustments.

So if the DC elites are really going to change the way inflation is measured when it comes to adjustments for the elderly, why not help Americans rather than hurt them? Why not correctly measure inflation in the price of things the elderly spend money on? (more…)

By Sen. Bernie Sanders
Independent U.S. Senator from Vermont

Despite such terminology as “fiscal cliff” and “debt ceiling,” the great debate taking place in Washington now has relatively little to do with financial issues. It is all about ideology. It is all about economic winners and losers in American society. It is all about the power of Big Money. It is all about the soul of America.

In America today, we have the most unequal distribution of wealth and income of any major country on earth, and more inequality than at any time period since 1928. The top 1 percent owns 42 percent of the financial wealth of the nation, while, incredibly, the bottom 60 percent own only 2.3 percent. One family, the Walton family of Wal-Mart, owns more wealth than the bottom 40 percent of Americans. In terms of income distribution in 2010, the last study done on this issue, the top 1 percent earned 93 percent of all new income while the bottom 99 percent shared the remaining 7 percent.

Despite the reality that the rich are becoming much richer while the middle class collapses and the number of Americans living in poverty is at an all-time high, the Republicans and their billionaire backers want more, more, and more. The class warfare continues.

My Republican colleagues say that the deficits are a spending problem, not a revenue problem. What these deficit-hawk hypocrites won’t talk about is their spending. They won’t discuss what they did to dig the country into this $1 trillion deep deficit hole. They waged wars in Afghanistan and Iraq without paying for them. They gave away huge tax breaks for the rich. They squandered taxpayer dollars on the pharmaceutical industry by making it illegal to let Medicare bargain for lower drug prices. They also rescinded financial regulations that enabled Wall Street to operate like a gambling casino, leading to a severe recession that eroded tax revenue and left more than 14 percent of American workers unemployed or underemployed.

Now, despite the deficits their policies helped to create and despite the enormous suffering which exists in our society, the Republicans want to cut Social Security, veterans’ programs, Medicare, Medicaid, education, nutrition programs, and virtually every program which benefits low- and moderate-income Americans. They choose to turn their backs on the economic reality facing a significant part of our population: high unemployment, reduced wages, 50 million without health insurance, college graduates saddled with enormous student debt and elderly people living in desperation. And they have tried to slam the door on any further discussion about how to raise revenue by ending tax loopholes and unfair tax breaks. (more…)

By Sam Pizzigati
Editor, Too Much online magazine

The Bush years gave America’s rich new and unprecedented preferential treatment at tax time. The fiscal cliff deal enacted in the early moments of 2013 leaves that preferential treatment in place.

Who won the New Year’s eve standoff over the “fiscal cliff”?

In one sense, everyone “won.” The deal that Congress blessed last week includes scores of provisions. Most Americans can point to at least one specific provision that works to their financial favor.

But the biggest winners from last week’s deal really don’t come into focus until we step back from those scores of specific provisions and take in the big picture.

President Obama, back two months ago in the early stages of this latest federal budget debate, insisted on a solution that would raise $1.6 trillion in new revenues over the next decade, with most all of those revenues coming out of the pockets of Americans making over $250,000 a year.

The final deal raises a bit over $600 billion in new revenue. In other words, the final deal essentially saves America’s most affluent nearly $1 trillion over what the White House initially sought.

That $1 trillion in tax savings, all by itself, would be enough to make America’s wealthiest the heftiest winners in the fiscal cliff showdown. But the magnitude of the victory for America’s wealthy runs even greater than that $1 trillion.

Consider this: Even if Congress had given the President every tax increase on the rich he initially sought, U.S. taxpayers in the nation’s top tax bracket would still be paying federal taxes at less than one half the rate that top-bracket Americans faced in the 1950s, under Republican President Dwight Eisenhower.

In other words, America’s wealthy won this latest battle over who bears the federal tax burden even before the battling began. But they also did mighty well after that battling started.

Take the matter of dividend income. Until 2003, income from corporate dividends enjoyed no particular tax preference. Dividend income faced the same graduated federal income tax rates as income from wages and salaries.

The George W. Bush years changed all that and slashed the tax rate on dividends — income that flows overwhelmingly to America’s wealthy — all the way down to 15 percent.

Wealthy Americans expected this preferential treatment for dividend income to end on December 31, 2012, the last day before the expiration of the Bush tax cuts. America’s top corporate executives, anticipating that expiration, had the corporations they run rush to post dividends before the year-end deadline.

Overall, in 2012’s final quarter, over 100 major U.S. corporations announced over $22 billion in dividend payouts, more than triple the dividend payout these same corporations distributed in the last quarter of 2011. Among the beneficiaries: Larry Ellison, the CEO of business software giant Oracle. Ellison personally pocketed $198.9 million of Oracle’s $800 million dividend surge. (more…)

By Jim Hightower
Author, Commentator, America’s Number One Populist

Well, finally – in the 11th hour and 59th minute – Republicans and Democrats negotiated a fiscal reform package, which they touted as the “American Taxpayer Relief Act.”

But if you had been allowed to peek behind the curtain during the deal-making, you would’ve noticed that the Dems and Repubs were not alone – and some taxpayers were getting extra-special relief. Captain Morgan, Bacardi, and other Caribbean rum peddlers, for example, were at the table, picking up a half-billion-dollar-a-year liquor subsidy; NASCAR wheeled in to win a multimillion-dollar loophole for building racetracks; railroad conglomerates hauled off a $165-million bundle for maintaining their own tracks; Disney and other fabulously-wealthy Hollywood studios reeled in a $75 million subsidy for making movies; and Big Coal mined the negotiations for a federal giveaway to buy safety equipment and provide safety training for their workers.

But the big dogs in the room, as usual, were Wall Street hucksters. Tucked inside the “reform” bill is Sec. 322, opaquely titled “Extension of subpart F exception for active financing income.” In plain English, that line of gobbledygook will move $9 billion this year from our public treasury into the already-overflowing coffers of Bank of America, Citigroup, JPMorgan Chase, and other fiefdoms of high finance. (more…)

This would make Ron Paul’s head explode.

By Jared Bernstein
Senior Fellow, Center on Budget and Policy Priorities

Today’s employment report shows steady employment growth, fast enough to keep the jobless rate from rising, but not fast enough to knock it down much.

December’s payrolls were up 155,000 and the unemployment rate held steady at 7.8 percent. Factories and construction sites added jobs — 25,000 and 30,000 respectively — an improvement over recent months. On the other hand, the public sector shed another 13,000 jobs, driven exclusively by local governments, the continuation of a longer-term negative trend as localities struggle with budget constraints.

Hourly wages and average weekly hours got a bit of a bump up as well, so weekly earnings are up 2.4 percent over the past year. Since inflation recently has been tracking at around 2 percent, that’s a slight gain in real pay (important, because starting this month, most workers will take a 2 percent hit to their paychecks due to the expiration of the payroll tax break, a casualty of the fiscal cliff deal). There was also some evidence of more folks moving from part-time into full-time jobs.

The main, first-take point here is that this is a glass-half, full-glass-half-empty jobs report, and more broadly speaking, job market. In the near term, market and political volatility over the recent fiscal craziness is not particularly evident in the job market, which has been moving along at about a trend growth rate. Uninspiring — and not fast enough to provide the opportunities we need, but steady and pretty resilient to everything from Congressional wound-infliction to hurricanes.

Over the longer term, say the last two years (2011 and 2012) employment averaged about 150,000 jobs a month, or 1.8 million jobs added in both those years. That’s enough to slowly open up job opportunities for the unemployed and to absorb new labor force entrants. But the key work is “slowly.” (more…)