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Sure, we urgently need to repeal the sequester.  (You can tell your Representative that here.) But it’s even more important to repeal the insane thinking that led to the sequester.

That means repealing the deficit babble that still dominates Washington (and provided the theme for the President’s weekly Saturday address). It means repealing a conservative Republicanism which is based, not on economic philosophy, but on an atavistic hatred for government in any form.

Most of all, it means repealing the politics of deprivation and replacing them with the politics of growth. We’ve learned that contractionary policy based on government cuts is … well, contractionary.  And that expansion policy is needed if we want the economy to expand.

The argument shouldn’t be about where we should be cutting, but about where we should be spending more money.

Have You Hugged a Keynesian Today?

Pity the poor Keynesian. This benighted economist has been vilified, ridiculed, and marginalized for decades. What was the Keynesian’s crime? To imagine that the proven economic principles which fueled our post-Depression and postwar growth were still proven economic principles.

The assault on Keynesian thinking went hand in hand with other mythologies of the New Economy: You don’t understand our new theories, the Keynesians and neo-Keynesians were told. You’re mired in the thinking of the past.  You don’t understand the information economy. You can’t grasp financial innovation.

And your old models of government action in recessionary times are obsolete because they’re not creative enough. (That’s an especially objectionable word in this context. This is economics, not a university extension course on “Self Expression With Clay.”) (more…)

Iciness is the defining feature of Margaret Thatcher, the United Kingdom’s first and only female prime minister, who died last week. She was the cold-as-steel Iron Lady. President Obama, warm, friendly, shaking hands, hugging the bereft, is the opposite.

It’s the same with their philosophies. President Obama, who worked as a community organizer, believes in the power of consensus and collective action. Thatcher, a conservative, scorned compromise and community.

It’s inexplicable, then, that a Thatcher policy would appear in the White House budget released last week. Thatcher once argued for taking milk from the mouths of babes, lobbying to restrict free milk for school children. Similarly, the White House budget proposes taking money out of the pockets of the elderly by cutting Social Security cost-of-living payments. Social Security is community action. It is Americans coming together to care for their parents and grandparents. Thatcher would definitely cut it. Republicans in Congress would. But Democrats should never allow the mean spirit of Margaret Thatcher to materialize in a progressive policy document.

Even in death, which tends to ease loathing, Thatcher is reviled by vast swaths of the United Kingdom. Graffiti gives her a rocky send off. The writing on the wall says: Iron Lady? Rust in Peace.  Reaction to a glowing obituary in The Daily Telegraph was so vile that the paper shut down all comment boards on articles about her. Those who still despise her held “death parties” and used social media last week to push the 1930s song, “Ding Dong, The Witch Is Dead,” to the top of the U.K. singles chart. (more…)

Last week, the president released his 2014 budget and, among some solid line items like additional infrastructure spending, universal preschool and reductions in tax breaks for Big Oil, he also proposed the truly stupid idea of linking Social Security cost-of-living-adjustments (COLAs) to something called “chained CPI” (chained consumer price index).

Briefly put, Social Security benefits are routinely hiked by a few percentage points each year based on inflation. Lately, those bumps have been scarce and more than a little weak, but adjustments based on chained CPI would be even weaker because the government would presume that as retail prices increase with inflation seniors will substitute lower-cost items. In other words, the government currently calculates benefits based on inflation, but with chained CPI, the government would calculate benefits based on an assumed consumer reaction to inflation (buying cheaper stuff). Consequently, Social Security benefits would be reduced to follow this assumption.

Yeah, it sucks. And the president, while attempting to play the role of the grown-up in the room and apparently taking responsible steps toward deficit reduction and Social Security salvation, is only managing to wrap his entire presidency around the big political third rail. It’s not as huge as George W. Bush’s second-term embrace of Social Security tinkering, but it’s a bad move.

Not only is the idea a punitive one for seniors, but the president is also fueling a series of inside-D.C. myths. They are:

1) Social Security is broke! IEEE! This might, in fact, be biggest D.C. myth of all D.C. myths. It originated with Republican concern trolls who pretend to care about Social Security but, in reality, are trying to kill it. The strategy is to weaken it to the point of being unpopular and unsalvageable — ripe for a private takeover or total shutdown. And so we get this on-going panic-button freakout that echoes through the complacent false equivalence press corp, and is ultimately fueled by Democrats like the president. But according to the Social Security trustees, the program will be capable of paying full benefits based on the current COLA formula for the next 20 years. Actually, the outlook is even better than that: the trustees also reported that Social Security will run a surplus until 2033. Can you imagine if any program in the federal government was projected to run a surplus for even half of that time? Budget hawks would crap their cages demanding immediate action to give back the taxpayers’ money by slashing the program to the line. Furthermore, once 2033 rolls around, Social Security will be capable of paying 75 to 80 percent of total benefits in 2033 money, which, accounting for inflation, is more than Social Security recipients receive today.

2) We have to tinker with Social Security because of the deficit. Whenever deficit hawks suffer from one of these routine fits of apoplexy, they always manage to loop Social Security, Medicare and Medicaid cuts into the mix, along with cuts to minor spending areas like foreign aid. Put another way, a gaggle of super-wealthy politicians and pundits who will never really need Social Security are always way, way, waaaay too eager to dump these programs onto the chopping block. In a budget crisis that’s ginned up by multi-millionaires, we should demand that they get in line first — cut programs and spending on areas that effect the wealthiest Americans, including corporations, before anyone else is forced to pitch in. (more…)

Here’s an outrage that must be changed: Big Pharma has been systematically price-gouging the Medicare program for seniors and people with disabilities — and raking in billions in excessive profits. The 11 largest global drug companies made an astonishing $711 billion in profits over the 10 years ending in 2012, and they got a turbo-charged boost when the Medicare Part D prescription drug program started in 2006, according to an analysis of corporate filings by Health Care for America Now (HCAN).

The drug companies hold the power to charge America’s consumers whatever they want. Worse, Medicare — the nation’s largest purchaser of drugs — is prohibited by law from seeking better prices. The result of this shortsighted policy is dramatic. In 2006, the first year of Medicare’s prescription drug program, the combined profits of the largest drug companies soared 34 percent to $76.3 billion. And unlike other industries, such as Big Oil, drug companies get something even better than a tax subsidy — they get a government program.

There is nothing wrong with a company making profits — that’s what they’re supposed to do. But the drug industry’s profits are excessive as a result of overcharging American consumers and taxpayers. We pay significantly more than any other country for the exact same drugs. Per capita drug spending in the U.S. is about 40 percent higher than in Canada, 75 percent greater than in Japan and nearly triple the amount spent in Denmark.

HCAN reviewed the last decade’s financial filings from the 11 prescription drug giants: Pfizer, Johnson & Johnson, Novartis, Merck, Roche, Sanofi-Aventis, GlaxoSmithKline, Abbott Laboratories, AstraZeneca, Eli Lilly and Bristol-Myers Squibb. Even as millions of Americans struggle to afford their medicines and as Republicans in Congress threaten to cut seniors’ benefits, these corporate behemoths have extracted $711.4 billion in profits for Wall Street investors. The drug companies’ annual profits reached $83.9 billion in 2012, a 62 percent jump from 2003. (more…)

As the U.S. Commerce Department released a report late last month showing corporate profits at a 60-year high, suddenly the big news was about how cheating surely must be rampant in social security disability.

Wait, what?

Also late last month, a Washington Post investigation showed that the 30 companies that make up the Dow Jones industrial average pay a dramatically smaller portion of their profits in taxes than they did a half century ago. Instead of discussing how that impacts government services, all of Washington is talking about slashing Social Security and Medicare.

It’s bait and switch.

CEOs and 1 percenters have elevated that old con to a whole new level. To them, bait is not a lure to a store but a taunt about the poor. “Look over there, a welfare queen!” they goad. “Look, someone not-quite-dirt-poor might get Medicaid,” they needle. Then they laugh all the way to their secret accounts in the Caymans as the 99 percent fight among themselves over how many pennies the government throws at the poor. The rich snicker as the vast majority of Americans are so distracted they don’t focus on record corporate profits, on record low corporate tax payments or on lobbyists buying tax breaks for corporations and loopholes for offshore accounts.

In defense of the 99 percent, it’s hard to concentrate on the big economic picture when household finances are so grim. The Commerce Department reported that in January personal income fell 3.6 percent. Overall, considering taxes and inflation, the decline was the largest in 57 years. (more…)

Yesterday the AFL-CIO learned President Obama’s budget will cut Social Security and Medicare benefits for working families. The so-called “chained” CPI will cut Social Security benefits and middle-income seniors (people who made $47,000 a year and more) will be asked to pay higher Medicare premiums.

Not only do the majority of America’s workers across the political spectrum oppose benefit cuts to the social insurance system, this is bad policy that will slow economic recovery even further. 

AFL-CIO President Richard Trumka said the “chained” CPI is wrong-headed policy.

Millions of Americans remain out of work and the job market is especially devastating for young people.  Young people ages 20-24 are facing 13.3% unemployment rates. Without the prospect of good jobs in their early and crucial earning years, these young people will bear the cost of these proposed cuts in Social Security.

In a time of rampant income inequality and stagnant wages, a blow to retirement security is the last thing we need.

It’s unconscionable we’re asking seniors, people with disabilities and veterans to be squeezed of every last penny when corporations and the wealthiest 2% are not paying their fair share of taxes, despite soaring profits.

This year alone, the job-killing sequester will cost 750,000 people their jobs. We need to invest in America’s workers, not pull the rug out from under them.  (more…)

Two recent news reports indicate that the President is “strongly considering” cuts to Medicare and Social Security in his upcoming budget, which is to be released in less than ten days.

The question’s been asked for four years: Why would Obama want to cut these popular and successful programs, especially when there are better solutions out there (and Social Security doesn’t even contribute to the deficit?)

It’s time to ask a new question: Why wouldn’t he cut them?

Bad News

Last Friday the Wall Street Journal reported that the President’s cuts would be “aimed in part at keeping alive bipartisan talks on a major budget deal.” No, you’re not experiencing déjà vu. We’ve heard this story before.

The Journal was vague on the President’s specific cuts, though it did cite the “chained CPI” cut to Social Security. (The Administration described those cuts as a minor “technical change,” although they’re technically less accurate than the current and already inadequate formula. They’d come to 6.5 percent of a 75-year-old’s benefits and 9.2 percent of a 95-year-old’s.)

The; New York Times reported that the President and House Republicans “have quietly raised the idea of broad systemic changes” to these programs as part of a broad “fiscal deal.” It also provided more detail on the President’s newest proposed Medicare cut, which would combine the deductibles for outpatient and hospital Medicare coverage. That would increase annual out-of-pocket costs for 80 percent of Medicare recipients (while typically lowering them for people who are hospitalized during the year.)

The rationale is that it will discourage the use of unnecessary medical care. That’s a misguided notion. But the President and his staff has shown a proclivity toward this kind of shallow wonkery in their support for misguided concepts like the excise tax on health insurance plans with higher than average costs.  The White House economic team may very well believe that this plan would “discourage people from seeking unneeded treatments” (as the Times puts it).

Bad Policy

Nevertheless, both cuts are bad ideas. The Medicare change is based on a model of health economics which fails to understand how health care decisions are made in the real world and relies on old (and challenged) studies, including one from the RAND Corporation, which claim such cuts reduce the use of unneeded services without reducing the use of necessary care.

As for the “chained CPI,” it’s already been dissected at length (we included a small compendium of critiques here).

Seniors and near-seniors today are facing a retirement crisis of tragic proportions, which a New York Times’ editorial outlines. That underscores the fact that these changes are both unwise and unkind. (more…)

A new study, Democracy and the Policy Preferences of Wealthy Americans, by Professors Benjamin I. Page, Jason Seawright and Larry M. Bartels sought to gauge the political and policy priorities of the wealthy, and how these concerns contrast with the concerns of the rest of us. Amazingly, the priorities of the 1% match up with the priorities of our political class, while the priorities and needs of the vast majorities of us are ignored.

The study questioned people with wealth that placed them in the top 1%. They were asked what they felt were the “very important problems” facing the country. The most common response was the budget deficit, with 87 percent believing this to me the most important problem. This contrasts with the rest of the population, with only 7% saying this is the country’s most pressing problem. Of course jobs and the miserable state of the economy for people what are not in that 1% were cited by regular people as the most important problem.

The 1%’ers want “entitlement programs” like Social Security and healthcare cut while the American Majority want (and need) them expanded.

The 1%’ers opposed raising the minimum wage, government help for the unemployed, government spending to ensure that all children have access to good-quality public schools, expanding government programs to ensure that everyone who wants to go to college can do so, and investing more in worker retraining and education. The American Majority supports all of these programs.

The 1%’ers also opposed more regulation of large corporations, raising the Social Security “cap,” using corporate taxes to raise revenue and taxing the rich to address inequality. The public supports these.

(Note – both the 1%’ers and the rest felt that the country needs to spend more on repairing and modernizing the country’s infrastructure.)

If the priorities of the wealthy seem to line up with the priorities of our DC elite, there is a reason. In an LA Times op-ed, The 1% aren’t like the rest of us, Professors Page and Bartels explained,

Over the last two years, President Obama and Congress have put the country on track to reduce projected federal budget deficits by nearly $4 trillion. Yet when that process began, in early 2011, only about 12% of Americans in Gallup polls cited federal debt as the nation’s most important problem. Two to three times as many cited unemployment and jobs as the biggest challenge facing the country.

So why did policymakers focus so intently on the deficit issue? One reason may be that the small minority that saw the deficit as the nation’s priority had more clout than the majority that didn’t.

This clout is further explained,

Two-thirds of the respondents had contributed money (averaging $4,633) in the most recent presidential election, and fully one-fifth of them “bundled” contributions from others. About half recently initiated contact with a U.S. senator or representative, and nearly half (44%) of those contacts concerned matters of relatively narrow economic self-interest rather than broader national concerns. This kind of access to elected officials suggests an outsized influence in Washington. (more…)

There are few areas where the corruption of the national media is more apparent than in its treatment of Social Security. Most of the elite media have made it clear in both their opinion and news pages that they want to see benefits cut. In keeping with this position they highlight the views of political figures who push cuts to the program, treating them as responsible, while those who oppose cuts are ignored or mocked.

This pattern of coverage was clearly on display last weekend. Both the New York Times and Washington Post decided to ignore the Senate’s passage by voice vote of the Sanders Amendment. This was an amendment to the budget put forward by Vermont Senator Bernie Sanders that puts the Senate on record as opposing the switch to the chained CPI as the basis for the annual Social Security cost-of-living adjustment (COLA).

Switching the basis for the COLA to the chained CPI is one of the most beloved policies of the Washington elite. The idea is that it would reduce scheduled benefits for retirees by 0.3 percentage points annually. This amounts to a cut of 3 percent after 10 years, 6 percent after 20 years, and 9 percent after 30 years.

If a typical retiree lives to collect benefits for 20 years the average cut in benefits over their retirement ends up being around 3 percent. This is a much bigger hit to the typical retiree, who relies on Social Security for more than two-thirds of their income, than the tax increases put into law this year were to the typical rich person. (more…)

First it was Fix the Debt, with tax-dodging corporations “leading the charge for massive new corporate tax cuts paid for with cuts to Social Security, Medicare, and Medicaid.” Now there’s a new “LIFT America coalition,” pushing for massive, massive corporate tax cuts, without bothering about cutting benefits. LIFT stands for “Let’s Invest for Tomorrow,” but as Citizens For Tax Justice (CTJ) points out, it really ought to be called LIE, for “Let’s Invest Elsewhere.”

The executives who run the giant multinationals want to be let off the hook for paying taxes on profits they make outside our borders. As an Apple executive said to The New York Times, giant multinationals “don’t have an obligation to solve America’s problems.” And to prove it, American corporations are holding $1.7 trillion in profits outside the country – just sitting there – rather than bringing that money home, paying the taxes due and then paying it out to shareholders or using it to “create jobs” with new factories, research facilities and equipment.

The LIFT Coalition

This corporate lobbying coalition claims that “antiquated U.S. tax laws are threatening America’s economic competitiveness.” They want their taxes lowered with a “Territorial Tax System” so they “pay home country tax rates that are competitive with those paid by foreign business rivals” (i.e. little or no taxes on their profits).

The LIFT website is full of lobbyist-speak, like “reform,” “modernize,” and “attract more investment.” When you hear lobbyists talk about “reforming” and “modernizing” things, it means that by the time they get done you’re going to have less money and the giant corporations they pay them are going to have more.

The short version of what LIFT wants: Lower corporate taxes here, plus no taxes on profits they make outside the country. These are the “antiquated U.S. tax laws … threatening America’s economic competitiveness” they are talking about. And they very well might have the money to push this through the Congress.

What this means is if we want to have schools and universities, roads and bridges, courts, police, military and the other things that support their companies, don’t expect them to cough up money for them. They are opting out of the social contract that asks them to help fund those things that helped them prosper. It’s all on us.

Who is in this LIFT coalition? From their website:

Members of the LIFT America Coalition include – 3M, Caterpillar Inc., Cisco, Eli Lilly and Company, Emerson, Financial Executives International, Honeywell International, Inc., Hewlett-Packard Company, International Business Machines Corporation, Information Technology Industry Council, Intel, Johnson & Johnson, National Foreign Trade Council, Oracle, Pfizer, Procter & Gamble, Semiconductor Industry Association, The Coca-Cola Company, United Technologies Corporation., Xerox Corporation, and Yum! Brands.

LIFT also relies on videos and materials from the Tax Foundation and the Manhattan Institute. Representatives of the Koch Foundation and LIFT member Eli Lilly are on the board of directors for the Tax Foundation. The Koch Foundation and other “conservative movement” funders fund the Manhattan Institute.

Their argument is a new form of the old “cutting taxes will increase growth” argument. Except, of course, there is no evidence and certainly no historical demonstration that cutting taxes increases growth while there is plenty of evidence and historical experience that cutting taxes cuts growth.

Corporate Profits Record High – Corporate Taxes Low

Here is the economic background as LIFT comes onto the stage. Corporate profits are at record levels, while corporate taxes are very, very low – an “effective” rate of just 12.1 percent but down to zero in so many cases. Corporate tax revenue accounted for 30.5 percent of federal revenue in 1953, but by 2011 the share of corporate tax revenue had fallen to 7.9 percent. But for We, the People jobs are scarce and wages are stagnant and falling.

Corporations are holding $1.7 trillion outside of the country because they would have to pay the taxes due on those profits if the cash was brought home, which would mean helping support the schools and police and courts and military and universities and research and all the other things that enable them to prosper.

But the giant, multinational corporations are claiming they can’t compete if they have to pay taxes. So the inside-the-Beltway consensus (the same crowd that told us we should invade Iraq and now says we have to cut Social Security and Medicare) is that we need corporate “tax reform” that lowers rates, and is pushing a territorial tax system that lets corporations bring back profits made outside the country without taxation. (more…)