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President Obama went to Austin, Texas, last week in pursuit of an industrial and employment revival. He wants to launch manufacturing institutes to foster American innovation and job creation.

Republicans responded by ridiculing the President, in the same arrogant way that the blooded aristocrats on the British television series Downton Abbey scorned a chauffeur who sought to marry into the patrician Crawley family.  “No opportunity for the downtrodden!” the GOP and wealthy vow.

Watching Downton Abbey would be pure escapism, a simple respite from the grind of work and duties of home. That is, except for the disquieting reality that Downton Abbey’s classist mores increasingly intrude on American life. The wealth gap between America’s rich and poor has widened to the point where it was in Downton Abbey days. And that is abetted by the GOP practice of continually cutting taxes on the rich while constantly cutting government services that provide opportunity to everyone else.

Income inequality in America is wide and widening. Just get this: while income stagnated for the middle class, the average annual income of the top .01 percent of U.S. households from 2002 to 2007 rose by 123 percent – a gain of $20 million each.

Even after the crash of 2008, the wealthiest .01 percent did just fine. Now, the stock market and corporate profits are soaring.  But only the wealthy are benefitting. The New York Times reported earlier this month that corporate profits in the third quarter of 2012 took the largest share of national income for any time since 1950, while the portion that went to workers fell to the lowest point since 1966.

While making those huge profits, corporations aren’t creating jobs.  For those who do have jobs but aren’t in the top 10 percent income bracket, wages fell 7 percent from 2007 to 2008. Unlike the rich, workers didn’t recover after the crash, with median household income declining 1.5 percent in 2011. (more…)

By Dave Johnson
Fellow, Campaign for America's Future

There is a big push going on to again reduce tax rates for the giant multinational corporations. See if you can guess who will make up the difference? (Hint: it will be you paying through cuts, and smaller companies that are trying to challenge the incumbency of the giant multinationals.)

Recently in the post Beware the New Corporate Tax-Cut Scam: LIFT Is A Big LIE, I warned about the LIFT coalition of large corporations trying to get rid of taxes on profits made outside the country. Of course this would result in giant companies moving jobs, factories and profit centers out of the country.

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.

Laura Tyson Argues For Corporate Tax Cuts

LIFT is mostly about profits the giant multinationals make outside of the country. There is also the RATE coalition, another group of giant companies working to get corporate taxes cut here, too. To that end, Laura Tyson has a syndicated opinion piece out, Why Give Corporations A Tax Break? in which she argues a “pro-growth rationale” for giving the giant multinationals a tax break to make them “more competitive.”

After its 1986 tax overhaul, the United States had one of the lowest corporate tax rates among OECD countries. Since then, these countries have been slashing their rates in order to attract foreign direct investment and discourage their own companies from shifting operations and profits to low-tax foreign locations. In the most recent and audacious move, the British government has embarked on a three-year plan to reduce its corporate tax rate from 28% to 20% – one of the lowest in the OECD – by 2015.
The US now has the highest corporate tax rate of these countries. Even after incorporating various deductions, credits, and other tax-reducing provisions, the effective average and marginal corporate tax rates in the US – what corporations actually pay – are higher than the OECD average.
Cutting the rate to a more competitive level would encourage more domestic investment by US corporations, and would also make the US more attractive to foreign investors.

In the op-ed Tyson argues that we cut corporate taxes in 1986 to be “more competitive,” but since then other countries have been slashing their corporate tax rates, which makes our giant multinational corporations “less competitive,” so we should slash our corporate tax rates again to be “more competitive.”

Tyson’s argument, summed up:

1. In the 1986 tax overhaul we cut corporate taxes a lot.

2. But then other countries cut their corporate tax rates “in order to attract foreign direct investment and discourage their own companies from shifting operations and profits to low-tax foreign locations.”

3. So we are now above the average.

4. Therefore we need to cut corporate taxes even more to be more “competitive” and “attract investment.”

5. Go to step 2 until corporate taxes worldwide are zero, then giant corporations start threatening to leave the country unless the country gives THEM money. (Tyson leaves out this obvious next step.) (more…)

By Jamie West
USW Local 6500

Whenever I read this phrase: “As more and more municipalities and governments are saying, business as usual simply cannot continue…”, I recognize it as the preamble to increased austerity measures – typically cuts to unionized public sector workers.

With record low tax rates for corporations, our government pretends to have a spending problem (when they actually have an income problem). This time, the government wants you to blame police officers – instead of obscene corporate tax cuts – for their budget woes.  Expect to see more and more stories about “high police wages” and “escalating costs” from the government. Next, the media will repeat key phrases like “rising cost of policing,” and “wages and benefits are a high percentage of the budget.” All of this will help get the public mindset ready to accept that the police are overpaid and that claw backs are necessary.

That might seem far-fetched, but this is the same strategy that has been used successfully in the past to manipulate citizens opinions about other unionized workers in the public sector. It’s a shell game where they convincing you to be angry at workers who earn a living wage while distracting you from analyzing corporate welfare. Not convinced? How does the public feel about teachers, nurses, city workers, and postal workers?

In my opinion, the next “greedy union villains” will be workers in the police force. The key words are already being trickled out. Before you know it, public opinion will sway away from the heroes of 911 who serve and protect us every day. That image will be replaced with the false blame of budget deficits. Finally, we will be given a solution: privatization and claw backs – pay those greedy workers less. It will be wrapped in a fancy name to make it sound important and educated: austerity. Finally, politicians and the media will repeat the phrase “austerity measures” like it’s the solution to all our budget problems. But it’s actually the cause.  (more…)

Bill Scher
Online Editor, Campaign for America's Future

Overlooked in the aftermath of the “fiscal cliff” deal and the questions about what spending cuts may be around the corner, was this part of President’s Obama statement following the bill’s passage:

I think we all recognize this law is just one step in the broader effort to strengthen our economy and broaden opportunity for everybody…

…we’re still investing too little in the things that we need for the economy to grow as fast as it should.

And that’s why Speaker Boehner and I originally tried to negotiate a larger agreement that would put this country on a path to paying down its debt while also putting Americans back to work rebuilding our roads and bridges, and providing investments in areas like education and job training.

Unfortunately, there just wasn’t enough support or time for that kind of large agreement in a lame duck session of Congress.

These should not be seen as idle words, but a clear marker for Republicans to heed and a target for the public to rally around. The next budget debate should not be all about what to cut when the economy still needs help and the unemployed still suffer from a dearth of job openings.

Thanks to the 2009 Recovery Act and the stimulus measures in the 2010 tax cut deal, we prevented a global depression and helped our economy slowly heal from the 2008 crash. But we can and should do better than a slow heal.

Part of the President’s initial offer to the House Republicans that got shelved as focus turned to a smaller compromise included “$50 billion stimulus package in FY13″ and a “Mass refi mortgage proposal”.

Presumably these proposals will return in short order. An under-appreciated fact about Obama’s past bipartisan agreements is that he never allows an imperfect deal to foreclose his future options. In December 2010, during the negotiations over the expiring Bush tax cuts the President rejected an appeal from Democratic Sen. Chuck Schumer to give up the $250K threshold for higher rates and accept $1M, because that would mean never being able to secure revenue below that point. Better to punt the whole issue for two years and wait until he had a stronger mandate. Similar logic shaped the 2011 debt limit deal which manufactured the whole “fiscal cliff,” logic that has borne out so far. (more…)

By Hugh J. Campbell
Philadelphia, Pa., son of a Steelworker

Milton Freidman’s caviler world-view regarding tax-cuts depicted in the following quote: “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.”, motivated the Neo-conservatives to champion many mindless tax-cuts. Just as counterproductive for America, the Neo-cons have obstructed the removal of mindless tax provisions already on the books. This situation provides meaningful low-hanging fruit for generating federal tax revenue to avert the “Fiscal Cliff” without decimating America’s historical social justice values.

Some examples of low-hanging fruit that primarily benefit the 1% are:

• Tax-deferral of tax on foreign income
• “Carried Interest” that enable income from labor to be converted into capital gains
• The Bush reduced rates on dividends and capital gains
• Reduced rates on dividends and capital gains on foreign investments
• Reduced rates on speculation (more…)

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

There are interesting, challenging, and portentous political economy issues in play right now, and unless you’re taking a well-deserved post-election vacation from such matters, they’re worth your attention.

For example, there’s the question of whether the upper-income Bush tax cuts will finally sunset. This was a clear platform of the president’s campaign… in fact, it may have been the policy point he hit the hardest and most consistently. And significant shares of voters agree (about half support the upper-income expirations, and even more recognize the need for more revenue).

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Republicans and their proxies, however, argue that the fact that they held the House was America’s way of saying they don’t want to see any tax increases. This is wrong, based on not just the above poll results but many other polls that preceded the vote, not to mention the fact that Tuesday’s results decidedly favored Democrats. But it’s predictable. The Republicans, virtually all of whom have pledged away tax policy to Grover Norquist, would make this argument no matter what the outcome was.

It’s also — and this is important — the case that the expiration of the upper-income cuts wouldn’t hurt the economy, a very common and consistent result across economic analyses.

Earlier we had a good conversation over at MSNBC with Martin Bashir on these matters. Like I say at the end of the segment, I keep running into this Republicans argument: “Ok, you won… now here are our demands.”

That’s some serious chutzpah. Of course, I understand and support the need for compromise. As the president emphasized in his victory speech, if we can work together we can solve this thing. But remember, we’ve already cut $1.5 trillion in spending over the next decade. Majorities rejected the Romney/Ryan/Norquist position, recognizing that a) there’s an important role for an amply funded federal government, and b) we can’t get there on spending cuts alone.

Sure, we’re a closely divided country. But the more I pore through election results, the more I think there’s a lot of people out there who understand the economic dynamics and needs of the country a lot better than House Republicans. So stick to your plan, Mr. President, and let’s see what unfolds.

***

Jared Bernstein joined the Center on Budget and Policy Priorities in May of 2011 as a senior fellow. From 2009 to 2011, Bernstein was the chief economist and economic adviser to Vice President Joe Biden, executive director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Befpre joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute in Washington, D.C. Between 1995 and 1996, he held the post of deputy chief economist at the U.S. Department of Labor.

***

This post originally appeared at Jared Bernstein’s On The Economy blog.

By Richard Trumka
President, AFL-CIO

After a hard-fought and divisive election year, it’s time to rebuild America’s middle class — but to do it we need to make sure the lessons from this campaign stick.

Four years ago, the leadership of the Republican Party made a cynical political gamble — and this year they lost because they bet against America.

Instead of rethinking the failed policies that got us into this mess, the Republicans in Congress tried to drag down the American economy and stall the recovery and then pass the blame to President Obama.

Along the way, they also blamed teachers, firefighters, nurses and, quite frankly, just about anyone and everyone except the real culprit — irresponsible tax cuts for the wealthy and deregulation.

Yet here’s something to remember: It wasn’t until Mitt Romney’s shocking and complete disavowal of everything — everything — he stood for during the Republican primary that he even began to close the gap with President Obama. The more he fabricated, the more he sounded like Obama, the closer to victory he came.

But a majority of working families remembered the real Mitt and turned out to reject him.

That shows how important voter education is, and the labor movement took that on as our top priority. We researched all the candidates and explained their stands on the issues. Across America, more than 400,000 volunteers shared what we learned by knocking on doors, calling from phone banks and by handing out leaflets. It was an incredible grassroots effort, like nothing I’ve seen before on a national scale.

The unprecedented tidal wave of secret corporate cash threatened to dilute and corrupt our democracy, but this election proved again that there is no match for the strength of people power. (more…)

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

I expected this presidential race to tighten up, so why should I find that fact so dispiriting?

At least two reasons come to mind. First, the stakes are high. If Romney/Ryan win and really do:

- Pass another massive trickle down tax cut on top of making the Bush tax cuts permanent;
- Repeal Obamacare, voucherize Medicare, and block grant Medicaid and food stamps;
- Deregulate financial markets and environmental protections;
- Push through budgets that spend a lot more on defense and a lot less on public goods, including education;

…the nation will be a lot worse off for it. I understand that they won’t have a free legislative hand to wreck such havoc, but new administrations tend to get quite a bit of what they want, and even half of the above agenda would be terrible.

I and others have written a lot about that. Here, I’d like to think a bit about the second reason the current moment feels so unsettling: facts, policy analysis, pragmatic compromise, even common sense and simple math seem less relevant in this election cycle than in any in my lifetime.

That’s not for lack of such analysis. I and many, many others offer tons of fact-based policy analysis, and many of us — Krugman and the Wonkbook team are especially noteworthy — try to do so in ways that are intelligible and go down easily. But I fear we are mostly writing for each other, our converted fans, and mindless opposition trolls.

It’s no great insight to point out we’re stuck in an age of truthiness, where fact-checking has been relegated to a section in the paper. It’s also an old saw to knock folks making this argument as egg-heads who don’t get the gut — the Drew Westin critique that Democrats lose when they go for the brain instead of the heart. [Though I must admit I was struck when I read a passage this week from a New Yorker article citing the political scientists Gerber and Green on persuading non-voters to vote: "We do not see much evidence that what you communicate matters."]

I’m sure that’s all true but it’s not the whole story. When I say “policy analysis is missing” I’m not talking about coursework from the Kennedy School of Government. I’m talking about the math that says you can’t cut taxes 20 percent across the board and balance the budget. Trickle-down doesn’t work. Climate change is a real threat. Occupying other countries without clear benchmarks and goals is not in our interest. If we deeply cut federal spending, we can’t invest in public goods including education, economically productive infrastructure, a safety net, pollution abatement, and so on-investments that matter to many of all political stripes.

But again, what bothers me about the Romney campaign and the current moment is not just the policy agenda. It’s their ability to completely deny that agenda and gain ground in the polls. It’s Romney’s ability to very successfully argue that he doesn’t really have a big tax cut (the first debate), that the tax cut he doesn’t really have can be paid for by magic math, that his foreign policy is the same as the President’s (the last debate), that his plan will add 12 million jobs — the number that forecasters tell us we’re likely to see regardless of who wins. (more…)

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

As we go into the final days of a dismal presidential campaign where too many issues have been fudged or eluded — and the media only want to talk about is who’s up and who’s down — the biggest issue on which the candidates have given us the clearest choice is whether the rich should pay more in taxes.

President Obama says emphatically yes. He proposes ending the Bush tax cut for people earning more than $250,000 a year, and requiring that the richest 1 percent pay no less than a third of their income in taxes, the so-called “Buffett Rule.”

Mitt Romney says emphatically no. He proposes cutting tax rates on the rich by 20 percent, extending the Bush tax cut for the wealthy, and reducing or eliminating taxes on dividends and capital gains.

Romney says he’ll close loopholes and eliminate deductions used by the rich so that their share of total taxes remains the same as it is now, although he refuses to specify what loopholes or deductions. But even if we take him at his word, under no circumstances would he increase the amount of taxes they pay.

Obama is right.

America faces a huge budget deficit. And just about everyone who’s looked at how to reduce it — the non-partisan Congressional Budget Office, the bi-partisan Simpson-Bowles Commission, and almost all independent economists and analysts — have come up with some combination of spending cuts and tax increases.

The practical question is who pays those increased taxes. If Romney’s view prevails and the rich don’t pay more, everyone else has to pay more.

That’s nonsensical. The rich are far richer than they used to be, while most of the rest of us are poorer. The latest data show the top 1 percent garnering 93 percent of all the gains from the recovery so far. But median family income is 8 percent lower than it was in 2000, adjusted for inflation.

The gap has been widening for three decades. Since 1980 the top 1 percent has doubled its share of the nation’s total income — from 10 percent to 20 percent. The share of the top one-tenth of 1 percent has tripled. The share of the top-most one-one hundredth of 1 percent — 16,000 families — has quadrupled. The richest 400 Americans now have more wealth than the bottom 150 million of us put together.

Meanwhile, the tax rates paid by the wealthy have dropped precipitously. Before 1981 the top marginal tax rate was never lower than 70 percent. Under President Dwight Eisenhower it was 93 percent. Even after taking all the deductions and tax credits available to them, the rich paid around 54 percent.

The top tax rate is now only 35 percent and the tax on capital gains (increases in the value of investments) is only 15 percent. Since so much of what they earn is from capital gains, many of the super-rich, like Mitt Romney himself, pay 14 percent or less. That’s a lower tax rate than many middle-class Americans pay.

In fact, if you add up all the taxes paid — not just on income and capital gains but also payroll taxes (which don’t apply to income above $110,100), and sales taxes — most of us are paying a higher percent of our income in taxes than are those at the top.

So how can anyone argue against raising taxes on the rich? Easy. They say it will slow the economy because the rich are “job creators.”

In the immortal words of Joe Biden, that’s malarkey. (more…)

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

Here it is the afternoon and I’m just getting around to some articles and blogs for your attention.

Senator Avoids Trap: First, Senator Chuck Schumer, to his great credit, understands the tax reform trap. Here at OTE, we’re always warning folks to be aware that when politicians talk about a “grand bargain” on taxes that lowers the rates and broadens the base, you’ve got to be extremely vigilant about not getting stuck with a lot of the former and a little of the latter.

“Rate cuts” sound good to everyone and “base broadening” sounds harmless enough. But the way these debates go, your loophole is my prized “job-creating investment incentive.” Just ask candidate Romney, who’s very specific about those rate cuts–20% across the board!–but completely silent on the base broadeners.

So I was happy to see Sen Schumer say this about that:

If upfront rate cuts are the starting point for negotiations on tax reform, it will box us in on what else we can achieve. Certain conservatives will pocket the rate reductions and never follow through on finding enough revenue elsewhere in the code to reduce the deficit. Or, if they do, it will almost certainly come out of the pockets of middle-income earners.

An Economist I Like Denounces Austerity Measure: Jan Hatzius is the chief economist at Goldman Sachs. That may alienate some readers but in his case, it should not. He’s someone who understands the economy’s moving parts as well as anyone and he’s just as unhappy as I am about the persistent slack in the economy.

As Matt Yglesias notes here, Jan doesn’t get why both parties are so ready and willing to allow the payroll tax cut to expire at the end of this year when unemployment is still so elevated. That 2% cut to take home pay that aggregates up to $120 billion, contributing to precisely the fiscal contraction you see in the second figure in this post (see the black parts of the bars).

I know that some people worry that this tax cut diverts money from the Social Security trust fund, and in doing so, provides great comfort to those who would destroy social insurance, and does so in the name of progressive, Keynesian stimulus, which is pretty diabolical, actually. I hear them and understand their concern–I know how much the enemies of Social Security would love to weaken the trust fund.

But the law specifies that any and all diverted dollars must be replenished by general revenues. A few months back I even identified the ledger within the government accounts that specifies the transfers, and they were, in fact, being made in accordance with the law. (more…)