Relevant and even prescient commentary on news, politics and the economy.

Corporate taxes down, workers’ taxes up–that’s America today

by Linda Beale

Corporate taxes down, workers’ taxes up–that’s America today

Corporate taxes used to constitute a significant portion of federal revenues, almost a third in 1950.  Payroll taxes from workers were considerably less–around 10% in 1950.  Andrew Leonard, Who Really Pays Taxes? Salon.com (Aug. 28, 2012).
The times have changed.  Corporate taxes have declined steeply in the 21st century as a percent of GDP, while payroll taxes paid by workers have become a significant part of tax revenues–more than a third in 2007.

That is one cause of the inordinate inequality of income and wealth that this country now endures–an inequality that has dire consequences for the economy and for the well-being or the vast majority of ordinary Americans.

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Courts and intellectual property rights

Caught from the Washington Post…and also interesting knowing theTrans Pacific agreements allowing multinational CEOs and firms to sue in domestic courts:

Apple patents were violated by Samsung, jury rules
Apple won a sweeping victory in its landmark patent dispute against Samsung when a Silicon Valley jury ruled Friday that a series of popular smartphone and tablet features — from the rounded rectangle shape to the way screens slide and bounce to the touch — are proprietary Apple innovations.

Tokyo court finds no Samsung infringement on Apple patent in latest in global battle
A Japanese court on Friday dismissed Apple’s patent infringement claim against Samsung, a significant legal bounceback for the South Korean tech giant as the rivals wage a global battle over intellectual property. A Tokyo District Court ruled in a preliminary session that Samsung didn’t violate patents with its technology for synchronizing music and video between computers and smartphones or tablets. The ruling, the latest in a series of lawsuits and counter-lawsuits spanning at least nine countries and four continents, comes one week after a U.S. court dealt Samsung a costly defeat that could lead to an injunction against some of its devices. Samsung shares rose after the Friday verdict, helping the company recover from sharp losses earlier in the week, reports Chico Harlan:

Chinese firms put intellectual property lawsuits to work
U.S. companies have long accused the Chinese of stealing their intellectual property. But now some in China are pointing the finger back. In recent months, Apple has been slapped with lawsuits in China alleging that the most valuable company in U.S. history is infringing on patents and trademarks with a range of its products, from the iPhone voice assistant Siri to the Snow Leopard operating system. Many U.S. firms are used to accusing the Chinese of mimicking their products. But the lawsuits being filed in Chinese courts are evidence of a growing awareness in this country that intellectual property can be a valuable tool — for protecting your ideas and for squeezing money out of other companies, too, reports Jia Lynn Yang:

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The Elephants are Still Thirsty

by Run 75411

The Elephants are Still Thirsty

In my earlier post on Carrying Water for Elephants I explained how the $716 billion in planned reductions to Medicare was calculated, who it impacted, and from where it originated.

The $716 billion is far larger than the initial $449 billion first reported. In 2010, the CBO arrived at an estimate of savings of ~$449 billion starting from 2012 onwards and covered 6- 7 years from when the bill takes full effect in 2014 to 2019. The second estimate of savings was the result of John Boehner’s request for a review of the costs and gains realized from the repeal the ACA in its entirety. The second review covered the period from 2014 to 2022 and resulted in the $716 billion. “Medicare Cuts: What is the Fight About?” Brookings Institute

Above the explanation of how the $716 billion calculated; I presented Ezra Klein’s pie chart explaining where the reductions were made. Not one of the reductions comes from reductions in Medicare benefits to recipients which as I also explained is denied the PPACA. In last night’s Republican Convention Paul Ryan again claimed the reductions to providers are actually cuts in benefits to Medicare recipients and the reductions are being used to fund the PPACA. Neither statement is true; but then, Paul Ryan is a Republican VP candidate who hopes to confuse the voters with supposition and conjecture. Paul should be made to explain what he will do with the reductions achieved from similar reductions he has proposed for Medicare . . . maybe more tax breaks for the 1 percenters???

There is no amount of water Paul Ryan or Mitt Romney can carry to quench the thirst of this elephant of misrepresentation.

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ONE NATION UNDER AARP….a review

A book review by Dale Coberly

ONE NATION UNDER AARP  The Fight Over Medicare, Social Security, and America’s Future
by Frederick R. Lynch

I was asked to write a review of this book, perhaps because I sometimes write about Social Security. But I had to completely rearrange my perspective in order to even understand what the book is about. I believe that I know that the “Social Security crisis” is essentially a lie. Lynch assumes that the crisis is real and writes about AARP’s efforts to make itself the spokesperson for the Boomers in the “generational war” that will follow from this “fact.”

Given that politics has nothing to do with facts, Lynch and AARP may be on the right track.
Lynch introduces his book by describing a conference hosted by AARP… “to demonstrate to…boomers that AARP… is no longer their parents’ AARP… A rebranded AARP is actively recruiting seventy eight million graying baby boomers. The mating dance of these organizational and generational giants has enormous implications for the nations’ political future. … half of the voters in the 2008 and 2010 elections were over fifty… and half of them were members of AARP… the nation’s fourth highest spending lobby…”

Okay, that’s why. But then Lynch just assumes “…an epic fight over…Medicare and Social Security is being forced by the ballooning national debt.”

In fact Social Security has nothing to do with the “ballooning national debt.” And Medicare so far has had nothing to do with that debt and need not do so in the future. The ballooning national debt has been caused by tax cuts, military spending, and a deep recession caused by unregulated banks “too big to fail” indulging in reckless if not criminal activity.

Social Security is paid for by the workers who will get the benefits. Medicare can and should be organized so workers pay directly and transparently for their own health insurance. The huge cost increases predicted for Medicare are driven by the huge cost increases predicted for medical care. Only a fool would decide that if we are expecting huge medical costs we need to cut our insurance. Even if we can’t control costs… and we can… we are still going to have to pay for them. The easiest way is to pay a little at a time each month while we are young and working. It doesn’t make much sense to “save” the cost of insurance now and be faced with unpayable costs when you are old and no longer working. Only Medicare allows people to pay in advance this way AND to finesse the problem of “medical inflation” with pay-as-you-go financing. But “only a fool” is what we have in Washington these days.

But IF Social Security is being blamed for the deficit, however falsely, THEN boomers will need leaders to defend it. The most likely candidate is AARP.

Lynch says his book examines three key issues:
1.) Are the boomers a sleeping political giant? Can they be organized to determine the policy that will shape the future of Social Security?
2.) Is AARP going to lead the boomers… or “stimulate boomers’ age awareness to entice them into becoming members and purchasing AARP products and services…?”
3) Will boomers and AARP “negotiate an increasingly competitive global super-capitalism… in which “working class Americans feel threatened” but “the nation’s elite — highly educated professional and managerial classes — embrace the new Post American Order?”

I may be the wrong person to be reviewing this book because I cannot get past the premise. Lynch ASSUMES “generational war,” ASSUMES that “Younger Americans will be asked to subsidize aging baby boomers’ entitlements.”

And this is simply not true. The boomers will have already paid for their Social Security and Medicare. “Younger workers” will be asked to pay, in advance, for their own Social Security and Medicare. That’s how insurance works. It is only the success of the Big LIe that has convinced them… and the Washington “elite”… that “pay as you go” means you are paying for someone else’s greedy grannies.
Apparently these people think that when you “invest” in a stock, or just put your money in the bank, it lies there breeding interest like bugs in a drawer. The fact is that ALL “saved” money has to be used… spent… by someone else to earn interest. What is important is that you get the money back when you need it. Social Security provides the best guarantee in the world that you will get your money back… and more, if you need it. That’s what makes it insurance.

It is worth noting that even the Big Liars are always promising that “if you are over fifty five, your Social Security will not be affected.” That pretty much eliminates “paying for the boomers.” It is the “young people’s” Social Security that they are trying to kill.

Perhaps the boomers, and the young people who may someday grow old in spite of themselves, will need AARP to represent them. But it is by no means clear that AARP understands Social Security or cares about the interests of old people. Instead, perhaps, it just wants a seat at the table, the power that that represents, and of course the business that comes their way as a result of being seen as the retirees representative in Washington.

I don’t know.

But if Lynch is right and AARP is the best hope we have in the game the “elite” are playing with our retirement security, then others more attuned to real politics than I am may want to start by reading his book.
And maybe they can see if there is a way to influence AARP’s influence on the phony “generational war.”

They would have this much going for them: Lynch quotes AARP CEO Bill Novelli,

“But when you get down to the level of needs, everyone needs health and healthcare and they need long-term financial security. Then, when you get down to the level of values, all generations are the same: they want a better world for their children and grandchildren; they want to leave the world a better place and to leave a legacy. These are common values, and that’s what we’ve built upon.”

And what they would have going against them is that unfortunately these values are not shared by the “elite” leaders of both parties and their sponsors, who want only what’s in it for them, here and now. And know how to lie to get it.

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The Federal Bailout That Saved Bain Capital & Mitt Romney

The Federal Bailout That Saved Bain Capital & Mitt Romney

Government documents prove the candidate’s mythology is just that

by: Tim Dickinson

Mitt Romney likes to say he won’t “apologize” for his success in business. But what he never says is “thank you” – to the American people – for the federal bailout of Bain & Company that made so much of his outsize wealth possible.

In fact, government documents on the bailout obtained by Rolling Stone show that the legend crafted by Romney is basically a lie. The federal records, obtained under the Freedom of Information Act, reveal that Romney’s initial rescue attempt at Bain & Company was actually a disaster – leaving the firm so financially strapped that it had “no value as a going concern.” Even worse, the federal bailout ultimately engineered by Romney screwed the FDIC – the bank insurance system backed by taxpayers – out of at least $10 million. And in an added insult, Romney rewarded top executives at Bain with hefty bonuses at the very moment that he was demanding his handout from the feds.

Under normal circumstances, such ample reserves would have made liquidating Bain an attractive option: Creditors could simply divvy up the stockpiled cash and be done with the troubled firm.

What’s more, the bonus loophole gave Romney a perverse form of leverage: If the banks and the FDIC didn’t give in to his demands and forgive much of Bain’s debts, Romney would raid the firm’s coffers, pushing it into the very bankruptcy that the loan agreement had been intended to avert. The losers in this game would not only be Bain’s creditors – including the federal government – but the firm’s nearly 1,000 employees worldwide.

The FDIC considered finding a buyer to take over its loans to Bain, but analysts concluded that “Bain has no value as a going concern.” And the government wasn’t likely to get much out of Bain if it allowed the firm to go bankrupt:

How had Romney scored such a favorable deal at the FDIC’s expense? It didn’t hurt that he had close ties to the agency – the kind of “crony capitalism” he now decries. A month before he closed the 1991 loan agreement, Romney promoted a former FDIC bank examiner to become a senior executive at Bain. He also had pull at the top: FDIC chairman Bill Seidman, who had served as finance chair for Romney’s father when he ran for president in 1968.

The federal documents also reveal that, contrary to Romney’s claim that he returned full time to Bain Capital in 1992, he remained involved in bailout negotiations to the very end….





This story is from the September 13, 2012 issue of Rolling Stone.

(Hat tip Barry Ritholtz via Spencer)

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Do Successful Business people make good Presidents?

WARNING****** Not health care related

Romney has continually flouted his business experience, and how this will lead him to be a better President than Obama. That got me thinking….We’ve had to have businessmen become Presidents before, right? So what’s been our track record? How have they done? Surely, they’ve been successful Presidents too, right?
Well, not so much. Businessmen make good businessmen. Historically, they have not done well as President’s. We’ve had five President’s with significant business experience that were successful since 1900. Carter, Bush I, Bush II, Harding, and Hoover. Yep…..Those five.

As is mentioned in the Bloomberg article…..CEO’s are generally surrounded with like minded goal oriented people all working together to achieve a goal or vision…..

That doesn’t exist in politics, when you have to listen to multiple opinions and take abuse that a CEO would never tolerate. The country is not a business……let’s say it again…the country is not a business.

From the first article:

None of the great or near-great presidents—Teddy Roosevelt, Franklin Roosevelt, Harry Truman, or Woodrow Wilson—was a businessman. Truman was a failed businessman (a haberdasher) before entering politics, but that hardly constitutes a ringing endorsement of Romney’s claim for private sector ascendency.

For that matter, none of the better-than-average presidents was a businessman either. In this category think of Presidents John F. Kennedy, Dwight Eisenhower, Ronald Reagan, Lyndon Johnson, and Bill Clinton.

Probably the most successful president with real business experience (and success) was George H.W. Bush. Before going into politics he founded Zapata Petroleum, which ultimately became Pennzoil. Bush 41 ended up a one-term president unable to kick-start an economy in a recession and seemingly out of touch with the problems of the common man. Sound familiar?

It gets worse from here. Jimmy Carter, another one-term president beset with economic woes, was a success in agribusiness (peanut farming) before getting into politics. He generally falls into the lower half of the historians’ rankings.

And then we get the big three—the men widely considered by historians to be the worst presidents of the modern era: Warren G. Harding, Herbert Hoover, and George W. Bush. One left the country on the verge of a depression, one left the country in a depression, and one presided over such corruption and ineptitude that despite the failings of the other two he still manages to get the lowest ranking of them all. And yet all three made millions of dollars in the private sector before entering politics. All three were successful businessmen (a newspaper publisher, a mining tycoon, and the owner of a professional baseball team). Bush 43 even went to Harvard business school, like Romney, and like Romney promised to bring business principles to the Oval Office.

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RS goofing on foreign trust letters, says AICPA

by Linda Beale

RS goofing on foreign trust letters, says AICPA

The American Institute of CPAs (AICPA) is asking the IRS Commissioner to resolve what it suggests is a “widespread problem” for taxpayers.  Download AICPA Letter to IRS on Erroneous Form 3520 Letters to Taxapyers.082812.   For 2010 and earlier years, the IRS apparently has made a wide range of systemic mistakes in processing the form required to be filed annually by owners of a foreign trust–Forms 3520, the Annual Return to Report Transactions with Foreign Trusts and REceipt of Certain Foreign Gifts.
  The AICPA reports errors including:

  • instructions to fill out Part II about ownership of a foreign trust, when the taxpayer is not the owner of a foreign grantor trust;
  • instructions to provide additional information required when a taxpayer answers a question “yes” when the question on the form was answered “no”;
  • instructions to provide identifying information required to be submitted when the information was already submitted; and
  • insturctions to provide an explanatory statementwhen such statement was already submitted.

This looks like one of those kinds of things that happen when staffing at a government agency is reduced beyond what is reasonable for the kinds of tasks that have to be carried out. 

Query–isn’t it likely that the right’s  (and now officially the GOP’s) drive to reduce staffing at all levels of government agencies (except, of course, for the right’s pet project, expansion of the military) likely to increase the headaches for ordinary citizens because those government agencies simply won’t be able to get their jobs done well with the reduced staffing and morale problems that will cause?

cross posted with ataxingmatter

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Republicans Embrace Gold to Hedge Non-Existent Inflation

Worth a post but this one is an item of information for gold bugs (hat tip J. McCord)

From Bloomberg:

Republicans Embrace Gold to Hedge Non-Existent Inflation

The platform the party adopted yesterday at its national convention in Tampa, Florida, calls for a commission to investigate a possible “metallic basis for U.S. currency.”

The move is driven by supporters of Representative Ron Paul of Texas, the libertarian presidential candidate who has long criticized the Fed’s control of the money supply and wants to revive the gold-dollar link to preserve the currency’s value.
….
I’m not particularly worried,” said economist John Makin of the American Enterprise Institute in Washington. “It’s not as if we’re about to rocket higher
…..
Such vigilance on inflation could affect the Fed if Romney wins in November. The former private equity executive has vowed to replace Bernanke, whose term expires in 2014. He’d likely fill any unexpected vacancies on the Fed board with inflation hardliners, who might favor raising interest rates before the end of 2014, as Fed policy makers currently plan, says Mark Thoma, an economics professor at the University of Oregon.
“If Romney is elected, he will put people on the board of governors who are very credibly hawkish,” Thoma said.

Romney’s running mate, Representative Paul Ryan, the House Budget Committee chairman, called in March 2009 for the Fed to base the dollar’s value on market measures “such as a basket of commodities.” Ryan also has assailed the Fed’s asset purchases.
“There is nothing more insidious that a government can do to its countrymen than to debase its currency,” he said in December 2010.

Critics such as Meltzer worry that the Fed will wait too long to begin withdrawing its extraordinary financial support.“We have a long history of producing money too fast, faster than the growth of the economy, and it always ends up in inflation.”

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