Archive for the ‘federal debt’ category

When Logic Fails

December 11, 2017

The Republican designed and President Trump supported “tax reform” is poised to become law. Only a few more horse trades remain before a mockery of fairness and consistency with past positions is presented to the American people, a big beautiful Christmas gift as President Trump has pontificated. The lipstick on this pig can’t mask the mind baffling contradictions from Republican policy and think tank positions.

Tax reform involves elimination of loopholes, exemptions, and other special interest sponsored deductions followed by a readjustment of the prevailing tax rates. Among the loopholes, exemptions, and deductions are those included to specifically encourage certain parts of the economy, or reward certain persons or industries normally for loyal support.

For example, the home mortgage deduction is intended to stimulate home ownership and incidentally benefits the building industry. Other loopholes, exemptions, or deductions are clearly targeted at key donors, for example, in the oil and gas exploration community.

Where has logic failed?

  • The US economy is already one of the strongest in the world. Why is there a need to stimulate?
  • The corporate tax rate is 35% and is the highest among similar modern countries. The effective tax rate (that is what corporations actually pay) is only 18%. This reflects the 35% minus all the loopholes, exemptions, and deductions. The 18% effective rate put the US right in the middle of other like countries. Why the need for corporate tax reform?
  • Our country already has a yearly budget deficit and a total debt of $20 trillion. The President and Congressional Republicans claim this “tax reform” which will cost itself $1.5 trillion, will so stimulate the economy that everyone wins.
  • Republicans claim economic growth alone will cover the $1.5 trillion and in the process will create more higher paying jobs. Despite two previous attempts (George W Bush and Ronald Reagan’s Administrations) where taxes were cut and corporations kept the windfall profits, Americans are asked to believe this time will be different. Hmmm.
  • The height of chutzpah falls to the GOP’s billing of this tax reform as a “middle class” tax cut. Under the questionable claim of middle class tax cut, the very wealthy and pass through business owners will reap the greatest amount of the $1.5 trillion in cuts.

As details are being ferreted out, mortgage interest and State/local taxes deductions will make the tax reduction less helpful to the middle class. Changes in how university endowments are treated will hurt many Universities financially and are likely to make higher education more difficult (read expensive) for the middle class to obtain.

President Trump has been in office 11 months and on every single claim he has made or policy action he has issued by executive order, there is overwhelming evidence that the President’s words are not supported by logic or fact.  A logical person must assume the President’s words are wrong again.

The Republican controlled Congress, on this issue, is equally and shamefully wrong. Following the money, one can explain the Republican Congress members’ action by who is buying the Republican Congressional members’ loyalty, for example the Kochs, the Mercers, and Sheldon Adelson.

The notion that America’s tax code should undergo a tax reform is not illogical or unnecessary. Tax reform targeted, however, for the wealthy and corporations is a dead end proposition for everyone else, and clearly destined to not deliver on its promises.

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Political “No Win” ?

November 27, 2017

Republicans are in the home stretch. This month they could pass the largest tax reform (actually tax cuts) in at least 30 years. And paying less in taxes is what most everyone wants. Right?

Yes but but chances are high that the Republican tax cuts represent a “political no win”

Republicans in Congress are poised to begin thumping their chests once the bill passes. Republicans sense a double victory coming their way.

  • First,  the tax cuts themselves will represent a victory. The Koch brothers, the Mercers, and dozens of other really rich supporters will be pleased with Congressional GOP (read more money in the future). Everyday Americans will gladly accept the scraps that fall off the tax cut table too. Does it get much better?
  • Yes it does. The second reason for GOP’s glee is that Congress will have to cut government spending in order to keep the deficit from exploding. And cutting the deficit means paring back massively entitlements.

You can see it now. Statesmanly Republican leaders worriedly calling for spending reduction action or otherwise out grandchildren’s children will inherit massive debt and an America bankrupted by Medicare, Medicaid, and Social Security. Can you imagine those wrinkled foreheads?

One must wonder, however, whether Republicans see the trap hidden amongst the tax cut changes?

The proposed Republican tax cuts can only be described as an unforced error. The American economy is strong and expanding. There is need for a government stimulus program and a good deal to worry about if the economy overheats.

On top of that, the promise of a huge boost in GDP growth is nothing short of a pipe dream. Only members of the flat earth society could seriously accept the notion that America’s economy could consistently outstrip the two dozen or so modern industrial nations.

The US economy, of course, can be stimulated to grow faster but what makes anyone think that faster growing economy would not contract after a short period of high growth? Add to that the risk of igniting inflation and higher interest rates (read a slowing force on the economy) amplifying a decrease in demand because most Americans have not seen real increases in the income.

Passage of a tax cut bill is not assured but should it happen, and should Republicans press forward with an assault on entitlements, “open season” at the polls will almost certainly follow.

Most Americans, strangely, do not pay federal income taxes anyways. They make to little. So they do not need any of the GOP tax cuts but are far more likely to feel the impact of cuts to Medicaid, Medicare, and Social Security.

The proverbial “middle class” will soon realize they too have not received anything when they get an opportunity to pay higher federal income taxes since deductions for State and local taxes as well as mortgage interest will be pared back.

And the probability of higher wages being the fruit falling from the tax cut tree is de minimis.

In 2018 and again in 2020, Republican candidates should have no shortage of campaign donations. In a relatively evenly divided electorate given 2016 election, it won’t take much to tip the Republican to Democrat Congressional ratio and put Democrats back in control of one or both houses. Such an outcome would be poetic justice for Democrats and could signal an end to Trump’s agenda (whatever that is).

Reading Election Tea Leaves

November 8, 2017

Today is the morning after. Yesterday an off year election was held which featured two high profile governorships at stake. Democrats won both (Virginia and New Jersey) and surprisingly across the country, Democrats picked up previously Republican held offices. What was behind this Democrat resurgence?

Money was not a factor even though there was plenty of money spent. Performance in office did not seem to be a factor either, both governor’s races were open since the incumbents were term limited and could not run. So what provided the spark for Democrats?

Some pundits are saying yesterday’s races represented a repudiation of President Trump and his policies. Interestingly, Republican spokespersons disagreed and claimed instead that voters were dissatisfied with the lack of legislative action on the President’s campaign promises.

In other words, had Congress passed the Affordable Care Act “repeal and replace”, and pushed through a huge Middle Class tax reform, then voters would have rewarded the Party with victories. Hmmm.

Reality, however, is more likely different. According to news reports, women played a big role in Republican candidates’ defeat. Women came out to vote and did so in what might be record numbers. Overall voter turn out was unusually high for an off year election across the country.

Rather than conclude Republicans lost key elections because the White House and the Republican controlled Congress did not accomplish what they promised in 2016, it might be wiser to think Republicans lost because of the mean spirited, wrong headed ways the President and Republican controlled Congress conducted themselves.

Trying to cheapen healthcare many women depend upon, backing away from the Paris Climate agreement potential leaving a more severely damaged world for our children, and attempting to pass a tax cut which blatantly passes out billions to the very wealthy and puts the tab on our children and their children charge account (the Federal Debt) has not been missed by a growing number of voters.

Voters, especially women voters, see what’s going on, and are beginning to recognize that  the outlook is not promising in the Trump/GOP teapot.

The Other Side Of The Coin

November 3, 2017

House Republicans have just released their proposed tax code rewrite. Experts are rushing to digest the proposal and perform the difficult task of assessing how this Republican bill will impact Americans. Wait, wait… if you are wealthy, you do not need to worry. This Republican plan will treat you well and provide opportunities for clever tax advisors to find new ways to save you tax payments.

The bill provides most (but not all) the gifts the rich have been expecting. The top bracket of 39.5% remains although the income threshold has been raised to $1,000,000 allegedly in deference to the “gift to the wealthy” optics.  Carried interest, estate tax elimination, and reduction of corporate taxes (35% to 20%) for private owner businesses will provide the wealthy with plenty of tax relief opportunities while the tax burden is shifted to lower income Americans.  And, for those unfortunate Americans earning $500,000 to $999,999, you will just have to pay in a lower bracket.

The deal is not set yet. Republicans from high tax States will argue for sweeteners in the restoration of State and local tax deductions and full credit for mortgage interest. Lobbyists representing all sorts of industries will go into full court press to preserve other deductions and credits. It is entirely possible that this attempt at tax code changes will stall or fail outright.

But it is entirely possible that this proposal or something substantially the same will pass. What then?

For sure it is maddening that very wealthy people like the Koch Brothers and Robert Mercer will pay less taxes.  It is maddening that as a consequence, the tax burden will shift to less wealthy people (like the Middle Class), or the cost of this tax cut will flow to the national debt, or both.

But that is not the real damage that this tax code change will bring.

A coin has two sides. On one side, heads, is the smiling faces of Americans paying less in taxes. The other side, tails, however, means there will be less government revenue to cover already approved government spending. Let there be no mistake, with lower tax revenues there must be less government spending sooner or later.

Republicans will be quick to assert that there are all sorts of waste and corruption in government spending. Why, Republicans will point out that there are able bodied Americans drawing social security disability benefits who could be working. And look at Medicaid excesses associated with the Affordable Care Act. And, with their faces now reddened, Republicans will bluster about spending in all sorts of other areas. Surely, cutting wasted money can be made.

Maybe. The problem usually boils down to which programs are viewed as wasted spending and what justification makes those expenditures “wasted”.

For example, Republicans have attacked the Affordable Care Act (train wreck, a jobs disaster) even though there were some 20 million more Americans insured with Obamacare than before. And, what have Republicans offered? Their best proposals offer less coverage and insure 10-15 million fewer Americans.

So, when it comes time to submit “post tax cut” Federal Budgets, what makes anyone think Republicans won’t feel that reducing programs which benefit all but the rich will be perfect targets?

The theme which comes up time and again is that there are no free lunches. Republicans are breathlessly trying to sell this tax code change as great for the middle class and the key to unlocking our economy, and best of all, there will be no cost to average Americans.

Really?

Governing Part I

October 29, 2017

There has been much written about the inability of the 115th Congress, one with Republican majorities in both Houses, to pass meaningful legislation. In the 113th Congress, Elements within the Republican Party orchestrated a Government shut down squabbling over an ideological but relatively pointless issue. The question is why are current day Republicans so inept when at the Ship of State’s helm?

Could it be there internal inconstancy among policies Republicans claim they hold dear such as:

  • Federal Debt – “Massive, out of control, and an unfair burden for our grandchildren”. In fact, US Federal Debt is about average for all the countries in the world. US Debt is higher than Switzerland, about the same as Germany, and lower than Japan. The real underlying problem with US Federal Debt is that it results from the Congress’ inability to make rational decisions on spending and taxation.
  • Tax Reform – When Republicans mention “Tax Reform”, the are really voicing a free lunch message around “tax cuts”. Republicans claim tax reform will lower (big time) Middle Class tax burden when in fact the tax cuts are premised on lowering the tax for the wealthiest of Americans. Oh, and what about the Federal Debt? This is a shameful policy and consequently Republicans must use all sorts of misdirection and misinformation to keep the voting public from seeing through their scheme before tax cuts are enacted.
  • Healthcare – In the past, Republicans were mainly agnostic about healthcare. Since the enactment of the Affordable Care Act (Obamacare), Republicans have been like a dog chasing after a meat wagon. Not surprisingly the Republican mantra overlooks the fact that some 20 million more Americans have healthcare access with Obamacare than before, or that the US pays twice as much for healthcare than other modern countries. It would appear that the national Republican Party goal is to reduce Medicaid involvement and to eliminate taxes which the wealthy pay, and in return Republicans are willing to see millions less Americans receiving coverage. Hmmm.
  • Medicaid – Even if there was not a broader fight over healthcare, Republicans support only a much smaller application of Medicaid. Many Republicans see Medicaid as “an entitlement” (something Americans do not earn) and a naturally growing government handout.
  • Social Programs – Republicans use this broad terminology to imply that Government aid for specific social programs is a wasteful and wrong headed idea. Surprisingly, the tone was different this past week when President Trump declared an emergency around the growing (predominantly white population deaths due to overdosing with opioids. Hmmm.
  • Environment – when it comes to government policy towards issues such as smoking, industrial discharge into rivers, land, and the air, and most recently global warming, most Republicans have been unusually skeptical on the “science” demanding controls. Could campaign contributions drive Republicans to favor businesses and overlook the welfare of its citizens?
  • Immigration – One of the most convoluted arguments Republicans have made is the danger posed by Mexican undocumented workers. The approximate 11 million illegal workers has been labeled as the cause of most violence, a huge drain on social programs, and “line breakers” who are trying to gain citizenship by not following the rules. Mexicans are mostly church goers, family centered, and extremely hard workers who make model Americans if given the chance. Could it be that Mexicans, if given the vote, might vote Democrat?
  • Faith Based Issues – Probably the most shameful and hypocritical position Republicans candidates have taken lie around the issue of god and religion. Republicans stand firmly by the Constitution when they pander to gun owners but are willing to twist the Constitution and accept discrimination based upon ethnicity, gender, or sexual orientation (if the discriminator is motivated by deeply held religious beliefs). This is akin to one Bill of Rights phrase, overriding all other rights if it is favored by a large number of bible totting voters.

The reality of this boils down to who elects Congress members and which issues are the most important. Distorting the otherwise democratic process is the unparalleled amounts of campaign donations coupled with the “legal” and huge amounts of “issues” money.   Mostly all of this money has emanated from the wealthy, and has driven the political conversation to elect a majority of RINOs (Republican in name only). This group, depending upon where in the country they represent, bring a range of intensity to the issue mentioned above.

If instead of keeping the single name “Republican”, each member chose a more applicable name like Christian Republican, No-tax Republican, Big Business Republican, etc, then the current Republican Party would not hold the majority and power would shift to others. So, banding together, even with vastly different depth of feelings around specific issues, makes the Republican brand the majority.

Republicans, however, are showing that being the majority and providing effective governance are two different matters. This year’s Republicans are hopelessly compromised owing so much to so many (tax cuts to the wealthy contributors, discrimination rights to bible thumpers, anti-immigration action to the xenophobes, anti-science policies to short sighted business leaders, and second class and hugely expensive healthcare policies to ignorant (uninformed) Americans.

Republican Congress members are complex and thinking people. Most, if not all, know the real nature of this Post’s issues. Unfortunately too many are willing to “go along”, thereby making unbalanced choices which are setting in motion collisions between common sense and prejudices or flatly unsupportable policies. In such an environment, facts are not important, and democracy suffers while governance becomes problematic.

 

A Name From The Past

October 23, 2017

This past week has seen a name from the past, former President George W Bush, step forward and call out the dangerous white nationalist elements who cheer the loudest when President Trump promises to “make America great again”. The former President said America is not defined by color, religion, or ethnicity. Rather Americans, or at least the ones Bush knows, share a common set of values that set the country apart from the rest of the world. Isolationism and trade wars only bring destructions and conflicts, Bush said.

Steve Bannon, President Trump’s “Karl Rove”, said President Bush was a disgrace. I wonder where he got that insight?

Only a few years ago, the political world was quite different. In the 2000s, Congressional Republicans offered a fiscally conservative agenda, were content with traditional precedents, and contained their exuberances within the boundaries of national values and America’s place in the world community. Regretfully, the “neoconservative” Republican Party wing, a splinter group, coaxed former President Bush, thanks to already having won over Vice President Dick Cheney, into invading and occupying Iraq. This misstep has turned out to be a disaster for foreign policy and one more proof to most Americans that the President and the Government could not be trusted.

Is this what Bannon is speaking about?

In another eery parallel with present day Republicans, President Bush also sought and obtained two tax cuts (no effort was made to disguised these cuts as tax reform). These cuts were premised upon stimulating the economy and words to the effect “these cuts will pay for themselves”. Hmmm.

The cuts did not pay for themselves and the costs went right to the charge account, the National Debt. Oh, and the greatest benefit went to the super rich. Hmmm.

Is this what Bannon was talking about?

While this linear reflection on history may be accurate, it is not sufficient to explain why former President Bush was motivated to give his speech this week, or why Steve Bannon was willing to denigrate a former President.

This week Congress passed a proposed $4 trillion budget which contains room for a $1.5 trillion tax cut (reform). Once again Americans were told that the tax cuts “will pay for themselves”. And once again Americans were told the cuts will benefit middle class Americans. And, once again the real winners were the very wealthy like the Kochs and a whole host of special interests.

Does history repeat?

Former President Bush’s words were not in opposition to tax reform.  His words were instead very much to the point of President Trump’s un-American rhetoric and apparent disdain for traditional institutions.    Bush’s comments represent a much needed push back from mainstream Republicans.

American voters, on the other hand, have much to be disenchanted with. The smell emanating from Congress members’ partisan behavior is only exceeded by their focus upon the needs of their financial supporters. What should a frustrated voter do, turn to men like Steve Bannon?

There has been a revival of the show “Caberet” recently. This musical drama about pre-World War II Berlin is a chilling reminder about dogmatic regimes that attempt to restrict personal freedoms and freedom of the press (expression).  “Fake News”, “Muslim bans, and “building walls” are dog whistles for those with fascists views.

If nothing more, former President Bush’s words provide weight to those who object to “bully-ism” or any related form of racism, homophobia, or gender discrimination.

President Bush may have made mistakes, and Republicans at that time may have been lax on fiscal and regulatory diligence, but no one can claim Republicans were intent on subverting traditional democratic ways to gain personal or political advantage.

Since 2008, things have been different.

“Caberet” and former President Bush’s words should serve as a wake up call for a sleeping Americans.  While we have all slept, “nationalist forces” have made large inroads into America’s governing process.   Like many Germans in 1939, some Americans are becoming aghast at what NAZI government control could do.

Taxes Make The World Go Round

October 18, 2017

Congress and in particular, the Republican majority are in a whirl. With majorities in both houses and a Republican President, the GOP has nothing to show for its hold on the reigns of power. I should be quick to say, nothing yet.

The two signature pieces of legislation Republican leaders boast about have been the “repeal and replace” for Obamacare and the “tax reform” for individual and corporate taxes. For a host of reasons the GOP has not been able to agree upon legislation which would accomplish these goals and have looked impotent in their efforts.

The most obvious reason for the GOP inability has been the absence of a sound logical rationale for either healthcare or tax reform even in the face of overwhelming evidence that the Affordable Care Act (Obamacare) and the current tax code are badly in need of modifications. One wonders why?

Would you believe that Republicans do not really care about either healthcare or about tax reform? True. Despite all the rhetoric and chest thumping, at the end of the day Republicans do not care about healthcare as a right of all Americans nor do they care about a tax code which generates sufficient revenue to cover government expenses. Hmmm.

One wonders how Republicans can justify a reduction in both benefits and the number of Americans covered with healthcare insurance while at the same time, and with a straight face, push for ending the individual mandate and the taxes higher income Americans pay under Obamacare. Republicans promise more healthcare options and lower costs for coverage without telling many Americans that they better hope they never get really sick (need coverage) or have pre-existing conditions.

But make no mistake Republicans do care about reducing taxes, especially on those Americans who are the major funders of their political campaigns. Hmmm.

The current individual tax code offers another insight.

Marginal Tax rate

On Earnings Per Year

10%

$0 – 9325

15%

$9325 – 37950

25%

$37950 – 91900

28%

$91900 – 191650

33%

$191650 – 416700

35%

$416700 – 418400

39.6%

$418400+

While the specifics of the Republican tax reform bill are not fixed, think about the impact of the rumored new rates and brackets. Gone will be the 10% bracket so one would assume that 15% would apply to all income from $0 to $37950. Sounds like a tax increase to me. (In truth, increased standard deductions could make the increase much smaller or even disappear.)

But let’s look at the other end where the top bracket of 39.6% is said to disappear. Someone earning, say $500,000 per year would see an immediate tax reduction $23,000 (4.6% x $500,000). For the average Fortune 500 corporate CEO earning $15,000,000 the savings looks more like $690,000. And you do the math for the billionaire earners.

For 2018 mid-term elections, it should not take a genius to inform American voters what the GOP has done (or tried to do) for the last two years and what lies in store for them in the future.. Most Americans have employer provided (group plan) health insurance or are on Medicare. They are not affected… now.

If the GOP is content to do dirty with some Americans, what makes anyone think that other Americans will soon be at risk?

The prognosis on taxes is just as dangerous. It is possible that the reformed tax code will only slightly hurt the average American (new deductions could offset those eliminated (like State and local taxes or mortgage interest). The baked in tax break for the very wealthy will reduce overall tax revenues which in turn will limit government spending on a variety of programs, and possibly leading to cuts in Medicare, Medicaid, and Social Security.

And, if Republicans do not try to cut enough spending to offset the tax revenue loss, the difference will go on the “credit card”, our Federal Debt.

Hmmm.