Fiscal Cliff nonsense from the Right

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Max Horkheimer Max Horkheimer's picture

I think I can cite this post I just created, I think it is relevant to the discussion of the fiscal cliff, and that is the role of the deficit. America is the issuer of its own currency so the credit downgrade from the governemt creating more money is an unrealistic concern in these regards. Modern Monetary Theory I have found has much to say on the matter, and reflects how the deficit fiscal cliff crisis is really not an economic crisis at all but in fact a political ploy.

In this way the Grand Bargain is what Bill Black, former regulator during the Savings and Loan Scandal of the 80s, has called a "Grand Betrayal." The Real News Network has an Economy section with a fair bit on the fiscal cliff and the Grand Betrayal, for instance:
http://therealnews.com/t2/index.php?option=com_content&task=view&id=31&I...

And their Economy page is overall pretty good:
http://therealnews.com/t2/index.php?option=com_content&task=view&id=842

And hence my own recent post on getting more organized about making our ecomics discussions easier. Here's my post:

http://rabble.ca/babble/babble-banter/should-there-be-official-babble-ec...

 

Hope this was helpful!

 

Fidel

[url=http://michael-hudson.com/2012/11/obama-wins-for-whom/]Obama Wins for whom?[/url]

Michael Hudson wrote:
What is collapsing is the idea of equity and fairness in the economy – and in the politicians that are remaking markets to benefit the 1%. Most voters opposed the bank bailouts of 2008. The Republicans were politically savvy enough not to vote for it, so that they could strike a populist stance. But Mr. Romney has not picked up this line of attack, even though it might have enabled him to defeat a president in whom much of whose constituency has lost confidence.

Obama will carry on delivering American voters to his real constituents,  the superrich 1%.

Charade they are.

Boom Boom Boom Boom's picture

CEOs Try to Shred the Safety Net While Pigging Out on Corporate Welfare
 
excerpt:
 
A gang of brazen CEOs has joined forces to promote economically disastrous and socially irresponsible austerity policies. Many of those same CEOs were bailed out by the American taxpayer after a Wall Street-driven financial crash. Instead of a thank-you, they are showing their appreciation in the form of a coordinated effort to rob Americans of hard-earned retirements, decent medical care and relief for the poorest.
 
    Using the excuse of a phony, manufactured crisis known as the “fiscal cliff” – which isn’t a crisis at all, as economist James K. Galbraith has succinctly explained -- they are gearing up to pull the wool over the public's eyes by cutting Social Security, Medicare and Medicaid. The CEOs are part of the Fix the Debt campaign run by the Peter Peterson-backed Center for a Responsible Federal Budget, which plans to unleash tens of millions pushing for a deficit reduction deal that favors the rich.

Sven Sven's picture

Bacchus wrote:

Bec.De.Corbin wrote:

What % of taxes do you Canadians pay up there?

The figure I have seen in studies published in the newspaper is that Americans keep 70% of their income after taxes and Canadians 69%

I'm not sure about that American figure (keeping 70% after income taxes).  Over 40% of American households that have an income pay no federal income taxes at all.

NorthReport
josh

Sven wrote:

[I'm not sure about that American figure (keeping 70% after income taxes).  Over 40% of American households that have an income pay no federal income taxes at all.

And that is by design.  The earned income tax credit, or the negative income tax, advanced by that great socialist Milton Friedman, is designed to keep low income workers afloat.  They are still subject to federal payroll taxes for social security, Medicare and Medicaid.  Not to mention state and local income, sales and property taxes.  Also those who are retired obviously don't pay income tax.  Although they may pay tax on their social security.

Sven Sven's picture

josh wrote:

Sven wrote:

[I'm not sure about that American figure (keeping 70% after income taxes).  Over 40% of American households that have an income pay no federal income taxes at all.

And that is by design.  The earned income tax credit, or the negative income tax, advanced by that great socialist Milton Friedman, is designed to keep low income workers afloat.  They are still subject to federal payroll taxes for social security, Medicare and Medicaid.  Not to mention state and local income, sales and property taxes.  Also those who are retired obviously don't pay income tax.  Although they may pay tax on their social security.

My point was that because over 40% of American households don't pay any federal income taxes, it just struck me that that the 70% figure may be too low.  Maybe there are far more taxpayers than I thought who pay much more than 30% of their incomes in federal income taxes such that, on average, the 70% figure is right. 

Sven Sven's picture

Okay, I did a quick bit of research regarding the current federal income tax rates paid by Americans:  The average rate is 11.8% (thus, the average American retains nearly 90% of their incomes after federal income taxes -- which is significantly greater than the 70% figure noted by Bacchus).

However, the rates vary significantly:

The average federal income tax rate paid by the bottom 50% of American taxpayers is only about 2.4%.

The average federal income tax rate paid by the top 1% of Americans is about 23.4%.

Mr.Tea

State income taxes also vary wildly from state to state. In Florida, for example, there's no state income tax. Some Miami Marlins baseball players just got traded to the Toronto Blue Jays and Jose Reyes, set to earn $96 million, is gonna be in for a tax surprise...

Sven Sven's picture

Mr.Tea wrote:

State income taxes also vary wildly from state to state. In Florida, for example, there's no state income tax. Some Miami Marlins baseball players just got traded to the Toronto Blue Jays and Jose Reyes, set to earn $96 million, is gonna be in for a tax surprise...

That's true!

I live in a relatively high-tax state (about a 9% top marginal tax rate on income).  A lot of Minnesota business owners will move to Florida to establish residency down there before they sell their businesses so that the gain on the sale will be subject to zero state income taxes.

So, if the "average American" keeps nearly 90% of their income after federal income taxes (granted, that figure varies widely, depending on what income category one is in), what is the similar percentage in Canada for federal income taxes?

ygtbk

@ Sven:

There's a fair amount of information here:

http://www.policyalternatives.ca/sites/default/files/uploads/publication...

although it's a bit out of date. Table 1 (on page 16) is broken out by decile. If you average D5 and D6 then the most recent federal tax percentage is 6.2%. Since you can't really get away from provincial income tax in Canada (we have no analogue of Florida) I would average D5 and D6 for federal and provincial income tax combined, coming up with about 10%. So the average Canadian keeps about 90% of their income after (combined) income tax, although as Table 1 shows there's a lot of other taxes - the "all tax" number is about 36%, averaging D5 and D6.

josh

Sven wrote:

Okay, I did a quick bit of research regarding the current federal income tax rates paid by Americans:  The average rate is 11.8% (thus, the average American retains nearly 90% of their incomes after federal income taxes -- which is significantly greater than the 70% figure noted by Bacchus).

However, the rates vary significantly:

The average federal income tax rate paid by the bottom 50% of American taxpayers is only about 2.4%.

The average federal income tax rate paid by the top 1% of Americans is about 23.4%.

 

And is there a problem with that?  Especially when you thrown in all the payroll, sales and (often) state taxes that are a flat rate.  Or, in the case of social security, regressive because there is no tax after around 110,000 in income.

ygtbk

@ josh:

Determining whether Social Security is regressive or not requires looking at the benefits as well as the taxes. Current PIA bend points can be found at:

http://www.ssa.gov/oact/cola/piaformula.html

Mr.Tea

Sven wrote:

I live in a relatively high-tax state (about a 9% top marginal tax rate on income).  A lot of Minnesota business owners will move to Florida to establish residency down there before they sell their businesses so that the gain on the sale will be subject to zero state income taxes.

Yep. Lots and lots of professional athletes keep Florida as their "primary residence" even if they play for New York or LA or somewhere else because it means huge tax savings.

Didn't realize you were from Minnesota. Great place! If you haven't tried one already, you need to try a beer called "Furious" by the Surly Brewing Company. You can only get it there, much to the dismay of beer drinkers everywhere else...

Sven Sven's picture

Mr.Tea wrote:

Sven wrote:

I live in a relatively high-tax state (about a 9% top marginal tax rate on income).  A lot of Minnesota business owners will move to Florida to establish residency down there before they sell their businesses so that the gain on the sale will be subject to zero state income taxes.

Yep. Lots and lots of professional athletes keep Florida as their "primary residence" even if they play for New York or LA or somewhere else because it means huge tax savings.

Didn't realize you were from Minnesota. Great place! If you haven't tried one already, you need to try a beer called "Furious" by the Surly Brewing Company. You can only get it there, much to the dismay of beer drinkers everywhere else...

Ha!  I've already enjoyed several of Surly Brewing's offerings!  There are a lot of small craft brewers here in town...Surly Cynic is my favorite.

 

Boom Boom Boom Boom's picture

Sven Sven's picture

NorthReport wrote:

Can a federal insurance program go bankrupt? Of course it can’t. Bankruptcy is a legal process for private citizens seeking relief from unpayable debts. How can the obligations of Social Security or Medicare ever be unpayable? These are public programs, not private companies. All the federal government has to do is to write the checks, pursuant to law. As for the size of the checks, it will be whatever Congress prescribes at any given time. Bankruptcy as a concept does not apply. So what are they talking about?  Lies and nonsense, nothing more.

Can a federal program (or the federal government itself) go through bankruptcy under Chapters 7, 11, or 13 of the US Bankruptcy Code.  No.

But a government can (and governments have) become insolvent (i.e., unable to pay all of their commitments).

NorthReport

Organizing McDonalds and Walmart, and Why Austerity Economics Hurts Low-Wage Workers the Most

Organizing makes economic sense.

Unlike industrial jobs, these can’t be outsourced abroad. Nor are they likely to be replaced by automated machinery and computers. The service these workers provide is personal and direct: Someone has to be on hand to help customers and dole out the burgers.

And any wage gains they receive aren’t likely to be passed on to consumers in higher prices because big-box retailers and fast-food chains have to compete intensely for consumers. They have no choice but to keep their prices low. 

That means wage gains are likely to come out of profits – which, in turn, would affect the return to shareholders and the total compensation of top executives.

That wouldn’t be such a bad thing. 

According to a recent report by the National Employment Law Project, most low-wage workers are employed by large corporations that have been enjoying healthy profits. Three-quarters of these employers (the fifty biggest employers of low-wage workers) are raking in higher revenues now than they did before the recession.

McDonald’s — bellwether for the fast-food industry — posted strong results during the recession by attracting cash-strapped customers, and its sales have continued to rise.

Its CEO, Jim Skinner, got $8.8 million last year. In addition to annual bonuses, McDonald’s also gives its executives a long-term bonus once every three years; Skinner received an $8.3 million long-term bonus in 2009 and is due for another this year. The value of Skinner’s other perks — including personal use of the company aircraft, physical exams and security — rose 19% to $752,000.

Yum!Brands, which operates and licenses Taco Bell, KFC, and Pizza Hut, has also done wonderfully well. Its CEO, David Novak, received $29.67 million in total compensation last year, placing him number 23 on Forbes’ list of highest paid chief executives.

Walmart – the trendsetter for big-box retailers – is also doing well. And it pays its executives handsomely. The total compensation for Walmart’s CEO, Michael Duke, was $18.7 million last year – putting him number 82 on Forbes’ list.

The wealth of the Walton family – which still owns the lion’s share of Walmart stock — now exceeds the wealth of the bottom 40 percent of American families combined, according to an analysis by the Economic Policy Institute.

Last week, Walmart announced that the next Wal-Mart dividend will be issued December 27 instead of January 2, after the Bush tax cut for dividends expires — thereby saving the Walmart family as much as $180 million. (According to the online weekly “Too Much,” this $180 million would be enough to give 72,000 Wal-Mart workers now making $8 an hour a 20 percent annual pay hike. That hike would still leave those workers making under the poverty line for a family of three.)

America is becoming more unequal by the day. So wouldn’t it be sensible to encourage unionization at fast-food and big-box retailers?

Yes, but here’s the problem.

The unemployment rate among people with just a high school degree – which describes most (but not all) fast-food and big-box retail workers – is still in the stratosphere. The Bureau of Labor Statistics puts it at 12.2 percent, and that’s conservative estimate. It was 7.7 percent at the start of 2008.

High unemployment makes it much harder to organize a union because workers are even more fearful than usual of losing their jobs. Eight dollars an hour is better than no dollars an hour. And employers at big-box and fast-food chains have not been reluctant to give the boot to employees associated with attempts to organize for higher wages.

Meanwhile, only half of the people who lose their jobs qualify for unemployment insurance these days. Retail workers in big-boxes and fast-food chains rarely qualify because they haven’t been on the job long enough or are there only part-time. This makes the risk of job loss even greater.

Which brings us back to what’s happening in Washington.

Washington’s obsession with deficit reduction makes it all the more likely these workers will face continuing high unemployment – even higher if the nation succumbs to deficit hysteria. That’s because cutting government spending reduces overall demand, which hits low-wage workers hardest. They and their families are the biggest casualties of austerity economics.

And if the spending cuts Washington is contemplating fall on low-wage workers whose families are under the poverty line – reducing not only the availability of unemployment insurance but also food stamps, housing assistance, infant and child nutrition, child health care, and Medicaid – it will be even worse. (It’s worth recalling, in this regard, that 62 percent of the cuts in the Republican budget engineered by Paul Ryan fell on America’s poor.)

By contrast, low levels of unemployment invite wage gains and make it easier to organize unions. The last time America’s low-wage workers got a real raise (apart from the last hike in the minimum wage) was the late 1990s when unemployment dropped to 4 percent nationally – compelling employers to raise wages in order to recruit and retain them, and prompting a round of labor organizing.

That’s one reason why job growth must be the nation’s number one priority. Not deficit reduction.

Yet neither side in the current “fiscal cliff” negotiations is talking about America’s low-wage workers. They’re invisible in official Washington. 

Not only are they unorganized for the purpose of getting a larger share of the profits at Walmart, McDonalds, and other giant firms, they’re also unorganized for the purpose of being heard in our nation’s capital. There’s no national association of low-wage workers. They don’t contribute much to political campaigns. They have no Super-PAC. They don’t have Washington lobbyists.

But if this nation is to reverse the scourge of widening inequalty, Washington needs to start paying attention to them. And the rest of us should do everything we can to pressure Washington and big-box retailers and fast-food chains to raise their pay.i

Bacchus

josh wrote:

Sven wrote:

Okay, I did a quick bit of research regarding the current federal income tax rates paid by Americans:  The average rate is 11.8% (thus, the average American retains nearly 90% of their incomes after federal income taxes -- which is significantly greater than the 70% figure noted by Bacchus).

However, the rates vary significantly:

The average federal income tax rate paid by the bottom 50% of American taxpayers is only about 2.4%.

The average federal income tax rate paid by the top 1% of Americans is about 23.4%.

 

And is there a problem with that?  Especially when you thrown in all the payroll, sales and (often) state taxes that are a flat rate.  Or, in the case of social security, regressive because there is no tax after around 110,000 in income.

You are mising the state, county and municpal income tax that americans pay. Plus Unemployment deductions etc. All of that makes the 69 and 70% results I quoted before

NorthReport

I think Nader is onto something here.

 

Ralph Nader on a simple way to avoid the fiscal cliff: Tax stock trades

http://www.washingtonpost.com/opinions/ralph-nader-why-a-tax-on-stock-tr...

Sven Sven's picture

Bacchus wrote:

josh wrote:

Sven wrote:

Okay, I did a quick bit of research regarding the current federal income tax rates paid by Americans:  The average rate is 11.8% (thus, the average American retains nearly 90% of their incomes after federal income taxes -- which is significantly greater than the 70% figure noted by Bacchus).

However, the rates vary significantly:

The average federal income tax rate paid by the bottom 50% of American taxpayers is only about 2.4%.

The average federal income tax rate paid by the top 1% of Americans is about 23.4%.

 

And is there a problem with that?  Especially when you thrown in all the payroll, sales and (often) state taxes that are a flat rate.  Or, in the case of social security, regressive because there is no tax after around 110,000 in income.

You are mising the state, county and municpal income tax that americans pay. Plus Unemployment deductions etc. All of that makes the 69 and 70% results I quoted before

If I read your earlier quote correctly, you said that the 70% was after "income taxes". There are essentially two income taxes: federal income taxes (which average about 11%) and state income taxes (where a 9% top marginal rate, as is the case in Minnesota, would be on the high side -- and where many states have zero income tax). So, income taxes are nowhere near an average of 30% of Americans' incomes. It's almost certainly closer to only about 15%, with most Americans paying far less than 15%.

Boom Boom Boom Boom's picture

Orcs v. Goblins: Crazed Republicans Turn on Each Other in Ugly Fiscal Cliff Battle

The Republican Party, particularly in the House of Representatives, is so blinded by greed and stupidity that factions are turning on each other.

NDPP

Democrats, Republicans Shift Burden of Depression to the Poor (and vid)

http://www.presstv.com/detail/2012/12/27/280379/lower-class-bears-burden...

"A prominent analyst tells Press TV that the US is headed towards a more divided society where the gap between the rich and the poor deepens ever more as the US authorities try to divert the burden of depression from Wall Street to lower class Americans. Interview with Eric Draitser, founder of stopimperialism.com and other analysts."

Bec.De.Corbin Bec.De.Corbin's picture

Boom Boom wrote:

Orcs v. Goblins: Crazed Republicans Turn on Each Other in Ugly Fiscal Cliff Battle

The Republican Party, particularly in the House of Representatives, is so blinded by greed and stupidity that factions are turning on each other.

Now that is a good find... thanks.

 

Boom Boom Boom Boom's picture

It'll be interesting if Boehner simply gets 50 Republicans to work with him and Obama to get a solution to this fake crisis against the will of the majority of the GOP.

Fidel

NorthReport wrote:
High unemployment makes it much harder to organize a union because workers are even more fearful than usual of losing their jobs. Eight dollars an hour is better than no dollars an hour. And employers at big-box and fast-food chains have not been reluctant to give the boot to employees associated with attempts to organize for higher wages.

Meanwhile, only half of the people who lose their jobs qualify for unemployment insurance these days. Retail workers in big-boxes and fast-food chains rarely qualify because they haven’t been on the job long enough or are there only part-time. This makes the risk of job loss even greater.

Which brings us back to what’s happening in Washington.

Washington’s obsession with deficit reduction makes it all the more likely these workers will face continuing high unemployment – even higher if the nation succumbs to deficit hysteria. That’s because cutting government spending reduces overall demand, which hits low-wage workers hardest. They and their families are the biggest casualties of austerity economics.

And if the spending cuts Washington is contemplating fall on low-wage workers whose families are under the poverty line – reducing not only the availability of unemployment insurance but also food stamps, housing assistance, infant and child nutrition, child health care, and Medicaid – it will be even worse. (It’s worth recalling, in this regard, that 62 percent of the cuts in the Republican budget engineered by Paul Ryan fell on America’s poor.)

By contrast, low levels of unemployment invite wage gains and make it easier to organize unions. The last time America’s low-wage workers got a real raise (apart from the last hike in the minimum wage) was the late 1990s when unemployment dropped to 4 percent nationally – compelling employers to raise wages in order to recruit and retain them, and prompting a round of labor organizing.

Good comments, North Report. And we might think that this would be prime time for union certifications across America. Not so, says American economist Michael Hudson. Hudson says that this is not the same class war waged 100 years ago. Today it's not so much a struggle between workers and industrialists employing us. Today it is financial oligarchs waging war on entire economies - their struggle is for a much larger piece of the pie than once motivated capitalist industrialists. Today what is at stake is whole categories of national economies, billions of dollars in crown land(Canada) and prime lands in the U.S. (now transformed into "real estate" to be had by the superrich one percent).

Hudson says:

Quote:
Indebting companies enables creditors to seize employee pension savings. And Indebting labor means that it no longer is necessary to hire strikebreakers to attack union organizers and strikers. 

Oligarchs have governments and labour by the short and curlies right now. Will our corrupt stooges give way to democracy at some point? Hudson thinks the banksters themselves will decide to allow us a bit of democracy at some point. They will have to at some point if they want to continue propping-up fictitious debts.

Boom Boom Boom Boom's picture

Al Qaeda Disbands; Says Job of Destroying U.S. Economy Now in Congress’s Hands  Laughing

WASHINGTON — The international terror group known as Al Qaeda announced its dissolution today, saying that “our mission of destroying the American economy is now in the capable hands of the U.S. Congress.”

In an official statement published on the group’s website, the current leader of Al Qaeda said that Congress’s conduct during the so-called “fiscal-cliff” showdown convinced the terrorists that they had been outdone.

 

NDPP

Democrats, Republicans Work Towards 'Fiscal Cliff' Deal

http://www.wsws.org/en/articles/2012/12/29/fisc-d29.html

"...Behind the smoke and mirrors of the 'conflict'..."

Michelle

Boom Boom wrote:

I love it.  But if you don't read music, you wouldn't get it!  :) :)

Boom Boom Boom Boom's picture

On CNN right now: deal reached on fiscal cliff, Obama to speak very soon. As I understand it, cutoff for increased taxes is  $450,000.00, not the $250,000.00 the Democrats wanted. But unemployment benefits continued. Obama will sign the bill into law in the morning.

ETA: another big battle looming in three months over the US debt ceiling, already incredibly high. $16.6 trillion I think. Surprised

ETA: I think I heard that spending cuts are delayed two months, and more negotiations.

ETA: CNN commentator just said the debt ceiling is an "artificial construct" and is meaningless because bills have to be paid whether there's a debt ceiling or not.

ETA: Someone said increased taxes on the top 2% would raise $650 billion - that's about half of what I thought it would be. Middle class tax cuts not affected.

ETA: Speaker Boehner voted "yes" to send a message to Republicans. Paul Ryan voted "yes" as well - that was a surprise. That vote - which raises taxes on the top 2% - might kill his presidential aspirations in 2016. Smile 

ETA: 16 Democrats voted against the bill.

ETA: Speaker Boehner got 80 Republicans to vote with him to support the bill - 30 more than expected.  I think 157 Republicans voted "no". The bill passed with a good majority.

Sven Sven's picture

This tax increase will raise an additional $60B per year. Meanwhile, annual federal spending exceeds annual federal revenues by $1.1T.

NDPP

Eight Corporate Subsidies in the Fiscal Cliff Bill, From Goldman Sachs to Disney to NASCAR

http://www.nakedcapitalism.com/2013/01/eight-corporate-subsidies-in-the-...

"So without further ado, here are eight corporate subsidies in the fiscal cliff bill that you haven't heard of..."

 

Max Keiser on Happy New Year and the Fiscal Cliff

http://youtu.be/O7QBEyJUAhY

"Fiscal cliff is theater designed to distract..."

josh

84% of the Bush tax cuts have now been made permanent.  Investment income--capital gains, dividends--will continue to be taxed at about half the rate of the top tax rate on wage income.  An opportunity to provide the federal government with additional revenue to fulfill its obligations has been lost.

abnormal

NDPP wrote:

Eight Corporate Subsidies in the Fiscal Cliff Bill, From Goldman Sachs to Disney to NASCAR

http://www.nakedcapitalism.com/2013/01/eight-corporate-subsidies-in-the-...

"So without further ado, here are eight corporate subsidies in the fiscal cliff bill that you haven't heard of..."

Have to admit I don't know why subsidies for rum producers and algae growers ended up in this bill.

 

NDPP

US Risks Collapse of Dollar in 2013: Economic Analyst (and vid)

http://www.presstv.com/detail/2013/01/03/281591/us-dollar-to-collapse-in...

"The US dollar is expected to take a value nosedive in 2013 if China refuses to continue financing Washington's spiralling debt, an economic analyst tells Press TV..."

Fidel

The war machine needs feeding. "Bipartisan democracy" in America is dead a long time. U.S. military dictatorship is in firm control.

Say A, say M, say E
Say R, say I, C
Say A, N

American woman gonna mess your mind
American woman gonna mess your mind
American woman gonna mess your mind

Bec.De.Corbin Bec.De.Corbin's picture

I see we are now tumbling instead of falling... Good job congress. Smile

 

 

NOT...

 

NorthReport

How could that be?

New study badly undermines GOP position on sequester

In a rational world, a new study that came out today on income equality would constitute a major blow to the GOP argument on the sequester.

The new study was performed by Thomas Hungerford of the non-partisan Congressional Research Service. Though the study is not a CRS product, Hungerford’s data is widely cited on both sides; he’s an impeccably objective analyst.

Here’s what Hungerford found: The single greatest driver of income inequality over a recent 15 year period was runaway income from capital gains and dividends.

This finding is directly relevant to the current debate, because Obama and Democrats want to offset the sequester in part by closing loopholes enjoyed by the wealthy, such as the one that keeps tax rates on capital gains and dividends low. Dems want to do this in order to prevent a scenario where the sequester is averted only by deep spending cuts to social programs that could hurt a whole lot of poor and middle class Americans. Republicans oppose closing any such loopholes and want to avert the sequester with only deep spending cuts.

Hungerford’s report, like all serious examinations of inequality, is very complicated. He looks at a bunch of recent data on inequality from the period from 1991-2006 — measured by the so-called “Gini index” — and calculates the degree to which various factors exacerbated it. Hungerford found that over that period, the rise in the Gini index (a story that’s been widely told elsewhere, one that’s largely been driven by the runaway wealth of the top one percent and top 0.1 percent) was driven mainly by the rise in capital gains and dividends income.

“By far, the largest contributor to increasing income inequality (regardless of income inequality measure) was changes in income from capital gains and dividends,” the report concludes.

Or, as Hungerford put it in an interview with me: “The reason income inequality has been increasing has been the rising income going to the top one percent. Most of that has come in capital gains and dividends."

http://www.washingtonpost.com/blogs/plum-line/wp/2013/02/20/new-study-ba...

NorthReport

And don't think for a second this does not apply to Canada as well.

If we seriously wish to have a more balnced and equal socity it way past the time to end the tax breaks on capital gains and dividends.

When are we ever going to stop providing all these tax loopholes for the people that are already very rich.

 

Quote:
Here’s what Hungerford found: The single greatest driver of income inequality over a recent 15 year period was runaway income from capital gains and dividends.

 

NorthReport

The US sequester: your essential guide to the looming spending cuts

The sequester is scheduled to kick in on March 1, with $85bn in cuts set to hit a variety of programs. We give you the lowdown

 

http://www.guardian.co.uk/world/2013/feb/22/us-sequester-guide-spending-...

NorthReport

Budget Impasse Signals a Shift in G.O.P.’s Focus

With Congress unlikely to stop deep automatic spending cuts that will strike hard at the military, the fiscal stalemate is highlighting a significant shift in the Republican Party: lawmakers most keenly dedicated to shrinking the size of government are now more dominant than the bloc committed foremost to a robust national defense, particularly in the House.

That reality also underscores what Republicans, and some Democrats, say was a major miscalculation on the part of President Obama. He agreed to set up the automatic cuts 18 months ago because he believed the threat of sharp reductions in military spending would be enough to force Republicans to agree to a deficit reduction plan that included the tax increases he favored.

“Fiscal questions trump defense in a way they never would have after 9/11,” said Representative Tom Cole, Republican of Oklahoma. “But the war in Iraq is over. Troops are coming home from Afghanistan, and we want to secure the cuts.”

Representative Howard P. McKeon of California, the chairman of the Armed Services Committee and one of the lawmakers Democrats had hoped would never accept the military cuts, went almost as far. “Republicans aren’t cookie cutter,” he said, “but we do agree on the basic premise of where we’re trying to go. And if we don’t get our fiscal house in order, it’s very hard to provide for the defense of the nation.”

As lawmakers prepared to return to Washington, the White House tried to raise the ante by highlighting the effects the cuts would have on programs in every state.

But at the heart of the battle over sequestration — the nearly $1 trillion in budget cuts that are scheduled to begin on Friday and accelerate over the next decade — are fundamental misunderstandings between the two parties over their respective priorities.

During the 2011 negotiations to raise the nation’s statutory borrowing limit, Mr. Obama wanted an onerous “trigger” to force both sides to reach a compromise on deficit reduction. For Democrats, the bludgeon that would drive them to negotiate changes to entitlement programs like Medicare andSocial Security would be cuts to domestic programs like child nutrition and national parks. For Republicans, the president wanted automatic tax increases to force a compromise on the broader tax code.

Republicans balked, but offered what Mr. Obama thought was a different Republican sacred cow — military cuts.

Ultimately, taxes trumped all of that. Republicans, who last month let taxes rise on incomes over $400,000 to avert broader tax increases and the “fiscal cliff,” are now ready to stand their ground, regardless of the military cuts.

“I really think they misunderstood what happened on the fiscal cliff,” Mr. Cole said. “They thought they had Republicans on the run, when all they did was push us to high ground. All the muskets are pointing out. You want to charge the hill? Come on.”

But the Republicans were surprised by Democrats, who would not shift the automatic domestic cuts to entitlement programs unless the people least affected by government support — the rich — also bore some of the burden.

“We always thought it wouldn’t happen because the other side wouldn’t stomach the nondefense reductions,” said Representative Tom Price, a Georgia Republican and a leading voice among House conservatives. “I guess what happened was each side was too smart for the other.”

Dan Pfeiffer, a senior adviser to Mr. Obama, said on Sunday that there was no miscalculation. In the final months of last year’s presidential campaign, Republicans “racked up a lot of frequent flier miles booking flights to Virginia” to denounce the coming military cuts, he said. If Republican leaders would step out of the way, he said, rank-and-file Republicans most worried about the military cuts would step forward to compromise on taxes.

A sizable number of Republicans, including many senators, are incensed by the cuts about to fall on the Pentagon, totaling $43 billion for the 2013 fiscal year. Because the Defense Department will have only seven months to put them into effect and because military personnel are protected, military training, weapons acquisition and maintenance stand to be cut by 13 percent.

President Ronald Reagan’s push in the 1980s for tax cuts and domestic spending restraint were accompanied by a huge military buildup. “There’s no way the party of Ronald Reagan should be accepting these cuts,” said Senator Lindsey Graham, Republican of South Carolina, who has privately sought some compromise on tax loopholes.

Writing in the conservative Weekly Standard, William Kristol, a Republican hawk, excoriated Republicans for being “so desperate for a ‘victory’ over Obama” that they were “willing to sacrifice national defense for minor cuts in domestic spending which will in no way fundamentally change our trajectory toward national insolvency.”

Senator John McCain, Republican of Arizona, called the cuts “unconscionable” on the CNN program “State of the Union” on Sunday.

But most Congressional Republicans are standing their ground, a position they say is strategic. The federal government’s growing debt cannot be controlled through the spending at the annual discretion of Congress, and after the cuts take effect, that part of the federal budget will drop to levels not seen in five decades as measured against the size of the economy. Long term, the problem is entitlements, especially Medicare and Social Security.

The pain of further cuts to discretionary programs could bring Mr. Obama to the negotiating table on them by the spring, if not by midsummer, when Congress must once again raise the government’s borrowing limit.

“Because the Democratic-controlled Senate and the president refuse to negotiate, the only way to potentially bring them to the table to negotiate is to go forward with the spending reductions as they are,” Mr. Price said.

With so many rank-and-file Republicans adamant that they would rather see the cuts stand than raise any taxes, Speaker John A. Boehner finds himself in a bind. Three times this year — on the tax deal to resolve the fiscal cliff, on a measure to suspend the debt ceiling and on a package of Hurricane Sandyrelief — he has let legislation pass the House against the votes of a majority of Republicans. In 2011, Republicans accepted caps on military spending as well.

 


http://www.nytimes.com/2013/02/25/us/politics/democrats-and-republicans-...

NorthReport

L'affair Reinhart/Rogoff Reinhart and Rogoff’s defense is misleading and here’s why

By Matt Phillips @MatthewPhillips 6 hours ago

Economics calls itself a “science”, but it’s pretty much always a political proxy war. Which helps explain the bone-crunching social media pile-on that Harvard economists Ken Rogoff and Carmen Reinhart received in recent days after some other researchers questioned their influential findings that high government debt is a drag on economic growth.

The source of those questions was a paper by University of Massachusetts economists Thomas Herndon, Michael Ash and Robert Pollin, hereinafter HAP. And today Reinhart and Rogoff (R+R) issued a pretty stark acknowledgement of errors  that was remarkable for its candor.

For instance: “Herndon, Ash and Pollin accurately point out the coding error that omits several countries from the averages in figure 2. Full stop. HAP are on point.” In the world of economics, that’s about as straightforward a mea culpa as you get. (Check out this post for a full list of the links on the affair.)

But while admitting this mistake, R+R contend that their conclusion of slower economic growth for high-debt countries still holds up if you look at other metrics. They also suggest that HAP reach the same conclusion, namely that countries with debt-to-GDP ratios over 90% will have slower growth:

Do Herndon et al. get dramatically different results on the relatively short post war sample they focus on? Not really. They, too, find lower growth associated with periods when debt is over 90% (they find 0-30 debt/GDP , 4.2% growth; 30-60, 3.1 %; 60-90, 3.2%,; over 90, 2.2%. Put differently, growth at high debt levels is a little more than half of the growth rate at the lowest levels of debt.

R+R go on to argue that while the above differences in GDP growth may not look like very much, they add up:

It is very misleading to think of 1% growth differences without recognizing that the typical high debt episode lasts well over a decade (23 years on average in the full sample.) … It is utterly misleading to speak of a 1% growth differential that lasts 10-25 years as small. If a country grows at 1% below trend for 23 years, output will be roughly 25% below trend at the end of the period, with massive cumulative effects.

But those statements are pretty misleading themselves. That’s because HAP’s key point isn’t that the decline from 3.2% growth to 2.2% growth for countries over 90% debt-to-GDP is small. It isn’t small. If your country grew at 1% less a year, it would indeed, as R+R say, be a good deal poorer two decades hence.

No, HAP’s point is that 1% is statistically insignificant. That, given the statistical margins of error that arise when you do a calculation like this with a limited set of data, “[d]ifferences in average GDP growth in the categories 30-60 percent, 60-90 percent, and 90-120 percent cannot be statistically distinguished.”

If that’s true, you can’t even really speak of a 1% growth difference for high and low debt countries. Why? Because statistically speaking there is not enough evidence to suggest it really exists, even with average growth data that the economists collected.

Think about it in terms of public opinion polling during election season. A typical opinion poll canvasses about 1,000 people. The “margin of error” for asking that many people if they’ll vote for person A or person B is about 3% either way. So if person A polls 51% and person B polls 49%, person A’s lead isn’t statistically significant. There’s no confidence that person A will actually win when all the votes are counted.

In other words, R+R seem to be claiming that even though their lead shrank considerably after redoing the math—so much so that it now falls within the margin of error—they’re still clearly in the lead. But statistically speaking, according to the new paper, that’s just not true.

 

http://qz.com/75439/reinhart-and-rogoffs-defense-is-misleading-and-heres...

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