Dirty Little Secrets
Posted: February 2, 2011 Filed under: Corporate Crime, Team Obama, The Bonus Class, U.S. Politics, Voter Ignorance, We are so F'd | Tags: corporate tax rates, effective tax rates, self dealing 12 Comments
The overall corporate income tax was featured during the President’s SOTU address and by Republican circles. I have mentioned that this particular rate isn’t even relevant anymore in posts and down thread comments because corporations here really don’t pay any where near the effective rate.
There are several reasons for this. First, many of them now set up real or pseudo headquarters in tax and off shore banking havens like the Bahamas or Qatar and place a lot of their operations out of the reach of the IRS. The second is the efficiency of lobbying efforts in getting them so many loopholes that most corporate revenues become exempt. Despite this, corporations use public services and create social costs. Social costs are those costs that the society gets to foot when corporations create problems they or their consumers can pass to the public. A big example is smoking that creates incredible public health issues or pollution. BP is definitely not taking care of the tab for its destruction down here and will most likely escape prosecution for costs the spill will continue to wreck on the environment, livings, and health of people and wildlife in the area. Meanwhile, as an oil business, they are the beneficiary of many, many tax loopholes and direct subsidies.
I was glad to see some hard data–albeit anecdotal–on this phenomenon today in David Leonhardt’s op ed column in the NYT called ‘The Paradox of Corporate Taxes‘. The narrative begins with the example of Carnival Cruises that has a special, extreme loophole that leaves the majority of its revenues untaxed while it uses a number of public resources like services of the Coast Guard. Corporations are cost minimizing and profit maximizing things. They will employ an army of lobbyists and lawyers to help them. They even produce commercials that tout their environmental friendliness and their patriotism. I always shake my head at the commercials of companies like GE and Boeing for whom competitive markets are imaginary and no bid government grants are major sources of revenues. Yet, they act like they are burdened by taxes.
This is so untrue.
Carnival’s biggest government benefit of all may be the price it pays for many of those services. Over the last five years, the company has paid total corporate taxes — federal, state, local and foreign — equal to only 1.1 percent of its cumulative $11.3 billion in profits. Thanks to an obscure loophole in the tax code, Carnival can legally avoid most taxes.
It is an extreme case, but it’s hardly the only company that pays far less than the much-quoted federal corporate tax rate of 35 percent. Of the 500 big companies in the well-known Standard & Poor’s stock index, 115 paid a total corporate tax rate — both federal and otherwise — of less than 20 percent over the last five years, according to an analysis of company reports done for The New York Times by Capital IQ, a research firm. Thirty-nine of those companies paid a rate less than 10 percent.
President Obama indicated that he was willing to simplify the Corporate Tax Code and lower the overall Tax Rate for corporations. In exchange, he asked Congress to remove all the pork, breaks, and exclusions they’ve granted many businesses–including ones that really don’t need it like the Oil Industry–over the years. I doubt we’ll see any moves on the latter. My fear is that will only see movement on the former thus cementing the de-funding of government by the by the very people who benefit from government largess. Many study shows that far more rich and upper middle class Americans and American Businesses use public services and public assets than the poor and working class. After all, who uses the roads, the airways, the universities, the grants and loans, and the many tax loopholes?
While the official corporate tax rate is among the highest of developing countries, the effective rate is among the lowest of the countries that actually have economies that don’t function as tax havens or off shoring banking centers. Even Republican economists will pony up that data.
“A dirty little secret,” Richard Clarida, a Columbia University economist and former official in the Treasury Department under President George W. Bush, has said, “is that the corporate income tax used to raise a fair amount of revenue.”
Over the last five years, on the other hand, Boeing paid a total tax rate of just 4.5 percent, according to Capital IQ. Southwest Airlines paid 6.3 percent. And the list goes on: Yahoo paid 7 percent; Prudential Financial, 7.6 percent; General Electric, 14.3 percent.
Economists have long pleaded for an overhaul of the corporate tax code, and both President Obama and Republicans now say they favor one, too. But it won’t be easy.
Indeed, it won’t be easy. First, it’s difficult for even neutral academics to get a good look at the workings of loopholes because because tax filings are confidential. Loopholes are everywhere and folks that support simplifying the tax code can’t even get a handle on how widespread or huge the problem. Publicly held corporations provide for public stockholder reports but even these things are of limited use over time when studying corporate tax avoidance. My field specializations for my doctorate is International Finance and Trade and Corporate Finance so I lot of my class work and research work is based in corporate finance as well as economics. I know the literature, models, and theories well.
Breaking News: Mubarak Speaks, Violence Erupts
Posted: February 1, 2011 Filed under: Diplomacy Nightmares, Egypt, Foreign Affairs | Tags: Alexandria, Million Egyptian March, US presidential statement on Egypt 53 CommentsLive Blog and Developing Situation 
SultanAlQassemi Sultan Al Qassemi
GUNFIRE IN EGYPT NOW
A pro-Mubarak demonstration has converged in Alexandria with protesters wishing him out. There are reports of stones tossing and gun fire. The army is circling the crowd in an attempt to intimidate the crowd. More shots fired on the Streets of Alexandria. AJ is speculating that the gunfire is a psychological tactic. The army is clearly firing in the air according to AJ journalists on the ground.
I really have to wonder what kind of background this provides to the upcoming US Presidential statement on Mubarak’s speech.
Many protesters from both side are holding ground in the heart of the square and are not disbanding.
AJEnglish Al Jazeera English
Clashes between anti-Govt and pro-Mubarak protesters in #Alexandria – coverage live on #AlJazeera: http://aje.me/ajelive#tahrir#egypt
thedailybeast The Daily Beast
RT @videobeast: Egypt President Mubarak says he will not run for re-election and never wanted “power or prestige”: http://thebea.st/dOZ9JN
jaketapper Jake Tapper
latest word is POTUS Egypt remarks will come at 620 pm ET
Where is the ‘supposed’ liberal media bias?
Posted: February 1, 2011 Filed under: Health care reform, SCOTUS, The Media SUCKS, U.S. Politics | Tags: constitutionality of health care reform, Dole Care, employer and individual mandate, healthcare, Hillary Care, Obama Care, Romney Care 12 Comments
I’m getting tired of all the sturm and drang over that stupid HRC law. The law’s been out there for some time–all 900ish pages of it–and yet, very few media outlets really tell people what’s in it and what’s not in it. Don’t even get me started on where the damned thing came from.
It’s disingenuous to just call it ‘Obama care’ when it was developed by the Heritage Foundation and carried by John Chafee in 1993-1994 in response to “HillaryCare”. I know it well because I was working for UHC and we had a VP on Hillary’s Task Force. Meetings were held at our HQ and many of us attended. I was on the Pharmaceutical Benefits Management side of the House. UHC wanted to make sure that forced insurance was in there to offset the cost savings from continual use of pre-existing conditions to deny coverage or make it so expensive that no one could afford it. Cherry picking the healthy and huge pools of insured are what makes insurance profitable.
Those of us at certain levels were well aware of the contents of both plans and the issues. I’ve linked to Paul Starr, “What Happened to Health Care Reform?” The American Prospect no. 20 (Winter 1995): 20-31 above and I’m going to quote some things that should sound familiar. The only difference is the current Republican complaints about the HCR were the Republican talking points back then until Bob Dole got interested in running for President. William Kristol--definitely not the liberal press–carried a lot of water and eventually help to tank both plans. It was a part of the narrative to remove Bill Clinton from office. The Heritage Foundation has changed its tune and conveniently remembers only the later part of the Republican Debate when it was decided this would be a good issue to skewer Clinton.
What’s really disingenuous is the hoopla over the individual mandate. This was originally the cornerstone of the Chaffee Republican plan because that was the insurance industry’s bribe to stop its cherry picking. It’s also part and parcel of the only state that adopted the Heritage Institute’s plan handed originally to John Chafee. Current disingenuous Republican Presidential candidate Mitt Romney made the infamous Dole Care a state level Romney Care. We’ve got plenty of people here that live in MA that can tell you there’s an individual/employer mandate in there and it wasn’t a Democratic Party idea.
In 1993, 23 Republican senators, including then-Minority Leader Robert Dole, cosponsored a bill introduced by Senator John Chafee that sought to achieve universal coverage through a mandate that is, a mandate on individuals to buy insurance. Nearly every major health care interest group had endorsed substantial reforms–grandiose ones, in fact. The American Medical Association (AMA) and Health Insurance Association of America (HIAA), the two great, historic bastions of opposition to compulsory health insurance, both went on record in support of an employer mandate and universal coverage. Even the U.S. Chamber of Commerce endorsed an employer mandate, as did many large corporations. Other groups came out variously for reform options that ran along a spectrum from Canadian-style, single-payer programs on the left to managed competition and medical savings accounts and radical changes in tax policy on the right. Under the circumstances, it was easy to believe the country was ready for substantial reform and that a market-oriented, consumer-choice approach to universal coverage, positioned in the center, could become a platform for consensus.
The fight over the mandate was well known at the time. It became a point of nitpicking late in the debate. The Republicans begin to look for ways to find exceptions for different business interests whose support they desired in upcoming elections. If this sounds familiar, it’s because it’s the same thing that went on last summer and a lot of the same disingenuous players played the game. Only then, the discussion was not happening in Democratic circles or being blamed on Democrats because it was not part of the Democratic proposal. The bickering became part and parcel of a strategy undermining the Clintons and the Clinton presidency which was going full throttle via the infamous White Water snipe hunt. Basically, in 1994, health care reform became a political football to destroy Democratic Presidents. Dole saw this as a way to further weaken the President and weasel his way into the office. They’re just replaying that same game plan now. Here’s the narrative on 1994.
The opponents of reform were organizing their forces, concentrating first on groups with ideological affinities. After an internal insurrection, the Chamber of Commerce reversed its endorsement of a mandate; other business organizations likewise “defected,” as one business representative put it to me at the time. The AMA qualified its endorsement of a mandate limiting it to firms with over 100 employees and thereby excluding most private doctors, the majority of whom do not cover their own employees. Senator Dole and other Republicans abandoned the Chafee bill and the individual mandate. Dole then cosponsored a bill with Packwood and within weeks abandoned that, too, saying that this the second bill he offered had “too much government.”
If you want to actually look at the 1993 Republican Health Reform plan, there’s a summary of it at Kaiser Health News. You may not remember, but there were two democratic a co-sponsors of the Chaffe Bill: Senators Bob Kerrey (NE) and David Boren (AZ). The House equivalent had no Democratic co-sponsors. The site states: “It bears similarity to the Democratic bill passed by the Senate Dec. 24, 2009, the Patient Protection and Affordable Care Act”. Kaiser is THAT Kaiser of the health care industry. I dare you to read those points and not walk away fully knowing that the current HCR is that old Republican bill.
Another good source for a discussion of the players and motivations can be found in a pdf version the articleCongress and Healthcare Reform: Divisions and Alliances published by Health Progress. The Love Boat’s purser Gopher turned Iowa Congressman, Fred Grandy, was a part of that effort. Also part of the effort was Big Pharma Whore Congressman John Breaux (D-LA).
A group of conservative Democrats and moderate Republicans supports the Managed Competition Act of 1993 (HR 3222, S 1579). This legislation was originally put forward by the Conservative Democratic Forum, which boasts 60-plus members. Bill cosponsors are Rep. Jim Cooper, DTX, and Rep. Fred Grandy, R-IA, in the House and Sen. John Breaux, D-LA, and Sen. Dave Durenberger, R-MN, in the Senate, giving this legislation bipartisan clout. The House version is supported by 31 Democrats and 26 Republicans. Cooper is the member of Congress whose name is most closely linked to this bill. A relative newcomer to health policymaking, this 39-yearold junior member of Congress is not the chairperson on any subcommittees, yet has become a major power broker in the health reform debate. Cooper is running for the Tennessee Senate seat vacated by Vice President AJ Gore. His cosponsor, Grandy, another newcomer, is widely praised by Capitol Hill staff for his intellectual ability to pick up the nuances of health policy. The Cooper-Grandy legislation closely models the managed competition plan espoused by the Jackson Hole Group. It differs from the Clinton plan in several key ways. First, it does not mandate universal coverage but rather establishes a voluntary system of health alliances to improve the access to healthcare for the small business employee and individuals in particular. Only employers with 100 or fewer workers are required to provide insurance through the alliance. To control costs, the plan relies more on competition and insurance market reform than on price controls, and employers’ tax deductions for health insurance premiums would be capped at the level of the lowest-cost insurance plan in the region.
While both the president’s proposal and the Cooper-Grandy proposal build on the managed competition model, their fundamental differences must be negotiated if the president hopes to attract support from this bipartisan, centrist group in Congress. Clinton has clearly stated that improving access is not enough; healthcare coverage must be universal. Yet the Cooper-Grandy group is not comfortable with President Clinton’s mandate on employers, much larger mandatory alliances, and premium limits.
This particular article has a really good narrative of all the competing interests and issues. Later, that same Heritage Foundation plan was resurrected by Republican Governor Romney and morphed into so-called Romneycare in MA. The stupid thing was written by a libertarian/conservative think tank and was later enacted in MA by a Republican Governor before Senator Max Baucus got a hold of another rewrite from an Insurance Lobbyist. File this under WakeTF up. I know. O just wanted his name on some “big f’ing deal” that enriched the FIRE lobby who are major investors in his presidency.
So, why am I rehashing all of this now besides wanting to see that people realize the astounding parallels and hypocrisy? First, news outlets are reporting the Mitt Romney is not offering any apologies for the Individual Mandate he supported in the MA law. Remember, this man is a Republican and plans to challenge Obama for the presidency in 2012. He’s basically running on the same damn health care platform that Obama will run on. Why is there no direct statement of this in major media outlets? Romney is even on a “No Apology” tour right now with a campaign that hearkens back to those silly “No Apology” Jeans from the worst of the CDS days. Some one should point out the hypocrisy of the statements given on ABC’s Sunday News show.
On the kick off to his “No Apology” book tour Mitt Romney is on message – refusing to apologize for the Massachusetts health care law that, like President Obama’s federal legislation, requires citizens to buy health insurance.
“I’m not apologizing for it, I’m indicating that we went in one direction and there are other possible directions. I’d like to see states pursue their own ideas, see which ideas work best,” Romney told me.
That stand seems to reject the advice of Karl Rove and others who say that Romney can’t get the GOP nomination in 2012 unless he finds a way to distance himself from “Romneycare”, but Romney did concede that his Massachusetts plan is imperfect.
As for “Obamacare”? It’s a “very bad piece of legislation,” Romney said, siding with the federal judge who ruled it unconstitutional and wrote in his decision that “it is difficult to imagine that a nation which began…as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place.”
“That was the whole idea of our federal democracy, we’d have people be able to try different ideas state to state but what we did not do was say that the federal government can make its choice and impose it on all of the states. That is one of the reasons why this bill is unconstitutional,” Romney said.
“The right thing for the president to do now with these decisions saying this bill is unconstitutional, with the house taking action to repeal it, with the senate considering doing so, he should press the pause button and say ‘You know what, let’s hold back on this ‘Obamacare,’” he said.
I know we have multiple commenters and two front pagers that are either currently in MA or have lived in MA so they can regale you with more of the details on that plan. I can only speak to the 1993-1994 federal attempts because both my husband and I–as health insurance executives for two separate companies–had front row seats to the conversation.
The absolute amnesia feigned by the press, Republican Politicians, and the Heritage Foundation is immoral. You also have to know that I am no fan of the current law precisely because it is part and parcel that early Heritage Foundation plan handed to John Chafee. Also, I was registered in Minneapolis at the time as an Independent Republican. Shortly thereafter, I registered as a Democrat in Louisiana. I saw Hillary’s Task Force in action and I saw the Republican misdirect that was clearly aimed at unseating President Clinton.
I’m watching Republicans gain steam over that Judge in Florida whose written decision that is weirdly propaganda-like as if it was the be all and end all of decisions. The level of misinformation to the public is deplorable. So far, there have been FOUR rulings on the HCR. Two have upheld HCR completely. One found the individual mandate to be unconstitutional but upheld the rest of the bill. The last one was the only one that ruled the entire law was unconstitutional. This is also part of the short memory of the American press and a lot of the American People. Remember, the individual mandate came from the Republican side of the aisle and was enacted into law in MA as part of state health care there.
What finally set me off was reading the analysis done at The Washington Monthly by Steven Benen cited above. He did an analysis of which papers dedicated ink to each of the four rulings. He concludes that the media largely ignored the two rulings that completely upheld the HCRA while making a very big deal of the writings of the activist conservative judges. You know me. I’m a complete fan of data based analysis. He has actually gone through WAPO, NYT, AP, and Politco headlines on the rulings and counted the number of words dedicated to each decision.
Now, I will explain why I found the focus on Vinson’s ruling to be particularly spurious. The focus should be on the oddity of the ruling and not the end finding. It is worrisome that it is not. Republicans should be howling about judicial overreach. Kevin Drum of Mojo points to an Orin Kerr at the Volkoh conspiracy has covered the idea of a political jurist and Vinson–in this decision–is clearly out on a political limb with his h/t to the libertarian propaganda channel Reason TV.
The Orin Kerr post he links to makes this point explicitly: district court judges aren’t supposed to decide cases on first principles, as Judge Vinson appears to have done. They’re required to obey precedent from higher courts. And unless the Supreme Court changes its mind, precedent is pretty clearly on the side of PPACA’s individual mandate being constitutional, whether you like it or not:
So, is this what the entire Health Care Debate–starting in 1993–has come down to? Is it simply cheering and posturing for Team Red or Team Blue? Is this why the press doesn’t seem able to cover this ruling in context of the other rulings and in terms of the bigger issue? Vinson has clearly overstepped his boundaries. Where are the cries of judicial activism? Where is the respect for the process designed and protected by The Constitution?
This seems like the same thing we see over and over. The folks that scream loudest on the TV news about the constitution and judicial activism only appear to care about it in the context of abortion and the second amendment. The corporate press now engages their political fantasy leagues rather than dealing with the contents of the law and the merits of the case. Is it a matter of just having cut their costs to the point where they can only cover one thing at a time? Or, is it deeper than that?
If there every was a liberal bias in media, I would argue that Benen’s evidence (Team Blue) and Kerr’s critique (Team Red) clearly show that a fair and competent press has completely gone the way of the DoDo bird. Please follow the links. I think you’ll find the reads interesting.
Normalizing Poverty
Posted: January 31, 2011 Filed under: poverty, U.S. Economy | Tags: homelessness, hunger, Poverty, unemployment 16 Comments
A very disturbing article from The Economist caught my eyes over the weekend. It seems like about as good of a time as any to share this with you. It’s one of those articles you probably won’t see in the US media because it basically decries the notion that we’re the exceptional nation of opportunity and chance and that all that politically motivated and packaged hope and change has really brought neither to most of us.
It’s about Sarasota, Florida which has the been named meanest city in America by the National Coalition for the Homeless. There are some amazing trends that we don’t hear too much about here. For example, do you know that “Arizona now has the second highest poverty rate in the nation, after Mississippi”? How about this? Poverty is growing fastest in suburbs and especially sunbelt suburbs. A third of America’s poor now live in suburban areas according to the article that cites Elizabeth Kneebone of the Brookings Institution.
Here are the poverty statistics for Sarasota which joins Bakersfield, California; Boise, Idaho; Greenville, South Carolina; Lakeland, Florida and Tucson, Arizona as having the fastest climbing poverty in the country.
THE statistics are worthy of Detroit or Newark: almost half the children in the local schools are from families poor enough to be eligible for free or cut-price lunches; a tenth of households qualify for food stamps; one in eight residents gets free meals from soup kitchens or food banks; perhaps one in 12 has suffered a recent spell of homelessness. Yet the spot in question is not a benighted rust-belt city, but Sarasota, Florida—a balmy, palm-studded resort town on the shores of the Gulf of Mexico.
The Sarasota-Bradenton metropolitan area, a two-county sprawl of condominiums, marinas and retirement homes, saw the proportion of people living below the poverty line rise by more between 2007 and 2009 than any other big city in America, from 9.2% to 13.7%, according to the Census Bureau.
The story is filled with tales of citizens surviving in a tent and shed city run by the Catholic Church called Pinellas Hope. The picture you see above shows one of the sheds and a resident. A small tent city that was supposed to be a six month temporary situation is booming.
Between 200 and 300 people live there at a time, large by shelter standards, but they are just a slice of Pinellas County’s overall homeless population, estimated at nearly 7,000.
Thousands of potential candidates are disqualified by a no-booze, no- drugs policy. Families with children aren’t allowed. Background checks seek to weed out sex offenders and those with violent pasts.
Even among those who do get in, dysfunction can run high.
Before background and sobriety checks improved, Tent City managers twice asked sheriff’s deputies to pose as residents to investigate drug dealing. Dozens were arrested.
Through April, deputies have been called to Tent City 102 times, though serious crimes like assault, drug dealing and grand theft have diminished noticeably over the past year.
Four out of 10 residents get kicked out, land in jail, or simply leave.
Who are American’s poor? What will happen as the US austerity program pushes more and more people over the edge? The official poverty rate in the US for 2009 was 14.5% . You can compare our country with other countries at the CIA World Factbook. The countries with the worst poverty statistics are on the Continent of Africa. For example, Cameroon has a 48% poverty level. Canada’s poverty rate is just under 11% as is the poverty rate in Germany.
More information on poverty can be found at the National Poverty Center at the University of Michigan. The 2009 poverty threshold for a family of four was $ 21,756. For a single person under 65 it was $ 11,161.
The poverty rate for all persons masks considerable variation between racial/ethnic subgroups. Poverty rates for blacks and Hispanics greatly exceed the national average. In 2009, 25.8 percent of blacks and 25.3 percent of Hispanics were poor, compared to 9.4 percent of non-Hispanic whites and 12.5 percent of Asians.
Poverty rates are highest for families headed by single women, particularly if they are black or Hispanic. In 2009, 29.9 percent of households headed by single women were poor, while 16.9 percent of households headed by single men and 5.8 percent of married-couple households lived in poverty.
There are also differences between native-born and foreign-born residents. In 2009, 19.0 percent of foreign-born residents lived in poverty, compared to 13.7 percent of residents born in the United States. Foreign-born, non-citizens had an even higher incidence of poverty, at a rate of 25.1 percent.
I think that it’s important we put these numbers out there. The President and Congress are clearly putting ‘entitlements’ on the table. Any changes will effect these numbers. There is also a link between unemployment and Poverty. There is no indication that there are any programs or there is a will in this country to deal with the high unemployment rate that we are now experiencing. Forecasted GDP growth is not high enough to bring it down any time soon. This article is actually a year old. See much difference now?
The response of state and local governments to this social catastrophe is drastic reductions in social services and job cuts, under conditions where the Obama administration refuses to provide emergency aid to help cover budget deficits.
The total deficit of the states from 2009 to 2012 is now estimated at $460 billion, a figure that is likely to grow as more state capitals adjust estimates for rapidly declining tax revenue.
”Anything and everything’s on the table,” said Todd Haggerty, a policy associate with the National Conference of State Legislators. States have “cut the fat, cut the muscle and are now cutting bone. The easy decisions have already been made.”
The fiscal situation confronting the states is expected to deteriorate sharply next year when funds from the federal economic stimulus package, the American Recovery and Reinvestment Act, are exhausted.
Like the states, the federal government faces a fiscal catastrophe, with cumulative US budget deficits expected to top $10 trillion by the end of the new decade, according to the Obama administration’s rather optimistic forecast. Cuts in spending must be put in place, in part, to convince creditors, especially China, that the US “can get its finances back in order,” the Wall Street Journal wrote Monday in a feature on the annual gathering of the American Economic Association.
The response of the Obama administration is to call for an unprecedented program of fiscal austerity and sharp cuts in social spending, to be announced in his State of the Union address early next month and outlined in the new federal budget proposal shortly thereafter. Obama’s repeated insistence on the need for Americans to reduce their consumption—even as trillions more are allocated for the banks and for ever-expanding wars in Central Asia and the Middle East—is code language for a deepening of the assault on the working class.
The discussion of possible deficit reduction measures includes regressive taxes such as a national sales tax and sweeping cuts in entitlement programs on which millions of people rely, such as Medicare and Social Security.
If this continues, we will see civil unrest. I am reminded of the tweet from Robert Reich posted by Zaladonis yesterday and another one that I had read earlier.
30 Jan
RBReich Robert Reich 3.5% ec growth pitiful. We’re in so deep a hole that we need twice that to get jobs back. Don’t believe the Wall St cheerleaders.
30 JanRBReich Robert Reich
If you think revolts in Tunis, Egypt, and Yemen are big, wait for coming food and energy shortages around world. US shld take lead now.






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