Friday Reads

Good Morning!

Republicans are asking Obama to try to ‘break the log jam” in the subcommittee.  I’m not surprised given the President’s known ability to give everything away at the bargaining table. I’m also sure it’s because they can get their lousy policies through and then when they backfire and people get mad, they’ll blame Obama.

Republicans are calling for President Obama to jump into the deficit-reduction talks gripping Washington, reflecting the widespread view that the congressional supercommittee is now headed for a failure.

Lawmakers and congressional aides familiar with the deliberations say the talks have reached a hard impasse, with Republicans locked in an internal struggle over whether to agree to higher tax hikes to cut a deal.
“It’s hard to see us getting a deal unless he comes in at the last minute,” Sen. Dan Coats (R-Ind.) said of Obama, who is on a nine-day trip to the Pacific and not scheduled to return to Washington until Sunday.

“We’re in the two-minute drill and closing in on a ‘Hail Mary’ and the quarterback is on the sidelines.

“Unless the leadership, including the president, steps in and saves this thing, I think the consensus is, in terms of coming up with a credible package, all is lost,” Coats added.

There was a surprising lack of urgency on Capitol Hill Thursday as members of the supercommittee talked past one another. Some lawmakers not on the super-panel shrugged at the inaction, saying they were planning to go home for the Thanksgiving recess and noting they don’t have to vote on any deal until next month. Meanwhile, House and Senate leaders indicated they are in no rush to jump in and broker an agreement.

E.J. Dionne, Jr. at Truth Dig says the easiest way to cut the deficit is to do nothing.   His thinking reflects some of the things that I’ve been supporting.  It includes letting the Bush Ta Cuts expire.  I hate to see the triggers on some things, but getting the Pentagon budget trimmed down would be a positive as far as I’m concerned.

Democrats have put huge spending cuts on the table—and keep offering more and more and more. All the Democrats ask in return is that the cuts be balanced by some revenue.

By rejecting their offers, Republicans induce Democrats who are anxious for some deal—any deal—to keep coming their way. The Republican approach is wrong and irresponsible but brilliant as a negotiating strategy. As my Washington Post colleague Ezra Klein wrote this week: “Over the past year, Republicans have learned something important about negotiating budget deals with Democrats: If you don’t like their offer, just wait a couple of months.”

Finally, the Republicans decided they needed to look slightly flexible. So they came up with $300 billion in supposed revenue from a promised tax reform in a plan that also included a proposal to slash tax rates for the rich. There is a lot more tax cutting here than revenue. Rep. Jeb Hensarling, R-Texas, co-chairman of the super committee, who said on Tuesday that this was the GOP’s final offer, reversed field Wednesday afternoon and declared himself open to other ideas.

Even Democrats inclined to capitulate know how shameful agreeing to such a deal would be. And mainstream, centrist deficit hawks should be grateful if a deal on such terms is killed. What Republicans want to do in effect is to make at least 90 percent of the Bush tax cuts permanent. This would only make deficit reduction even harder in the future.

That’s where the do-nothing strategy comes in. Championed early this year in The New Republic by New York Magazine writer Jonathan Chait, it looks even better now because of the spending cuts scheduled to go through if the super committee doesn’t act.

Jack Ambramoff is sure biting the hands that used to feed him.  He’s written an article for Bloomberg and calls congress criterz “Willing Vassals” that are up for anything as long as they can cash in.  Now that he can no longer make a profit from the game,  he’s got some suggestions to end it.

There is only one cure for this disease: a lifetime ban on members and staff lobbying Congress or associating in any way with for-profit lobbying efforts. That seems draconian, no doubt. The current law provides a cooling off period for members and staff when joining K Street. The problem is that the cooling off period is a joke.

Here’s how it works. “Senator Smith” leaves Capitol Hill and joins the “Samson Lobbying Firm.” He can’t lobby the Senate for two years. But, he can make contact with his former colleagues. He can call them and introduce them to his new lobbying partners, stressing that although he cannot lobby, they can. His former colleagues get the joke, but the joke’s on us.

Because the vast majority of lobbyists start on the Hill, this employment advantage is widely exploited. It cannot be slowed with a cooling off period. These folks are human beings, not machines — and human beings are susceptible to corruption and bribery. I should know: I was knee-deep in both. Eliminating the revolving door between Congress and K Street is not the only reform we need to eliminate corruption in our political system. But unless we sever the link between serving the public and cashing in, no other reform will matter.

That’s easier said then done considering the foxes write the rules about how they can behave in the coop.  One thing they have managed to do is arrange to avoid taxes.  Check out the nifty chart from Felix Salmon at Reuters.  It graphs corporate taxes as a percentage of corporate profits.  Can you say magically disappear?

Once upon a time, the corporate income tax generated a significant share of tax revenues; now, it’s bumping along in the 2%-of-GDP range. Yes, the marginal rate of corporate income tax is high, at 35%. But US companies are extremely good at not paying that.

But at least we know the aggregate amount that corporations pay in taxes. What we don’t know — because they won’t say, and no one’s forcing them to say — is how much any given public company pays.

Follow the article to this link to CNN Money that shows you why reporting requirements allow corporations to hide their true tax positions.

During the past few months I’ve repeatedly asked three big companies in the tax-wars cross hairs — GE (GE), Verizon (VZ), and Exxon Mobil (XOM) — to voluntarily disclose information that would refute allegations that they incurred no U.S. federal income tax for 2010. All have refused, saying they won’t disclose anything not legally required. They still manage to complain about the allegations, however. I suspect that if I called the rest of the Fortune 500, I’d get 497 similar responses.

As a society, we need the “taxes incurred” information to inform our current tax debate. Investors, too, would benefit; knowing the tax that companies actually incur would be a useful analytical tool.

The solution, as I’ve said before, is for the Financial Accounting Standards Board to require companies to disclose information from their tax returns for the most recent available year and the nine years before that. This information, from lines 31 and 32 of their returns, would take at most one person-hour a year per company to provide. Adding a 17th tax metric to the 16 already available hardly seems like an invasion of corporate privacy.

Here’s an interesting read in the New York Review of Books by Jeff  Madrick entitled “America’s New Robber Barons”.

So it’s worth knowing who is in that group of very rich with runaway incomes. Several news reports in recent weeks have cited a seminal 2010 study that uses IRS tax returns to find out who belongs to the top 0.1 percent. The authors deserve mention because they are often left out when their results are cited: Jon Bakija of Williams College, Adam Cole of the US Treasury, and Bradley Heim of Indiana University. This was not a Treasury study, however, but a private if scholarly one.

One key finding of the study is that three out of five of those in the top 0.1 percent of tax filers are executives or managers of financial and non-financial companies. Overall, more are from non-financial companies. Does this partly exonerate Wall Street, suggesting it is really Main Street where the problem lies?

In fact Bakija, Cole and Heim’s analysis shows the opposite: it turns out that much of the increase in wealth of non-financial executives was also tied to the rise in stock prices. Keeping in mind that stocks options appear as wages in the data, it seems Wall Street itself was often a main source of income growth for “non-financial” managers as well. (Lawyers were another large category of tax payers in the top 0.1 percent, and though there is not direct data for this, one can fairly assume that many of those in corporate firms made a lot of money from the booming business on Wall Street.)

Next, think about how these executives managed their businesses. If they wanted a big pay check they had to orient their strategies to push up their stock prices—that is, often to appeal to the financial fads and fashions of the day. These strategies typically have included cutting labor costs and R&D in order to boost short-term profits. This delighted their advisers on the Street. Stock investors soon loved nothing better than consistent increases in quarterly profits, and not coincidentally, stock options accounted for an ever-growing proportion of executive pay over the past thirty years. We used to say once that Wall Street worked for business, but over the past thirty years business has come to work for Wall Street.

It is just as interesting to explore the factors that the authors found out probably did not cause the surge at the top. Economists typically posit sophisticated technologies (often related to digitalization) as a source of growing inequality: because these technologies require better educated and smarter workers, those who have mastered them are rewarded handsomely. But there was no surge at the very top in other nations like Japan or in Western Europe, which also adopted the same technologies.

Similarly, some have argued that globalization led to higher incomes at the top because skilled workers can sell themselves globally at ever higher salaries. Again, however, such skilled workers have not seen a surge at the very top in Europe or Japan.

One reason for the discrepancy between the US and other countries is that boards of directors in the US are especially willing to give their CEOs and other high level executives big raises and generous stock options. Lucian Bebchuk of Harvard has done a lot of research on this so-called “governance” issue. Meantime, as Bebchuk’s work shows, shareholder influence over executive compensation is far too weak. And there is also the issue of culture itself. America—with its admiration for the self-made man—tolerates high remuneration for the men and women at the top and lower wages in the middle and the bottom. Culture likely matters.

So, that’s a few things to get you started this morning.  What’s on your reading and blogging list today?

Misreading Elections

Politicians these days represent narrow interests and are deliberately misrepresenting recent election results as support for policies not presented to the general electorate during their campaigns. Some of this agenda may have been possibly inkled to their extremists supporters through code words but from the looks of polls, most of it appears to have come as a complete surprise to their electorate.  This is probably because people generally don’t pay attention to primaries and the types of candidates supported by the most vocal and most extreme partisans.

No where is this disconnect more clear than in Wisconsin where poll-after-poll shows buyer’s remorse for their right wing extremist governor, Scott Walker. The latest Rasmussen Poll shows support for Budget Cuts but not state usurpation of collective bargaining rights for state workers.

Most Wisconsin voters oppose efforts to weaken collective bargaining rights for union workers but a plurality are supportive of significant pay cuts for state workers. Governor Scott Walker is struggling in the court of public opinion, but how badly he is struggling depends upon how the issue is presented.  There is also an interesting gap between the views of private and public sector union families.

A new Rasmussen Reports telephone survey of Wisconsin voters shows that just 39% favor weakening collective bargaining rights and 52% are opposed. At the same time, 44% support a 10% pay cut for all state workers. Thirty-eight percent (38%) are opposed. That’s partly because 27% of Wisconsin voters believe state workers are paid too much and 16% believe they are paid too little. Forty-nine percent (49%) believe the pay of state workers is about right. (To see survey question wording, click here.)

Strong support for collective bargaining rights showed up in a WSJ/NBC Poll yesterday where only 33% supported limited collective bargaining rights.  This result supported an early poll done by US Today who found the same 33% level of support. Yet, we continue to see bills advance that would erode these rights.  Ohio state senators barely advanced a bill with drastic limitations.  I’m getting qualified in a few months as a professor in one of the few high demand, high paying areas. That would be finance. I’m one of very few white, American women to do so also.  This implies I have two additional job skills that are very difficult to find these days in people with technical doctorates.  I speak and write in coherent American English.  Many of my peers struggle to do their lectures and research in cogent English.  You can only imagine what this does to students.  I don’t have to imagine.  I hear the complaints all the time.  This is a problem for candidates coming from top tier schools.  Ask me if I’m interested in any place in Wisconsin or Ohio at the moment.  The answer is a big fat no. I’m looking outside Louisiana for similar reasons.  I’m not going to be drastically underpaid in cash without some compensating benefits.  I can’t imagine that similarly qualified folks in engineering, accounting, medical fields, and computer sciences aren’t having the same thoughts. I pity the poor administration that’s going to try to find qualified people in those areas under these circumstances.

Why do politicians find people like me so terrible and unprofessional that they seek to deny us a place in determining our working conditions and remuneration?

Ohio state senators narrowly approved a bill that would prohibit public-employee unions representing 400,000 state and local workers from bargaining over health benefits and pensions, while also eliminating the right to strike. I’ve never particularly felt the need to strike except in the private sector where I basically just have voted with my feet after finding another job.  The private sector is filled with capricious and overtly-political bad managers.  It’s why most corporations can’t compete unless they scramble to find extreme cost cutting measures. They don’t want to be bothered with the higher callings of research and development, customer service, or any other type of innovation that would actually benefit employees and customers.  This now appears to be the model that many of these folks want transferred to the public sector where you still had a chance of being paid and promoted on how well you do your job instead of whose ass you’re willing to frequently kiss. The problem now is that there is so much market in the hands of so few businesses and some jobs are only available through the public sector.  The power to abuse is very much in their favor.  This brings me back to the 2/3rds of the electorate that appreciate checks and balances.  Union power checks the power of huge oligopoly and monopoly employers.

This brings me to a story of excess and the  Northern Mariana Islands and Jack Abramoff.  This also includes notorious B I G  Felon, The Hammer, Republican Tom Delay (H/T to Bostonboomer for reminding me about this.).  It’s a story of sex trade, Republicans, a deregulation haven, and the type of things that Republicans would like to see hoisted on the US and American workers.  I have to admit to having to do some reading up on this since most of the story broke in 2006 and I was busy recovering from a little thing called Katrina at the time.  You may recall we were a ‘petri dish’ of privatization and no bid contracts at the time and still are the guinea pigs of US privatization scams.  What they did to us pales in comparison to the treatment of people in the US Territories of the Marianas Islands.

The Marianas Islands situation serves as a cautionary tale that would be worth remembering today because the same people who took jaunts to this paradise of no regulation and slavery are the same people stripping US citizens of rights our grandparents fought for during the gilded age.  Here’s NPR describing work compounds that delighted and tingled the legs of visiting Republican politicians.  JOHN YDSTIE is the NPR host.  He introduced his guest as “Wendy Doromol was a schoolteacher there in the 1980s and ’90s, but became a human rights activist fighting sweatshops after guest workers on the islands came to her with tales of abuse“.  Now remember, this is the work environment that Republican politicians like Scott Walker and John Kasich admire.

Ms. DOROMOL: The barbed wire around the factories face inward so that the mostly women couldn’t get out. They had quotas that were impossible for these people to reach and if they didn’t reach them, they’d have to stay until they finished the quota and they wouldn’t be paid for that work. They were hot, the barracks were horrible. A lot of the females were told you work during the day in the garment factory and then at night you can go and work in a club and they’d force them into prostitution at night.

YDSTIE: And they also experienced things like coerced abortion?

Ms. DOROMOL: Yes, if some female got pregnant, they either had to go back to China to give birth or have a forced abortion.

YDSTIE: Guest workers were lured to the Marianas by recruiters in countries like China, the Philippines and Bangladesh, who told them they were going to the United States. The recruiters charged workers around $5,000 for the trip. Nashir Jahidi(ph) is one of the workers Wendy Doromol befriended. He came to Saipan, one of the Northern Mariana Islands from Bangladesh by way of the Philippines. He says when he got on the plane, he thought he was going to America.

Mr. NASHIR JAHIDI (Ex-Worker): And not only me, there was some people that recruiter exactly told him that he can be going to Los Angeles by train from Saipan. So when I hear that the plane, you know, the host or somebody’s saying they were about to land in Saipan and I when I looked out the window and I saw it’s like blue water everywhere and small island and I was like, how?

YDSTIE: So you thought that you were going to be going to California or somewhere on the U.S. mainland?

Mr. JAHIDI: Not only me, most of the worker. They were surprised when they see the United States flag and the local island flag and we used the U.S. dollar, we used the U.S. stamp and everything, then people understand that this is only a small island. There is no way that you have the opportunity like what’s in the United States.

YDSTIE: Garment manufacturers were attracted to the Marianas, which had become a U.S. commonwealth in 1976, because clothes made there could be labeled made in the U.S.A. and didn’t face import quotas or duties. But despite flying the U.S. flag, the islands were exempt from many U.S. labor and immigration standards. As the abuses that Wendy Doromol helped uncover came to light, garment manufacturers there were sanctioned by the U.S. Labor Department. Then in the mid-1990s when it looked like Congress might force the Marianas to adopt U.S. Labor and Immigration laws, the island’s government took action. It hired lobbyist Jack Abramoff to protect its special status. Abramoff was paid millions for his work.

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