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Guns and Butter: Christmas 2012

by: DocJess

Thu Dec 20, 2012 at 06:42:15 AM EST


Politico has that Patrick Leahy will keep the Justice chair, Barbara Mikulski will head Appropriations, and Tom Harkin will stay at HELP. Thus, we know the Senators who, this term, will head the committees involved with Supreme Court nominees and gun legislation, the budget, and entitlements. A good crew all around.

"Guns and butter" refers to the old production model related to what type of industrial products a government would spend its money on. Normally, it has to do with whether a government buys arms, or dedicates its funding to civilian goods and services. Not this year.

We know that Congress is running slower than molasses on a cold day. The House more so than the Senate, and hopefully the Senate will speed up with the filibuster changes. If the Senate can change the filibuster rules on Day 1, then either they'll go back to putting forth legislation, or CSPAN will see its highest ratings ever. And then the Senate will need to decide on a different kind of guns vs. butter: who do we allow to be armed? How do we control that? Do we spend our time on that issue, or provide for general good in other ways? 

I've been thinking a lot about movement (or lack thereof) in Congress, and guns and butter. This year's terms are "Plan B" "Chained CPI" "Sequester". Plan B is DOA, Chained CPI is a terrible idea, sequester will be applied unfairly in terms of what is good for the country, and there are far better ideas that no one seems to want to consider. Here's a list, compiled by Richard Eskow at the Campaign for America's Future. Reprinted with permission from this site.

Read them, absorb them, and think about guns, butter, and what is good for America. Then share the information with everyone you know, call your reps, write your newspaper...let's see if grassroots can get these ideas the discussion they deserve.

1. Close multiple loopholes in the capital gains law: $174.2 billion. (1.42x)

Lawmakers could save nearly one and a half times as much money as they’ll get from stripping seniors, the disabled, veterans, and children of their benefits - 1.42 times as much, to be precise – by closing capital gains loopholes.

They include the “carried interest” loophole, which taxes hedge fund managers’ service fees at the low “investors’” rate; the ‘blended rate,’ which taxes some quick derivatives trades as if they were long-term investments; the ability to ‘gift’ capital gains to avoid taxation; a dodge for bartering capital gains; and the ability to ‘defer’ gains to future years.

A more aggressive approach – eliminating the capital gains altogether – could yield more than $900 billion in savings, but that might affect middle-class families and seniors.  By using the “chained CPI,” America’s seniors, vets, and disabled are taking a hit so that hedge fund managers can keep their loopholes.

(Source: Calculations based on figures cited by the Center for Budget and Policy Priorities.)

2. Refuse to compromise on the President’s $250,000 figure for increased taxation: $183 billion (1.5x)

The President’s initial tax plan – the one he and his party ran on, the one that voters endorsed  - called for letting the Bush tax cuts expire for income above $250,000.  That would bring in an estimated $366 billion in added revenue over the next ten years. Now, say reports, he and the Republicans will agree on a figure that’s “somewhere in the middle.”

If true, the deal’s deficit reduction impact will be reduced by $183 billion.  That’s one and a half times as much as the “chained CPI” will take from seniors, the disabled, veterans, and their dependents.  They’ll pay — so that people earning $250,000 and up don’t have to.

(Source: CBPP estimate, divided in half.)

3. Reduce the budget for US overseas military bases by 20 percent: $200 billion. (1.6x)

The United States maintains 702 military ‘installations’ in 63 foreign countries (it has 4,471 bases altogether), according to the Defense Department’s annual budget statement.

These figures don’t include bases in Iraq and Afghanistan. We’re talking about our military presence in nations like Germany, South Korea, and Japan. While the total cost of these bases is kept secret, the best analysis I’ve seen estimates their ten-year cost at approximately $1 trillion.

A twenty percent cut in that budget is extremely modest under the circumstances, and would save 1.6 times as much as the “chained CPI” cut.

(Sources: US Defense Department; David Vine via Juan Cole and Tom Engelhardt.)

4. Allow the government to negotiate with drug companies: $220 billion. (1.8x)

Current law specifically forbids the government from using its negotiating power to obtain lower rates for Medicare prescriptions – even though much of the research behind the drugs involved was performed at government expense.

If we allow the government to negotiate with drug companies, that will save an estimated $220 billion. That’s 1.8 times as much money as the “chained CPI” – and it comes from the drug companies, not vulnerable Americans.

(Source: Outterson and Kesselheim, Health Affairs.)

5. Enact DoD-friendly cuts to military budget: $519 billion. (4.25x)

A defense think tank conducted an exercise to help the military prepare for the possibility of forced spending cuts under sequestration (the so-called “fiscal cliff”).  It convened what it called “a series of strategic choices exercises,” using “experts from across the defense community,” in order to decide how best to cut $519 billion from defense spending cuts over ten years.

The participants were not peaceniks – most were in the defense community, while some were Congressional staffers – and the think tank’s staffed by ex-military and military-friendly consultants.  Nevertheless, they were able to come up with options that seemed acceptable by balancing short-term readiness with long-term preparation.

It was a surprisingly smart exercise – and it sounds like a very good way to build consensus around defense cuts (even though that was not its intent).  A project leader described the exercise as “listening to the future,” while the report itself said that “Failing to recognize and make strategic choices is effectively a form of self-sequestration.”

We can listen to our future selves, since we’ll all need Social Security some day, and say: Make these cuts. That’s better than “self-sequestering” by letting politicians cut Social Security.

(Source: “Strategic Choices: Navigating Austerity,”  Center for Strategic and Budgetary Assessments)

6. Enact Rep. Jan Schakowsky’s ‘Fairness in Taxation Act’ for very high earners: $872.5 billion. (7.15x)

In 2011 Rep. Jan Schakowsky introduced the “Fairness in Taxation Act,” which would have created additional tax brackets for very high earners.  As Rep. Schakowsky noted at the time, today’s tax structure “fails to distinguish the merely ‘well-off’ from the ‘super-duper rich.’”

The bill adds the following tax brackets:

• $1-10 million: 45%
• $10-20 million: 46%
• $20-100 million: 47%
• $100 million to $1 billion: 48%
• $1 billion and over: 49%

It also taxes capital gains and dividend income as ordinary income for those taxpayers with income over $1 million.

The very wealthy would still be paying much less than they paid under Republican President Dwight D. Eisenhower, when the top rate was 91 percent. For that matter, these rates are lower than those we had under most American Presidents of the last century.

This bill brings in more than seven times the “chained CPI” savings by asking the ultra-rich to pay their fair share, instead of targeting seniors and other Americans in need.

(Sources: Rep. Jan Schakowsky; Economic Policy Institute.)

7. Eliminate corporate tax loopholes: $1.24 trillion (10x)

A 2007 Treasury Department report (prepared under President Bush) concluded that “corporate tax preferences” – that is, loopholes – resulted in lost revenue of $1,241,000,000,000 over a ten-year period.

That number looks pretty good – especially when it’s stacked up against the “chained CPI” figure of $122 billion.

If we can’t afford to honor our commitment to America’s veterans and their families, or to our seniors, or to the disabled, we sure can’t afford these corporate tax loopholes – excuse me, I meant “preferences.”

(Source: United States Department of the Treasury background paper.)

8. Create a financial transactions tax for high-volume Wall Street trading: $1.8 trillion (14.75x)

And here’s our grand prize winner: A financial transaction tax like the one they’ve imposed in the United Kingdom. The UK tax rate is tiny – 0.25 percent of each transaction, levied on both parties – but the overall impact is substantial.

Not only would this tax bring in substantial revenue, it would also discourage the massive volume of ultra-high-speed computer-driven transactions that have turned the stock market into both an imperceptible ‘black box’ and a real-time mega-casino operating in nanoseconds.

‘Algorithmic trading’ and other forms of Wall Street speculation don’t build economic value or encourage wise investment.  Instead they’re used to drive the kinds of speculation that’s driving out smarter investments – and brought our economy to its knees in 2008.

Dean Baker of the Center for Economic and Policy Research estimates that a UK-style tax would bring in $1.8 trillion over ten years. It could also lead to healthier investment – and potentially might even help prevent another crash.  More than 200 economists signed a letter supporting the concept of a financial transaction tax.

So the choice is clear: Tax the folks who ruined the economy, and protect the rest of us in the process, or ask seniors, etc. to sacrifice needed benefits.  Guess which one they’re leaning toward right now?

(Source: Dean Baker, “The Deficit-Reducing Potential of a Financial Speculation Tax“)

DocJess :: Guns and Butter: Christmas 2012

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Thoughts (0.00 / 0)
1. Capitol Gains - I have always thought that capitol gains should be taxed at the same rate as income. Only exception to that would be short term holdings that should be taxed at a higher rate. Investing should be done on long term basis so companies have the stable $$$ invested. Not some artificial value of their stock, but a solid investing principle that ties their stock price back to their actual worth. Not only does this add revenue in taxes, but it stabilizes the Markets and the Economy.

2. Agree on this, but I think more Tax Reform is needed. After WW2 the top marginal rates were raised even more to pay down the war debt. I think it is time to do that again. We have been at War for over 10 years, without paying for it. Time to do something about that and one method is to increase the top marginal rate to over 50%. You could still give tax credits (aka loopholes) to people in those rates that reinvest the money back into their business, those lowering their taxable income keeping them out of that top marginal rate, but those that are making large profits and skimming the money off will pay more on that top block of money.

3. Not sure you could set a percentage for a cut, or should. But there are substansial cuts that could be made at home and abroad in the military spending. I know there are long term savings from closing bases, but I have been stationed at a base overseas when it closed. And due to the nature of the USA, we spent a lot of money helping that area of Germany not lose the ecomony in that area as we left and they worked to get German industry into that area. It's not as easy as breaking a contract and leaving. One twist to closing a base that many don't think about. Anyone remember Super Fund? The bases have produced toxic waste over the years, and we tend to pay for the cleanup instead of face the lawsuits.

4. Agree with this one.

5. Every department should go through a scrub like the DOD did. There is a lot of savings out there to be had. But the problem has always been, let someone else cut we need everything we get and more. There is also the end of the year spending mentality in the government. You are budgeted X amount of dollars. If you don't spend them, your next years budget is cut. Get rid of the use it or lose it mentality around government budgets. Reward departments that save over projected spending, and do real budgets each year based on accessed needs.

6. Kind of goes to what I stated in my #1 and #2.

7. The only Corporate "loophole" should be that they can deduct for growing their business in the USA. Add staff, facilities, equipment (and more to the point, Made in America equipment), and you can have a loophole.

8. I would put such a tax only on selling. Still accomplishes the goal.


Potential Taxes (0.00 / 0)

1)  On capitol gains, I would index to avoid having inflation punish those who truly invest long-term, but then tax the "real" profit at or near the levels of ordinary income.

2/6 -- I would probably have the rates a little bit lower but put caps on certain deductions for things like home mortgages.

 

3/5 -- Think a study on real needs of all departments need to be done -- not what could you cut if you had to, but what programs actually work and what are we doing merely because the program exists.  For the military, that might be closing 10% of the bases or closing 30% of the bases, that might be cutting 50 billion a year or it might be cutting 30 billion or 70 billion.



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