Monday, April 18, 2011

Getting Richer

Many of our rich men have not been content with equal protection and equal benefits, but have besought us to make them richer by act of Congress.

-- President Andrew Jackson, vetoing reincorporation of the Second Bank of the United States (1832)

In this week's Sift:

  • The Return of Candidate Obama. If you've been wondering what happened to the guy America voted for, he came back Wednesday to give a speech about the deficit.
  • Corporations Can Pay Taxes. Conservatives often claim that corporate taxes are an illusion: Any tax on corporations just gets passed on to the consumers who buy their products. But that simplistic view of the market contradicts other conservative rhetoric, not to mention common sense.
  • Why Bradley Manning Matters. Just as the Jose Padilla case summed up the Bush administration's contempt for human rights, the Bradley Manning case sums up how little has changed under the Obama administration.
  • Short Notes. Quid pro quo in Wisconsin. Fair and balanced coverage quantified. Trump's rise is good for Obama. Incorporating your uterus. Rapping knuckles at Goldman Sachs. Green sex toys. A suspiciously amusing dispatch from the Shady Pines Home for the Violently Senile. And more.
  • This Week's Challenge. Freeing Bradley Manning seems to me like too much to ask for. But can we at least let some neutral observers in to inspect his treatment? Here's the petition to sign.


The Return of Candidate Obama

If you haven't watched to or read the speech President Obama gave Wednesday on the deficit, you should. It's a reminder that on occasion our political leaders can be factual and sensible. I had the same reaction as Salon's Joan Walsh: "That's the president I voted for."

Obama defended a lot of basic American values that conservatives often attack and liberals often leave undefended:

  • the public sector. In addition to individualism and suspicion of government, "there’s always been another thread running through our history -– a belief that we’re all connected, and that there are some things we can only do together, as a nation. … And so we’ve built a strong military to keep us secure, and public schools and universities to educate our citizens. We’ve laid down railroads and highways to facilitate travel and commerce. We’ve supported the work of scientists and researchers whose discoveries have saved lives, unleashed repeated technological revolutions, and led to countless new jobs and entire new industries."
  • entitlements. "Part of this American belief that we’re all connected also expresses itself in a conviction that each one of us deserves some basic measure of security and dignity. … We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff may strike any one of us.  'There but for the grace of God go I,' we say to ourselves." And so: Social Security, Medicare, unemployment insurance, Medicaid. "We would not be a great country without those commitments."
  • progressive taxation. "This is not because we begrudge those who’ve done well -– we rightly celebrate their success. Instead, it’s a basic reflection of our belief that those who’ve benefited most from our way of life can afford to give back a little bit more."

He told the often-forgotten story of how the deficit got this big: "America’s finances were in great shape by the year 2000.  … But after Democrats and Republicans committed to fiscal discipline during the 1990s, we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program -– but we didn’t pay for any of this new spending. Instead, we made the problem worse with trillions of dollars in unpaid-for tax cuts. … When I took office, our projected deficit, annually, was more than $1 trillion. On top of that, we faced a terrible financial crisis and a recession that, like most recessions, led us to temporarily borrow even more."

He faced facts about the budget: "Around two-thirds of our budget -- two-thirds -- is spent on Medicare, Medicaid, Social Security, and national security. Two-thirds. Programs like unemployment insurance, student loans, veterans’ benefits, and tax credits for working families take up another 20 percent. What’s left, after interest on the debt, is just 12 percent for everything else … education, clean energy, medical research, transportation, our national parks, food safety, keeping our air and water clean."

He nailed the Ryan deficit plan: "I believe it paints a vision of our future that is deeply pessimistic. It’s a vision that says if our roads crumble and our bridges collapse, we can’t afford to fix them. If there are bright young Americans who have the drive and the will but not the money to go to college, we can’t afford to send them. …  [I]f that [Medicare] voucher isn’t worth enough to buy the insurance that’s available in the open marketplace, well, tough luck -– you’re on your own. … It’s a vision that says up to 50 million Americans have to lose their health insurance in order for us to reduce the deficit." (Hunter elaborates on this "staggeringly bleak vision".)

And he tells us who many of those 50 Medicaid recipients are (Ezra Klein illustrates): old people in nursing homes, poor children, children with autism or Downs syndrome or other disabilities that may require constant care. "These are the Americans we’d be telling to fend for themselves."

And thank God somebody finally rejected -- on moral grounds! -- the idea that the rich need more tax cuts: "In the last decade, the average income of the bottom 90 percent of all working Americans actually declined. Meanwhile, the top 1 percent saw their income rise by an average of more than a quarter of a million dollars each. That’s who needs to pay less taxes? They want to give people like me a $200,000 tax cut that’s paid for by asking 33 seniors each to pay $6,000 more in health costs. That’s not right." (Cartoonist Clay Bennett doesn't think so either.)

Finally, we get the President's deficit plan. It's typical Obama. No magic bullets, we have to do a little bit of everything: cut the kinds of discretionary spending we've already been cutting, but also let the Bush tax cuts expire for the wealthy, cut defense, reduce health care spending by raising the efficiency of care rather than by making the old and poor do without, and limit tax deductions for both individuals and corporations.

He claims that adds up to $4 trillion in deficit reduction over 12 years. I'm sure somebody reputable will check those calculations, and when I find that analysis, I'll link to it.


Usually the if-we-do-nothing scenario is a horror show that is supposed to goad us into action. But if we do nothing, it turns out that the deficit pretty much gets under control: The Bush tax cuts go away, Obamacare starts to control health-care costs, and so on.


Jargon watch: Conservatives have begun referring to entitlements as "welfare". Examples: Paul Ryan has equated Medicaid reform with welfare reform. (Matt Yglesias debunks this.) And David Brooks starts out talking about a European-style "welfare state", but then shortens it to just "welfare", as in "Obama, meanwhile, does not believe the current welfare arrangements are structurally unsustainable." and "Every few years, Republicans try to reform the welfare delivery systems to make them more marketlike." In both of these lines, "welfare" means entitlements like Social Security and Medicare.

So the millions of Social Security beneficiaries are "on welfare". This narrative has been building at least since August, when Alan Simpson referred to Social Security as "a milk cow with 310 million teats."

Paul Ryan isn't lying when he says his plan doesn't change Medicare for those over 55, but you need to think another step ahead: After Ryan's plan passes, the generational warfare can start. Conservatives will tell young people that they pay crushing taxes to support welfare-queen baby-boom seniors. How long can that last?


About that theory that Keynes was wrong and the government should cut spending before the job market is back to normal: The United Kingdom is already trying it, and it's not working. Cutting government spending lowers demand, which kills jobs -- just like Keynes said it would


The Willamette Week reveals 9 Things the Rich Don't Want You to Know About Taxes. And Nicholas Kristof adds this bit of common sense:

it’s worth remembering that the last time our budget was in the black was in the Clinton administration. That’s a broad hint that one sensible way to overcome our difficulties would be to revert to tax rates more or less as they were under President Clinton.


Corporations Can Pay Taxes

A week and a half ago, Rep. Bill Posey (R-Florida) mocked the people who think oil companies should pay higher taxes. It's pointless, he argued, to tax corporations:

Let’s say we tax those evil oil companies another dollar a gallon. They’re not going to write the check. We know what’s going to happen; they’re going to raise the price a dollar a gallon. Or, given the corporate greed we sometimes see, round it off to two dollars. Corporations don’t pay taxes. Corporations collect taxes. They collect taxes from consumers who ultimately pay the tax.

This is an example of the heads-I-win-tails-you-lose logic I called out two weeks ago. In any other context, conservatives tell us how competitive and efficient the free market is. But now, when it's convenient, the price of gas is not bound by the market and can be whatever the oil companies want it to be. So we'd better not make them mad by asking them to pay taxes.

Suppose Exxon really could respond to a higher corporate income tax (it paid no U.S. corporate income tax in 2009) by raising its price to make up the lost profit. Then someone needs to explain this: Why isn't Exxon already charging the higher price?

Corporations are (as I have explained before) sociopaths. They are not interested in charging a fair price and making a fair profit, because the whole concept of fairness does not register with them. So at all times -- tax or no tax -- they are trying to charge the highest price the market will bear and make as much money as they can.

In short: Exxon is already charging the highest price the market will bear. That price will go up or down in response to changes in the market, but subtracting an income tax from their maximized profit doesn't change the calculation. Corporations can pay taxes if politicians have the courage to tax them.



Why Bradley Manning Matters

In the Bush years, the individual civil-liberties case that summed everything up was Jose Padilla: an American citizen arrested in Chicago and held in a military brig for 3 1/2 years without charges or trial, in abusive conditions that ultimately destroyed him as a person. (Padilla was eventually convicted on a vague conspiracy charge unrelated to what he was originally suspected of. During his trial Padilla appeared to root for the government and against his own defense.)

President Obama was supposed to change all that. But though he has softened the Bush regime a little, overall not much is different. The Bush administration's interpretation of the Constitution could have gone on to justify more-or-less any abuse a president could imagine -- a John Yoo memo from 2001 claimed that the President's role as commander-in-chief allows him "to take whatever actions he deems appropriate" to fight terrorism -- so we're well rid of those guys. But most of the actual civil-liberties abuses under Bush continue and are being defended by the Obama administration.

The individual case that sums it all up now is Bradley Manning. Manning is widely believed to be the source of a vast trove of documents that have been made public by WikiLeaks. So he's either the greatest whistle-blower since Daniel Ellsberg (as Ellsberg himself believes) or a traitor to the United States or both.

But (like Padilla during the worst of his ordeal) Manning is still just a suspect, not a convict. And yet he is being held in conditions that constitute punishment, not detention. He sees no other prisoners and very few visitors. (Ellsberg, Congressman Dennis Kucinich, and the U.N. Special Rapporteur on Torture have all been refused permission to see him.) He is allowed to pace in a large room for an hour a day, but otherwise does not leave his cell. At times his clothes have been taken away, Abu-Ghraib-style. He is allowed to have one book at a time.

Individually, all these conditions are allowed in military brigs for short time periods in response to specific risks like escape or suicide. None of this applies to Manning; he is simply being punished for what he is suspected to have done. In the long term, this level of isolation is known to be debilitating, as it was to Padilla. Nearly 300 legal scholars -- including Obama's teacher Lawrence Tribe -- have signed a letter charging that this is cruel and unusual punishment banned by the Eighth Amendment.

In short, our government is literally driving a man insane -- an American citizen who has been convicted of nothing, and who some Americans consider to be a hero.


If you find it curious that anyone could make a hero of Manning, look at what Marcy Wheeler learned from the WikiLeaks cables: the extent to which our foreign policy is shaped by Monsanto. As in the Pentagon Papers, many of the secrets in the WikiLeaks cables are not being kept from foreign governments, they're being kept from the American people.

And if you're wondering how a low-ranking enlisted man was able to get his hands on that much sensitive information, Marcy is on that question too.



Short Notes

What do the Koch brothers get in exchange for funding the campaigns of Wisconsin Governor Walker and Supreme Court Justice Prosser? Their company gets to keep dumping phosphorus into Wisconsin rivers. Not a bad return on investment.

The NYT points out that this is a theme among the new Tea Party governors: "cut budgets and personnel at regulatory agencies, prevent the issuing of new regulations, roll back land conservation and, if possible, eliminate planning boards that monitor, restrict or permit building development."

Whether these environment-bashing policies create any jobs (other than in cancer care 20 years from now) is debatable, but they definitely create profits for the Tea Party's financial backers.


Fox News scorecard: Pumping up the phony New-Black-Panther-Party scandal: 95 segments lasting 8 hours. Covering the Justice Department OPR report debunking it: two segments lasting 88 seconds.


The rise of Donald Trump in Republican presidential polls is great news for President Obama. All the Republican front-runners are damaged in one way or another, so the party's only real chance in 2012 is for a presidential-stature candidate to come out of nowhere. Dark horses like Tim Pawlenty or Mitch Daniels hope to be that guy, but the more oxygen Trump sucks out of the room, the fainter their voices get.


Are you a woman who worries that corporate rights keep growing while women's rights keep shrinking? The ACLU of Florida has the solution: incorporate your uterus.


Arizona's anti-immigrant law is working its way up the court system. An appeals court just backed up the district court's injunction against enforcing the law, on the grounds that the federal government seems likely to win its claim. The opinion is boring and technical, but boils down to this: Federal law takes precedence over state law, especially on issues that the Constitution explicitly assigns to the feds.


You can quote Catholic League President Bill Donohue, but you can't parody him. Consider last Monday's full-page ad Straight Talk About the Catholic Church in the Boston Globe.

What did he "talk straight" about? How overblown the whole priest-sexual-abuse thing is. After a bunch of whining and excuse-making -- "rape" is an exaggeration; most victims were just molested -- Donohue's punch line explains why priests are "singled out" even though all kinds of people abuse children:

Let’s face it: if [the Catholic Church's] teachings were pro-abortion, pro-gay marriage and pro-women clergy, the dogs would have been called off years ago.

OK, I'm not president of the Catholic League, but I think I have a better explanation: Maybe the furor has more to do with the claiming-to-represent-God-on-Earth thing. For some weird reason, that always makes people judge you by a higher standard.


Equal time for Catholics who pay attention to the teachings of Jesus: Franciscan nuns are going to the Goldman Sachs annual meeting to protest the sinful level of executive compensation. I hope they bring their rulers.


Heads I win, tales you lose: Planned Parenthood has to be defunded because money is fungible; no matter what accounting controls exist, any money the government gives them might get spent on abortions. But public money given to faith-based groups is not fungible; we can be sure -- somehow -- that the government isn't unconstitutionally funding religious proselytization.


Probably the Left will have this kind of fund-raiser to itself for a while: Buy your green sex toys at Babeland and the environmental news site Grist gets 10%. What makes a sex toy "green"? Babeland explains: rechargeable batteries, non-toxic materials, and so on. (Probably no animal testing either, though I'm trying not to picture that.)


The Center on Budget and Policy Priorities has the charts: Taxes are low in the United States, both compared to other countries and compared to U.S. taxes in the past. The Republican talking point says: "We don't have a revenue problem, we have a spending problem." But in the real world, we have a revenue problem.


Matt Yglesias imagines how income tax could work: The IRS could sum up all the income reported to it, compare to your personal information from last year, and send you a bill. If you had additional information to offer or claims to make, you could file a return. Otherwise, just send a check or claim your refund.

Downside? H. R. Block's lobbyists would hate it, and conservatives want you to find taxes annoying.

Yglesias also calls BS on the claim that a flat tax would be simpler. If you do your own taxes, you understand why: "What’s complicated is the definition of taxable income", not the tax rates. The only thing a flat tax simplifies (by a line or two) is the computer program that produces the tax tables.

Flat-taxers argue that they also want to do away with deductions, which would simplify things. But we could eliminate deductions and still tax the rich at a higher rate than the poor. The two ideas are unrelated.


Having hit my 20-article monthly limit, I bit the bullet and got a digital subscription to the New York Times. The Times is far from perfect, but it does journalism that nobody else is doing. Good reporting doesn't happen by magic; somebody has to pay for it. If not the readers, then who?


I have no idea whether anything written on the Sarah, Proud and Tall blog is true or not. (You have to wonder about "Dispatches from the Shady Pines Home for the Violently Senile.") Sarah Howard claims to be 92 years old and tells a lot of unverifiable (and perhaps unlikely) stories about famous people. This one is about Ayn Rand, and if isn't true, it ought to be.



This Week's Challenge

There's an online petition to free Bradley Manning, which I haven't signed because I think it goes a little too far. Civil disobedience ought to have a price. But FireDogLake has a petition asking the government to stop restricting official visits to Manning. That seems like the least we can do. Take a look and see if you can sign it in good conscience.

The Weekly Sift appears every Monday afternoon. If you would like to receive it by email, write to WeeklySift at gmail.com. Or keep track of the Sift by following the Sift's Facebook page.

13 comments:

Colin said...

"Then someone needs to explain this: Why isn't Exxon already charging the higher price?"

Because of the other oil companies. Its called competition. :-)

Have you ever noticed which station has the cheapest gas in town? It is not any of the majors....

Doug Muder said...

Exactly. And what would change if Exxon paid income tax?

Colin said...

They would "make" less money, their stock would be worth less, pay less dividends, less money for research and bonuses, may be pressure to increase earnings by cutting costs, etc, are some possible outcomes.

http://finance.yahoo.com/q/ks?s=xom

52-Week Change3: 24.08%
S&P500 52-Week Change3: 10.70%

John L said...

The CBPP's analysis of Obama's budget plan is a good place to start.

http://www.cbpp.org/cms/index.cfm?fa=view&id=3469

Mike Ignatowski said...

It's my understanding that corporations only pay tax on their profits, which is the money left after deducting for such things drilling expenses, safety equipment, research, salaries, bonuses, etc. It's not a given that taxing profits would reduce any of these, or could be immediately passed on to customers.

Perhaps you're thinking of taxing the raw materials that companies use, which is a different matter. That cost could be passed on to consumers if it impacted all companies in the market and raised their costs equally.

Michael said...
This comment has been removed by the author.
Colin said...

"It's not a given that taxing profits would reduce any of these, or could be immediately passed on to customers."

I firmly believe one can not treat these as independent variables. If nothing else, many corporate officers have compensation packages that are linked to profits....

Good article on corporate "profit" here: http://www.fool.com/investing/general/2007/09/05/foolish-fundamentals-the-income-statement.aspx

Doug Muder said...

There's got to be a choice between "treat as independent variables" and the position that income tax can be passed on penny-for-penny as Rep. Posey claimed. There undoubtedly are second-order effects by which a corporate income tax would effect the workings of the market. But the primary effect is that government revenue goes up and corporate profit goes down.

Colin said...

Doug, I agree with your last comment, though we can argue how big the second order impacts are....but you originally said this:

"subtracting an income tax from their maximized profit doesn't change the calculation".

My original point: it does change the calculation even if they CAN'T charge more due to the market. At a minimum it will lead to more "tax avoidance" in future years.

Doug Muder said...

OK, I think I see what's going on: We're talking about different calculations.

I'm starting with the context of Rep. Posey's comment, where the oil company looks at the tax, figures out what it needs to charge to cover the tax without hurting its profit, and maybe tacks on a little more.

I'm saying it doesn't work that way: Exxon's pump price is still going to be determined by what the independent down the street and the Shell by the highway are charging. As I imagine the what-do-I-charge-today calculation, there's no place in it for the tax to have an effect.

But if, say, I'm modeling the situation as an outside economist, I might track some indirect effects of the tax that in the long run do come around to affect the pump price. (Maybe the guy who owns the independent decides this is a good time to retire. Or maybe it's no longer worthwhile to drill in some risky place.)

But while I'm aware of those possible effects, I want to avoid the kind of just-so-story thinking that I often see in places like the editorial page of the Wall Street Journal, where if we can imagine such an effect, we can go ahead to assume that it necessarily dominates.

So, to sum up: The kind of calculation Rep. Posey imagines isn't what's happening. If there's another calculation that comes to the same result, I want a chance to look at it and kick the tires.

Colin said...

So, given this discussion, what do you think of this?

"Meantime, Obama has ordered his Justice Department to form a task force to look for fraud or manipulation in the oil markets. "

http://www.boston.com/news/nation/articles/2011/04/23/obama_knows_political_fortunes_tied_to_gas_prices/?p1=News_links

Doug Muder said...

The link doesn't go to that quote any more. But markets can be manipulated. Enron showed that. I'm not sure what the connection is.

Doug Muder said...

I see that I did Colin an injustice: his link does go to the quote if you read on to page 2.

I have no reason to believe the administration will find an illegal market manipulation, but I think such things are possible if enough of the majors conspire. I wasn't including that possibility in my analysis because I was assuming legal behavior.