Orszag on the impending "Taxmageddon"

Former OMB director Peter Orszag, who's now with Citigroup:

The nation is hurtling toward what has been called “taxmageddon,” the enormous tax increases and spending cuts scheduled for the beginning of 2013. At around the same time, we will also be spending some more quality time with our old friend: the debt limit.

At the end of this year, all the Bush tax cuts expire -- amounting to about $250 billion a year. The payroll-tax holiday, at more than $100 billion a year, ends too, as do expanded unemployment-insurance benefits. And we face other spending cuts of about $100 billion, from the sequester set up by the 2011 debt-limit deal. All told, this fiscal tightening adds up to about $500 billion -- or more than 3 percent of gross domestic product. The economy will be in no shape to handle that much of a squeeze. If we do nothing to reduce or stop it, the economy could be thrown back into a recession. As if that were not challenging enough, we are expected to bump back up against the debt limit, which currently stands at $16.4 trillion. Projections suggest we will approach the limit in the fourth quarter of 2012. Then, the Treasury secretary will take temporary measures to allow continued issuance of debt. The Bipartisan Policy Center estimates those actions will get us to February 2013 -- at which point we will hit the debt-limit wall. If the economy is weaker than expected, it will widen the deficit faster, and we’ll hit the wall sooner.

Republicans block "Buffet Rule" debate

That's right, not just the rule, but even debating the rule was blocked by the GOP. The Party of No is doing what it does best and ignores the overwhelming support for the Buffet Rule among the public. What are the Republicans afraid of besides losing control of the debate that they know enjoys broad support?

It's interesting to see that when there's a tax out there on the poor that might generate a few million dollars, it's a big deal for the GOP but when it's a tax that generates billions, suddenly, the number is insignificant. Why is it so consistently difficult for the Republicans to stand up for middle class Americans?

Compare your taxes to Mitt Romney's

Guess who loses?  It's a great site.  Check it out.  Oh, and enter your total income in the first line AND your total federal taxes in the second. I found it a bit confusing, but still a good site.

Mr. 14% Romney filed for tax extension due just before election

Politicians from both parties are already bad with transparency, but this is ridiculous. Mr. 14% tax rate has to be worried about discounted rate while regular working Americans suffer through this economy wondering how they will make ends meet. At the moment it sounds like he has his tax team on this to make it look less embarrassing for Romney. Who believes that his tax rate is suddenly going to look anything remotely like the unwashed masses? It's going to take some work to make this anywhere near the rate that others are paying.

Romney will only be able to hide this information until October if everyone allows him to get away with it. Obama is now calling for Mr. 14% to release his taxes for the past 12 years, as Obama has already done. While Romney is at it, he needs to start explaining why he needs a secret Swiss account and billionaire Warren Buffet doesn't. More from the Boston Globe.

Obama releases taxes, likely higher than Romney's

It would be a shock and a significant tax increase for Romney is he is even paying the same amount as President Obama. Beyond Obama, who made less last year but still enjoyed a healthy income, how many middle class families will have paid higher tax rates than Mitt Romney? For a person who hasn't worked in years and who can still afford an elevator for his cars or chat about his exclusive horse collection, Mitt Romney sure lives a privileged lifestyle. Even though his wife Ann Romney doesn't think they are rich, they are of course among the richest in the country.

Despite all of the nonsense Republican talk about taxes killing job opportunities, the reality is that the US can't afford to give a free ride to people like Romney. There's no question that Romney worked hard but so do plenty of other Americans. The difference is that others didn't grow up with a daddy who was a governor and then corporate CEO who could put their kid in a position to prosper.

Maybe Romney did a better job with what he was given than say, Bush Jr., it was still a privilege that doesn't exist for most others. So why should he and others like him now get yet another easy ride by paying less than everyone else despite being part of the financial elite?

Bush regrets "Bush tax cuts" name, but not the cuts

After complaining about the popular name for his disastrous tax cuts for the rich, Bush then goes on to sell the benefits of his tax cuts for the rich. Despite there being no evidence to support the common right wing theory that tax cuts spur investment, Bush continues to promote this false theory. After all, what is Mitt Romney doing with the tax cuts that he received besides adding an elevator for his cars or tearing down his $12 million house and building something larger?

If the country is looking for something to boost the general economy and not just a few workers, tax cuts for the ultra rich is a bad idea. CNNMoney:

"I wish they weren't called the Bush tax cuts. If they were called someone else's tax cuts, they'd be less likely to be raised," he said in introductory remarks at a conference at the New York Historical Society.

The former president repeated the argument often used by Republicans -- that eliminating those tax cuts for the wealthy, as Democrats have proposed, would hit small businesses and hurt hiring.

"If you raise taxes on these so-called rich, you're really raising taxes on the job creators," he said at the conference, which was sponsored by the Bush Institute, which he opened after leaving office. "And if the goal is to create private sector growth, you have to recognize that the best way is to leave capital in the treasuries of the job creators."

Driving a car is a bit deadlier around tax day

Well, for most at least. Mitt Romney is probably driving comfortably with his less than 14% tax rate, if he even drives. The guy has elevators for his cars so he may not even drive himself. CNNMoney:

The odds of getting into a fatal crash increase by 6% on tax filing day, according to a study published Wednesday in the Journal of the American Medical Association.

"Tax days are associated with an increase in fatal crash risk, which is similar in magnitude to the increase in crashes on Super Bowl Sunday," wrote study authors Dr. Donald Redelmeier and Christopher Yarnell of the University of Toronto.

VIdeo: How to master your taxes, the Romney way (humor)

Britain hit with "pasty-gate" class warfare

For those of you unfamiliar with a pasty, it's a popular food that is a meal folded into pastry. (Many people love them though I was unable to stomach more than a few bites on my one and only attempt.) They're widely available in the UK with one particular pasty chain that seems to be at every train station across the country.

To some degree, it's sort of a home grown McDonald's in that it's cheap and quick food for people on the run. Just as the 1% in America probably doesn't often do fast food like McDonald's the British 1% (including and especially the blue blood elite government leaders) probably don't do too many visits to pasty shops.

With that in mind, fast forward to the ongoing economic problems in the UK. The Conservative government recently announced tax cuts for the rich (to spur on growth despite there being no proof of such a theory) while raising taxes on take-away food items such as pasties. The pro-austerity government once again is fine with clobbering the middle class who works for a living while catering to the richest Brits, who have prospered during the recession. Fortunately these policies are being noticed by the public, who are now turning against the current government in favor of Labour.

With a sagging economy and slow growth expected due to the unnecessary (and counter-productive) austerity, the Tories may be in for a rough ride. Their class warfare against the middle class is being exposed. NY Times:

The tax controversy, which the British press has called, inevitably, “Pasty-gate,” has come to symbolize the increasingly vitriolic debate in Britain over who should shoulder the burden of the government’s drive to cut debt and spending.

The tax has ignited a political firestorm, prompting even generally pro-government tabloid newspapers to attack it and leading the equally posh British prime minister, David Cameron, to claim — not all that convincingly — that he, truly, is an aficionado of the pasty (which rhymes with nasty).

The issue has also revived memories of the poll tax and other unpopular measures imposed by previous Conservative Party-led governments that left many Britons feeling that their leaders were out of touch.

How is it possible that Cambridge educated government leaders who carry the title of baronet could be viewed as elitist and out of touch? Go figure.

Buffet rule would generate $47 billion, GOP unimpressed

Of course they're unimpressed, because it generates a much more significant amount of money than the GOP plans to tax the poor and middle class. Forget all of the GOP talk about how there are so many Americans who don't pay taxes and ought to pay taxes even though taxing them would never come close to solving any financial problems. Here's a plan that actually delivers, so naturally the GOP hates it. Bloomberg:

Implementing a “Buffett rule” to require a minimum 30 percent tax rate for the highest U.S. earners would raise $47 billion over the next decade, according to a government projection.

The estimate for the proposal backed by President Barack Obama comes from the Joint Committee on Taxation, Congress’s scorekeepers. Lawmakers updated the projection late today to reflect different assumptions about how taxpayers would adjust their capital gains realizations from an earlier $31 billion version.

“The president’s so-called Buffett rule is a dog that just won’t hunt,” Senator Orrin Hatch of Utah, the top Republican on the Finance Committee, said in a statement, adding that the proposal would have little effect on reducing the federal budget deficit. “It was designed for no other reason than politics. There is no economic rationale for it.”

Uh huh, the politics of raising $47 billion. Who needs it, right?

Prof. Richard Wolff: We have a "failed economic system"—To fix it, we must tax the wealthy

This headline captures just one of the many excellent points made by New School professor Richard Wolff in this interview.

The questioner (Sam Seder of the Majority Report) asks just eight questions, and the answers are so cogent and clear that you feel like you've walked through a ton of material and barely exerted yourself. It's quite a performance by both of them.

There's a rundown of questions and a few answers after the clip, in case you want to jump around.

The interview starts with Greece — an explanation of what's happening now after the "orderly" partial "default" (actually, debt forgiveness). But the parallels between Europe and the U.S. are obvious and well-explored throughout the interview.

Wolff ends with a terrific discussion of Franklin Roosevelt, why he succeeded, and what we need to do today. Enjoy:



Sam's questions (paraphrased):

1. [0:30] What is the recent Greek deal, and what are its implications for the Greek people?

2. [4:55] How did Greece find itself in this situation?

3. [9:03] What's the distinction between private debt and public debt? In Greece, it's public debt, right?

4. [13:30] Isn't charging [sufficient] interest the way that bankers offset the risk of some loans defaulting? Why do bankers also have to be bailed out?

5. [18:38] With income disparity [between the rich and the rest in the U.S.; between rich nations and the rest in Europe] comes political disparity, right? What does that look like?

6. [19:30] What options were available to Greece, and what options are available in the U.S.?

7. [23:32] In the U.S., what would be the best way of doing what you suggest — a bailout of the folks at the bottom, rather than the top? Wouldn't increasing the deficit by borrowing at near-zero rates be a good idea?

Note: The answer might surprise you. See below.

8. [28:20] As a political calculation, are we anywhere close to to being able to make changes? [Unlike during the Depression] we're now living with the New Deal. We're still in a roll-back phase.

I'd like to expand Wolff's answer to the seventh question, about deficits. It's fascinating and contains two stories about Roosevelt I wasn't aware of.

Here's Wolff, paraphrased, at 24:20 in the clip:

[To your borrowing question], I'd say no. I'd take that page from FDR as well. He didn't borrow. Roosevelt went to the business community and to the rich and [basically] said:

Look you have to help me. You have to give me the money to take care of the mass of the people. If you don't, the CIO and the communists will come down the road and offer you a much worse deal than I'm offering you.

If you give me the money. I'll go to the unions and give them a massive bailout, and in return they'll agree not to interfere with your business. You'll remain the shareholders and boards of directors and all the rest.

So basically he split the business community. Half of them became the sworn enemy of the New Deal. The other half agreed with him, the equivalent of people like Buffett today.

Between the support from the mass of the Dems below, and half of the wealthy at the top, you got the kind of support for FDR to enable the New Deal. He became a virtual saint to the American people.

In that same answer, Wolff tells this telling story about how Roosevelt financed the New Deal (26:18 in the clip; again, paraphrased):

Deficits and debts are real problems. The way to deal with them, at least to move part of the way back [to lower levels], is to raise taxes on the wealthy and on corporations.

Illustration: In 1942-43, FDR sent Congress a proposal for a 100% top income tax. This would create a maximum salary or wage or income. Like a minimum wage for the poor, it's a maximum wage for the rich.

Congress went ballistic, led by republicans, of course. In the end, they compromised — on a 94% top tax bracket. [And that's how Roosevelt financed his programs.] In the 50s and 60s, the top marginal rate was 91%, endorsed by both parties. If we're going through the 5th year of a crisis, the same logic ought to move us in the same direction.

I think most of the country would cheer if that actually happened. I've been in favor for years of rolling back the Reagan top marginal rate to Nixon-era levels — all the way back to 70% or 75%.

If that were to occur, the looting of corporations by CEOs would stop in its tracks. No incentive to steal if you can't pocket the loot. (Sadly, if that were to occur, I would stop in my tracks as well, looking for the alternate universe I'd fallen into.)

But at least we agree on the solution. Prof. Wolff, in the rest of the answer to the last question, thinks we need the mass base of pressure from below that allowed Roosevelt to split the rich; he also thinks we're starting to see that.

Here's hoping; and here's hoping its the orderly version.

GP

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