By James Kwak
Today’s Atlantic column is about one of my favorite topics: the French Revolution. Actually, it’s mainly about tax expenditures and how traditional Republicans should want to eliminate them. Unfortunately, there are no traditional Republicans left, and Grover Norquist’s anti-tax pledge makes clear that you can’t eliminate tax expenditures unless you use all the revenue to lower tax rates below where George W. Bush put them.
The Baseline Scenario 
Excellent post, James :-))
Crunching the data has a good feel about it,… especially when it’s non-partisan, Bravo!
I’ve got some documented stats here that will heighten your thoughtful discourse about how absurd current tax loopholes for american corporation’s have evolved spontaneously over the last two decades since the “Glass-Steagall Act” was (gutted) redacted by Graham,Leach,and Biley!
#1) If you, or I paid $2 in federal taxes in 2010, you actually paid more than Citigroup, or Exxon Mobil which together made more than $19bn in profits last year!
#2) Bank of America (BAC) which was bailed out by the American taxpayers (our generous government actually bought and gave them Merrill Lynch on a silver platter as was the case with Bear Stearns being given to JP Morgan Chase for pennies on the dollar, but that’s in the past -right?) for a minutia ($$$) Trillion dollars! Guess what – BAC made over $4.4 Billion in profits in 2010 and got a tax refund check from our gratuitous government,… in the mail mind you, for $1.9bn, amazing! What really works [?] is the colossus top-heavy cherry to the “Hot Fudge`Sundae” given to CEO Jeff Emmelt from General Electric for being a stalwart member on the Obama Team. GE also made $26 bn in profits the last five years and got back $4.1 bn in refunds! Again, amazing,… but that’s starting to get stale.
#3) Conoco-Phillips also made over $16bn in profits from 2007-09 and was cut a tax break for half-a-billion ( $$$) bucks (what’s a half billion amongst friends?). Carnival Cruise Lines made well over $11bn in profits the last five years – ironically, as per usual, paid a unjust/unfair [?] tax rate of a whopping 1.1%! Can you imagine the audacity of our government’s cruelty? The “Horror”!
#4) This is just the beginning – but I’ll end it here,..this litany,… this unending plethora,… this merry-go-round-Myriad of obscene corporate welfare that has no shame – Goldman Sachs was handed a $800bn bailout, and over the last five years made profits of $2.3bn, and again paid an outrageous, overbearing, and unfair tax rate of under/over ~ 1.1% ! The nerve and audacity of this government to even tax these poor job-creating US MultiNational Corporation’s!
Swiss Cheese punch-outs or Dunkin Donut Munchkins seem to be in a league of their own as the preferred snack food relegated to our elite Tax Structure hoola-hoop enthusiast !
Thankyou James and Simon
And I’ll add a hoorah to bringing Paulsons stock down to two dollars a share. we think that’s fair.
A loophole is generally understood to be “technicality” or an ambiguity in the law that can be exploited by a person or corporate person to his advantage. Many of the “loopholes” that are problematic today were inserted into the tax code by some member of Congress, specifically to provide advantage to some person or corporate person (in exchange for favors and personal enrichment, my opinion). What was it Mark Twain said about Congress being America’s only distinctly criminal class? They are a shameless bunch.
@ James,
After striking out big time in your last blog, blithely dismissing the S&P downgrade, you’ve now gone back to shadow boxing with Republican oligarchs.
This may be an easy applause line for your clown act, but look at your fans: earle the Floridian conspiracy theorist and pompous auteur and of course, owen owens, a man so bad (in the ebonics sense) that he had name himself twice!
But in case you get truly desperate, I wouldn’t invite them to your house — unless of course you have a hotline to the Yale New Haven Psychiatric Hospital.
There is an excellent example of public support for sensible taxation in recent history. There are many examples — many from northern Europe, especially the Scandinavian countries. Mine is Britain, which fits conveniently given Mr. Kwak’s reference to Britain circa the French Revolution.
Tony Blair, in his Thatcherite strategy of Copy the Americans (call it The Wimpy™ Approach), proposed cutting taxes (can’t find the specifics right now). The British public opposed the Blair policy, rightly realizing that the cuts would mean cuts in services.
@ Title50
You are of little character my off green goofball, who’s masochistic visits yearn your tempest swing a downgrade in converse. Yours’ is liken to a gnat at night, that feeds off a quartered moon ferrying across the dark-side finding its slumber in said abyss above,… you hopeless xenophobic troll!
“What is,… is a Conspiracy Theorist old Sage, the Title50 from Beyond the Grave?”
“an excuse not to except the truth
to hide in the shadow of the sun
or just a plain old vanilla contrariety of sorts
tightly wrapped as a inexhaustible myopic syndrome
buried between logic, sight, and blind intuition this mystical entity
always questioning and querying the question once more
but never slander great thought
please never, ever do that
for its reflection is of survival lest you fall victim to your own demise
such as discarded rotting carrion flesh
yours is the ignorance the beast shall gorge upon tonight
in which there will be no excuse except for the lacking of truth
yet the contraian is he that stares at you in the sea deep mirror of life
as your drowning ignorance quicksands your deliberate demise
if only you had questioned
even knowing you could have been right”
My father once told me some great advise that beckons foretelling. It goes like this:
“never believe anything you hear unless you’ve seen it with your own eyes, and if your wise only believe half of what you saw with skepticism for sight can be tricked at the slight of a hand” To Earle from Dad :-)
Thankyou James
Dear earle,
How we’ve missed you! Forgive me for not being up on your writings [sic].
Your last post leaps far beyond any of your previous works and will provide choice comedic fodder at the next dinner party — where it will be read aloud with relish!
I tip my glass to thee.
Excellent post. How will you go about changing the situation?
From the Atlantic piece: “With the debt ceiling crisis past, and S&P demanding further deficit reduction, the next step is for a joint committee of Congress to identify at least $1.5 trillion in deficit reduction over the next ten years. The simplest, most sensible way to do this would be to eliminate tax expenditures.”
This is very funny. I think I heard on the news tonight that today’s US stock market losses totalled $1.4 trillion.
Funny, honey: it’s all funny money. There is no reality to it AT ALL EXCEPT:
THE MILLIONS OF LIVES THAT ARE BEING DESTROYED.
That is the only reality that matters. And as for the people who are playing this game? The guillotine is way too good for them. (Just to stay on topic with the French Revolution, dontcha know.)
@ Rien,
Excellent question. What can you politically + financially do? The choices are:
1) QE3 by the Fed who may be the only organization that’s capable, politically and financially to do anything. Will this “stabilize” the markets? Depends what you mean; it will make the continual slide downward a little less dramatic but can’t stop it.
2) ECB will have to come along for the ride, but will China? I can imagine that China will tend to help the euro more and directly while continuing to vilify the U.S. That way they can continue to play Europe off the U.S., all the while deflecting attention away from their bad loans and the less than productive state-owned borrowers.
3) You can forget any political organ such as the U.S. Congress coming up with anything useful. In other words, there won’t be a TARP II. Although they’d like to aggrandize themselves further with a Frank-Dodd II, they won’t have a chance.
In other words, there isn’t a lot that can be done, is there? Simon can continue to snipe at people like Lagarde and Kwak can continue to nip at the heels of Republicans, but to little avail. One has become a professional financial commentary TV guest and the other imagines he can use this blog to launch his political career.
What do you think of the consequences of a QE3?
I think it’s soooo cool to see James writing at the Atlantic. I think he could find, although the administration (Editors) are not perfect there, it would be a much more friendly long-term environment than the Washington Post. The Washington Post has been totally ruined by Katherine Weymouth, who is probably better skilled at throwing phony parties to peddle influence and scratching her hip than running a newspaper. After Katherine Weymouth made the corrupt decision to peddle influence at a party at her home, and smeared cow crap all over the face of her grandmother’s memory, she then tried to blame it on her staff.
http://www.hillmanfoundation.org/blog/washington-post-rip
Maybe worse than this is letting Fred Hiatt hire and fire people based purely on politics (Dan Froomkin chose not to lick Dick Cheney and Cheney’s administrative assistant “W” Bush’s hiney, hence Froomkin’s sacking from the rag).
If Katherine Graham (one of the greatest newspaper publishers ever) could look down from heaven and see her descendent’s “work”, she would wince in severe mental pain.
Of course, Froomkin being fired for unsubstantive reasons from the Washington Post didn’t make as many headlines as FOX’s Juan Williams being fired from NPR, but Froomkin didn’t have the Murdoch/FOX matrix carrying his water for him…..
Atlantic has a terrific history of great writers (of course being a colleague of Megan McArdle, you must have to occasionally explain her errors in math and economics to the public, but there is a price to be paid for everything). I was trying to think if Walt Whitman had ever written anything for the Atlantic. Surely they would have put him on this list if he had???
http://www.theatlantic.com/ideastour/contributors/
QE1, and 2 were wiped out in the last ten days. What’s QE3 going to do? Simply printing money out of the myst and funnelling it into the offshore taxdodging accounts of the predatorclass is insane policy, doomed to fail, immoral, and illegal. The PONZI game is up. Burn the entire system to the ground, wipeout the den and vipers and thieves responsible for this nightmare, force the predatorclass to pay their fair share, and subject them to the ruleoflaw, meaning many of these fiends and shaitans will loose substantial valuations of illgotten booty, and many will rightfully go to jail for a long long time.
The entire system is a cancer. A malignant parasitic organisim that will suck the life blood out of the nations, and the worlds poor and middleclass. It is kleptocracy, fascism, ruthless robbing and pillaging the poor and middleclass to feed the superrich, the predatorclass.
Burn it all down. Tear this evil system apart, excoriate the offending microbes, and start anew, reset, revolt.
There’s no other way!
In a world where there are no laws, – there are no laws for anyone predatorclass biiiiiaaaatches!
James: The French Revolution is also one of my favorite topics.
In 1789, when the French people finally demanded reforms, they were met with evasion, temporizing, and downright mendacity on the part of the king, the aristocracy, and the clergy. Frustrated, they seized their untrustworthy monarch at Versailles and marched him back to imprisonment in Paris, where they could keep an eye on him.
He promptly escaped and made a run for the border (disguised as a woman), in hopes of raising a foreign army that would crush the revolution. History records that he was spotted by an alert “citoyen” (the splendor of his carriage and equippage apparently gave him away), taken into custody, and returned in ignominy to Paris.
The king never did agree to a Tax Reform Act (or any other Reform act for that matter). So the people’s representatives, after much debate, managed to agree to “re-form” his body—-by removing its head. And they did. The Revolution turned bloody thereafter.
Will our ruling class in America today reform itself? Or will we the people be forced to abolish it—-probably somewhat rudely? The French Revolution shows us one outcome. What will ours be?
Btw, the term “sansculotte” from the FR? It literally translates as “without breeches”. A more idiomatic translation would be “trouserman”.
(excerpted news brief from channel 4 news in London)
Street violence in east London as riots spread
http://www.channel4.com/news/london-riots-spread
LONDON RIOTS
As we go on air a vigil is due to begin in Tottenham, where community leaders
and politicians are trying to calm the air – but across London young men seem to
be planning something quite different. The Home Secretary Theresa May came back
from her holiday, the Mayor of London Boris Johnson resisted but is now set to
return tomorrow. Nick Clegg, back from Spain, visited Tottenham and met some of
the victims of the violence, who asked him why the police allowed it to happen,
why nobody came to protect them when their homes were set on fire and whether
this is a product of the cuts.
Word Trouserman!
@Title50: Your ebonics sense makes no sense to my mind, and who needs fans when the spotlight is throwing chit on your next meal. And you seem more like a princeton boy, than the career Mcdonalds burger flipper at yale you claim title to. Did you fail at your attempt to be that political hero riding a white horse and yelling the Chinese are coming, the Chinese are coming, all the while realizing that there is not much that can be done about the Chinese. Or did you simply fall off your horse and need someone to blame for it? So I’m suggesting you and the horse you rode in on leave town before some fire puts the heat on your fannie and burns your titles into a pile of ashes.
Question for you, James: if we remove the exemption for employer-purchased health care, don’t we have to do something much more drastic to our health care system than the ACA, something like a single-payer system? While I would support the move, I would imagine this system would cost the treasury more than the $117B removing the exemption would save. Thoughts?
@ owen squared,
I must say it’s a whole lot more fun to be “upside the head” by earle than by you. earle’s rejoinders have a lot more going for them: the numerous malapropisms, Cliff notes allusions to history and literature, elaborate embellishments that fall off a cliff with their weight. It is in short like a declawed swipe from an old, corpulent Persian cat. You’re amused by the pretentiousness of the creature and it’s definitely not fatal.
And you, well, it’s like being gummed to death.
Gawd, the personal invective being hurled on this forum of late is very dismaying. If all that we feel we can do to vent our frustration and rage at the clueless titans on the Hill, the Street, and in Basel is to rip into each other cruelly, then the forces that have so polarized this country have done their work well. If there is no tolerance, then there is no moderation. If there is no moderation, then there is no reason. If there is no reason, there is no governance. If there is no governance, there is only…
Off topic (forgiveness, please): In a globalized world the affluent save more in taxes by judicious donation to honest politicians (those who, once bought, stay bought), outsourcing manufacturing and profits, and keeping the losses domestic. Markets are at best metastable: The combination of the S&P downgrade and the AIG/BofA litigation sufficed to nudge the boulder down the hill. The big question is whether defense spending will survive while entitlements languish. With legislative and regulatory capture, there seems little appetite for cutting defense, socializing medicine, prosecuting rampant investment fraud, implementing market transparency, and taxing capital gains, especially those derived from short positions. We need to go long, together.
I question the wisdom of those that espouse a low-tax environment as the sole catalyst to spur the super-rich on, so that they will save us all, dazzling us with their entrepreneurial wizardry. Is the conventional wisdom still that comparative advantage dictates that the US’ only major economic sectors are weaponry, finance, real estate, petrochemicals, pharmaceuticals, and service?
Title, if you can’t bite, don’t show your teeth. : > )
@ owen squared,
Or you can be pecked to death, the favorite method of shrews, viragos and mothers-in-laws. :))
@Woych
ah yes, no surprise that the London Orc Peacock team lost the head game match…
If the USA Orc Peacock team insists on subjecting 150 million (HALF of population) to a match up between Michelle, the Channelor of the Big Giant Head, and Obambi
as the self-proclaimed ruling elite head game of choice, (it’s TORTURE to be subjected to so much dumbing down)
we can expect the same, and worse, over here….at least in London they’re not going to release the mercenary Orcs and Moussad to deploy “6 creepy new weapons”….there is a loyalty, daft as it appears to globalists, to the “One” – United Kingdom itself – and politicians do step down for that greater good…
Who gave them PERMISSION….?
@ Annie, since when do criminals feel a need to request permission to do anything? Isn’t this the heart of sociopathy, no conscience, and an indifference to standards of morality and decency? :)
@ Title 50, if your sole reason being here is to diss Earle of Florida, then why don’t you take your troll a$$ somewhere where it’s appreciated?
Ref: “Why are Conservatives Afraid of Grover Norquist?” *(The Libertarian Liberator from Foreign Oil with Love – Whoa is my Motivation?)* 2/14/11
http://www.uncoverage.net/2011/02/why-are-conservatives-afraid-of-grover-norquist/
Scroll & Link to page site: Saudi tendrils by Mona Charen @ “http://www.townhall.com/columnists/monacharen/2003/02/18/saudi_tendrils/page/full/
Please note if link fails Google Ref:
Thankyou James and Simon
@woop – exactly – so if criminals don’t sit around waiting for permission to do whatever they want – and I guess let’s mention that they re-write the *laws* after their crime to make it appear like it was new and creative *economic* progress, not theft and murder….
Then WHY do people sit around waiting for *permission* to be honest, just, fair, kind, loving, generous, brave, hard-working, etc….?
More on Kwak’s feckless “So What” opinion on the S&P downgrade:
S&P’s real victim: cash-strapped cities?
By Suzy Khimm
(STAN HONDA/AFP/GETTY IMAGES) In a way, Monday’s market gyrations seemed like a direct snub to Standard & Poor’s downgrade of U.S. creditworthiness. Though investors fled the stock market, plunging the Dow more than 600 points, they rushed to snap up Treasury bonds — that is, buying the very debt that S&P had deemed less trustworthy. But the impact of the ratings agency’s downgrade may not stop there, as cash-strapped states, towns and cities could see their costs to borrow rise.
S&P’s is poised to downgrade thousands of municipal bonds that are directly tied to the federal government, with an announcement expected later this week. In July, Moody’s recommended downgrading 7,000 muni bonds if the U.S. credit rating went down. While this secondary wave of downgrades is unlikely to shock the municipal bond market, it could reveal the vulnerable finances of some of the country’s more fiscally troubled towns and cities, ultimately putting them on shakier footing by making borrowing more expensive.
On the surface, municipal-bond watchers seemed relatively confident about the near-term health of the $2.9 trillion municipal market, where bond yields have remained low — a key indicator of investor confidence.
“The trend has been that they’ve been benefiting from the flight to security,” said Richard Ciccarone, managing director of McDonnell Investments. The bonds most likely to be downgraded will be “the safest of muni holdings” most closely tied to Treasurys, Ciccarone adds. The thinking goes: Because investors haven’t abandoned Treasurys, they won’t flee from muni bonds, either.
Many states and cities forced by law to balance their budgets have made painful, sweeping cuts to improve their balance sheets this year, and they’ve anticipated further cutbacks in federal aid. And they’re going to be better positioned for whatever comes next.
But then there are states and municipalities relying more heavily on federal support that are already on shaky fiscal ground. The federal government has committed to slashing trillions in funding under the debt-ceiling deal, and as such cuts materialize, they could have an outsize impact on these municipalities.
“The weaker the government it is, the less able it is to provide on its own and the more dependent it is on revenues from above,” said Matt Fabian, managing director of Municipal Market Advisers, a Boston-based strategy firm. Particularly vulnerable might be large public housing projects that receive a federal guarantee as well as bonds underwritten by federal aid for transportation projects, Ciccarone said.
Standard and Poor’s itself suggested that federal spending cuts, without new revenues, could impact its credit ratings of municipal debt. “We said we would be looking carefully at some of the indirect effects, if you like, on possible fiscal consolidation programs in Washington as they might impact the budgetary decisions of state and local governments,” an S&P official said on a Monday conference call, as Bloomberg reported.
During the last sharp downturn in 2008, the federal government provided a short-term stimulus to state and local governments that help prop up the muni market. This time, there’s little expectation that it would be willing or able to do the same. Facing burgeoning Medicaid costs, for instance, “they’ll probably push the problem back down to the state and local governments,” Fabian said. “That’s a problem we’re concerned about … and that’s when we do individual credit reviews, to see if there are implied [federal] support lines that shouldn’t be taken for granted.”
S&P’s second wave of downgrades is already raising greater concern for cash-strapped states and municipalities that rely heavily on federally financed housing. On Monday, S&P announced that the biggest sources of financing for federal housing — Fannie Mae, Freddie Mac and the Home Loan Bank Board — would all be downgraded. There are already small signs that investors are responding: Ciccarone pointed out that the some Fannie and Freddie holdings showed wider yields than U.S. Treasurys on Monday, suggesting that investors could have less confidence in those assets going forward. “There’s a chip in that piece of art,” he said.
Investors are unlikely to lose faith in Fannie and Freddie anytime soon, but such a drop in confidence would be a “double whammy” for public housing on the local level as well. “Any state or local housing finance agency bonds issued for low- or moderate-income housing backed by Fannie or Freddie or FHLB will likely be downgraded. That would increase the interest rates — and thereby the cost, creating fewer units at higher rents,” said Frank Shaforth, director of George Mason University’s Center for State and Local Government Leadership. The fear, Shaforth added, is that higher interest rates would also reduce assessed property values, further reducing revenues to local governments that are struggling to fund schools, roads, sewers and other basic infrastructure.
Given the relatively low rate of municipal bankruptcies to date (five municipalities filed for Chapter 9 in the first half of the year), there’s little fear that investors will suddenly lose faith in state and local governments’ ability to repay their debts, with Treasurys still a reliable backstop. But at the end of the day, unlike Treasurys, “munis are not cash, they have credit risk,” Fabian noted. “The market has grown warier.” And local governments could pay the price of such newfound uncertainty.
Put a surcharge on every stock market trade large enough to stop the madness and gain some revenue from the high-speed traders who take their tolls from the investment highway while we all lick our wounds. Those guys are making a million because of the volativity they create that wreaks havoc with the markets.
@ Annie, I am stumped by that last question!
The United States is the most powerful nation state in the world. Enough of these S & P threatening utterances. Start with criminal investigations, there’s a lot of meat on the bone for presentation to a US Attorney. What, no politic will to confront the SOB’s who would ruin the social, economic, and financial fabric?
Time to stop pussy-footing, and time to start playing hardball. These clowns could be legitimately prosecuted and crushed like a bunch of grapes.
@ Woop,
What a Disneyland you live in! First the numbskull exchange with Annie about why aren’t people nice? Gee, why aren’t they? After all Mickey and Goofy are *always* nice.
And then in your last entry, the “I’m not gonna take it anymore and we’re so powerful” posting. Whatcha gonna do big boy? Sue McGraw Hill (owner of S&P)? How about suing Buffett, one of the larger investors in Moodys?
Hate to break to you, but you’re not going to get very far. Whether you should or not is another story. (Personally I wish you could.) They have more well paid lawyers than you’ve probably ever met in your life.
Write your Congressman? Even you wouldn’t think so.
Imagine that Frank-Dodd is the savior? Think again. How about Johnson-Kwak? Wouldn’t put your life on it.
Even if you get as informed and smart about financial regulation as Elizabeth Warren, you don’t get very far. After all, it didn’t help her, did it?
But there is something you *can* do in all seriousness: Put pressure on any politician or regulator who favors the current NRSRO system. And keep at it. If you don’t know what NRSRO stands for, you should.
@ Title 50, wipe your nose, the snot is dripping off.
@Diogenes “Given the relatively low rate of municipal bankruptcies to date (five municipalities filed for Chapter 9 in the first half of the year), there’s little fear that investors will suddenly lose faith in state and local governments’ ability to repay their debts, with Treasurys still a reliable backstop. But at the end of the day, unlike Treasurys, “munis are not cash, they have credit risk,” Fabian noted. “The market has grown warier.” And local governments could pay the price of such newfound uncertainty.”
Wait – there’s no connection between foreclosures and revenue for the municipality?!
We’re going into a twilight zone episode now with the rationalizations and the math….
Stephen Colbert nailed the Wall Street mafia in the skit about what to pack into your Emergency Hobo Satchel….
D.C. is willing to burn the country down rather than admit that their *political genius supporters* are holding trillions in worthless PAPER….toxic assets….just like one MD has 1000 profit sucking parasites living off the fact that health care is provided one person to another, one mortgage has 1000 people pretending they got a piece of the single family house…
@Woop
luvu2
“What do you think the following profitable corporations paid in actual total federal income taxes in that period: American Electric Power, Boeing, Dupont, Exxon Mobil, FedEx, General Electric, Honeywell, International, IBM, United Technologies, Verizon Communications, Wells Fargo, and Yahoo? Nothing!”
“CTJ reports that “from 2008 through 2010, these 12 companies reported $171 billion in pretax U.S. profits. But as a group, their federal income taxes were negative: $2.5 billion.”
“CTJ documents that “not a single one of the companies paid anything close to the 35 percent statutory tax rate. In fact, the ‘highest tax’ company on our list, ExxonMobil, paid an effective three-year tax rate of only 14.2 percent…and over the past two years, Exxon Mobil’s net tax on its $9.9 billion in U.S. pretax profits was a minuscule $39 million, an effective tax rate of 0.4 percent.”
“…had these 12 companies paid the full 35 percent corporate tax, their federal income taxes over the three years would have totaled $59.9 billion.” CTJ director, Bob McIntyre noted that these 12 companies are “just the tip of an iceberg of widespread corporate tax avoidance.”
http://www.counterpunch.com/nader07122011.html
who doesn’t luv a revolution for making *MONEY* on BOTH sides of the carefully crafted anarchy….?
From the article “6 creepy new weapons”:
“Penn State’s College of Medicine researchers agreed, contrary to accepted principles of medical ethics, that “the development and use of non-lethal calmative techniques is both achievable and desirable,” and identified a large number of promising drug candidates, including benzodiazepines like Valium, serotonin-reuptake inhibitors like Prozac, and opiate derivatives like morphine, fentanyl, and carfentanyl, the last commonly used by veterinarians to sedate large animals. The only problems they saw were in developing effective delivery vehicles and regulating dosages, but these problems could be solved readily, they recommended, through strategic partnerships with the pharmaceutical industry.”