"B" Equals Bad For Poor

Speaker of the House, John Boehner has submitted and now pushing his own tax cut plan to avoid the impending austerity bomb. As usual, it hurts the poor.

Eric Cantor believes it will raise revenue without hurting small business, vast majority make less than $250K, or taxpayers. Adding to the gap between reality and rhetoric, plan "B" raises taxes on those making less than $200K and those making more than $1 million in wages... not capital gains or investment (billionaire income) profits.

Lobby For The Rich

Clearly, this is a posturing done by CONS to push the president to give up more cuts aimed at low tax rates for the rich.

With the elimination of the AMT (Alternative Minimum Tax), the GOP leadership has effectively risen taxes for those making $10,001 by 2.6%. While those making $1,000,001, will see taxes raise 7.2%. Or those making $20,000,000 (non capital gains revenue) will see a tax hike of 3.6%. I'm not sure who supports this and why the poor who are working should continue their path of misery...

Math Matters

The non-partisan Tax Policy Center has crunched the numbers and provided a snapshot for you if your care...

Romney Trashes Seniors And Students Faces Video Backlash

I've covered politics in Economist Wonk as it pertains to the economy.  The two are hopelessly intertwined.   Romney's candid camera moment is an all too familiar line used like a dirty towel in a football locker room by the GOP. 

The Romney 47% video was first released in MotherJones, a progressive news site.  Let's see how Romney's tax numbers add up.

47% Pay No Federal Income Taxes

Even though when all the numbers are crunched nearly all Americans pay taxes in some form or another.   Here are Romney's 'dependents' that are likely to pay no federal income taxes:

Members of the military serving in combat zones, senior citizens, children, students in college, corporations, family of 5 making $50K a year, super rich...

Youth And Elderly

The overridding largest population that doesn't pay federal income taxes are the elderly and students.  As students graduate and are employed, hopefully in this environment, they contribute to federal income taxes while the elderly had spent a lifetime contributing to fed income taxes.  Hamilton's blog handles the 47% breakdown the best.




Family Tax Credits

Earned Income Tax Credit and Child Tax Credit, which give working families a tax break allows for families with low income to receive federal income taxes back at the end of the year.  This 'entitlement' was pushed by Romney's predecessors in the GOP.

Payroll Taxes Are Virtually Tied With Fed Income Taxes

The reality is payroll taxes nearly match the contributions federal income taxes do... yet incomes more than $106,000 payroll taxes cease.  This could be considered regressive as lower incomes see a higher percentage of their income go to payroll taxes than those earning more than $106,000.  MJ does a great job sharing graphics in the 47% tax breakdown. 



Corporations are profiting at record levels yet pay a lesser and lesser amount of overall taxes shifting the burden to individuals.

These 'Poor' People Pay No Federal Income Taxes

Don't forget the indigent rich 'taking personal responsibility for tax policies' that slant in their favor.


In case you were wondering how this happened and who made it possible...



Tax policy under Bush???

For sure not the tax policy under Clinton...



Irony Of How Dependents Really Will Cast Their Vote

Ezra Klein points out 'moocher' states will nearly all vote for Romney.  Red states are notorious for net welfare takers or receive more federal funds than they pay out in federal taxes.  Red states will once again support a GOP president that bad mouths 'dependents of the federal government'.  

Obama gets 50 electoral votes from the “maker” states to Romney’s 9 — 17 are tossups — while Romney gets 96 electoral votes from the “taker” states to Obama’s 5, with 29 as tossups.

In case you didn't click on the link, 'maker' states vote for Obama and pay more in federal taxes than recieve through federal programs sent back to the state from Washington.  'Taker' states vote for Romney.

GOP Candidates Running From Romney's Statement

Scott Brown, GOP Senate candidate, backed away from Romney's statement. 

"That's not the way I view the world. As someone who grew up in tough circumstances, I know that being on public assistance is not a spot that anyone wants to be in. Too many people today who want to work are being forced into public assistance for lack of jobs."

Linda McMahon, said

"I disagree with Gov. Romney's insinuation that 47 percent of Americans believe they are victims who must depend on the government for their care."

Yahoo News Commentator Backlash 'Rant'

Frank

"As an independent my #1 problem with politics in this country is money and lobbyists.

The enemy of Freedom and America to me is the greed in money and buying our politicians. The interest of the rich should not be above those of me, my family, my neighbor, or my fellow countrymen.

I've watched both parties over the years and have voted for both parties. I voted for Bush, Clinton, and Nader. Got every party covered!

It seems like over the last decade all I've seen from the Republicans is their constant fighting for the rich. I know both parties get money from corps for campaigning, but this desire for the GOP to only care about the rich over everyone else, all while bankrupting the country with wars is ridiculous. And now they suddenly want fiscal responsibility after a decade of having none for themselves?

What about cuts to their beloved military which consumes 25% of all tax dollars and most of which goes to make military contractors rich? Nope. They want to double the military spending. So much for cuts. I'm mad at myself for ever voting for these clowns.

Meanwhile who continues to vote for money heavily tied into politics= Republicans.

Look at how the Supreme Court Justices voted in Citizens United, which allows unlimited money to flow with from companies to politicians. All the conservatives voted for big money over the interests of the people. To me that says it all.

In the last 30 years, the separation between the rich and the middle class have never grown this wide in all of US history. This is a fact. Meanwhile the Republican strategy seems to be to blame the poor.

Why should we be more worried about the poor (who have nothing by the way) paying no income taxes, when the rich aren't paying their fair share? They hide their money overseas, and as a percentage of their wealth pay less than you and I. It’s just distracting us from the truth-the rich are robbing us blind.

Google 'Red State Socialism'.

States who TOOK the most money FROM the federal government, Republicans states, states who GAVE the most TO the federal government, Democrat states.

I’ve been searching to find a single thing the Republicans have done over the last decade that has helped America, Americans, or the planet. I can’t find a single thing.

After what the Republicans have done to this country in the last decade, I'm proud to say I am an Independent voting a straight Democrat in 2012."

How Could QE3 Increase Demand Krugman?

Paul Krugman gives scenario how he feels QE3 could work...

Change in Fiscal Policy Could Affect Housing Recovery

Krugman argues that the Lesser Deppression is a crisis of poor demand.  Boosting the economy is paramount.  Demand can be increased through stimulus or Fed policy.  -that's the theory.

There is an disagreement amongst top officials in the Fed whether QE3 will be effective.  The reasons QE3 is being considered are pretty obvious.  A lack of Demand!

US debt crisis depressed housing prices across the country.  Demand in housing dropped along with construction cutting a large chunk of growth out of the US GDP.  Rising house prices is vital to a healthy recovery in US markets.

Housing Recovery or Housing Bottom?

 

At the beginning of the Lesser Depression, Krugman felt that the Fed can get traction on the real economy through "transmission mechanism".  Housing is the most sensitive or responsive market that the Fed can affect growth.  Why?

Here's what he said:

Because long-lived investments are very sensitive to interest rates, short-lived investments not so much. If a company is thinking about equipping its employees with smartphones that will be antiques in three years, the interest rate isn’t going to have much bearing on its decision; and a lot of business investment is like that, if not quite that extreme. But houses last a long time and don’t become obsolete (the same is true to some extent for business structures, but in a more limited form). So Fed policy, by moving interest rates, normally exerts its effect mainly through housing.

Not this time, however, since housing is deeply depressed and there’s a huge overhang of excess capacity.

 He changed his mind recently:

Since then, several things have happened. First, when I wrote that I don’t think I fully grasped just how big the shortfall in home construction has been, and how long it has gone on; and at this point, of course, it has gone on for another year and a half. So at this point it’s not at all clear that we have an overhang of excess housing capacity; we might even have a shortfall.

This means that we actually can hope that the Fed’s new policy will boost housing as well as operating through other channels, and therefore that it can act more like conventional monetary policy in fostering recovery.

He isn't sure if QE3 will work but at least it provides an environment with low rates battered consumers can use to purchase neighborhood houses.

The stock market moved up strongly after Bernanke announced QE3.  Investors may not believe this is a fix but signals that there may be further fiscal stimulus... or they think this will snowball the housing recovery into a broad, sustained economic recovery!

Growth In Stimulus, Ultimate Measuring Stick Of All Things Good

As mentioned in the last post on, 2009 American Recovery and Reinvestment Act  "What the Stimulus Meant For Jobs", shortly after exceptional measures took effect job loss peaked and the US economy began adding jobs.

U.S. GDP Growth Took Off After Stimulus

As mentioned in other blogs, the U.S. has done much much better than the Eurozone after the global financial debt crisis.  Not in small part because U.S. was focused on stimulating the economy while Europe was more obsessed with meeting debt to GDP ratios.  Even though cutting public spending during economic downturns (rapid de-leveraging) adds to the budget deficits.

Growth is the single strongest factor that eliminates high net sovereign debt.

Tax revenues drop and social safety net spending increases during a prolonged cyclical economic decline. Tax revenues tend to increase during economic expansion. Inversely, budget deficits skyrocket during a financial crisis… a crisis of weak GDP growth.

Drop Unemployment AND Increase GDP

The Obama administration was focused on reducing unemployment and increasing economic output simultaneously.  The chart below illustrates the beginning of the stimulus in 2009 and the abrupt turnaround in GDP growth...  quite effective!

Some may argue that the economy over-reacted like a rubber band and snapped back.  Some GDP correction might naturally happen but not to this degree or within such a short time!  At the time, there was no end in sight and every day the economy was one step from the edge of the fiscal Armageddon.

The short-term to mid-term effectiveness of the 2009 American Recovery and Reinvestment Act -Stimulus - is obvious!  Quantitative Easing by the Fed may have also had an impact... this QE topic is for another post.

Long Term Economic Trajectory, Sharp Increase

According to Michael Grabell, over 41,000 miles of new roads will be paved, increased, or enhanced.  Low-income houses will be weatherized. 3.000 schools in rural areas will be connected to high-speed internet services.

Read more: http://www.nypost.com/p/news/opinion/opedcolumnists/how_the_stimulus_failed_97RlMvRHLSLCiCf8op1iEM#ixzz26IbA7hwH

The video below is from Michael Grabell interviewed by Jared Bernstein:

Grabell highlights the way the Stimulus bill 'as is' will improve education, healthcare, unemployment, and green energy industry.  Energy in the U.S. would be forever changed.  The boldest plan to actually make the U.S. energy independent.

Clean Energy Stimulus Program

The Stimulus package revitalized and forever changed the trajectory of clean energy industry in the US...

Obama administration used federal funds of $90 billion to leverage another $100 billion of private investments.  Or...  $90 billion in public money drew $100 billion in private sector investor.  Wind power is on it's way to being doubled.  Natural gas incentives enacted...

 While the Stimulus program worked in many ways, it was planned poorly from a political standpoint.  The effects were to short lived as well.

More on Grabell's book soon...

Rand Paul Pulls A 'Enourmous' Paul Ryan

Over the weekend, Rand Paul brought a sling shot to a tank fight.  On "This Week" Paul Krugman and Rand Paul decided to exchange barbs on the number of government employees during the Obama administration.

Rand Paul's Abbott and Costello Routine

Rand Paul vs Paul Krugman Excerpt:

Rand Paul:  "Are you arguing that there are fewer government employees under Obama than there were under Bush??"

Paul Krugman: "That's a fact.  That's a dramatic fact!"

Rand Paul:  "The size of government is enormous under President Obama!"

Paul Krugman:  "If government employment had grown as fast under President Obama as under President Bush, we'd have a million and a half more people employed!"

Government Employees At Thirty Year Low!



Rand Paul advanced the traditional GOP line that govt is ballooning and blowing up under Obama.    The problem is they aren't.

Most government jobs are things like teachers, firemen - state employees have been drastically cut.  In total, 600K fewer government employees during Obama's tenure than are employed than during Bush's presidency.

 

If At First You Get Pawned By A Nobel Prize Economist, Then Change The Words And Argument!

On Monday, Rand decided "Are you arguing there are fewer government employees under Obama?" was actually, "fewer FEDERAL (governement) employees under Obama".

Rand went on to cite 140K new jobs created at the federal level under Obama.  The problem is he excluded federal post office employees...

 "The size of government is enormous under President Obama!"

Adding ALL federal employees hired from when Obama took office until now, federal employment rose an 'enormous' 1%.  Not nearly enough to cover the population increase.  Nor enough to cover the losses of government employment at the state levels.  Rand Paul cherry picked data that he never said and still was wrong!  Government is NOT enormous under Obama!  Not by ANY metrics used to measure government employment OR federal government employment.

A Paul Is A Paul But Not Krugman

Bill Clinton's economic errors were isolated at the DNC.  Paul Ryan got his hand caught in the 'lying' cookie jar several times during his RNC speech.  From medicare to plant closings, fact checkers had a field day.  Paul Ryan then doubled down on the lie.

Faulted Obama for failing to deliver a 2008 campaign promise to keep a Wisconsin plant open. It closed less than a month before Obama took office.  Obama wanting the plant to succeed and getting elected was somehow tied to the plant's closure.

Repeat You Are Right But Change What You Said... And Still Be Wrong!

Paul Ryan said accurately that the plant didn't last a year after Obama visited it on the campaign trail.  Whereas Rand Paul was completely false!  He was false in his statements  "The size of government is enormous under President Obama!" as well as his presumption that there are more federal employees under Obama versus Bush.

Rand Paul said Paul Krugman who is a "supposedly smart man" was "manipulating the numbers".  At least, Krugman knew the accurate numbers if he ever want to manipulate them!  Even after changing what he said, Rand Paul was still wrong about how "government is enormous"!

What The Stimulus Actually Meant For Jobs And Econonomic Growth

2009 American Recovery and Reinvestment Act, (Stimulus) was an $800 Billion spending boondoggle.  A veritable New Deal style, government spending binge, Obama instituted shortly after becoming the 44th President of the United States, according to many Washington pundits.

Independent studies of the stimulus point to another conclusion...

U.S. economy has largely benefited from the stimulus and other measures enacted by government agencies like Ben Bernake and the Fed.  Read to the bottom for a comparison to Europe's approach.

Effects of The Stimulus.  


Stimulus Unemployment Facts


According to many sources, including non partisan CBO Congressional Budget Office, 2.5 million people would not have a job without the unprecedented stimulus passed early 2009... some economists have upward of 3.3 million jobs added from the effects of stimulus.

As evidenced by the the chart to the left, these stimulative measures worked.   They worked in an environment of lackluster demand by consumers.

Keynesian economists and liberals would argue the interventions ended too soon.  They cite shaky footing private businesses have experienced through massive deleveraging by consumers and private industry.

Stimulus In Action

Here are several noticeable measures few noticed but nearly everyone benefited from the stimulus:

• Tax cuts for 95% of American workers.
• GM bailout (thousands of jobs saved).
• Substantial state government aid...
• prevent Medicaid cuts
• prevent teacher layoffs
• prevent unemployment benefits from expiring
• enable food stamps additional funding
• general assistance for citizens hit hardest by the recession

Eurozone Unemployment

Austerity measures have widely been pushed onto neighboring countries by German economic leaders and enforced throughout the Eurozone countries' economies.  Predictably, Germany is doing well.  Youth unemployment is the lowest in the Eurozone and maybe the world.  They got theirs and look at enacting self serving nationalistic policy versus multinational policy needed to save the Eurozone and their common currency, the Euro.

Many liberals in the U.S. have complained there hasn't been enough stimulus and they would be right.  Just compare the Eurozone unemployment numbers to U.S. unemployment in the chart below.

The unemployment numbers speak loudly whose policy has been the most effective for reducing unemployment.

Eurozone unemployment is 3% more than in the U.S.  A big difference equating to millions who have a job versus millions who are homeless.

Source:  US Monthly Jobs Changes Chart

Future National Debt - They Built It!

"I" Built It!

Yesterday, I posted a graph denominating debt share by presidents who created it.   Debt to GDP is non-partisan.  You know, who "built it", passed the law or created the conflict, gets credit for it!

Future U.S. Debt Obligations

Below is a graph including future debt obligations based upon past and current policy/obligations.      Budget projections were assessed by non-partisan CBO, Congressional Budget Office.



The King Has No Clothes

While there could be debate on the necessity of both wars and TARP, tax cuts largely a benefit to corporations and high income earners are/were not a necessity.  Unless record poverty and record inequality is your goal...  simply put, a large and stable middle class is the best economic environment.  Furthermore, Bush era policy, (not including Medicare Part D and the higher drug costs it helped create) Wars and Tax cuts, are the largest debt obligations saddling future generations.

What did America get for the handout to the rich?  Lower GDP growth, economic collapse, and higher current AND long term debt.!

Middle Class Matters

More spenders who spend a larger percent of their overall income.  Though savings rate matters as well as the debt bubble accumulated in the private sector, consumption accounts for 70% of the GDP.  High incomes spread throughout the general economy tends to snowball consumption and stimulates the economy longer term.

Chart Credited

CBPP created the chart using CBO budgetary analysis.  CBPP is a progressive, non-profit with the goal to analyze fiscal policy and it's effects on lower income and middle class households.

Politics, Debt, Balancing the Budget and Facts

There is considerable hype from both sides of the aisle about the economy and balancing the budget... 

zFacts.com graph assigning net debt (economic output/national debt) to each President.

 

 

 

 

 

I don't know how else to frame the discussion if you are looking at facts...

Tax and Spend.  A DEM Model.

GOP has a horrid record balancing the budget.  Morbidly ironic if you actually listen to the words coming out of conservative politicians the last four years.  From a fiscal standpoint, Democrats may tax and spend like households buy their landscaping materials with a debit card. 

Borrow and Spend.  A GOP Model.

Republicans have a history of borrow and spend.  Like borrowing the most during the times when interest rates are highest in order to finance wars, corporate handouts to prescription drug companies, and handouts to the very richest who have benefited the most from the general economy everyone has built.

GDP growth has alot to debt to gdp, tax revenues, and income inequality.  More on that later...


Debt to GDP by Presidents.

Biased Arguments And The Tax Policy Center

Established in 2002, by tax policy experts from Reagan (GOP), Bush I (GOP), and Clinton (DEM) administrations, the Tax Policy Center is now under fire by conservatives as biased.  Here's why:

"Our major conclusion (Tax Policy Center) is that a revenue-neutral individual income tax change that incorporates the features Governor Romney has proposed - including reducing marginal tax rates substantially, eliminating the individual alternative minimum tax (AMT) and maintaining all tax breaks for saving and investment - would provide large tax cuts to high-income households, and increase the tax burdens on middle- and/or lower-income taxpayers."

God forbid they crunch Romney's purposefully vague budget plan!  There is a litany of conservatives who are bashing TPC as "biased"... Bill O'Really, WSJ, and Washington Post editors have all piled on the "Tax Policy Center is Biased" bandwagon.  Contradicting previous statements that TPC was non biased.

To further illustrate the point that the Tax Policy Center is NOT biased look to it's director.  Donald Marron served on George W. Bush's Council of Economic Advisers.  Right???

Paul Ryan's budget plan is basically Romney's budget plan... no matter how much Romney wishes to withhold details.

Here is what you can expect.

In many cases, low-income households would see a tax increase of $100 or less, but some would be hit harder. Among households earning between $10,000 and $20,000 a year, about 1 in 5 would get a tax increase averaging over $1,000, the Tax Policy Center analysis showed. Households earning more than $1 million a year would get nearly 40% of the benefits of the plan, with a cut averaging about $265,000.

In 2010, Ryan pushed a plan forward that would entirely eliminating taxes on capital gains, interest and dividends.  Though the plan didn't get traction, Ryan hasn't retracted the "no taxes for billionaires plan".

As a stated Catholic, Paul Ryan's budget was so draconian, the U.S. Conference of Catholic Bishops condemned it "unjustified and wrong" and void of social justice.

They join a bevy of other religious groups condemning Paul Ryan's budget:

• NETWORK:  "We agree with Catholic Bishops that Paul Ryan's budget fails the test of Catholic Social Teaching since it deliberately harms people at the economic margins. It is also unpatriotic because it says that we are an individualistic, selfish nation. This is emphatically not who we are. Both our Constitution and our faith teach us that "We the People" are called to care for one another, to have responsibility for each other. This year's election will present us with a critical choice. Do we want to favor the rich on the backs of people in need? Is that who we want to be?"
• Lisa Sharon Harper from Sojourners: "It is simply unconscionable to balance the budget on the backs of struggling Americans while protecting tax breaks for millionaires. Churches and faith-based nonprofits are already fighting an uphill battle to meet the needs of their communities. They don't need politicians making their work even harder because Congress is dead set on politicizing a simple duty of common sense governance."
• Rabbi Jack Moline of the Rabbinical Assembly: "The poor are not statistics ... it is unimaginable to look in the face of a child who would go hungry without government assistance and say, 'Sorry -- we need to reduce the deficit.'"
• Rev. Gabriele Salguero of the National Latino Evangelical coalition: "Budgets reflect our deepest moral commitments. Politicians ought to remember that protecting vulnerable families and children is at the center of the biblical command to care for the poor.

Not to worry!  In order to contradict the growing economic, religious, and political voices standing up against these policies, radical conservatives are using the video instructions below as ammunition...

  Argument Rules For R & R Ticket

"The Sky is Falling" A Garry Shilling Makes For A Different Stock Predictor

Garry Shilling, predict-O-matic 'get-off-my-lawn' econowonk, recently hinted to Tech Ticker that Paul Ryan/Romney's Austerity, rape-the-poor-and-middle-class budget plans would give confidence to the marketplace and essentially increase GDP.  

Actual data examining debt yields from countries like the UK and US point destroy these austerian mythologies.  See IMF study at bottom.

 The takeaway?  ..."fiscal indicators such as deficit and debt levels appear to be weakly related to government bond yields for advanced economies with monetary independence."

There is no data to support the "market faith" theory austerians use to justify creating further market downturns through cutting government spending. 

Shilling's Market Predictions Are Telling 

When not missing economic predictions, Shilling peddles stock newsletters.  You can buy one for $275.  In, 2010 Investment Strategies: Six Areas To Buy, 11 Areas To Sell, Shilling said, "7. Sell U.S. Stocks in General."  He went on to peddle buying bonds, which was a losing proposition, along with income securities in general. 

Stock Market Climbed 9.4% In 2010!

The DOW increased 977 points for the 2010 calendar year.    Mr Shilling did say to SELL stock!  I wonder if there is a fund that takes the opposite position of stock newsletters picks?  To be considered a stock forecaster or predictor, you MUST be mostly right inside of the time frame given!

Too negative?  He is correct in saying there needs to be time for the public to de leverage from all the debt incurred the last several decades.  Without govt spending, consumers and business are paying down debt, there are no other consumers in the economy.  

De facto these right wing econowonks are creating lower GDP and lower tax revenues by cutting government spending.  This leads to more supply of labor and less demand for consumption.  Just like in Ireland debt to GDP then increases along with higher unemployment.

In short, Shilling has been calling for a double dip recession since right after the first recession.  He also is a big fan of cutting government spending KNOWING consumers are deleveraging and not fueling the economy!!!  Talk about a self fulfilling prophesy...

Resources:

The IMF [IMF Country Report No. 12/190 - Staff Report] has researched above hysterical and mythological claims about investor confidence fueling low demand economies and has another idea.  See paragraph 43. below.

43. Further slowing consolidation would likely entail the government reneging on its net debt mandate. Would this trigger an adverse market reaction? Such hypotheticals are impossible to answer definitively, but there is little evidence that it would. In particular, fiscal indicators such as deficit and debt levels appear to be weakly related to government bond yields for advanced economies with monetary independence. 

[Source 1]