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Sunday, January 6, 2013

What Deal?

Deal?  Cliff?  How about Bamboozle? 

Once again, reality is being hidden by clever words and then forced upon us by the Republican minority.  This is not about deals.  It is not about negotiations.  It is not about reasonable debate or process.  This is about leverage and power, in the form of shutting down the federal government.  It is about the priority of this radical Republican cabal.  They want to destroy the federal government, and their smokescreen is still the misleading mantra that the government spends too much, thus it must be reined in, capped, and cut. 

“Spending cuts” are the key to this smokescreen.  Yes, we need them.  Yes, the government has grown and over-reached.  Yes, there is too much bureaucracy.  As with past recessions, we need to act in a balanced way - increase revenue, stimulate the economy and cut government spending where that is prudent and necessary.  But the deficit is not the major problem.  What is a major problem is the fact that the economy is recovering so slowly.  Instead of stimulating a dragging economy by repairing infrastructure and providing jobs, Republicans would rather cut the very programs that are enabling certain sectors of our society to continue to put money into the economy where it is desperately needed.  If we do what Republicans want, we will find that the Great Recession will deepen and the economy will take forever to recover.  But Republicans say “no” to this even though, in the first term of FDR, cutting federal spending was tried and failed, so FDR went for the New Deal to stimulate the economy as much as possible.

  The Congress is the problem: they make the laws; they appropriate the money; they manipulate the tax code.  All the debt that we owe is because of legislation already passed by the Congress.  So, logically, that says to me that Congress is not serious about spending cuts or deficit reduction.  What they are serious about is the destruction of government programs that they do not support.  What they are most serious about is an ideology that proclaims the federal government as unwieldy, ineffective and cumbersome.  So, they portend, it must be reduced in size and gotten out of the way so that the States can oversee most programs and projects.  The most recent example of putting ideology above need and even above emergency relief is John Boehner’s insistence that federal relief for victims of Sandy, the storm that devastated parts of the Northeast, be held up and voted on piecemeal, as though that is what will reduce our deficit.

This whole “fiscal cliff” thing - first that of revenue enhancement, and now that of spending cuts -  is simply a ploy to make the voting public believe that the country is facing a fiscal crisis that will affect our children and grandchildren.  History of deficit reduction does not support that particular image.  As a country, we usually resolve deficits through a balanced plan of spending cuts and tax revenues, and new jobs.  Sometimes war has had an effect, and at other times, a long peacetime accompanied by a manufacturing and consumer buying boom has helped to overcome a deficit/debt situation.  But, one would be hard-pressed to find a situation where the next generation inherited a debt that crippled their advancement, unless we count the Era of the Depression when families were definitely affected through more than one generation during the 1920s to the early 1940s.

If the real problem is over-spending, then it makes eminent sense to find those parts of the budget where the largest spending occurs.  That would, of course, be the budget of the Department of Defense. But, where are the Republicans when this is presented?  Hiding, of course (or passing appropriations that are larger than those asked for by the military).  They do not want to touch the DoD budget and even when sequestration was used to force a budget solution, they acted to nullify the over $500 billion cut to the DoD budget.  Such an action gives the lie to their cry of  “spending cuts” and “spending crisis.”  Even the Simpson-Bowles Commission said that cuts to the military budget are imperative, but not the Republicans.  In spite of what Secretary Panetta says, or the Republicans say, this is the place to start. 

Lawrence J. Korb, a senior fellow at the Center for American Progress, served as assistant secretary of defense in the Reagan administration.  He summarizes where we stand in terms of this budget and proposes some solutions.

“While reducing projected levels of defense spending will not solve the country's massive federal deficit, defense must play a part. The current budget comprises 20 percent of overall spending, about the same as Social Security and more than 50 percent of the discretionary budget. Moreover, defense has accounted for two thirds of the increase in the discretionary budget over the last decade.
“The budget is also now in a position where it can be safely reduced. In real dollars, it has grown for an unprecedented 13 consecutive years and is now higher than at any time since World War II.
Even excluding war costs, the regular or baseline budget has grown by about 50 percent over the past decade, the U.S. share of global military spending has risen from one third to about one half, and the United States now spends more on defense than the next 17 nations combined.
The Pentagon has already been ordered by the President to cut its projected spending by $450 billion over the next decade and, if sequestration happens, the cuts could total $1 trillion.  Despite the doomsday scenarios continually espoused by Secretary Panetta and the military chiefs, a cut of that size would amount to only 15 percent, in real terms return spending to its 2007 level, and still leave the United States above what we spent on average in the Cold War. Finally, such a cut would be far less than cuts made by Eisenhower (27 percent), Nixon (29 percent), and Reagan, H.W. Bush, and Clinton (35 percent), which were done without jeopardizing security.
Obviously, a reduction of a trillion dollars would have to come in a balanced way and, as was done in previous draw-downs, it should be implemented through a phased approach and would involve all components of the budget.
To give but a few examples, our nuclear arsenal can be slashed from the current level of 5,000 to 311, as recommended by some Air Force strategists. Since we are withdrawing troops from the Middle East and are unlikely to need large armies there anytime soon, the size of our ground forces can be cut back by 100,000 to their pre-9/11 levels. Since the Cold War ended 20 years ago, the 80,000 troops still in Europe can be reduced to 20,000. Since the military increasingly relies on unmanned planes and precision-guided munitions, the number of carriers and Air Force fighters can be reduced by 25 percent.”

Where do we next look?  Republicans will quickly lead you to what they call “the main drivers of our spending:  Social Security, Medicare, and Medicaid.  This is the “sucker punch” -- getting us all to believe that these government insurance programs are the main cause of our debt.  As expressed on, “America does need long-term reforms to its entitlement system and tax system . In addition to regulating excessive healthcare costs, the United States needs a middle-class welfare state that is bigger, not smaller. It’s the restricted, elitist private welfare state that needs to be cut, not the universal public social insurance system.”

The writer makes a very cogent point about the reason for the attempts to “reform” Social Security.” 
“We are barraged with propaganda demanding that we cut Social Security, the successful public program, and expand the private savings alternatives like 401Ks and IRAs that have failed so miserably.
Why? The answer is that Wall Street wants to charge fees on as much of our retirement money as it can get its tentacles on. The well-funded campaign to partly privatize Social Security under George W. Bush failed. But the same forces want to achieve the same result indirectly, by getting Obama and enough conservative Democrats in Congress, along with the GOP, to cut Social Security. Their manifest objective is to compel Americans to try to make up the losses in public benefits by gambling more with their savings in mutual funds, from which hefty profits will be skimmed by overpaid money managers.”

Social Security is not part of the government’s discretionary budget, and therefore, has little effect upon it.  These smoke-screen Republicans forget to tell you that the Affordable Care Act actually targeted $716 billion from waste and overpayment in  Medicare over a ten-year period.  “Entitlement Reform” should be done as a separate deal.  These programs are too complicated to throw into the discretionary spending mix.  It is a huge mistake.  Michael Lind of tells us why:

“Medicare and Medicaid are different from Social Security, because they involve the very structure of the U.S. medical-industrial complex. But the basic policy choice is similar. Is the goal of reform to enrich fee-skimming middlemen belonging to the 1 percent by forcing Americans to channel their healthcare spending, like their retirement savings, through private corporations? Or is the goal to provide universal health security along with universal retirement security by the simplest and most efficient means?
Today the actual scale of government is disguised, because politicians and policymakers fail to describe tax-favored private health insurance and private retirement saving accounts as “government” or “entitlements.” In public discourse we need to expand the definition of “entitlements” to include the tax-favored private savings and health insurance that chiefly benefit the few, not just the public spending programs that benefit the many.
If our objective is what is good for most Americans, rather than what enriches parasitic middlemen, then we should reduce inefficient and inequitable tax-favored private spending on retirement and health benefits and use the savings to increase more direct, fair and efficient public spending, including an expansion of Social Security. The alternative of cutting public benefits while favoring private benefits through the tax code means bigger, guaranteed windfall fees for America’s bloated financial industry — forever.”

So there it is: the same old story from the 1% Republicans.  Their “reform” of entitlements is aimed at making it easier for private corporations to profit.  They have no concern at all for improving these government programs.  They want to get their hands on your money, and manage it for you.  Ask yourself why Part D under Medicare could not be passed until private companies were protected and given full rights to setting rates and managing the money involved in medicines under Part D.  Why was there a “donut-hole” built in?  Why was Medicare (the government) specifically denied the ability to negotiate lower drug costs?  Every provision of that legislation points to the favoritism provided through our tax code and legislation for private corporations.  Republican spending cutters do not want to “reform” Medicare and Medicaid; they want to grab more of it for their clients. If we allow the government to negotiate with drug companies, that will save an estimated $220 billion. That’s 1.8 times as much money as the “chained CPI” – and it comes from the drug companies, not vulnerable Americans.

So now we come to that part of the government that gets little attention, and when it does that attention is turned into “tax reform”, which is not what is needed.  We’re not talking here about changing the deductions on the taxes of the rich; we’re not talking about changing to a flat tax regressive system of taxation.  We’re talking about real money here: those provisions of the tax code that allow certain individuals, corporations and industries to extract money from the federal government under the general topic of “tax expenditures.”  A great deal of government spending is hidden in the federal tax code in the form of deductions, credits, and other preferences.  These are the government “entitlements” that need to be targeted, not those that support the middle class and the working poor.  These are preferences that seem as though they let taxpayers keep their own money, but are actually spending in disguise.

“Spending in disguise.”  There it is:  the bamboozle, the scam, the dirty work of legislators and lobbyists and lawyers over the years.  Let us take a quick look at some of these “tax expenditures.”  Independent estimates say that the “chained CPI” will slash Social Security benefits by $122 billion over the next ten years. Here are some solutions that will save more money - and really will reduce the deficit.

1) “The hidden cost of allowing the top 5% of income earners to deduct healthcare costs is… significant: 12.2% of $172.9 billion dollars is over $21 billion dollars in lost revenue or the same amount the Federal Government spends on student financial aid every year”

“The biggest subsidy to our top 5% of income earners are tax incentives for retirement savings: They enjoyed 41% of the benefit, costing the Government over $81 billion dollars, almost equal to the entire amount proposed by Obama to spend on Unemployment Insurance in 2011. As opposed to the entire bottom 60% of wage earners who enjoyed only 7.3% of the subsidy, or less than $15 billion.
So that's $145 billions of dollars that the Government loses in income to benefit the wealthiest 5% of Americans. “ (Fri Mar 18, 2011 Daily Kos)

2)   Close multiple loopholes in the capital gains law: $174.2 billion. (1.42x)
Lawmakers could save nearly one and a half times as much money as they’ll get from stripping seniors, the disabled, veterans, and children of their benefits - 1.42 times as much, to be precise – by closing capital gains loopholes.
They include the “carried interest” loophole, which taxes hedge fund managers’ service fees at the low “investors’” rate; the ‘blended rate,’ which taxes some quick derivatives trades as if they were long-term investments; the ability to ‘gift’ capital gains to avoid taxation; a dodge for bartering capital gains; and the ability to ‘defer’ gains to future years.
A more aggressive approach – eliminating the capital gains altogether – could yield more than $900 billion in savings, but that might affect middle-class families and seniors. By using the “chained CPI,” America’s seniors, vets, and disabled are taking a hit so that hedge fund managers can keep their loopholes.

3)  Eliminate corporate tax loopholes: $1.24 trillion (10x)
A 2007 Treasury Department report (prepared under President Bush) concluded that “corporate tax preferences” – that is, loopholes – resulted in lost revenue of $1,241,000,000,000 over a ten-year period.
That number looks pretty good – especially when it’s stacked up against the “chained CPI” figure of $122 billion.

4)  Instead of providing a tax break for hedge fund managers, how about adding something to the tax code that would be a huge boon, although a small tax . Create a financial transactions tax for high-volume Wall Street trading: $1.8 trillion (14.75x)
A financial transaction tax like the one they’ve imposed in the United Kingdom. The UK tax rate is tiny – 0.25 percent of each transaction, levied on both parties – but the overall impact is substantial.
Not only would this tax bring in substantial revenue, it would also discourage the massive volume of ultra-high-speed computer-driven transactions that have turned the stock market into both an imperceptible ‘black box’ and a real-time mega-casino operating in nanoseconds (see for more on each of these matters).

During the next month or more, we are going to experience the smokescreen rhetoric from the Republicans about budget cuts and deficits, as well as entitlement reform. Don’t be bamboozled.  Question everything you hear and remember one more thing: do NOT allow the President to give in on Social Security, Medicare and Medicaid, or to allow “spending cuts” that fall heavily on the poor, the elderly, veterans, persons with disabilities, and other vulnerable populations. 

The Republicans are not truthful about spending cuts or entitlement reforms.  You are being swindled, bamboozled and misdirected.   They are wolves in sheep’s clothing, aiming to get your tax money into the hands of their private sector puppet-masters. Don’t let it happen!