So here we go – the next big “most important event ever” (TM) will be the miguidedly named Fiscal Cliff – an event entirely manufactured by conservatives pretending to be defecit hawks while rent-seeking for their wealthy constituents.
suddenly the clear and present danger to the American economy isn’t that we’ll fail to reduce the deficit enough; it is, instead, that we’ll reduce the deficit too much. For that’s what the “fiscal cliff” — better described as the austerity bomb — is all about: the tax hikes and spending cuts scheduled to kick in at the end of this year are precisely not what we want to see happen in a still-depressed economy.
Now we have those same lobbyist for uber-wealthy rent-seekers looking to turn the Fiscal Cliff into another moneymaker for their fat cat patrons in the form of the Bowles-Simpson foundation “Fix The Debt”, a lobby group of rich men for rich men. “Of the 63 Fix the Debt CEOs at publicly held firms, 24 received more in compensation last year than their corporations paid in federal corporate income taxes. All but six of these firms reported U.S. profits last year,” according to a report by the Institute for Policy Studies that calls Fix the Debt “a Trojan horse for massive corporate tax breaks”
•The 63 Fix the Debt companies that are publicly held stand to gain as much as $134 billion in windfalls if Congress approves one of their main proposals — a “territorial tax system.” Under this system, companies would not have to pay U.S. federal income taxes on foreign earnings when they bring the profits back to the United States.
•The CEOs backing Fix the Debt personally received a combined total of $41 million in savings last year thanks to the Bush-era tax cuts. The top CEO beneficiary of the Bush tax cuts in 2011, Leon Black of Apollo Global Management, saved $9.9 million on the Bush tax cuts. The private equity fund leader reaped $215 million in taxable income last year just from vested stock.
But don’t these people need tax cuts to raise their confidence in investing the trillions they’re sitting on, so that the money can create jobs instead of garnering interest in some Caymans bank account? Warren Buffett knows a thing or two about investing.
SUPPOSE that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.”
Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.
Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent — and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered.
Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation’s economic output) increased at a rapid clip. The middle class and the rich alike gained ground.
So let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if — gasp — capital gains rates and ordinary income rates are increased. The ultrarich, including me, will forever pursue investment opportunities.
The deficit crisis, so-called, began as a smoke-and-mirrors exercize with two objectives – adding another zero to the uber-wealthy’s bank balances, because greed, and providing a convenient pretex to bash Obama when not one conservative gave that much of a shit about deficits when Bush Junior was giving away the furniture to finance fat-cat enrichment at the same time as two misguided wars.
Unfortunately, the politicians backed themselves into rhetorical corners for the sake of campaign contributions and thus the agreement that led to the current threat of an Austerity Bomb arose. I’m not sure whether it’s better to let the bomb drop or not. Krugman makes a convincing case that if we did, the economy wouldn’t crater as the fearmongers (all paid by rich people) want us to believe. The US can always print more money, its debt is all in dollars unlike Greece where it can’t just print more Ecus, and inflation right now wouldn’t be a bad thing since it might motivate some of those uber-rich to spend some of their vast hoarded savings instead of seeing them devalued. Still, like it or not, if the bomb drops or we go over the fiscal cliff, call it what you will, normal people will be hurt – mostly the already disadvantaged. But then again, if a deal gets done to pair tax revenue increases (or even, gasp, actual tax rate rises) with cuts to social spending, those same people will still get hurt.
Here’s the bottom line: polls be damned, the spineless Obama White House is ready to trade and the one thing we know for sure is that the trade will involve even greater hardship for the least well off. Then, just to add insult to injury, the Obama campaign will mobilize their troops with messaging that “Austerity for thee but not for me” is a good idea.