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The following essays are so simplified that after reading them almost everyone should understand (if they so desire) why the poor (or just lazy middle class) are being blamed for being poor (or not rich) by the rich, and further, why there is a concerted push to rid the U.S. of all social welfare programs (and middle-class jobs). After all, if none of the rich (corporations and individuals) have to pay taxes, who would support retirement for their workers? (HINT: NO ONE!)
P.S. If you don't attribute most of this to what Bush and Cheney did just before exiting the White House in 2008 (remember Cheney's tight smile goodbye?), you're still not thinking too hard (or well).
The Super Rich Reinvent US Capitalism
Monday, 11 November 2013
By Shamus Cooke
As U.S. corporate profits soar to record highs, food stamps for the neediest were quietly cut.
The politicians who are demanding endless cuts to social programs — Democrats and Republicans alike — insist that the U.S. is broke, all the while conveniently ignoring the mountains of tax-free wealth piling up in the pockets of the super rich.
This newest flood of cash for the nation’s wealthiest 1% is a blatant government subsidy: the Federal Reserve continues to pump out an extra $75 billion a month, the vast majority of which fattens the already bursting overseas bank accounts of the rich. Since Obama has been president this pro-corporate policy has helped funnel 95 percent of the nation’s new income to the wealth-soaked rich.
And while it’s true that the global super rich have an estimated $32 trillion [!] stashed away abroad in off shore tax havens, an even newer way to avoid taxes has gripped the endlessly-greedy minds of U.S.-based billionaires.
Instead of shielding themselves behind the classic ‘C’ corporation structure — and all the burdensome taxes and regulations associated with it — two-thirds of new corporations have “evolved” into pseudo-legal “partnership” structures, commonly referred to as “pass throughs,” the idea being that the corporate-partnership instantly passes the profits through to the shareholders, no corporate tax necessary.
The most common form of pass throughs are “innovative” variations of a Limited Liability Company, a tax structure created in 1975 for narrowly regulated purposes. But now rich investors are performing accounting and legalistic somersaults to exploit the tax structure, practices that were illegal before the regulators were “captured” by the big banks.
The pro-billionaire Economist magazine recently discussed the pass through fad:
“A mutation in the way companies are financed and managed will change the distribution of the wealth they create…The corporation is becoming the distorporation . . . . More businesses are now twisting themselves into forms that allow them to qualify as pass throughs.”
So, for example, imagine that nine rich guys get together and call themselves a pass through corporation of some variety. They do this because they want to avoid personal liability in case things go awry. Their partnership only buys and sells stocks and goes on to make billions, while paying zero corporate taxes. When their risky bets go bust and the partnership is sued by hoodwinked investors, the company instantly declares bankruptcy, since all profits were quickly “passed through.” The partners (the nine guys) cheerfully go home to swim through their sea of cash.
In real life shady pass throughs make massive wealth. Richard Kinder, who co-founded the biggest pass through, named Kinder Morgan, personally received $376 million in dividends last year alone [!], according to the Economist.
The pass through fad is on track to becoming the dominant way that the super rich get together to make huge amounts of money — pass throughs were 6 percent of all corporate profits in 2008, and are likely higher now, since many of the big private-equity companies making a killing by the cheap fed dollars are organized under pass through umbrella structures.
There is a huge society-wide risk for this type of behavior, which resembles the reckless gambling that destroyed the economy in 2008. As an ever-larger share of wealth is poured into these risky, non-regulated vehicles, the potential grows for them to self-destruct and pull down the broader economy with them. Pass throughs — which include most private-equity firms — function “efficiently” when the government is handing them cheap money; when interest rates go up, the pass throughs go bust, with predictable outcomes.
“But wait,” the billionaire will protest, “we pay individual taxes, which help fund social services.” Not necessarily. If the billionaire investor paid their legal obligation of “capital gains” taxes, they’d already be paying far less than the average worker. But the pass-through billionaires excel at avoiding all taxes. TheEconomist again:
“For a [pass through] partner a payout can be considered merely a return of capital rather than a profit, and consequently no tax is due until the sale of the underlying security. When tied to nuances of estate law, this may mean no tax at all.”
This type of blatantly criminal behavior used to be actually illegal, but as Wall Street bought Congress, the rules were either bent or ignored.
The Economist explains:
“[T]he limitations on becoming [a pass through] seem to be tied more to legal dexterity [!] and influence [buying politicians] than any underlying principle. Politicians want to extend the benefits of [pass through] partnerships to industries they have come to favor either on the basis of ideology [of the corporate type], or astute lobbying [bribery], or a bit of both.”
The rest of society is affected because public services are being starved of funds, while these new pass throughs face vastly less regulation than the standard C corporations, and push wealth inequality to new heights while threatening a deeper recession.
Historically, government began regulating corporations because everyone realized the profound effects these institutions were having on the rest of society; the nation was becoming more unequal, the labor force more exploited and the environment torn to shreds.
As the super wealthy organized themselves into corporations they took most of society’s wealth with them; government realized that a semi-functioning country would need to tax these institutions and regulate their behavior, since the “natural” behavior of the capitalist — greed — was capable of pushing the rest of society into the dregs.
The new pass through fad is also indicative of the current state of U.S. capitalism; instead of investing profits in a company to buy machines or hire new workers, all the cash is either sitting in overseas bank accounts, or is being instantly funneled, via pass throughs, into the hands of ever-richer billionaires, who are proving to everyone that there (are) no bounds to the amount of cash they can accumulate.
Where there are barriers to accumulation (regulations and taxes), they will supersede them while paying politicians of both major parties to make it legal.
This dynamic occurs, in part, because the wealthy are basically refusing to invest in the real economy, as they fear the unstable economic conditions are not safe enough to make long term investments, which they believe won’t yield long term higher rates of profits. Safer to speculate on risky stocks, pocket the money and be the first one out when things go bust, as they did in 2008.
Of course the big name C corporations are up to their eyes in fraud too. Apple made big news when it only paid 2 percent taxes on $74 billion in profits, by “declaring” its profits in Ireland, a corporate tax haven.
This occurs while other giant companies simply use clever accounting tricks to pay zero taxes, including giants like Wells Fargo, Boeing, Verizon and General Electric. In fact, General Electric even finagled a rebate.
When it comes to oversea tax havens, it’s estimated that the U.S. national budget is annually starved of $280 billion in tax revenue.
Politicians have been struggling with ways to deal with the problem, since even in their mind some amount of tax collection needs to happen, if only to fund the military, provide more subsidies to corporations, and please the public by appearing to try to reduce the billionaire’s obscene behavior.
One popular idea among the politicians is to declare a corporate “tax holiday,” where the trillions of off-shore profits can be ceremoniously brought back to the U.S. while the feds look the other way. The idea is that, once the money is actually back in the U.S., the wealthy will want to spend it on something which will eventually help the economy — trickle down economics at its finest.
What seems certain to happen is that lowering corporate taxes will be a central piece of any “grand bargain” that eventually emerges, since there is a clear bi-partisan consensus that corporations need to pay lower taxes.
Some argue that if corporate taxes are low enough — and regulations removed — the corporations will reward the nation by not stockpiling their profits abroad and not creating pass through loopholes.
Of course all of this implies that the wealthy have a stranglehold over the U.S. economy. It’s telling that politicians want to deal with corporate tax evasion by lowering the corporate tax rate, instead of actually sending the IRS after them and throwing them in jail, as they do with working and middle class people.
The above dynamics create an ever-increasing wealth inequality that claws at the thinning strings holding society together. The bankruptcy and social disintegration of Detroit is a foreshadowing event for the rest of the country, unless this dynamic is stopped.
When the next crash happens the nation will have learned its lessons: the big banks and wealthy investors who destroyed the economy in 2008 are back at it, encouraged by Obama’s pro-corporate behavior and the Federal Reserve’s money flooding.
It’s becoming increasingly obvious that breaking the power of the super wealthy is the first step towards balancing the budget, job growth, protecting the safety net, and creating a semblance of a rational society. Until then the U.S. will lurch from one crisis to another, while blaming everyone but the real culprits.
Super Rich Holding $21 Trillion Overseas to Avoid Taxation
And even juicier details (or bloodier, anyway).
The 1% Want Your Kidney: Tales of Redistribution
By Dean Baker, Truthout
In a recent paper, Harvard economics professor Greg Mankiw, the former chief economist to President Bush and one of the country's most prominent conservative economists, compared progressive taxation to forcefully removing a person's kidney for a transplant.
That is probably not how most people would view imposing a high tax rate on rich people.
However, the analogy is an interesting one; it just needs a bit more context.
First, we have to realize all the sweet little things that the government does to make the rich even richer. Everyone's favorite starts with the goodies we give to the boys and girls on Wall Street. It takes lots of taxpayer dollars to keep Jamie Dimon and Lloyd Blankfein in nice suits.
According to an estimate from Bloomberg News, the implicit subsidy from the government's too-big-to-fail insurance policy is worth $83 billion a year, a bit more than the $76 billion annual cost of the food stamp program.
The wizards of Wall Street also benefit from the fact that the financial industry is exempt from many of the taxes that more pedestrian businesses face.
The International Monetary Fund (IMF) suggested taxes on the order of 0.2-0.3 percent of GDP ($35-$50 billion a year) to level the playing field.
Then we have the massive redistributions that go to the holders of government granted patents and copyright monopolies. The former easily cost the economy several hundred billion dollars a year.
While patent monopolies can make drug companies and tech companies very rich, these monopolies are an enormous drag on the economy, slowing growth and reducing employment.
And we also have the high-end professionals like doctors, dentists and lawyers, who can often get very rich because they get to set the rules of the market. This means, for example, that while trade pressure in general is designed to force down workers' wages by putting them in competition with low-paid counterparts in the developing world, these professionals are largely protected from such competition. In addition, they get to restrict the number of people who can become members of their profession in the United States. And they set rules that can make it illegal for other, less highly compensated workers from doing tasks for which they are entirely qualified.
But even if we ignore these and other ways in which the rich use the government to redistribute income upward, we still get to the basic issue of macroeconomic policy.
Currently the U.S. economy is close to 9 million jobs below its trend level of employment.
This means that if we had competent people running the Fed back in 2002 - when the housing bubble first became evident to people who follow the economy - and these competent people had taken the necessary steps to stem the growth of the bubble, another 9 million people would have jobs today.
The Right-Wing Plot to Stop the Public Option
By Thom Hartmann, Salon
11 November 13
Behind the scenes as the Koch Brothers, Sarah Palin and Fox News fought to defeat progressive health care reform.
he Koch Brothers have been behind mind-boggling amounts of political spending.
Koch Industries itself has spent more than $50 million lobbying since 1998. But Jane Mayer, with The New Yorker, cautions, "Only the Kochs know precisely how much they have spent on politics."
According to tax records, between 1998 and 2008, the Kochs have funneled hundreds of millions of dollars through charitable organizations, with much of that money winding up in the hands of political organizations, too.
Mayer writes, "The three main Koch family foundations gave money to thirty-four political and policy organizations, three of which they founded, and several of which they direct. The Kochs and their company have given additional millions to political campaigns, advocacy groups, and lobbyists."
The National Committee for Responsive Philanthropy produced a report in 2004 questioning the charitable nature of the Kochs' donations. Their report concludes that the Kochs aren't actually making charitable contributions; they're making investments in ideas that will eventually lead to higher profits. According to the report, Koch foundations "give money to nonprofit organizations that do research and advocacy on issues that impact the profit margin of Koch Industries."
The International Forum on Globalization has mapped the various organizations and individuals that make up the tentacles of the Kochtopus.
They include media personalities such as Rush Limbaugh and Glenn Beck. Think tanks beyond CATO, including the American Enterprise Institute, which has received nearly $2 million in Koch cash, and the Heritage Foundation, which has received more than $4 million. Also benefitting from the Kochs are lobbying organizations such as the US Chamber of Commerce and the American Legislative Exchange Council.
And the Kochs provided nearly $6 million in funding for Americans for Prosperity, one of those organizations that split off from CSE's tobacco Tea Party in the first decade of the twenty-first century to form the new Royalist-tinged Tea Party after Barack Obama was elected in 2008.
It takes a lot of money to get the entire political and economic class to buy into an ideology that has repeatedly caused massive economic crashes - especially since the last crash was still fresh in everyone's mind.
As Charles Koch told Doherty, "We have a radical philosophy."
The Tea Party, even if birthed by the tobacco companies, was nurtured by multimillionaire Royalists and billionaires such as Charles and David Koch. They spent millions to set up and promote Tea Party organizations, fund rallies, and charter buses to carry people from all around the country to boost participation.
And by the summer of 2009, what appeared to be a full-on grass-roots movement, but in the background was a well-oiled, corporate-funded, anti-Obama PR machine, had developed all around the country, complete with mostly elderly white Americans shouting down their congressmen and congresswomen, accusing them of being socialists and pushing secret agendas to raise everybody's taxes and destroy democracy.
But the Kochs weren't operating alone. Born out of the Ailes memo for GOP TV in the 1970s, Fox News was now the most watched cable news network in America. And they did their part to squash any sort of Progressive Revolution, and ensure that the Royalists' counterrevolution succeeds.
Fox News Gets in the Game
Bill Sammon got the memo.
On the morning of October 27, 2009, staffers at Fox News received an urgent message from their boss, the Washington managing editor, Bill Sammon. It had to do with certain wording to be used by Fox News anchors when reporting on the health reform debate - in particular, the wording to be used to describe the "Public Option."
Ten months had passed since Barack Obama and a slew of progressive Democrats in Congress were sworn in, promising to break up the Royalists' stronghold in our democracy and economy.
First up was the Royalist dominance in our health care system - the only one in the entire developed world that does not offer health care as a basic human right.
The Royalists knew their grip on our nation's health care system was in danger, so they grabbed ahold of their megaphone to spew disinformation - namely, Roger Ailes.
Fear of "death panels" was one of several myths spun out of the right-wing messaging campaign funded by big for-profit health insurance corporations opposed to any sort of health reform. It was given credence by Sarah Palin in an August 2009 Facebook post in which she wrote, "The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama's 'death panel' so his bureaucrats can decide, based on a subjective judgment of their 'level of productivity in society,' whether they are worthy of health care. Such a system is downright evil."
The ironic thing about Palin's message was that so-called death panels were actually a very real thing in America. Every single day, death panels at for-profit health insurance corporations determine whether or not it's worth paying out a certain claim or signing on to a certain lifesaving medical procedure. In those cases, a "subjective judgment" is made on how a cancer patient's chemotherapy will affect the corporation's bottom line.
It was exactly this sort of abuse that President Obama's Affordable Care Act was trying to curb. But in the perversion of the health reform debate, somehow that message got reversed. And even though there was no such thing as a "death panels" provision in the health reform bill, it was an issue that dominated much of the health care debate in the summer of 2009.
Another myth was that the president's health reform would amount to a government takeover of the private health insurance industry.
Given the antigovernment fervor sweeping the nation after thirty years of bad government under Royalist Republicans, this myth gained a lot of traction.
The Royalists warned that President Obama was taking over the American health care system with all its advanced MRI machines and laser surgeries and cutting-edge medication, and transforming it into a socialized, rationed health care system like the ones that were killing off millions of people in "Communist Europe."
It was a myth that everyone who lives outside the United States, in particular in Canada and Europe, regarded as patently absurd. Europeans have far better health care results than Americans, and nearly every single person I've talked to from a nation that has a single-payer system told me they prefer their health care system to mine any day of the week, thank you very much.
But Royalists were able to find a handful of Canadians who'd had a bad experience with their home health care system and paraded them around as victims of "socialized medicine." Eventually, like the "death panels" myth, the government takeover myth stuck, too.
It grew out of the Public Option component of the health reform law.
In some parts of the country there was only one health insurance choice for consumers. One big for-profit health insurance corporation held a monopoly over the local market and could therefore charge whatever they liked and treat their customers however they liked. To inject some competition (the stuff Royalists claim to love) into the market, a government health insurance program was conceived that would serve as a more efficient and compassionate alternative to private health insurance plans. In the proposed health reform legislation, this alternative was known as the Public Option. The idea is simple, give people a choice and let the free market decide.
The Public Option was a far cry from what progressives wanted, which was a single-payer system. But if private health insurance corporations suddenly had to compete, then at least prices would get lower and quality would get better.
Royalists hated the idea, as you would expect, since their corporate donors knew that more competition in the markets meant that less money could be diverted to the bonuses of health insurance executives such as "Dollar" Bill McGuire, who made a billion dollars working at United Healthcare.
So Fox News took up the cause. The subject of the Bill Sammons October 27, 2009, e-mail was: "Friendly reminder: let's not slip back into calling it the 'public option.'"
This e-mail was later obtained by the media-watchdog group Media Matters. It read in full:
1) Please use the term "government-run health insurance" or, when brevity is a concern, "government option," whenever possible.
2) When it is necessary to use the term "public option" (which is, after all, firmly ensconced in the nation's lexicon), use the qualifier "so-called," as in "the so-called public option."
The e-mail continued with two more "reminders" from Sammon about how to talk about the Public Option:
3) Here's another way to phrase it: "The public option, which is the government-run plan."
4) When newsmakers and sources use the term "public option" in our stories, there's not a lot we can do about it, since quotes are of course sacrosanct.
Fox anchors did as they were told, and suddenly the phrase "Public Option" vanished from the Fox News airwaves.
Why the name change? Why call it a "government option" rather than its legal name, the "Public Option"?
The answer: polling.
About two months earlier, on the same airwaves, Republican pollster Frank Luntz went on the Sean Hannity show and let slip a critical Republican messaging strategy. In regard to the Public Option, Luntz told Hannity, "If you call it a 'public option,' the American people are split . . . [but] if you call it the 'government option,' the public is overwhelmingly against it." After all, a "government option" implied a government takeover of health care, which meant socialized medicine.
Hannity himself was blown away and immediately noted that Luntz made "a great point" and that from then on Hannity himself would use the term "government option."
A new message was born.
Here was the Washington managing editor of Fox News, Bill Sammon, instructing his news anchors to use poll-tested terms that would help Republicans sway the public's opinion against President Obama's health reform law.
It was plain-and-simple propaganda.
A few months later, Fox News's manufactured fear of a "government takeover of health care" successfully forced Democrats to drop the Public Option from the health reform law.
But, hey, what is Fox News except a branch of government? Right?
Kids today won't put up with this world. What? What? What? Oh! Peace!!!
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