LACK OF GOOD JOBS IS OUR MOST URGENT PROBLEM

ABSTRACT: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term. The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year. Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. Workers at Walmart, the largest employer in the US, are in a similar situation. These very profitable corporations can afford to raise their workers’ wages to $15 an hour – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. We undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed.

The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making.

FULL POST: The most urgent problem facing the US right now is a lack of jobs, especially jobs that pay middle class wages and provide benefits. Unemployment is high and long-term – since 2010 roughly 40% of those unemployed and actively looking for work have been unemployed for more than 6 months. This is triple the rate of long-term unemployment in the period from 2000 – 2007. [1]

The official unemployment rate is 7.2% based on those who are actively looking for a job. It would be significantly higher, well over 10%, if those who have given up looking were included. And higher still if the under-employed were included – those working part-time who would like to be working full-time and those who are working at jobs for which they are over-qualified.

The jobs being created during our 4 year old economic recovery are disproportionately low-wage, low skill jobs. (See post of 9/27/13 for more detail.) High unemployment and low wage jobs are key factors in our slow economic recovery (consumers’ lack purchasing power), in the government’s budget deficit (reduced tax revenues), and in growing inequality (95% of the economic gains during the recovery have gone to the richest 1%). As a result, income and wealth inequality have increased to levels not seen since the 1920s.

Fast food workers are emblematic of the low wage, low skill jobs being created. The typical fast food worker makes $8.69 per hour. Two-thirds of them are adults, most of them bring home at least half of the family’s income, and a quarter of them have children. Only 13% get health insurance through their employers.

As a result, over half of fast food workers rely on public, taxpayer funded benefits to make ends meet. The cost to taxpayers is estimated to be $7 billion per year; much of it is for health care, but also food assistance and other economic supports. [2] You can watch a 2 minute video about this, which includes a recording of the McDonald’s help line telling a 10-year employee with 2 children to access food stamps and Medicaid, at
http://lowpayisnotok.org/mcvideo/?utm_campaign=LowPay&utm_medium=email&utm_source=mcvideo-r.

Meanwhile, the fast food corporations make billions of dollars in profits and pay tens of millions of dollars to their senior executives. For example, McDonald’s has 700,000 employees. They are estimated to get $1.2 billion a year in taxpayer funded benefits. McDonald’s is very profitable, making $5.5 billion a year and paying its CEO $13.8 million. It has just purchased a $35 million luxury jet for its executives, which costs at least $2,400 an hour to operate.

Workers at Walmart, the largest employer in the US, are in a similar situation. They make an average of $8.80 an hour. When General Motors was the largest employer in the 1950s, it paid its workers about $50 to $60 an hour (adjusted for inflation). As with the fast food workers, we taxpayers are supporting Walmart workers with multiple types of public assistance. [3]

These big, profitable corporations operate with a business model that uses low paid and part-time workers, typically without benefits, who are, therefore, unable to afford the necessities of life. This leaves taxpayers to pick up the tab for the public benefits they need. These very profitable corporations can afford to raise their workers’ wages to $15 an hour (see post of 9/8/13 for more detail) – a wage they could live on without public assistance. In the meantime, taxpayers are subsidizing these corporations.

Nationally, the typical workers’ wages, adjusted for inflation, have barely increased over the last 30 years. (See post of 9/2/13 for more detail.) The typical male worker in 1978 was making around $48,000 (adjusted for inflation), while the average person in the top 1% earned $390,000. By 2010, the typical male workers’ pay had gone down, while the person in the 1% had their pay more than double. Today, the richest 400 Americans have more wealth than the bottom half of the country, 150 million people, combined.

It used to be that unions and government provided workers with a voice and the power to balance that of the large employers. Today, that voice and power are largely gone. Therefore, wages, benefits, and job security have been eroding. Workers are not even receiving the benefits of their increased productivity. As a result, we are losing the middle class, equal opportunity, and upward mobility. This is undermining our economy and our democracy.

In the first 4 years of the current recovery, the richest 1% of Americans took home 95% of the income gains. In stark contrast, between 1946 and 1978, as the economy doubled in size, everyone’s income doubled as well.

Starting in the late 1970s, the historic link between growth in the economy and productivity on the one hand, and growth in workers’ wages on the other hand, was severed. Income gains started going to the richest Americans and people in the middle, the typical worker, saw their wages stagnate. Part of the problem is that we didn’t adapt to globalization and technological change. We didn’t change public policies. We didn’t change the rules of our economy to continue to provide opportunity, upward mobility, and ensure that economic and productivity growth were broadly shared. We could have done so, but we didn’t. [4]

Among other things, we let the minimum wage fall behind inflation. If it had kept up with inflation, the national minimum wage would be $10.40 today instead of $7.25. If productivity improvement was included, it would be at least $15 an hour. We deregulated the financial system, both domestically and internationally, favoring investors and corporations over workers. And we didn’t include labor standards in trade treaties. Meanwhile, we cut tax rates on high incomes and wealth substantially.

If we had a democracy that was working for the people, the average citizen and worker would have the voice and power to see that their interests and the greater good were served. Instead, we undid or failed to adopt rules for our economy that ensure the gains of economic and productivity growth are widely and fairly distributed – without sacrificing efficiency or innovation. The failure of our policy makers in Washington to focus on creating jobs, let alone good jobs, and on spurring economic growth is the clear and tragic result of the ascendancy of politics over rational policy making. This failure may put their political careers at risk because every poll shows that the public is much more concerned about jobs and the economy than any other issue, including the deficit.

[1] Woolhouse, M., 10/22/13, “Long search finally ends,” The Boston Globe

[2] Johnston, K., 10/16/13, “Public aid crucial to fastfood workers,” The Boston Globe

[3] Moyers, B. with Reich, R., 9/20/13, “Inequality for all,” http://billmoyers.com/episode/full-show-inequality-for-all/

[4] Moyers, B. with Reich, R., 9/20/13, see above

REPUBLICAN SABOTAGE

ABSTRACT: Republicans are sabotaging democracy and the United States of America. Republicans in both the US House and Senate have used obstructionist tactics to block progress on a budget to keep the government operating and on an increase in the debt ceiling to avoid a financial default. In efforts to get policy changes that they don’t have the votes to pass in Congress and didn’t convince the American public to support in the last 3 elections, they have shut down the government and are on the verge of causing an unprecedented financial default.

Republicans in the US House of Representatives have blocked a vote on a simple, straight-forward bill extending the budget, which passed in the Senate, and would keep the government operating. In the Senate, a bill to increase the debt ceiling received a favorable majority vote but the Republicans filibustered, blocking progress.

An extremist minority has taken over the Republican Party because the rest of the Republicans refuse to stand up to them and say, “No.” These extremists have escalated their demands every time President Obama and the Democrats have compromised with them. For example, the extremists are demanding more budget cuts, even though the deficit has shrunk to half its size of 4 years ago.

Every compromise put forth on the budget or debt ceiling that has any chance of passage is torpedoed by the extremists, often with new demands. The track record makes it clear that these extremists won’t be satisfied with any concessions they get. In fact, anything they get will just embolden them to create another crisis so they can demand more.

FULL POST: Republicans are sabotaging democracy and the United States of America. Republicans in both the US House and Senate have used obstructionist tactics to block progress on a budget to keep the government operating and on an increase in the debt ceiling to avoid a financial default. In efforts to get policy changes that they don’t have the votes to pass in Congress and didn’t convince the American public to support in the last 3 elections, they have shut down the government and are on the verge of causing an unprecedented financial default. [1]

Republicans in the US House of Representatives have blocked a vote on a simple, straight-forward bill extending the budget, which passed in the Senate, and would keep the government operating. They used an unprecedented parliamentary procedure to block any chance that the bill would get voted on in the House. They did so by making a very specific change in the normal rules of operation of the House. Under normal procedure, any House member would have been able to request that the Senate bill be voted on. On the night of September 30, the eve of the shutdown, Republicans changed the normal rule to say that any request to vote on the Senate bill would have to be made by the Republican majority Leader or with his approval. “I’ve never heard of anything like that before,” said Norm Ornstein, resident scholar at the conservative American Enterprise Institute. As a result, efforts by Democratic House members to bring the Senate bill up for a vote and keep the government operating, were blocked. If the bill had been voted on it almost certainly would have passed because at least 28 House Republicans have publicly said they would support such a bill if it were brought to a vote, which, when combined with Democratic votes, would be a majority. [2][3]

Meanwhile in the Senate, a bill to increase the debt ceiling was brought to a vote. A majority voted in favor of it but the Republicans filibustered, making a 60 vote super-majority necessary to move forward. [4]

An extremist minority has taken over the Republican Party because the rest of the Republicans refuse to stand up to them and say, “No.” These extremists have escalated their demands every time President Obama and the Democrats have compromised with them. In 2010, they wanted the Bush tax cuts for the wealthy extended through 2012 so they could make their case for the tax cuts to voters. They made their case and lost the election. Did they then let the tax cuts expire? No. As part of the fiscal cliff negotiations they demanded they be extended permanently. The President and the Democrats compromised and extended them permanently for incomes up to $400,000. And now the Republicans are back demanding tax cuts for the wealthy.

On spending cuts, they demanded large spending cuts and held the financial credibility of the country hostage to their demand in the summer of 2011. When the President and the Democrats compromised and made significant cuts, they demanded more. So a Super Committee was created to find ways to reduce the deficit but the extremists refused any compromise. They presented their case for budget cuts to the voters in 2012 and lost. Nonetheless, the extremists refused to compromise and the automatic, across the board cuts that the Super Committee was supposed to find a way to avoid went into effect in March. But the extremists are demanding more budget cuts, even though the deficit has shrunk to half its size of 4 years ago and is continuing to shrink.

The extremists have also demanded that the Affordable Care Act, which they have dubbed Obama Care, be repealed, even though it would provide health insurance to tens of millions of Americans who don’t have it now. Having campaigned on this issue in 2012 and lost, and without the votes to repeal it in Congress, they are now holding our democracy hostage to their demand to stop it.

Every compromise put forth on the budget or debt ceiling that has any chance of passage is torpedoed by the extremists. Often, they put forward new demands such as restrictions on health insurance coverage of women’s reproductive health or shifting the sequester’s budget cuts to cut social programs rather than the military.

The track record makes it clear that these extremists won’t be satisfied with any concessions they get. In fact, anything they get will just embolden them to create another crisis so they can demand more. Hopefully, the country, President Obama, the Democrats, and perhaps even the majority of Republicans have learned that extortionists’ demands escalate if you give in to them. Furthermore, keeping the government running and paying the nation’s bills should never have been negotiable in our democracy in the first place. [5] This is sabotage of the democratic process and the democratic principle of majority rule.

It is frustrating to see a minority in Congress and in the country creating such hardship and inconvenience for so many in their pursuit of political goals that have been rejected repeatedly by the majority in Congress and multiple times by the voters. It’s particularly frustrating to see Congress people getting paid (although some have committed to donate their salaries to charity), keeping their staffs on at full pay in some cases, keeping their gym and pool open, and even keeping their special little subway running between the House and Senate office buildings, while so many others are harmed or inconvenienced. Meanwhile, among other things, toxic waste clean-ups have stopped, accepting new patients into clinical trials at the National Institutes of Health has stopped, access to National Parks is blocked (except where states are paying to keep them open), contractors and programs that depend on federal government funding are shutting down, people who depend on, need, or expect government services or information are having to go without, and, of course, hundreds of thousands of government employees are not getting paid, creating real hardships for many families. [6]

It’s past time to raise our voices and demand that our democratic principles be honored by the extremist minority and their Republican enablers in Congress. I urge you to contact your Representative and your Senators to tell them to reopen our government and raise the debt ceiling so our government can pay its bills.

[1] Moyers, B., 10/4/13, “On the sabotage of democracy,” http://billmoyers.com/segment/bill-moyers-essay-shutdown-showdown/

[2] McCarter, J., 10/10/13, “How House Republicans guaranteed a shutdown: by changing the rules, “ Daily Kos

[3] Alman, A., 10/13/13, “House Republicans changed the rules so a majority vote couldn’t stop the government shutdown,” The Huffington Post

[4] Laing, K., 10/12/13, “White House slams Senate Republicans,” The Hill

[5] Reich, R., 10/12/13, “Why giving Republican bullies a bloody nose isn’t enough,” The Huffington Post

[6] Terkel, A., 10/9/13, “Congressional perks deemed essential during government shutdown while public sacrifices,” The Huffington Post

CORPORATIONS’ TAX AVOIDANCE

ABSTRACT: Large corporations are dodging taxes by using offshore tax havens. They use them to avoid paying about $90 billion a year in US income taxes. Of the 100 largest US corporations with publicly traded stock, 82 maintain subsidiaries in offshore tax havens and they are holding $1.2 trillion in them, on which they have avoided paying US income tax. If all 82 of these corporations reported their $1.2 trillion stashed offshore as US income and paid the 35% rate, the federal government would receive $420 billion, which would cut the deficit by more than half.

For the 2010 tax year, profitable US corporations that filed a US income tax return paid an average of only 13% of their worldwide profits in income tax, despite the stated US corporate income tax rate of 35%.

The loss of this revenue for the federal government hurts all of us. It means that we, as individual taxpayers, and small businesses either have to pay more taxes to make up the difference or that our federal government (and state governments too) have less to spend on things we count on government to do.

Closing this offshore tax haven loophole would be a step toward tax fairness. There are bills in Congress to do so. I urge you to contact your Senators and Representative to urge them to support closing the offshore tax haven loophole.

FULL POST: Large corporations are dodging taxes by using offshore tax havens. They use them to avoid paying about $90 billion a year in US income taxes. This costs the US government more than was saved ($85 billion a year) by the ill-conceived, across-the-board budget cuts in March (known as the sequester) and far more than the proposed cut in food stamps (known as SNAP) would save ($4 billion a year). (See posts of 9/16 and 9/19 for some of the effects of the sequester.)

Of the 100 largest US corporations with publicly traded stock, 82 maintain subsidiaries in offshore tax havens and they are holding $1.2 trillion in them, on which they have avoided paying US income tax. Fifteen corporations hold two-thirds of this cash in 1,900 subsidiaries. [1] Many of these subsidiaries are officially housed in the Cayman Islands where the corporations maintain a legal address but no other physical presence. Ironically, roughly half of this offshore money is invested in US securities or through US accounts. [2]

In part because of the use of these offshore tax havens and accounting tricks that shift income to them, for the 2010 tax year, profitable US corporations that filed a US income tax return paid an average of only 13% of their worldwide profits in income tax. Even when state, local, and foreign income taxes are included, they paid only around 17% of profits, despite the stated US corporate income tax rate of 35%. [3] (See post of 11/5/11 for more information on corporate income taxes.)

A few specific examples help to put this in perspective.

Pfizer, the world’s largest drug maker, has 40% of its sales in the US but reported no taxable income in the US over the last 5 years. It has $73 billion sitting untaxed in 172 subsidiaries in offshore tax havens.
Microsoft has an untaxed $61 billion in 5 offshore tax havens.
Citigroup, which US taxpayers bailed out during the 2008 financial collapse, has $43 billion sitting untaxed in 20 offshore subsidiaries. [4]
Apple Computer made $30 billion in supposedly offshore profits over the past 4 years on which it paid no taxes to any national government, largely by exploiting technicalities in US and Irish tax laws. [5]
The Bank of America, also bailed out by US taxpayers during the 2008 financial collapse, has $17 billion sitting untaxed in 316 offshore subsidiaries.
Oracle has an untaxed $21 billion in 5 offshore subsidiaries.
Google has $33 billion sitting untaxed in 25 offshore subsidiaries. [6]

If these 7 corporations reported this $278 billion as US income and paid the 35% tax rate on it, the federal government would receive $97 billion. This would be more than enough to reverse the sequester’s cuts and continue food stamp benefits. If all 82 of the largest corporations with offshore tax haven subsidiaries reported their $1.2 trillion stashed offshore as US income and paid the 35% rate, the federal government would receive $420 billion, which would cut the deficit by more than half.

The loss of this revenue for the federal government hurts all of us, including small and local businesses. It means that we, as individual taxpayers, and small businesses either have to pay more taxes to make up the difference or that our federal government (and state governments too) have less to spend on education and job training, transportation and other infrastructure, safety and security, and all the other things we count on government to do.

Closing this offshore tax haven loophole would be a step toward tax fairness. There are bills in Congress to do so: in the US Senate, the Cut Unjustified Tax (CUT) Loopholes Act (bill # S.268) and in the US House, the Stop Tax Haven Abuse Act (bill # H.R. 1554). I urge you to contact your Senators and Representative to urge them to support closing the offshore tax haven loophole.

(You can find out who your Congress people are and get their contact information at: http://www.senate.gov/general/contact_information/senators_cfm.cfm for your Senators and http://www.house.gov/representatives/find/ for your Representative.)

[1] US PIRG, 7/31/13, “Offshore shell games,” (http://www.uspirg.org/reports/usp/offshore-shell-games)

[2] Clark, K., 10/4/13, “Crackdown on offshore tax havens,” Daily Times Chronicle

[3] US General Accounting Office, May 2013, “Corporate income tax: Effective tax rates can differ significantly from the statutory rate,” (http://www.gao.gov/products/GAO-13-520)

[4] MASSPIRG, 4/4/13, “Picking up the tab,” (http://masspirg.org/reports/map/picking-tab-2013)

[5] The Balance Sheet, 5/21/13, “Apple slips through $30 billion tax-code hole,” The American Prospect

[6] US PIRG, 7/31/13, see above

WHY IS THE GOVERNMENT SHUTDOWN?

ABSTRACT: The federal government’s shutdown for lack of a budget has nothing to do with the deficit or democracy; rather, it has everything to do with politics, ideology, and the tyranny of a minority. The extreme wing of the Republican Party, without the support in Congress to pass legislation and having lost the last election, is trying to impose its ideology on the country by taking the government’s budget hostage.

The federal government’s budget deficit is at its lowest level in 5 years and roughly half of what it was in 2009. The Republicans’ primary policy target is the Affordable Health Care law, also known as Obama Care. They ideologically oppose this expansion of the government’s role in health care, even though it is built on conservative principles and will provide health insurance to tens of millions of Americans who don’t have it now.

There’s a bill sitting in the House that funds the government for a few weeks – a so-called Continuing Resolution (CR). With a simple yes or no vote, it would pass. But because it doesn’t have the support of the majority of Republicans, Speaker Boehner won’t allow a vote on it.

800,000 federal employees will lose their paychecks and millions of Americans will lose services funded by the government. Nonetheless, members of Congress will continue to get their paychecks and their good, taxpayer-subsidized health insurance.

As recent history has shown, if the extremists in Congress get what they want, or any part of it, they’ll just be back at the next opportunity, creating another crisis, and asking for more. Therefore, negotiation with this extortion, blackmail, hostage taking, or bullying, whatever you want to call it, should not and cannot be undertaken.

FULL POST: The federal government’s shutdown for lack of a budget has nothing to do with the deficit or democracy; rather, it has everything to do with politics, ideology, and the tyranny of a minority. The extreme wing of the Republican Party, without the support in Congress to pass legislation and having lost the last election, including the presidency and seats in both houses of Congress, is trying to impose its ideology on the country by taking the government’s budget hostage.

This extreme faction is not willing to abide by the last election, by legislation previously passed (such as the Affordable Care Act), or by the will of the American public. And they are not willing to engage in meaningful negotiations because they believe they know what is best for the country and for all of us. They are willing, however, to disrupt the lives of millions of Americans and to harm our weak economic recovery by shutting down the federal government.

And this is not about the deficit. The federal government’s budget deficit is at its lowest level in 5 years and roughly half of what it was in 2009. [1] The deficit is projected to continue to fall as the economy recovers, which increases government revenue and reduces expenses. Many economists expect that in 2 years it will have decreased to a sustainable level. [2]

The Republicans’ primary policy target is the Affordable Health Care law, also known as Obama Care. They ideologically oppose this expansion of the government’s role in health care, even though it is built on conservative principles: 1) it uses private health insurers and providers, and 2) it requires personal responsibility through the mandate that individuals purchase health insurance (an idea born in a conservative think tank). They oppose it despite the fact that it will provide health insurance to tens of millions of Americans who don’t have it now, and the fact that the more the public knows about Obama Care’s specific provisions, the more they like it. (See my posts of 8/21/13 and 8/19/13 for more information.)

Various budget proposals from the Republicans identify their other policy targets. They have included cuts to other social programs that their extreme wing opposes, including cuts to Social Security, the Medicare and Medicaid health programs, and food and nutrition assistance, among others. On the other hand, most of them would increase military spending on top of its significant increases in recent years, which already mean that we are spending more on the military (adjusted for inflation) than at any time since World War II. [3]

The Republicans in the House of Representatives, who are the roadblock to passage of a budget, are refusing to bring to a vote any budget that does not have the support of a majority of Republicans. Therefore, the most extreme 117 Republicans in the House, 27% of its overall membership, can and are blocking progress and forcing this shutdown. (See post of 7/27/13 for more information on obstructionism in the House.)

There’s a bill sitting in the House that funds the government for a few weeks – a so-called Continuing Resolution (CR). It’s simple and straightforward; it simply funds the government at current levels without making any policy changes. If the Republican leadership in the House would allow a simple yes or no vote on this bill, it would pass with support from members of both parties – as it did in the Senate. But because it doesn’t have the support of the majority of House Republicans, Speaker Boehner won’t allow a vote on it.

800,000 federal employees will lose their paychecks and millions of Americans will lose services funded by the government, including meals for seniors, Head Start classes for preschoolers, and access to national parks for all of us. Nonetheless, members of Congress will continue to get their paychecks and their good, taxpayer-subsidized health insurance.

This is the second time in 20 years that an extreme Republican agenda has forced a government shutdown. Democrats have never done this when they were in the minority or did not hold the presidency.

As recent history has shown, if the extremists in Congress get what they want, or any part of it, they’ll just be back at the next opportunity, creating another crisis, and asking for more. Therefore, negotiation with these extortionists, blackmailers, hostage takers, or bullies, whatever you want to call them, should not and cannot be undertaken. [4]

Long before blocking Obama Care was linked to a government shutdown, Norm Ornstein, the political scientist at the conservative America Enterprise Institute, wrote that “What is going on now to sabotage Obamacare is not treasonous – just sharply beneath any reasonable standards of elected officials with the fiduciary responsibility of governing.” [5] I wonder what he would say now about those in Congress whose behavior has led to this government shutdown.

[1] Klimasinska, K., 9/12/13, “U.S. budget gap narrows as stronger growth boosts revenues,” Bloomberg

[2] Lowrey, A., 4/22/13, “The incredible shrinking budget deficit,” The New York Times

[3] Bilmes, L., 7/31/13, “Pentagon a ripe target for cuts,” The Boston Globe

[4] Reich, R., 9/30/13, “Why Obama and the Democrats shouldn’t negotiate with extortionists,” The Huffington Post

[5] Light, J., 7/25/13, “Obstructionism for the recordbooks,” Moyers & company (billmoyers.com/2013/07/25/obstructionism-for-the-recordbooks)