The Fraud That Is The Campaign To Fix The Debt
You may have heard of this group back in late October, when a group of 80+ CEOs signed a letter to Washington that asks Congress work out a deficit-reduction deal that calls for both increases revenues and cuts spending. This letter (and the launch of this group) had enough of the optics of bipartisanship that Senator Chris Coons rushed out with a statement that endorsed this “balanced approach” to deficit reduction. You can see something of these optics in the Statement of Principles that these CEOs published:
In order to develop a fiscal plan that can succeed both financially and politically, it must be bipartisan and reforms to all areas of the budget should be included. The plan should:
o Reform Medicare and Medicaid, improve efficiency in the overall health care system, and limit future cost growth;
o Strengthen Social Security, so that it is solvent and will be there for future beneficiaries; and
o Include comprehensive and pro-growth tax reform, which broadens the base, lowers rates, raises revenues, and reduces the deficit.
There’s more, and you should click over to read the whole thing.
Right out of the gate, commentators started pointing out the problems with this group of CEOs and their high-profle search for some fiscal sanity — namely, that these CEOs and their companies had alot to gain from a deal that insisted on “balanced cuts”, when in fact, one of the reasons why the debt is so big is that these CEOS and their companies are not paying their fair share in taxes. But yet, they are perfectly willing to push for a deal that will reduce their taxes at the expense of folks living off of Social Security and Medicare. Let’s start with Felix Salmon(who probably ought to have the last word on this business):
So when the CEOs talk about “our growing debt”, what they mean is just the debt owed by the Federal government. And when the Federal government borrows money, that doesn’t even come close to making up for the fact that the CEOs themselves are not borrowing money.
Money is cheaper now than it has been in living memory: the markets are telling corporate America that they are more than willing to fund investments at unbelievably low rates. And yet the CEOs are saying no. That’s a serious threat to the economic well-being of the United States: it’s companies are refusing to invest for the future, even when the markets are begging them to.
Instead, the CEOs come out and start criticizing the Federal government for stepping in and filling the gap. If it wasn’t for the Federal deficit, the debt-to-GDP chart would be declining even more precipitously, and the economy would be a disaster. Deleveraging is a painful process, and the Federal government is — rightly — easing that pain right now. And this is the gratitude it gets in return! […]
But when they try to get to the specifics of tax reform, they start falling into blather, asking that it be “pro-growth” (an utterly meaningless phrase), and asking too that it include lower rates and higher revenues.
Maybe they should have just asked for a pony for everybody instead: that would be easier. You can’t have lower rates and higher revenues — not without eviscerating pretty much all of the tax deductions which much of the middle class has learned to rely upon. Mortgage-interest tax relief, the charitable deduction, even the deduction for state and local taxes: pretty much all of them would have to go. That wouldn’t just get blocked by Democrats: it would get blocked by Republicans, too. And because most of these tax expenditures go to the middle class, broadly defined, the one group which would see most of the benefits while bearing very little of the costs would be the top 1%: the very CEOs who signed this letter.
Seriously, go read the whole thing — the comments are good here too.
The Institute for Policy Studies did an analysis of the fiscal impacts of implementing the principles of the Fix the Debt group and found that they would stand to gain quite a bit if they were implemented:
- 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.
- 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.
(The entire IPS document is here.)
But the Huffington Post notes as these CEOs get out and about with their powerpoint slides and media appearances:
Yet the CEOs are not offering to forgo federal money or pay a higher tax rate, on their personal income or corporate profits. Instead, council recommendations include cutting “entitlement” programs, as well as what they call “low-priority spending.”
Many of the companies recommending austerity would be out of business without the heavy federal support they get, including Goldman Sachs and JPMorgan Chase, which both received billions in direct bailout cash, plus billions more indirectly through AIG and other companies taxpayers rescued.
Just three of the companies — GE, Boeing and Honeywell — were handed nearly $28 billion last year in federal contracts alone. A spokesman for Campaign To Fix The Debt did not respond to an email from The Huffington Post over the weekend.
Right. We let these companies repatriate money from overseas — money that will go directly to the pockets of shareholders and executives — they won’t be “creating jobs” with this money in return for cutting back on Medicare and Social Security benefits. such a deal, right?
Peter Overby did a piece on Pete Peterson — the man who is bankrolling this juggernaut to cut corporate taxes AND Social Security and Medicare — the other day.
So what’s missing from this charm offensive by these CEO’s trying to look sober and balanced on America’s debt?
How about American Jobs? You never see these people talk about that — the fact that we still have an employment crisis here in the US. And shame on the legislators who continue to be influenced by the money of all of these people so that they have prioritized making sure that rich people get the better of a debt deal over making sure that Americans are working.
What tax subsidies or deductions would they support eliminating? Most of these firms use as many of these as they can get away with to reduce their tax burdens — some reportedly to zero. It is interesting that they can call for cuts to Medicare and Social Security without naming what of their own tax privileges they would eliminate.
And where’s the stick? Groups like the NRA get what they want because they will with hold checks or support primary challenges. These CEOs aren’t putting their muscle into this — I suspect because they think they can sell this shared sacrifice to a bunch of legislators who are desperate to be seen as being Bipartisan. Except in this thing, being Bipartisan means that middle class people get the short end and are supposed to think that they are doing their bit.
You are going to see alot of these CEOs over the next weeks and you will likely hear alot from local legislators on “bipartisanship” and “working together” — which is just fine. They *should* be working together to craft some policy that is meant to work for most Americans. Just be sure to let them know that this Fix the Debt approach is meant to make these companies whole at the expense of working class and middle class people. Again.
cassandra–can you fix the link to the “statement of principles”–I get a DL 404 error
It is sad to see otherwise smart people like Chris Coons and John Carney taken in by this sort of BS. Basically, you have people with effective tax rates south 18 percent arguing for more tax cuts.
“…a comprehensive and pro-growth tax reform, which…lowers rates, raises revenues…” my ass.
“All Americans should pay their fair share. I fought to raise the tax rates on the wealthiest American and stop giving them a free ride.”
I’d work for someone saying that. Instead we get so much wishy-washy bipartisanship.
Link is fixed, Steve — sorry about that and thanks for pointing that out.
“Our corporations rightly point out that the US has one of the highest statutory corporate tax rates in the world. Over the years, Congress has worked to help these corporations by providing them with a wide range of deductions and tax incentives which allow most of our largest businesses to pay almost nothing in taxes. Let’s make our corporate taxes more fair and more competitive by reducing the rate to 12% (the Irish tax rate these companies admire) and eliminating all business deductions and tax breaks. Companies will get a lower tax rate and Americans will get corporate citizens who finally pay their fair share of taxes.”
I’d work for that.
President Obama, only 36 more days to go without signing tax cuts for the rich. The pressure’s on now – can you do it? No matter what Congress sends you, just keep that pen in your pocket, and start drafting a better tax cut deal for January.
And when I say “tax cuts for the rich,” I mean anything less than the rates that would be obtained by expiration on January 1.
And while you are at it, can you please not cut Medicare benefits?
I’ve had my fill of bipartisanship for twelve years now while Democrats enabled the failed Republican agenda and brought a healthy economy to ruin. Now to achieve bipartisanship, we need twelve years of implementing Democratic policies.
A near perfect post. Thanks Cassandra.
Warning to Coons & Carney, blue state or not we’ll get rid of you if you sign up with these creeps to destroy Medicare and Social Security. In particular I hate the evil Pete Peterson, billionaire Wall St. monster incarnate.
Everyone is going to keep kicking the can down the road. The problem is now, the annual deficit is expanding, in October it was 120 billion. That is starting to look like an annualized rate of close to 1.5 trillion. So, if GDP is around 16 trillion, and we are spending each year now approximately 10% more than we take in, (which is absolutely idiotic). Then the problem is far worse than anyone is admitting. What needs to be done is a reality check. We have to do something about the 16 trillion in debt we have, besides the extra 1.5 trillion per year we are now accumulating. So in Reality, if we take an approach that says, over the next 20 years we are going to pay down the 16 trillion in debt to zero. Then we need about 2 trillion a year in savings or revenue growth just to pay down the 16 trillion, plus an additional 1.5 trillion a year in savings or reveue growth to balance the budget. So our real shortfall is 3.5 trillion per year. So we are off by about 22%. Another words, for revenue, (gdp) of 16 trillion, our spending is 22% to high. Or our revenue is 22% to low. or a combination of both. So, any plan that does not address the 22% im balance is just waisting everyone’s time. There is no way to accomplish this without dramatic economic growth, and heavy spending cuts in all sectors. If you are not for this, then you are not for a viable solution to the problem. There is no way just taxing the rich can add 22% reveune to our whole economy. Even if you tax the rich at 100% tax rate, it would only put a small dent in this problem. It is an idiotic solution. The only solution is to get the economy hitting on all cylinders again, growing dramatically, agressive speninding cuts, and some taxes increases by closing loop holes
Good Show Dils Old Boy. Now then, If you are truly committed to doing your part, vow to never again vote for a Republican for the office of President of the United States.
Unlike your innumeracy regarding spending, the data speaks very clearly on what will happen if a Republican is ever returned to the White House.
Will you take the vow? Do you really care about the deficit, or is this just posturing?
Seriously Jason, allowing all those tax cuts to expire puts the AVERAGE US household owing $3500 more in federal taxes next year. So, while everyone was high-fiving the 1-2% population, and making sure they get a bill–of which they will–the small print was the impact on the average household. But of course getting that pound of flesh was more important. Now I’m just a babe in the woods who has been crying this deadline hurts everybody–but I think the route to nab those 1-2%ers was a bit disingenuous to voters, not to mention us average hits we will be taking on. Personally, $3500 is much more financially devastating to the average family, than the scheckels that will be collected from the uber-wealthy. So, Congress better get crackin’–before the rest of America figures out how they are being played–and collected on. The only break coming is to households earning less than 80k/yr., and then more substantially to those less than 50k–as it should. But really, dya’ think those above that cap can drop minimally 3500 more per year to meet the projections targeted? That’s not chump change to make it all work. Everybody thought it wasn’t going to be them……..
The first thing to do is to remember that the $3500 average is an average that includes all tax brackets. People in the lowest taxable income range would see approx $400 increase, while the 1-2% who got the maximum benefit of the Bush tax cuts would see a $120K increase (approx.). The second thing to do is to remember that there are portions of the entire tax cut picture that were meant to expire. Such as the payroll tax reductions that were a part of the stimulus package. Middle class and working class people will feel this one more since that represents the larger portion of the tax cuts they got. And this cut largely stood in for raises they didn’t get but should have. The third thing to do is to remember that the Bush tax cuts were never paid for. Never. And one very large part of the deficits and debt that folks are screaming over come from the fact that GWB gave away alot of money for 10 years that has never been accommodated in the budget.
The fact is that most Americans aren’t going to see a $3500 increase. But there will be an increase. And if the fiscal cliff does happen, you get increased revenues AND you get spending cuts that will certainly address the concerns of the debt and deficit hawks to some extent. Really, it is a win win. Sure it hurts everybody, and for all of the folks who keep saying that no household would manage its budget like this, hurting everybody is something of the point of the kind of austerity that keeps getting demanded. And here we are being treated to the spectacle of folks who are usually having on about too much spending and too much debt objecting to one big solution that attacks them both.
I doubt that we’ll go over the fiscal cliff, and that President Obama will get his tax cuts for income under$250K. But even if we do, it won’t be long before the middle class portion of those cuts gets restored.
ps. The report where people pulled the $3500 figure and where I got the detail is here. It is a pdf.
Solve mediocre wage growth and weak mobility from the bottom of the income ladder, and all the other fiscal problems disappear.
And those ceo’s may be able to help with that.
this might help also,
http://www.nytimes.com/2012/11/26/opinion/buffett-a-minimum-tax-for-the-wealthy.html?hp
cass–thanks for the PDF–actually my source is Howard Gleckman of a different commentary, but associated w/ the Urban Institute also. So, I’m glad you were able to reproduce another, albeit same team piece. I’m just not nimble like you in the ol’ attached research area–but it was Gleckman out of the same think tank–that I find pretty credible–you know–dry and non-partisan :).
excellent 55min podcast on the fiscal cliff from the Majority Report with Sam Seder: http://ec.libsyn.com/p/e/2/5/e2524be9018062b4/11-20-12-Stephanie_Kelton-PUB.mp3?d13a76d516d9dec20c3d276ce028ed5089ab1ce3dae902ea1d01cd8337d2cb5c10df&c_id=5161585
Stephanie Kelton was on Harry Shearer’s Le Show just before the election. This was an EXCELLENT interview by Harry — you can get the podcast and the transcript of that show here.