Tales From The Crypt - Tax Cuts and Bond Markets Edition

Markets screeched in horror at the mere mention of conservative ideas like tax cuts, a GOP "free market" and glibertarian favorite stump speech talking point that should be laid to rest permanently:

For the past several months, we've been told by various Serious People that European governments were being punished by markets for being too lavish on social spending, despite bond rates being at record lows (other than in peripheral countries subject to more specific attacks) - or would be punished if they didn't "reform" and lower taxes. The same has been promoted in the US, via the Catfood Commission and the whole noise machine against deficits and stimulus packages... Well, the US government did just what the Serious People wanted, with a nice fat tax cut for the rich, and bond rates jumped - ie markets actually literally hated the measures, selling off US bonds violently.

Bwahahaha! RIP conservative tax cut kool-aid.
Considering al Qaeda's stated goals of destroying America economically... This kind of puts the conservative ideology of never-ending tax cuts firmly in the arsenal of a terrorist's financial Weapons of Mass Destruction (right up there with Credit Derivatives and Credit Default swaps) and those that support them... Well? In the words of an American idiot, "if you aren't with us, yer against us."

How Wrong Can One Person Be?

I know it’s exciting when someone new walks in and turns everyone’s heads. They’re mysterious. That’s sexy. And, if they can put words together into complete, grammatically correct sentences, they (by today’s standards) are brilliant.

So, suddenly, the known quantity of the person we’ve been with seems suddenly unbearably dull. And all their flaws become magnified to funhouse proportions. We’re prone to find fault with old reliable. We dream of dancing with the New Kid In Town.

But sooner or later, the New Kids reveal themselves to be complete jerks. What was once cool, suddenly seems mean. We realize that New Kid hasn’t been laughing with us, New Kid has been laughing at us. Or worse, we realize that seemed “cool” is actually, kinda dumb.

It may sound like middle school, but that’s politics in America today. And Linda McMahon has been CT’s New Kid du jour. But guess what? Turns out that scrappy-business-woman-who-will-shake-things-up-in-Washington-and-go-to-the-mat-for-us-in-CT narrative isn’t really an accurate character portrayal. McMahon really, really, is far more out of touch with “real people” in CT than she claims.

http://www.ctnewsjunkie.com/ctnj.php/archives/entry/mcmahon_doesnt_rule_out_reducing_minimum_wage/#cmt

McMahon was asked if she supported increasing the minimum wage. (This wasn’t a gotcha media question out of nowhere. She’d just received the endorsement of the National Federation of Independent Business, who is decidedly anti-minimum-wage increases: http://www.nfib.com/issues-elections/issues-elections-item?cmsid=240). She responded:

“What I think what we have to look at whenever we’re talking about minimum wage increases is where is our economy is at this particular point, and how’s that going to impact the businesses that are going to have to pay those wages?” McMahon said.

Yes. It must be really, really terrible to be paying out minimum wage to one’s workers. Really, if we wanted to help out mom-and-pop business owners (like McMahon and her hubby, who run a mom-and-pop small business themselves, dontcha know?), we’d indenture workers to them for 7 years.

“Pressed further, McMahon admitted she did not know the current minimum wage or if anyone at World Wrestling Entertainment is earning that amount.”

Oh. That’s probably why she needs to study it more, then. For the rest of us, who already know that the minimum wage is $8.25/hr in CT (and $7.25 from the feds), and who also know that the federal minimum wage recently rose after nearly a decade of remaining stuck at $6.55/hr, do we really need the review?

Minimum wage is only the bottom rung (well, second bottom rung: don’t forget the many employees who earn less than minimum, and rely on tips to make up the difference. And Americans are lousy tippers.) of the pay-scale ladder. And it’s been clear to anyone who earns an hourly wage that our wages are not keeping up with our cost of living. By keeping the minimum wage down, wages all up the ladder stagnated. (Except at the tippy top. Where Linda McMahon sits.) Which is part of the reason we are in this nightmare recession to begin with.

McMahon, however, doesn’t earn an hourly wage. She earns $46 million a year with her little mom-and-pop business. Now, much of that money is “bred”: it’s dividends and compound interest on investments and all kinds of other low-tax, non-work-related income that one can get when one has accumulated a huge pile of cash. If McMahon’s earnings were calculated hourly, assuming 50 work weeks a year –I’m giving her 2 weeks’ vacation like the rest of working stiffs– she’d be making $23,000 an hour.

Nice work if you can get it. Which, apparently, McMahon can, but she’d rather you and I ….. can’t.

Now, McMahon, sensing she’d maybe said something a little out-of-touch, quickly back-pedaled:

“Don’t take away this morning that I’m saying that we should scrap minimum wage,” she said. “That is clearly not my position.”

So, she’s not for not increasing minimum wage? Or, she was for it, but now she’s against it? Or, she has no idea what it’s like to live on $14,500 a year ($16,500 in CT), but she does know that increasing the tax rates on people earning $250,00 + is just too much to be borne? Clearly, her position is entirely unclear. But, her sympathies do lie with the people who have to pay their workers.

Oh well, any rising star candidate can have one bad moment, right?

Except, the more I hear from McMahon (and, honestly, I get so much junk mail from her campaign, I feel like I went to high school with her), the less I understand about her positions.

Maybe you don’t know this, but immigration has become somewhat of a hot topic this election cycle (I know. Who knew?). Two important pieces of immigrant-related legislation were nearly voted on this week. (Except that the GOP voted to not vote on either one of them. Hasta la vista, baby!) Maybe you’ve heard that CT is home to a sizable population of immigrants?

Well, it’s all news to McMahon!

http://newhavenindependent.org/index.php/archives/entry/mcmahon_hits_fair_haven/

“In an interview, she claimed ignorance of two issues of top concern for Latino advocates, especially in a city that has thousands of illegal immigrants: She said she is not familiar with the federal Dream Act, a federal bill that would have allowed “alien children” a path to citizenship. She also said she had not heard about the New Haven’s municipal ID, which made national headlines when Mayor John DeStefano created it in 2007 for all residents, regardless of immigration status.”

Awesome. It’s not like the legal status of American-born children of non-native-Americans will be of any consequence to CT, right? It’s not like issues of immigration and minimum wage are completely unrelated. Nor the idea of educating children of immigrants (legal or otherwise) won’t have an impact on our workforce, our economy, or wages!

(Hmmm, maybe McMahon should ask her kindred spirit - another mom-and-pop-small-business owner! - and fellow office-seeker, Meg Whitman, about thorny issues of immigration and wages …

http://tpmmuckraker.talkingpointsmemo.com/2010/09/arrest_meg_whitman_housekeeper_says_conservative_i.php?ref=fpb

…. Maybe not.)

Then there’s McMahon’s two-step cha-cha position on education:

http://www.ctmirror.org/story/7758/mcmahon-campaign-shrugs-possible-tea-party-endorsement

“As a member of the state Board of Education, McMahon supported the state's application for federal Race to the Top funds, an education program that many in the Tea Party see as another federal intrusion into what should be the province of local and state government.

“But McMahon did tell [Freedomworks] she would consider voting to eliminate the U.S. Department of Education, as well as the Department of Energy and, possibly, the Environmental Protection Agency.”

Or, maybe she didn’t!

“McMahon's campaign says McMahon's position to the Tea Party was that she would have to study the issue, before deciding if she could support dismantling any federal agency.

Except, there’s a Video of her remarks, taken by an audience member, is available on YouTube.

The question comes at 4:45: “Can you name the top 2 or 3 federal agencies you would dismantle?”

The answer is coy.

"I'm not sure that I know an agency should be totally dismantled and done away with until I've had an opportunity to look at it more," she said. "Some that come to mind that I think would have a first look: one would be the Department of Education."”

So, she won’t dismantle the DoE, until she’s looked at it. Then she’ll dismantle it.

I now have a headache in my right eye. This is political hair-splitting. Does McMahon ever state a clear policy position? For someone who has used her “political outsider” credentials a major line on her resume, she sure learned the argot of political double-speak pretty quick. (I should also add, she put the Department of Energy and the Environmental Protection Agency on the chopping block as well.)

Or her remarks on repealing health care reform (at about minute 2 in the same video): she thinks we need health care reform, but because there was “no bipartisanship” in the recent overhaul (which is true only in the sense that no Republicans voted for it. Because there are a lot of Republican ideas in HCR. But that’s another blog post), she wants to “repeal it” and “start over.” And probably end up with a bill that looks remarkably similar, but with less access to health care for the middle and working class. And more perks for the ultra-wealthy, like herself.

That’s what really gets me. Here is a candidate who pretends to be “for the regular people.” But she’s really in it for people like her. Top earners. (And, of course, she then smears her opponent with her own flaws.)

http://blogs.courant.com/rick_green/2010/09/watercress-or-baloney-linda-mc.html

Here’s the rundown so far (based on her campaign website):

Linda McMahon is for:

▪ tax reductions on capital gains and dividends

▪ abolition of the estate tax and the gift tax

▪ greater tax deductions to encourage savings for IRAs and higher education

▪ passage of pending free trade agreements with Colombia, Panama, and Korea

All of which help to enrich the top earners, at the expense of bottom earners.

She’s against:

▪ the minimum wage (starve the worker, so the employer can make more)

▪ health care reform (so her “independent contractor” wrestlers have even fewer options when the steroids they’ve used to stay employed melt their internal organs.)

▪ the stimulus (we should take all that money and “pay down our national debt.” So the jobless, and the soon-to-be-homeless can feel financially responsible, I guess.)

▪ “burdensome regulations” (want some eggs?)

All of which help to level the playing field for the middle and working class. (Once again, let me refer you to Senator Al Franken’s brilliant one-act play:

http://www.skeptically.org/curpol/id24.html

Because sometimes, you need Helen Hunt and Drew Barrymore to explain regressive tax policy.)

She’s also, apparently, against the Department of Education, for reasons I can’t begin to guess.

On top of it, she doesn’t even bother to know the details of things that concern “regular people”. Like what the minimum wage actually is. Or what the DREAM act might mean to cities like New Haven. But then, we should recognize this character trait by now. Look at how hard she and her husband worked to make sure they were enriched at their wrestlers’ expense! (Insert your own links here. There are many. Just don’t go to that vapid ad with the 2 soccer moms jabbering about “soap opera.”)

Color me unimpressed with Linda McMahon. She’s wrapped up Reaganomics talking points in wrestling tights and cape, but she’s no more compassionate about the actual plight of actual constituents than any other Beltway bloodsucker. And she’s willfully ignorant on issues that do not intersect with her rarified world of the very, very rich.

While certainly more polished(and less whackadoo) then, say, Sarah Palin or Christine O’Donnell, under the surfaces, she’s cut from the same “Me first! Screw you!” cloth.

Cool? Nope. Smart? Not in my book. Senatorial? Let’s hope not.

UPDATE:

Here's what McMahon's opponent did today:

http://voices.washingtonpost.com/political-economy/2010/10/connecticut_halts_all_foreclos.html

Which will certainly come as a relief to many CT homeowners. (I've been wondering: if McMahon is really so concerned about her potential constituents, why doesn't she dole out $25 million in mortgage relief to CT homeowners unemployed from the Great Recession? How many houses would $25m save from the bank auction? And how would keeping these people in their homes positively impact the CT economy? Linda? Call me!)

UPDATE 2:

The hits keep coming. (This is where being a shut-in on a Friday night pays off. Who else saw Rachel Maddow tonight?)

http://www.cqpolitics.com/wmspage.cfm?docID=news-000003745379

When asked by an audience member at a TEA-bagger event, if she'd ever lobbied congress:

"McMahon then acknowledged having made campaign contributions to both parties. But “in terms of lobbying dollars in Washington, I have not spent lobbying dollars in Washington,” she said. "

Too bad she's, um, lying.

"Between 2001 and 2008, McMahon’s company paid at least $680,000 to lobby Congress and federal agencies over such issues as the defense authorization bills of 2002 and 2003, which included taxpayer-funded advertising programs during wrestling programs. McMahon’s company also sought lobbying help during a Congressional steroids investigation.

Yeah. Lying. Pants-on-fire lying.

But this is my favorite part:

"The McMahon campaign dismissed the issue as a simple matter of imprecise language and defended the lobbying payments."

I'm guessing she left herself some wiggle-room with the sentence, "I have not spent lobbying dollars in Washington." She probably wasn't "in Washington" when she made those lobbying payments. She was probably on the phone, credit card in hand, in CT. Or, she sent a flunky to DC with the check while she was on vacation. Or, maybe, she was in the District of Columbia, but not in Washington State. See? It's all a big misunderstanding!

So. Tell me again how Linda McMahon is an "outsider" offering us something "new?"

Party like it's Orwell's 1984

This summer, I read George Orwell’s paranoid dystopia novel, 1984. I have no idea how I managed to graduate from high school, let along college, without reading it, but, there you go. (And, all literary genius aside, I’m so glad I wasn’t friends with Orwell. Somehow I doubt he was ever the life of a party.)

Now that I’m done with it, I can safely say that I will never read it again. Not because it’s a bad book (it’s brilliant), or because Orwell’s prophetic powers were off (in so many ways he’s so dead-on-balls-accurate it’s frightening). No. I will not reread it, because I can go anywhere there’s a “Don’t Tread On Me” flag flying, and relive it, kind of like a Renaissance Faire or a Civil War Reenactment. Between the idea of perpetual war and the permanent underclass, the celebration of enforced ignorance, the rewriting of history, and “Newspeak” (Orwell was channeling Sarah Palin’s Twitter account, wasn’t he?!), I am certain most of the novel is actually set in a TEA Party rally.

Want an example of Orwell’s Oceania in “real” life? Look no further than this discussion between CT 5^th district Congressional candidates, Chris Murphy (D) and Sam Caligiuri (R).

http://www.housatonictimes.com/articles/2010/08/20/news/political/doc4c6dbc03cf24d674185404.txt

Let’s remember a few things: we’re in a recession. The worst one since the Great Depression. We all, no matter our political leanings, want to end the recession as soon as possible. And, while progressives and Democrats have suggested investing in economic stimulus projects to create jobs, services and infrastructure (like Grove St and Boardman Rd), Republicans have been screaming since, oh, November 6^th 2008, that we Must! Lower! The! Deficit!

Thankfully, our 43^rd president showed us the way to do just that. The huge tax breaks to the biggest earners are set to expire. This will return tax levels to Clinton administration levels. (Remember the great recession of the Clinton administration? Neither do I). And yet, suddenly, this is a bad idea. It’s a startling idea. It’s also, apparently, a plot cooked up by Obama.

So. Chris Murphy calmly explains how these expiring tax cuts will be good for everyone, and Sam Caligiuri repeats the same double-think talking points that every Republican across the country has repeated since Obama won the presidency.

Murphy: “If you are serious about deficit reduction, then I can’t see how you can support adding $700 billion over the next 10 years to the federal budget deficit by extending the Bush tax cuts for the wealthy when a millionaire is getting an extra $100,000 in tax reductions and a middle-class person in Waterbury is getting $20 a year.” (Duh.)

Caligiuri: “Small business owners I talk to in the district have said that they are concerned that those tax cuts might be there in January, and it can have an effect in them hiring again.”

According to Caligiuri, “If you tax the upper class more, then you’re going to have fewer jobs and less revenue.”

Because, in his world, you must be of the “upper class” to own a small business. And a marginal increase in the tax rate causes otherwise prosperous businesses to go belly up. (I’m guessing he also will tell us that a million bucks just isn’t worth what it used to be too.)

Murphy, dwelling in reality, reminds us, “People expand their businesses because they have more customers.” If you sell widgets, and people start buying your widgets faster than you can make them, you hire someone to help you make widgets. You may even bump up the price of your widgets. Regardless if your personal income tax rate is 28% or 31%. Because, dude, you’re selling more widgets! (And if that’s not how you do business, UR doin it wrong!)

It’s like watching a college senior debate Scooby Doo. Except not as funny.

Caligiuri is selling that old song, that asking top earners to bear a greater portion of the tax base than their mini – er, employees, is “wealth redistribution.” Which is communist, or at least French and gay, and could lead to dancing. Or a terrorist attack (I get lost after the “redistribution of wealth” part). Of course, this is pure bunk. The thing is, the Bush tax cuts of the last decade were a “redistribution of wealth” back into the hands of the very, very, rich, at the expense of the other 98% of earners.

But, don’t take my word for it.

http://www.fivethirtyeight.com/2010/04/jonah-goldberg-anti-maldistributionist.html

There’s some nifty charts, some fancy economist words, and a well-supported argument that we are not in danger of sending our million- and billionaires to Siberia while we dirty proles dine on their Bichon Frises off their gold plates. Basically, we as a nation do not over tax our population, we do not play Robin Hood with the tax revenue, and we are not in danger of becoming French and gay.

Here’s a more plain-spoken explanation of the blatant hypocrisy of the “tax cuts save jobs” double-think:

http://www.cnbc.com/id/38720553

“Those who want to extend the Bush tax cuts make the following argument, among others. This is not their only argument: 1) The rich include many small business owners. 2) Small businesses are the primary engine of job growth. 3) If we raise taxes on the rich, they will not hire people or will hire fewer people than they would have under the lower tax rates. 4) Therefore, raising taxes on the rich will hinder job growth.”

But … we’ve been doing tax cuts for much of the last decade. How did they work out for jobs, growth, and small businesses?

They sucked at it. Why? Because:

“If there is no increase in business, no profitable reason to add to the payroll, no small business is going to hire people no matter what their tax rate is.”

Now, why did Bush enact those tax cuts in the first place? Because, in his world, Bill Clinton (remember when Bill Clinton was a socialist? Neither do I.) had imposed an unfair tax burden on the rich (those poor business owners, again). So, maybe if the Bush tax cuts hadn’t been enacted, the uber wealthy would have done even worse?

I dunno. I look at these numbers, from the oppressive Clinton tax era, and it doesn’t look like many of the “upper class” went hungry:

“In 1990, the marginal rate was raised from 28 percent to 31 percent and the higher rate bracket was changed to include income over $82,150 (previously it was $162,770). That year job growth slowed dramatically from about 2 million in 1989 to 321,000 in 1990. In 1991 there was a net loss of 857,000 jobs.”

This was under Bush Senior. (Remember his “No New Taxes” pledge? Yeah. Me too. But, hey, the guy was trying to pay for a war in a tiny, far away, oil-rich country. Because he apparently forgot that wars pay for themselves.) Here’s what happened under Bill Clinton:

“In 1993, two new high income brackets were created: For income over $140,000 the rate went from 31 percent to 36 percent; for income over $250,000 the rate went from 31 percent to 39.6 percent. In 1993, 2,791,000 new jobs were created on a base of 109,415,000. In 1994, 3,851,000 new jobs were created.”

I know, I know, I mentioned the C-word! And even though he shepherded America through a fantastic economic boom (and recovery from the Bush-41-era Recession), created millions of jobs, balanced the budget, and left us with a huge surplus, by taxing the super-rich at slightly higher rates than his predecessor, America did not crumble, nor did super-rich people find themselves homeless, penniless, or too scared to hire people and make more money.

http://www.kellysite.net/taxes.html

“ Not only was the entire national deficit eliminated after raising taxes on the wealthy in 1993, but the economy grew so fast for the remainder of the decade that many conservative economists thought that the Fed should raise the prime interest rate in order to slow it down.

“This is another of conservatives’ hidden agendas: they keep promising workers that if we cut taxes on the wealthy and the economy grows, their wages will go up. But when wages even start to go up—for whatever reason—conservatives do everything they can to slow down the economy.”

How’s that for double-think?

Of course, in true Orwellian fashion, many citizens on the Right have decided that the Bush-41-Recession was really Clinton’s recession, and the Clinton-era good times was Bush 43’s boom. Sigh. Or, if they can remember the reality everyone else experienced, they assume the Clinton boom was an aberration.

Too bad history doesn’t support that idea:

http://www.yalelawjournal.org/the-yale-law-journal/content-pages/why-tax-the-rich?-efficiency,-equity,-and-progressive-taxation/

“In Greek mythology, Atlas was a giant who carried the world on his shoulders. In Ayn Rand's 1957 novel Atlas Shrugged, Atlas represents the "prime movers"--the talented few who bear the weight of the world's economy. In the novel, the prime movers go on strike against the oppressive burden of excessive regulation and taxation, leaving the world in disarray and demonstrating how indispensable they are to the rest of us (the "second handers").

“Rand wrote in a world in which the top marginal federal income tax rate in the United States was 91% (beginning at taxable income of $400,000). This is an unimaginably high rate by today's standards, when the dominant view in Washington is that a marginal rate of 39.6% (the top rate from 1993 to 2001) is too high. The key turning point in the process of abandoning high marginal tax rates occurred in the presidency of Ronald Reagan. When Reagan became President in 1981, the top marginal federal income tax rate was 70%; when he left office in 1989, the top rate was 28%.

“The reduction of marginal tax rates in the Reagan years was driven by a new policy consensus that still persists today. That consensus is that high marginal tax rates on the rich come with an unaffordably high price for the U.S. economy in the form of reduced incentives for the rich to work and to save, and increased incentives to engage in socially wasteful tax planning. And yet 1957, when Rand wrote Atlas Shrugged and the top income tax rate was 91%, falls in the middle of the period from 1951 through 1963. Those were the golden years of the U.S. economy, in which the average annual rate of productivity growth was 3.1% (compared with about 1.5% after 1981). Of course, the growth might have been even faster had the marginal tax rates been lower, but the coincidence of high rates and high productivity raises challenging questions for those who believe that high marginal tax rates carry an unacceptable cost.”

Not that I want to eat the rich. I don’t want to punish them (well, except for the knuckleheads who melted down the economy, then walked away with millions while regular people watched their homes fall into foreclosure. Those guys … I want to punish. With plagues of boils or some other Biblically poetic means. But, failing plagues of boils …) I understand that returning to Eisenhower-style tax brackets is probably inefficient. There is only so far the super-rich can be taxed.

http://www.fivethirtyeight.com/2010/08/how-much-revenue-would-millionaires-tax.html

It’s just, right now, the super-rich aren’t being taxed at a reasonable rate. There is a “vast redistribution of wealth” happening in this country. Wealth Trickles out of the pockets of the average tax-payer, up to the super-rich, where it apparently dissipates into off-shore accounts or gets spent on diamond-studded doggie collars.

This is probably best explained in a play:

http://www.skeptically.org/curpol/id24.html

Thank goodness we don’t live in George Orwell’s Oceania. This play was written nearly a decade ago. If this were 1984, Winston would long ago have slid this gem into a memory hole, or else rewritten it entirely.

I’d love to sit Sam Caligiuri down to a performance of Bush Tax Cut, and then ask him to repeat his talking points. I’d like to see how deep his double-think programming goes.

Actually, I’d prefer it if the voting public viewed it. Over Halloween Weekend.