Where's the ACA tax?

James Kwak at Baseline Scenario explains the "tax" impact of ACA:

So the new Republican argument (which Mitt Romney was against before he was in favor of it) is that the individual mandate is an oppressive tax on the middle class. Cute, isn’t it, adopting John Roberts’s argument?

First of all, there’s the little matter that the word “tax” in legal doctrine means something different from the word “tax” in ordinary English. And there’s nothing wrong with that. Plenty of words have precise legal meanings that would be foreign to ordinary English speakers, like “negligent,” “reckless,” “material,” and so on, and billions of dollars turn on those precise legal meanings. But that’s not going to sway many people, so let’s go to the numbers.

The ACA "tax" and the insanity of contemporary "conservatism"

The professional Right truly don't have a clue, will say anything no matter how absurd, "can't handle the truth" and are totally in the grip of their unhinged resentments and hate-mongering:

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ACA & SCOTUS

Jeffrey Toobin at The New Yorker has a good, cautionary post-mortem on the "controversial" decision by Justice Roberts to split his decision and uphold health care reform as constitutional under the taxing powers of Congress:

When Chief Justice John Roberts emerged from behind the red curtain and took his seat at the center of the Supreme Court bench last Thursday, he did not look like his usual self. The brisk confidence of the Midwestern burgher was absent, replaced by a more sombre mien. His eyes were red-rimmed and downcast, his voice nearly a mumble. The announcement of the Court’s decision in National Federation of Independent Business v. Sebelius was clearly an unhappy duty for him. It’s easy to see why. By affirming the constitutionality of the Affordable Care Act—the legislative cornerstone of Barack Obama’s Presidency—Roberts was disappointing those closest to him. Roberts was a professional Republican: a staffer in the Reagan and Bush I Administrations, a judge and a Justice thanks to Bush II. And here, alone and exposed, Roberts joined with the Court’s four liberals to dash the Republican Party’s most fervent wishes. It was a singular act of courage.

One hopes, then, that it is not too churlish to point out that this should have been an easy case. The core dispute before the Court involved the portion of the A.C.A. which requires all Americans, eventually, to have health insurance. Failure to comply with the so-called individual mandate subjects scofflaws to a modest fee, to be paid when they file their tax returns. The basic idea for the mandate had bounced around policy circles for years, usually with Republican sponsors. As governor of Massachusetts, Mitt Romney implemented an individual-mandate system; as President, Obama based his proposal, more or less, on Romney’s. For two decades—from the mandate’s début in a policy proposal released by the right-wing Heritage Foundation to shortly before Congress voted on the A.C.A.—no one suggested that there was any constitutional problem with the idea. This is because there isn’t one.

The utterly nonsensical "We're on the road to becoming Greece" hype

If a politician - or, worse, an economist - claims that the US is in danger of becoming "Greece", it's a signal that the person is either a shameless ideologue stooping to dishonest rhetoric or...an idiot who doesn't have a clue. Mitt Romney's intellectually frivolous and politically hysterical claim that President Obama is taking us "forward on the way to Greece" probably qualifies him as some combination of the two.  

Matthew O'Brien at The Atlantic deals this nonsensical "Road to Greece!" rhetoric a death blow:

Greece is almost certainly Greece. That goes without saying.

Got it? 

But there's one country that definitely isn't Greece. That's the United States.

Let's step back. What makes a country "Greece"? It's become shorthand for wild government overspending -- especially on entitlements. Paul Ryan says we don't have long to avoid the same fate... that absent drastic reform -- read: cuts -- to the social safety net, we'll end up in penury like the Greeks.

It's a scary story. But it's just a scare story. Yes, we have a long-term healthcare spending problem. But that doesn't make us Greece. Heck, Greece isn't even Greece. At least not the "Greece" that's become such a political football. The evidence -- or lack thereof -- is in the chart below. It compares each country's average social spending since 1999, via the OECD, against its current borrowing costs. See the pattern?

There is none. Europe's biggest social spenders don't have any problems. And Europe's biggest problem countries don't spend that much on social programs. The death knell of the welfare state this is not. 

Here's the dirty little secret of the euro debt crisis. There is no euro debt crisis. There is a euro crisis. The debt is a symptom of the crisis of the common currency.* Europe's bailed out countries all saw piles of capital pour in during the boom, only to pour out during the bust. They were left with inflated, uncompetitive wages -- and that's sent them into deep slumps. That's been despite lower social spending than their northern euro neighbors...

The ACA SCOTUS Decision - some very bad people held in check

Professor Krugman reminds us of the dishonesty and cruelty of the opposition to ACA:

(T)he law that the Supreme Court upheld is an act of human decency that is also fiscally responsible. It’s not perfect, by a long shot — it is, after all, originally a Republican plan, devised long ago as a way to forestall the obvious alternative of extending Medicare to cover everyone. As a result, it’s an awkward hybrid of public and private insurance that isn’t the way anyone would have designed a system from scratch. And there will be a long struggle to make it better, just as there was for Social Security. (Bring back the public option!) But it’s still a big step toward a better — and by that I mean morally better — society.

Which brings us to the nature of the people who tried to kill health reform — and who will, of course, continue their efforts despite this unexpected defeat. 

At one level, the most striking thing about the campaign against reform was its dishonesty. 

Remember “death panels”? Remember how reform’s opponents would, in the same breath, accuse Mr. Obama of promoting big government and denounce him for cutting Medicare? Politics ain’t beanbag, but, even in these partisan times, the unscrupulous nature of the campaign against reform was exceptional. And, rest assured, all the old lies and probably a bunch of new ones will be rolled out again in the wake of the Supreme Court’s decision. Let’s hope the Democrats are ready. 

But what was and is really striking about the anti-reformers is their cruelty. It would be one thing if, at any point, they had offered any hint of an alternative proposal to help Americans with pre-existing conditions, Americans who simply can’t afford expensive individual insurance, Americans who lose coverage along with their jobs. But it has long been obvious that the opposition’s goal is simply to kill reform, never mind the human consequences. We should all be thankful that, for the moment at least, that effort has failed. 

Let me add a final word on the Supreme Court. 

Before the arguments began, the overwhelming consensus among legal experts who aren’t hard-core conservatives — and even among some who are — was that Obamacare was clearly constitutional. And, in the end, thanks to Chief Justice John Roberts Jr., the court upheld that view. But four justices dissented, and did so in extreme terms, proclaiming not just the much-disputed individual mandate but the whole act unconstitutional. Given prevailing legal opinion, it’s hard to see that position as anything but naked partisanship.

Europe's Deficit Hawks

Paul Krugman explains how Europe's version of "deficit hawks" operate:

Spain has troubled banks that desperately need more capital, but the Spanish government...faces questions about its own solvency.

So what should European leaders — who have an overwhelming interest in containing the Spanish crisis — do? It seems obvious that European creditor nations need, one way or another, to assume some of the financial risks facing Spanish banks. No, Germany won’t like it — but with the very survival of the euro at stake, a bit of financial risk should be a small consideration. 

But no. Europe’s “solution” was to lend money to the Spanish government, and tell that government to bail out its own banks. It took financial markets no time at all to figure out that this solved nothing, that it just put Spain’s government more deeply in debt. And the European crisis is now deeper than ever.

Let's get this straight.  The leaders counseling austerity and cutting government spending sink Spain's crisis-ridden economy into deeper debt...to bail out the banks.  If ever there was evidence of the fraudulence and class warfare foundations of "austerity economics," this is it. 

Our Independent Judiciary

Ezra Klein at WaPo:

“Over the past two years, the Republican Party has slowly been building a permission structure for the five Republicans on the Supreme Court to feel comfortable doing something nobody thought they could do: Violate the existing understanding of the commerce clause and, in perhaps the most significant moment of judicial activism since the New Deal, overturn either all or part of the Affordable Care Act. The first step was perhaps the hardest: The Republican Party had to take an official and unanimous stand against the constitutionality of the individual mandate. Typically, it's not that difficult for the opposition party to oppose the least popular element in the majority party's signature initiative. But the individual mandate was a policy idea Republicans had thought of in the late 1980s and supported for two decades. They had to, in effect, persuade every Republican to say that the policy they had been supporting was an unconstitutional assault on liberty.”

Eliminating state income taxes doesn't help growth or revenues

Bloomberg:

Governors seeking to expand their economies by eliminating income taxes find little support for the idea in the record of U.S. states that lack such a levy.

The BGOV Barometer shows the nine states with the highest personal income taxes on residents outperformed or kept pace on average with the nine that don’t tax their residents’ incomes, according to a study of economic output, unemployment and household income by the nonpartisan Institute on Taxation and Economic Policy.

Mr. Laffer & his curve.

The findings show cutting state income taxes to stimulate growth relies on “flawed analysis” based on the theories of economist Arthur Laffer, said Carl Davis, a senior analyst at ITEP in Washington and author of the report. Laffer’s work was cited by Republican Governors Sam Brownback of Kansas and Mary Fallin of Oklahoma as a reason to cut income taxes as a way to stimulate job growth and attract business.

“Being low-tax doesn’t generate economic competitiveness or long-term economic viability,” said Ralph Martire, executive director at the nonpartisan Center for Tax and Budget Accountability in Chicago...

Median household income declined an average 0.7 percent among the nine “high-rate” states, compared with a 3.5 percent drop in the nine states without such a levy. The study found no difference in the average unemployment rate between the two groups of states. The time period of the report includes the 18- month recession that ended in June 2009.

“States that have higher overall taxes have better capacity to weather economic downturns,” Martire said. “Then they can maintain their spending on the salary of workers, who then go out and spend their paychecks on the local economy.” ...

“Those who don’t believe in Santa Claus or the Easter Bunny anymore, and actually look at facts and data, recognize that since supply-side economics has been implemented in America, the complete opposite of what supply siders had promised has occurred,” Martire said.

 HT: John Thompson

" Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low"

 Henry Blodgett @ Business Insider:

In case you need more confirmation that the US economy is out of balance, here are three charts for you.

1) Corporate profit margins just hit an all-time high. Companies are making more per dollar of sales than they ever have before. (And some people are still saying that companies are suffering from "too much regulation" and "too many taxes." Maybe little companies are, but big ones certainly aren't).

Business Insider, St. Louis Fed

2) Fewer Americans are working than at any time in the past three decades. One reason corporations are so profitable is that they don't employ as many Americans as they used to.

Business Insider, St. Louis Fed

3) Wages as a percent of the economy are at an all-time low. This is both cause and effect. One reason companies are so profitable is that they're paying employees less than they ever have as a share of GDP. And that, in turn, is one reason the economy is so weak: Those "wages" are other companies' revenue.

Business Insider, St. Louis Fed

In short, our current system and philosophy is creating a country of a few million overlords and 300+ million serfs.

That's not what has made America a great country. It's also not what most people think America is supposed to be about.

So we might want to rethink that.

Meanwhile, if you want to know more about what's wrong with the economy, flip through these charts:

Okay, Folks, Let's Put Aside Politics And Look At The Facts...

The "Job Creator"

 Washington Post:

Mitt Romney’s financial company, Bain Capital, invested in a series of firms that specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India.

During the nearly 15 years that Romney was actively involved in running Bain, a private equity firm that he founded, it owned companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components, according to filings with the Securities and Exchange Commission.

America in decline

David Cay Johnston @ Reuters:

A broad swath of official economic data shows that America and its people are in much worse shape than when we paid higher taxes, higher interest rates and made more of the manufactured goods we use.

The numbers since the turn of the millennium point to even worse times ahead if we stay the course. Let’s look at the official numbers in today’s dollars and then what can be done to change course.

First, incomes and jobs since 2000 measured per American:

Internal Revenue Service data show that average adjusted gross income fell $2,699 through 2010 or 9 percent, compared to 2000. That’s the equivalent of making it through Thanksgiving weekend and then having no income for the rest of the year.

Had average incomes just stayed at the level in 2000, Americans through 2009 would have earned $3.5 trillion more income, the equivalent of $26,000 per taxpayer over a decade. Preliminary 2010 data show a partial rebound, reducing the shortfall by a fifth to $2.8 trillion or $21,000 per taxpayer.

Wages per capita in 2010 were 4.3 percent less than in 2000, effectively reducing to 50 weeks the pay for 52 weeks of work. The median wage in 2010 fell back to the level of 1999, with half of workers grossing less than $507 a week, half more, Social Security tax data show. The bottom third, 50 million workers, averaged just $116 a week in 2010.

Social Security and Census data show that the number of people with any work increased just 1.5 percent from 2000 to 2010 while population grew 6.4 times faster. That’s why millions of people cannot find work no matter how hard they try.

In May, nearly 23 million workers, 14.8 percent, were jobless or underemployed, the Bureau of Labor Statistics reported...

PRESSURE ON WAGES

"Twilight of the Elites"

Rachel Maddow talks with Chris Hayes about inequality
and our increasingly out-of-touch, dysfunctional elites:

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"What Bernanke Can Do..."

 Dean Baker:

The Federal Reserve Board's open market committee meeting this week likely presents the FOMC with its last opportunity to boost the economy before the end of the year. While the FOMC meets every six weeks, as a practical matter, the FOMC has historically been very reluctant to take major moves close to an election...

The fact that the economy can use an additional boost should not be in dispute. The rate of job creation in the last two months understates the underlying growth path, since it is essentially a payback from the stronger growth due to an unusually mild winter.

Even the 165,000-a-month average rate of job creation for the last five months is far too slow. With the economy needing roughly 100,000 new jobs a month just to keep pace with labor force growth, it would take us more than 12 years to make up our 10 million jobs deficit at this point.

If there is a clear need for more rapid growth, the data also show there is no downside risk of excessive inflation. The consumer price index fell 0.3% in May. It has risen by just 1.7% over the last year. (The core index rose 0.2% last month and is up 2.3% over the last year.)

Of course, many of us have argued that higher than normal inflation would be desirable, in any case. It would reduce real interest rates in a world where the Fed has already pushed the nominal federal funds rate as low as it possibly can. That would provide businesses with more incentive to invest. Higher inflation should also help to lift house prices, helping homeowners to rebuild equity.

However, even if the Fed is unwilling to accept the idea that it should promote higher inflation, as Chairman Ben Bernanke used to recommend back in his days as economics professor, it should at least be confident that the data show no reason to be concerned about inflation exceeding its target... There are two routes the Fed can go.

Common Sense Conservatism

"It's Even Worse Than It Looks"

Michael DeLong (corrected) on "It's Even Worse Than It Looks" - the book by two centrist political analysts who have not been invited to a single major Sunday talk show to discuss their new work, presumably because they depart from the "wisdom of centrism" and state the plain fact that the GOP has become little more than a party of obstruction and right-wing ideology:

Thomas Mann and Norman Ornstein’s It's Even Worse Than It Looks convinced me that having a political system where corporations can spend unlimited amounts of money for or against politicians is a recipe for favoritism and corruption. We need to reduce the influence of money in politics.

But there's much more to the book than that. Here are some of my thoughts:
Both Mann and Orntein have written about Congress for many years. Both are well-respected centrist scholars. They know what they are talking about. And both Mann and Ornstein agree that politics today is far worse than usual: that our political process right now is unusually broken...

Both Democrats and Republicans now view each other as adversaries. Republicans, however, are far more unified and obstructionist--and also have become more conservative in part because of primary challenges.

Obstruction has been taken to ridiculous levels, with Republicans now using holds and filibusters to block nominees and legislation. Obama nominated economist Peter Diamond to the Federal Reserve. Senator Richard Shelby placed a hold on his nomination, claiming he was too inexperienced for the job. While being delayed, Diamond was awarded the Nobel Prize in Economics. Shelby kept blocking his nomination. After a year of waiting, Diamond withdrew. Other nominees, such as Donald Berwick (to head the Center for Medicare and Medicaid Services) and Richard Cordray (to head the Consumer Financial Protection Bureau) were also blocked. Every one of Obama's bills has had to get 60 votes or more to pass, due to the threat of the filibuster.

Republican obstruction is not entirely new. In a 1993 memorandum, William Kristol urged Senator Bob Dole and other Republicans to oppose Bill Clinton's health care plan “sight unseen”, no matter what the substance of the policy he proposed. Passage of any health care reform at all, he argued, would harm the Republican Party.

It is good to see two respected centrist observers of Congress recognizing that Republican obstruction of Obama's proposals is largely driven by a desire to hurt him politically, no matter what its effect on the country.

So are there any solutions to our current state of affairs?

"Small Business Owners’ Views on Implementing the Affordable Care Act" (aka What the Chamber of Commerce and NFIB won't tell you)

From research by The Small Business Majority, independent small business advocates:

The Supreme Court is expected to hand down its decision any day in the case against the Affordable Care Act, filed by the National Federation of Independent Business (NFIB) and state attorneys general.

The polling of 800 small business owners in eight states (Florida, Illinois, Louisiana, Michigan, Missouri, New York, Texas and Virginia) found 50% of small business owners want the healthcare reform law upheld—either as is or with minor changes—while only one-third want the Supreme Court to overturn it. Once small business owners learn more about the law, their support for keeping it intact—either as is or with minor changes—rises to 56 percent, while opposition falls to just 28 percent...A 55% majority say they want it upheld because we need to make sure everyone has health coverage.

Via Kay at Balloon Juice.

Dean Baker explains the world to a remarkably incoherent and confused David Brooks

Dean Baker at CEPR Beat The Press: "David Brooks Says That...Republicans Are Not Very Good At Arithmetic"

That probably was not his intention, but that is the only conclusion that numerate readers can take away from his column. He tells readers that:

"But many Republicans have now come to the conclusion that the welfare-state model is in its death throes."

He points to the crises in Greece, Spain, and Italy and then adds:

"In the decades after World War II, the U.S. economy grew by well over 3 percent a year, on average. But, since then, it has failed to keep pace with changing realities. The average growth was a paltry 1.7 percent annually between 2000 and 2009. It averaged 0.6 percent growth between 2009 and 2011. Wages have failed to keep up with productivity. Family net worth is back at the same level it was at 20 years ago."

There are a number of problems with this story. First Greece, Spain, and Italy have among the least developed welfare states in Europe. If someone wants to make an argument that there is some inherent problem with the welfare state model then we should look for crises in Sweden, Denmark and Germany, all states with far more generous welfare states than these Mediterranean countries. In fact, the welfare states of northern Europe are doing relatively well through the crisis, it is difficult to understand how anyone can look at the pattern of the crisis across Europe and conclude that it implies that the welfare state model has reached its end.

Brooks account of U.S. growth is just bizarre. Did he somehow miss the collapse of the housing bubble? If he excluded the period since the crisis then there is not much of a case for a weakening economy. The economy definitely did better in the three decades immediately following World War II, when the top marginal tax rate was between 70-90 percent than it did in the post-Reagan years, but there was a substantial uptick in productivity growth in the mid-90s. The second half of that decade saw the strongest sustained growth since the early 70s, with workers up and down the income latter sharing in the gains of productivity growth.

The economy did turn down with the collapse of the stock bubble in 2000-2002, but it is hard to see how Republicans tie the collapse of this bubble to the death throes of the welfare state, just as it is difficult to see how the more recent collapse of the housing bubble implies the death throes of the welfare state. In principle the Los Angeles Kings victory in the Stanley Cup could also signal the death throes of the welfare state, but it is not easy to see the connection. The more obvious take away from this story is that a corrupt financial sector can wreck the economy.

In terms of the link between wages and productivity growth, Brooks Republican friends seem to be in an inverted world. If this is the concern, then the welfare states in Europe would seem to be the answer, not the problem.

End This Depression Now! - Aid to the States Edition

Ben Polak and Peter K. Schott explain at NYT's Economix why unemployment is far greater for much longer into the "recovery" phase of the private sector in this extended recession:

Why is the recovery from this recession different from recoveries from past recessions? In the previous two recessions, it took 32 months for nonfarm employment to reattain its June 1990 peak, and 48 months for it to reattain its January 2001 peak. Assuming the economy keeps adding nonfarm employment at the current rate, it will have taken 88 months to reattain its January 2008 peak. The explanation most often heard is that “financial crises are different”: after a debt crisis, shaken consumers are reluctant to spend and shaken firms are reluctant to hire, slowing private-sector job growth even after the recession has bottomed out.

There is some truth in this, but it is not the whole story. In fact, while the latest recession was particularly deep, the recovery in private-sector employment, once it finally started, has not been particularly slow by recent historical standards. In the 27 months since the start of the current employment recovery, the private sector has added 4.3 million jobs, fewer than the 5.0 million it added in the 27 months after February 1992 but not many fewer than the 4.5 million it added in the equivalent period after August 2003.

Source: Bureau of Labor Statistics

But there is something historically different about this recession and its aftermath: in the past, local government employment has been almost recession-proof. This time it’s not.

End This Depression Now! - Infrastructure Edition

Ezra Klein, filling in for Dr. Maddow,  proposes the most immediate
and essential investment in jobs we can make - and at rock bottom prices!
Repair our crumbling infrastructure.

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Chris Hayes asks a rude question: "Is Ben Benanke trying to get Mitt Romney elected President?"

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An appeal to the Fed - take aggressive action to help recovery

At NYTs, Former Council of Economic Advisors Chair Christina Romer:

THE next meeting of Federal Reserve policy makers, on June 19 and 20, will probably be contentious. The latest employment report, showing anemic job growth for a third consecutive month and an uptick in unemployment, will surely make some Fed members want to take additional expansionary action. Others, however, appear steadfastly opposed.

The argument for additional monetary action is straightforward. By law, the Fed is supposed to aim for maximum employment and stable prices. But the unemployment rate is 8.2 percent — a good two percentage points above what even the most pessimistic members say is its sustainable level. Moreover, the spate of disappointing data and the deepening crisis in Europe make continued weakness all too likely...

Some Fed members contend that monetary policy has already done its share. Other policy makers, they say, need to step up. Both the Fed’s chairman and its vice chairwoman have talked about the need for additional near-term fiscal stimulus as part of a gradual deficit-reduction plan. And many Fed committee members have called for a more aggressive housing policy. Indeed, the Fed raised some hackles in January when it sent an unbidden white paper to Congress, outlining possible administrative and legislative initiatives to deal with problems like foreclosures and underwater homeowners. 

I agree that we need more effective fiscal and housing policies. But neither is likely to happen, at least not before the presidential election. As a result, the Fed is the only plausible source of immediate help for the American economy. It was set up as an independent body precisely so that somebody can do what’s right when politicians can’t or won’t. 

The Very Serious, Very Crazy People

Martin Wolf at Financial Times, via The Professor:

Austerians - Brit PM Cameron and German Chancellor Merkel

Before now, I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate and failure to stay ahead of events.

Compared to Reagan, Obama is shrinking government spending

From Krugman, Reagan vs. Obama - increases in government spending:

 

Reagan, of course, is the blue - with huge increases in government spending per capita, and Obama is the red - with smaller increases, and significant decreases in state and local spending due to deep recession.  Mind you, these low rates of spending in an ongoing high-unemployment, reduced-consumer-demand depression are not a good thing - but the facts accentuate the hypocrisy and lies of the GOP and "Tea Party" crazies. 

Two tax systems - one for the super-rich, one for wage-earners

David Cay Johnston:

Six American families paid no federal income taxes in 2009 while making something on the order of $200 million each. This is one of many stunning revelations in new IRS data that deserves a thorough airing in this year's election campaign.

The data, posted on the IRS website last week, brings into sharp focus the debate over whether the rich need more tax cuts (Mitt Romney and congressional Republicans) or should pay higher rates (President Obama and most Democrats).

The annual report (link.reuters.com/vec68s), which the IRS typically releases with a two-year delay, covers the 400 tax returns reporting the highest incomes in 2009. These families reported an average income of $202.4 million, down for the second year as the Great Recession slashed their capital gains.

In addition to the six who paid no tax, another 110 families paid 15 percent or less in federal income taxes. That's the same federal tax rate as a single worker who made $61,500 in 2009.

Overall, the top 400 paid an average income tax rate of 19.9 percent, the same rate paid by a single worker who made $110,000 in 2009. The top 400 earned five times that much every day.

Just 82 of the top 400 were taxed in accord with the Buffett rule, which proposes a minimum tax of 30 percent on annual incomes greater than $1 million.

Let's return for a moment to the single worker who made $61,500 in 2009 and paid 15 percent of his salary in federal income taxes. The top 400 made more every three hours than he did in a year, and yet many of them paid the same or a lower tax rate, according to the data in the report.

On top of his $9,225 federal income tax, he also paid $9,409 in payroll taxes, which include Social Security and Medicare taxes. Half of the payroll tax was deducted from his check. His employer paid the other half, which was really hidden wages taxed at a 100 percent tax rate.

His total federal tax burden was 30.3 percent, exactly 50 percent more than the 20.2 percent tax burden, measured the same way, on the 400 at the top.

TWO TAX SYSTEMS

Maestro

The Professor notes more out of sorrow than anger:

"(L)ook at the man who insisted that credit default swaps had made the financial system stable, that there was no housing bubble, that the housing market was poised for recovery in 2006, telling us that with interest rates at their lowest levels ever, what we need to worry about most is … the threat of rising interest rates."

Tax Cuts Uber Alles

There's a simple formula for job creation - cut taxes!  Here's the rock-solid, faith-based, empirical, wishin' & hopin' evidence from St. Reagan's reign as Holy Patron of the Job Creators:

Oh, wait a minute...

Chart from Mark Thoma, Economist's View

Jersey Shore

Professor Krugman:

For some time now (Jersey Guv Chris) Christie has been touting what he calls the “Jersey comeback.” Even before his latest outburst, it was hard to see what he was talking about: yes, there have been some job gains in the McMansion State since Mr. Christie took office, but they have lagged gains both in the nation as a whole and in New York and Connecticut, the obvious points of comparison.

Yet Mr. Christie has been adamant that New Jersey is on the way back, and that this makes room for, you guessed it, tax cuts that would disproportionately benefit the wealthy.

Last week reality hit: David Rosen, the state’s independent, nonpartisan budget analyst, told legislators that the state faces a $1.3 billion shortfall. How did the governor respond? 

First, by attacking the messenger. According to Mr. Christie, Mr. Rosen — a veteran public servant whose office usually makes more accurate budget forecasts than the state’s governor — is “the Dr. Kevorkian of the numbers.” Civility! 

Keynes and fiscal irresponsibility

Econospeak corrects some confusion over Keynes and long-term debt that's pushed by the "Reagan taught us deficits don't matter" BizarroWorld "Keynesianism" that rears it's head on the Right when it's "more tax cuts" time and magically disappears when the agenda morphs into "cut entitlements":

Keynes was not in favor of the type of long-term fiscal irresponsibility that we have witnessed say in the United States during the Administrations of Ronald Reagan and George W. Bush. Yes I know proponents of the 1981 and 2001 tax cuts could argue that we were not at full employment when these tax cuts were passed. However, the 1981 tax cut was not needed to get us back to full employment. Volcker’s [contractionary] monetary policy – for better or worse (worse in my view) – was the main driving factor for the U.S. economy. And we know George W. Bush pursued a host of fiscal policies that were more long-term in nature and all fiscally irresponsible. If [anyone] thinks Lord Keynes would have approved these episodes of fiscal stimulus – I submit he’s very ignorant of the brand of economics that Lord Keynes and economists like Paul Krugman strive to describe.

More Keynesian Blather From Paul Krugman...

 You can't shut Paul Krugman up:

(I)f you take a trillion dollars for instance, out of the first year of the federal budget, that would shrink GDP over 5%. That is by definition throwing us into recession or depression.

Oh, wait a minute.  That was Mitt Romney doing that Beltway "gaffe" thing, where blurting out the truth is seen as a "mistake," especially when it runs counter to every crank proposal Romney has endorsed that has been forthcoming from the Ryan Austerity Megaphone of the GOP - the dominant party "intelligentsia," who are either economically illiterate or WANT to plunge the country into even deeper extended depression.

Jon Chait notes: "Romney says this as if it’s completely obvious that reducing the deficit in the short term would throw the economy back into recession, even though he and his party have been arguing the opposite case with hysterical fervor. Republicans have committed themselves to Austrian economic notions and other hoary doctrines justifying the position that reducing deficits is a helpful way out of a liquidity trap"

I'm not convinced Willard M. Romney is particularly smart, but it's clear that beneath the nauseating facade of sheer cynicism there's still some small grain of common sense.  The fact that he's a practiced liar when glibly espousing the GOP far Right's agenda as his own - albeit subject to the occasional "Beltway gaffe" as in the CNN interview - appears to be the only "redeeming" feature of his candidacy, not a fatal flaw.  Which is pathetic.

(updated)

This Just In! Presidential Aspirant Can Read a Balance Sheet!

Good discussion of Romney and Bain by Martin Bashir and guests, standing in for Lawrence O'Donnell last night - special props to Joy-Ann Reid for devastating take-down of Willard's reference to Bain's Steel Dynamics start-up, which leaned heavily on tax-payer subsidies - including a tax increase - to make a large profit:

 

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Is Greed Good? Professor Krugman Wonks Us Out With the Data

Krugman @ NYT:

From "Mitt Romney Is a Tool" - K. Genius & TBX

As the debate moves – appropriately! – to a discussion of Romney’s career at Bain, one thing I’ve noticed is that everyone on the right, and a fair number of people who should know better, basically believes that Gordon Gekko was right. Before the Gekkos came along, they assert, American business was sluggish, unproductive, and uncompetitive. Then came the LBOs and all that, and our economic energy was unleashed.

As I said, everyone on the right knows that this happened. Needless to say, none of it is at all true.

Let’s look at how trends changed after 1980 or so, when the underlying rules of American business (and politics) shifted. Start with productivity – I use a log scale, so that the slope of the trend represents the rate of growth. See the big acceleration? Neither do I – productivity growth has actually been slower since the rise of Bain-type operators.

The "Austerity Cliff" and the GOP's Military Keynesians

 Brian Beutler at TPM:

A giant austerity bomb is timed to go off at the beginning of next year, and the threat of significantly higher taxes and lower spending has Republicans running around the Capitol sounding more like John Maynard Keynes than John Boehner.

Automatic, across-the-board reductions to domestic and defense spending, combined with the looming expiration of the Bush tax cuts, will dramatically consolidate the budget in the next calendar year, if Congress does nothing. And despite bemoaning deficits throughout the Obama years, the GOP’s suddenly come around to the view that cutting government spending is a job killer.

Just listen to Sen. John Cornyn (R-TX).

“Just when you thought the economic news could not get much worse with slow economic growth, with reduced wages because of higher costs, and with many people simply giving up looking for work with the lowest labor participation rate we’ve had in some time,” Cornyn warned reporters in the Capitol Tuesday, “we have an entirely predictable and preventable jobs crisis approaching in January, where because of the sequestration [automatic spending cuts], my state alone will lose 91,000 private sector jobs — and there are about a million private sector jobs at risk if the sequestration goes into effect on January 2.

This marks the return of the Defense Keynesians — Republicans who admit that government spending supports job growth in a weak economy, if and only if that spending is directed toward the military.

As luck would have it, a new Congressional Budget Office concludes Republicans are right about the economic consequences of defense cuts — but that their other fiscal priorities are just as perilous for economic growth.

If all the fiscal tightening scheduled for the beginning of the year is allowed to take effect, it will take a huge bite out of the projected deficit for the coming fiscal year.

Unfortunately, it’ll take a similarly large bite out of GDP — enough to threaten a new recession. And the resulting job losses would reduce tax revenues and increase spending on jobless benefits enough to undo billions of dollars in direct deficit reduction.

Willard M. Romney's Debt and Deficits Hustle

Romney: "Today America faces a financial crisis of debt and 

spending that threatens what it means to be an American."

Center for American Progress: 

There’s one major problem with Romney’s rhetoric: his economic plan makes the debt worse. Romney’s tax plan gives a 20 percent across-the-board tax cut to all Americans and repeals the Alternative Minimum Tax, costing $10.7 trillion over the next decade and reducing federal revenues to just 15 percent of GDP, according to Center for American Progress Director of Tax and Budget Policy Michael Linden. Romney hasn’t offered a plan to pay for those cuts, instead simply asserting that he will balance the budget.

But balancing the budget under those terms would be next to impossible. Even if Romney limits tax deductions for the richest Americans as he says he would, he would need 6.5 percent economic growth for the next five years to keep his plan from adding to the deficit. To put that in perspective, the best five-year period of growth since World War II was from 1961 to 1966, when the economy grew at 5.8 percent per year.

"Deja Vu Debacle"

 Paul Krugman @ New York Times:

Sometimes it’s hard to explain why we need strong financial regulation — especially in an era saturated with pro-business, pro-market propaganda. So we should always be grateful when someone makes the case for regulation more compelling and easier to understand. And this week, that means offering a special shout-out to two men: Jamie Dimon and Mitt Romney...

First...let me talk about Mr. Romney, whose remarks about those troubles were so off-point that they constitute a teachable moment. 

Here’s what the presumptive Republican presidential nominee said about JPMorgan’s $2 billion loss (which may actually have been $3 billion, or $5 billion, or more, but who’s counting?): “This was a loss to shareholders and owners of JPMorgan and that’s the way America works. Some people experienced a loss in this case because of a bad decision. By the way, there was someone who made a gain.” 

What’s wrong with this statement? Well,...it’s not O.K. for banks to take the kinds of risks that are acceptable for individuals, because when banks take on too much risk they put the whole economy in jeopardy — unless they can count on being bailed out. And the prospect of such bailouts, of course, only strengthens the case that banks shouldn’t be allowed to run wild, since they are in effect gambling with taxpayers’ money.

Incidentally, how is it possible that Mr. Romney doesn’t understand all of this? His whole candidacy is based on the claim that his experience at extracting money from troubled businesses means that he’ll know how to run the economy — yet whenever he talks about economic policy, he comes across as completely clueless...

Jamie Dimon is no Jimmy Stewart. But he has, in a way, been playing Jimmy Stewart on TV, posing as a responsible banker who knows how to manage risk — and therefore the point man in Wall Street’s fight to block any tightening of regulations despite the immense damage deregulated banks have already inflicted on our economy. Trust us, Mr. Dimon has in effect been saying, we’ve got this covered and it won’t happen again. 

Now the truth is coming out. That multibillion-dollar loss wasn’t an isolated event; it was an accident waiting to happen. For even as Mr. Dimon was giving speeches about responsible banking, his own institution was heaping on the risk. “The unit at the center of JPMorgan’s $2 billion trading loss,” reports The Financial Times, “has built up positions totaling more than $100 billion in asset-backed securities and structured products — the complex, risky bonds at the center of the financial crisis in 2008. These holdings are in addition to those in credit derivatives which led to the losses." ...  It really is déjà vu all over again. 

A prosperous middle class is central to economic productivity and income inequality is a threat to our economic and political health

 Heather Boushey and Adam Hersh at Center for American Progress:

To say that the middle class is important to our economy may seem noncontroversial to most Americans. After all, most of us self-identify as middle class, and members of the middle class observe every day how their work contributes to the economy, hear weekly how their spending is a leading indicator for economic prognosticators, and see every month how jobs numbers, which primarily reflect middle-class jobs, are taken as the key measure of how the economy is faring. And as growing income inequality has risen in the nation’s consciousness, the plight of the middle class has become a common topic in the press and policy circles.

For most economists, however, the concepts of “middle class” or even inequality have not had a prominent place in our thinking about how an economy grows. This, however, is beginning to change. One reason for the change is that the levels of inequality and the financial stress on the middle class have risen dramatically and have reached levels that motivate a closer investigation. The interaction and concurrence of rising inequality with the financial collapse and the Great Recession have, in particular, raised new issues about whether a weakened middle class and rising inequality should be part of our thinking about the drivers of economic growth.

"Taxing the rich to make investments...is the single shrewdest thing we can do for the middle-class, for the poor...and for the rich"

Millionaire tech investor Nick Hanauer gave a talk at Technology Entertainment and Design - which regularly posts the equivalent of video essays on it's popular site - but it was apparently kept off of the site because the presumed audience of wealthy entrepreneurs wouldn't want to hear Hanauer's message of "taxing the rich" as "the single shrewdest thing we can do." There's a lot of applause for Hanauer in the room. One wonders why TED found Hannauer's timely and insightful talk troublesome:

HT: Rob Grocholski

Volcker: "If you want to gamble in derivatives, surrender your banking license"

Former Treasury Secretary Paul Volcker on JP Morgan/Chase:

A battle looms over "Simpson-Bowles" - among Democrats

Simpson: "Veterans...are not helping the country in this fiscal mess."

Richard Eskow of Campaign for America's Future files this harsh, utterly depressing report from the "Deficit Summit." Unfortunately, it rings true. The 2012 election is going to take most liberal folks' eyes off of this ball, but a major fight is looming - and within Democratic circles - over the Simpson-Bowles "bi-partisan" plan to gut government programs and shift wealth even more toward the 1% than it already has.

Establishment Democrats are embracing an approach to "deficit reduction" that privileges the 1% and ignores the centrality of unemployment as the nation's #1 problem.  And they ignore the fact that worrisome long-term deficit projections are - above all else - rooted in the need to reform our health care delivery system.  Medicare has nothing to do with that problem - other than providing the most cost-effective approach to health insurance that exists currently in the US.  Medicare doesn't drive the problem of health care costs as % of GDP - it lessens them. Address the larger issue and long-term federal deficits are easily managed.

Be prepared for the looming deficit battle - because these "rich white guys" clearly are. And be prepared to draw lines in the sand against a significant cohort of establishment  Democrats and administration insiders.

Eskrow:

Today a bunch of rich white guys held a "Fiscal Summit" and agreed that:

1. Despite the fact that unemployment is causing untold suffering for millions of people, it's not very important.

2. Despite the fact that wage stagnation is destroying the middle class, that's not important either.

3. Despite the fact that we need the social safety net more than ever after what they've done to the economy, it's expendable.

4. Despite the fact that our government can borrow money at record low rates and use it to put people to work, thereby ending the recession and jumpstarting the economy, that option's not even worth discussing.

5. Despite the fact that these men all possess great power, wealth, and/or influence, everything that's wrong with the economy is your fault.

6. Since it's all your fault, you better get ready to pay up.

Oh, and one other thing:

7. They're all very smart and very brave. It's too bad the rest of you people are such jerks.

"Make Banking Boring"

NYT's Joe Nocera:

Let’s begin by stipulating the obvious: nobody outside of JPMorgan Chase knows for sure what really happened with those trades that have cost it so much money and done such severe damage to its once stellar reputation. 

In his conference call last Thursday, Jamie Dimon, the bank’s chief executive, characterized the trades as “stupid,” but refused to get into any specifics. Even hedge fund managers on the other side of the JPMorgan trades have been able to cobble together only bits and pieces. Most of the emphasis has been on the credit derivative business managed by one Bruno Iksil in JPMorgan’s London office — a k a the “London whale.” Yet from what I hear, his losses probably won’t total more than $600 million — while the bank’s total losses have reached $2.3 billion, and could well hit $4 billion, according to The Wall Street Journal. Where are the rest of the losses coming from? As I say, nobody knows. 

Still, we know enough to be able to make some informed judgments. We know that JPMorgan, awash in taxpayer-insured deposits, took some of that money — around $62 billion at last count — and decided to invest it in corporate debt, which had the potential to generate higher returns than, say, old-fashioned loans...

We know that JPMorgan’s chief investment office, which had orchestrated the debt purchases, decided to hedge the entire portfolio by selling credit default swaps against a corporate bond index. You remember our old friends, credit default swaps, don’t you? Three years ago, they nearly brought down the financial world. Not content with its hedge, it then hedged against the hedge. It was all very complex, of course, and all done in the name of “risk management.”