U.S. Firms Stash Tens of Billions in Tax Havens, Govt Says

February 3, 2013 by

Global Geopolitics & Political Economy / IPS

Carey L. Biron

WASHINGTON, Jan 31 (IPS) – The research arm of the U.S. Congress is warning that U.S. corporations’ use of tax havens has risen substantially in recent years, with companies offering massively inflated profit reports from small countries with loose tax regulations.“Ample evidence of a significant amount of profit shifting exists, but the revenue cost estimates vary from about 10 billion to 60 billion (dollars) per year,” Jane G. Gravelle, a senior specialist in economic policy, writes in a new report for the nonpartisan Congressional Research Service (CRS).

Elsewhere, Gravelle suggests that the revenue losses from this “profit shifting” could reach as high as 90 billion dollars a year, while the cost of evasion on the part of individuals could be as high as 70 billion dollars a year. (Although CRS reports are not publicly released, a copy can be found here.)

Further, these numbers appear to be growing. Extrapolation from the new CRS statistics suggests that U.S. corporate profits reported from, for instance, Bermuda grew by five times during the decade leading up to 2008, the last year for which data is available.

Perhaps the most striking part of the new findings is simply the brazenness with which U.S. corporations appear to have become accustomed to misreporting their overseas earnings. To run her analysis, Gravelle chose five relatively small but well-known tax havens – Bermuda, Ireland, Luxembourg, the Netherlands and Switzerland – and then looked at the percentage of profits U.S. companies reported as having come from those countries in 2008.

Incredibly, notes Citizens for Tax Justice, an advocacy group here in Washington, these countries were found to have accounted for 43 percent of the 940 billion dollars of overseas profits reported by U.S. multinational corporations, despite having made just seven percent of their foreign investments in those same countries.

On the other hand, the five countries where U.S. corporations do much of their overseas business (the United Kingdom, Germany, etc) were reported to tax authorities as having accounted for just 14 percent of overseas profits.

“Obviously they aren’t making their money in these countries – their economies are nowhere near large enough,” Robert S. McIntyre, the director of Citizens for Tax Justice (CTJ), told IPS. He points out, for instance, that U.S. multinationals’ reported profits in Bermuda amounted to 1,000 percent of the island’s economic output.

“This is just more significant proof that we have a really serious problem, both in the United States and in Western Europe,” McIntyre says, noting that the trend has almost certainly continued, if not increased, since 2008.

Food from the hungry

A December report by Global Financial Integrity, a Washington watchdog, found that the developing world lost nearly a trillion dollars in 2010 due to tax evasion, corruption and other financial crimes. That figure is 10 times larger than the 88 billion dollars provided as development assistance to developing countries that year – and, the researchers warned, this figure was almost certainly an underestimate.

“Whether you’re a big, developed country like the United States or a smaller developing country in Africa,” McIntyre says, “if you can’t get tax money out of the businesses operating in your territory, how are you going to pay for infrastructure, health, education and all of the other things you need to maintain and grow an economy?”

On Wednesday, Oxfam International, a humanitarian aid organisation, called for global policymakers to close off loopholes that have allowed for the recent increase in tax evasion. The group is suggesting that just a quarter of the revenue that could accrue from taxing misreported profits would be able to “lay the foundation for ending global hunger”.

“Governments should agree to end global hunger by 2025 and an end to tax havens, which could help pay for this and much more. Tax-dodging effectively takes food from hungry mouths,” Stephen Hale, advocacy head for Oxfam, said in a statement on Wednesday.

The group offers an estimate of 32 trillion dollars currently sitting in tax havens around the world, and notes that taxes on this lump sum could raise nearly 190 billion dollars a year. On the contrary, Oxfam states, “Just 50.2 billion (dollars) a year is estimated to be the level of additional investment needed, combined with other policy measures, to end global hunger.”

Dutch funnel

While the United States’ ability to impose taxes is supposed to span worldwide, that system includes a significant exception, in that foreign profits are not taxed until companies bring their earnings back into the country.

On the ground, the result has been more and more companies looking to keep their profits overseas – or claiming that the money was made in countries that have either strict privacy regulations or lax reporting requirements.

Due to legalities and bilateral treaties, the Netherlands has become a significant transit point for unreported earnings for companies across the world. According to recent estimates, the Netherlands is allowing some 13 trillion dollars to funnel through its financial system en route to classic tax havens such as the Cayman Islands.

Particularly given the current fiscal crunch in Europe, such figures have caught the attention of E.U. policymakers; in December, the European Commission warned that tax avoidance was costing the regional bloc a trillion euros every year. The E.U. is currently trying to put in place a system that would divide up corporate profits among member states before it could, say, end up in the Netherlands and then leave the continent.

Last week, the Dutch legislature took up the issue in what appears to be a broad-based attempt to tweak the country’s laws. Also last week, U.K. Prime Minister David Cameron stated that, when his country takes over the rotating presidency of the Group of 8 (G8) rich countries this year, corporate tax evasion will be one of his central priorities.

In Washington, much of the effort is currently revolving around attempts to lower the U.S. corporate tax rate – at 35 percent, the highest among all developed countries. Beyond this, though, CTJ’s McIntyre warns that there are few allies for any major legislative push.

“Republicans like the fact that these companies are successfully avoiding taxes, while the Democrats are afraid that if they do anything strong, corporate money will go against them in the next election,” he says. “Companies are hoping that they’ll get away with these practices, and currently they have the (tax authorities) outgunned.”

All rights reserved, IPS – Inter Press Service, 2012.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Budget, Economy, Report, Transparency, United States Tagged With:

Obama’s OMB Channels its Inner Tea Party

December 27, 2012 by

By William K.Black The Office of Management and Budget (OMB) is every administration’s heavy artillery on budget issues.  OMB’s staff is dominated by neo-liberal micro-economists under every administration, so it is institutionally…

 

“The Office of Management and Budget (OMB) is every administration’s heavy artillery on budget issues.  OMB’s staff is dominated by neo-liberal micro-economists under every administration, so it is institutionally conservative.  OMB personnel obtain promotions by killing programs, cutting spending, and either blocking the adoption of regulations or weakening the regulations.  OMB is institutionally predisposed to embrace austerity.  OMB is also expected to be a zealous advocate for the President.”

“The combination of those dual roles can produce especially bad pro-austerity propaganda.  President Obama’s OMB produced a classic example of that propaganda in 2012 that exemplifies the administration’s incoherence on austerity.  Obama 2013 budget proposal contains OMB’s ode to austerity.  It was prepared under Jacob Lew’s direction.  Lew was OMB’s head until he became Obama’s chief of staff in January 2012.  Lew is described as the leading candidate to succeed Treasury Secretary Geithner.  Lew, Geithner, and William Daley (then Obama’s chief of staff) were Obama’s principal aides during his attempt in July 2011 to negotiate the Great Betrayal with Speaker Boehner.  Each of them is a strong supporter of austerity and cuts to the safety net and a champion of Wall Street’s interests.”

See on neweconomicperspectives.org


Filed Under: Budget, Economic Policy, Economy, Headlines, United States Tagged With: , ,

This Emerging Fiscal Cliff Deal Could Push the Economy Into Recession

December 19, 2012 by



By Peter Morici Washington has always made lots of things—bureaucratic regulations and hot air to name two—and it even prints money that instigates inflation.

“

U.S. the New Europe?


“What is going on in Washington these final weeks before the New Year is the kind of fiscal fundamentalism that is making Greece, Italy and Spain economic train wrecks.

With unemployment so high, real wages falling and so many folks working part time for lack of full time work, the unemployment rate could easily surge into the teens, and no amount of stimulus spending could bring it back.

Clearly, Messrs. Obama and Boehner know a lot about getting elected but on economics they are spread thin. Like the sorcerer’s apprentice, they are courting disaster.”


Alan Frederick Fogelquist‘s insight:

This article provides some evidence that the idea of “fiscal cliff” is nonsense and that austerity economics is likely to put the US economy in much worse shape just as it has in Europe.


See on finance.yahoo.com


Filed Under: Budget, Economy, Headlines, Politics, United States Tagged With:

Bankers, Swindlers

November 9, 2012 by

Global Geopolitics & Political Economy / IPS

Ignacio Ramonet

PARIS, Nov 09 (IPS) – For anyone who might not have realised it yet, the current crisis is demonstrating beyond a shadow of a doubt that the financial markets are the lead players in the current economic situation in Europe. Power has passed from the politicians to speculators and crooked bankers. This is a fundamental change.

Every single day a staggering quantity of money floods through the markets – for example, seven billion euros worth of eurozone governments’ debt alone, according to the European Central Bank. The daily collective decisions of these markets can now topple governments, dictate policies, and subjugate entire populations.

Moreover, these new "lords of the earth" have no concern whatsoever for the common good. Solidarity is not their problem, much less the preservation of the welfare state. Greed is the only motive for their actions. Speculators and bankers, driven by a hunger for profits, behave with total impunity, diving like birds of prey on target after target.

Since the crisis broke in 2008 no serious reform has been imposed to either regulate the markets or rein in the bankers. It is apparent that banks play a clear role in the economic system and that their traditional activities ­ encouraging savings, providing families with credit, financing businesses, spurring commerce ­ are constructive.

However, since the dawn in the 1980s of the "universal bank", which added speculation and investment to the above mix of functions, risks to customers’ savings shot up dramatically along with deceit, scandals, and fraud.

One of the most shameless acts was carried out by Goldman Sachs, which now dominates the financial universe. In 2001 it helped Greece to cook its books so that Athens would meet the conditions to join the euro.

In under seven years, this scam was discovered and the reality exploded like a bomb. The consequence: a debt crisis engulfed almost an entire continent; Greece was sacked and forced onto its knees; recession struck, with massive unemployment and plummeting buying power of workers; restructuring and drastic cuts in social services followed, with widespread misery and the imposition of structural adjustment programmes.

How were the perpetrators of this devastating swindle punished? Mario Draghi, the ex-vice president of Goldman Sachs for Europe who was aware of most of the fraud, was named president of the European Central Bank. Meanwhile, for its crooked window-dressing for Greece, Goldman charged 600 million euros. The story has a clear moral: when it comes to major rip-offs by the banks, impunity is the rule.

For confirmation look no further than the thousands of Spanish depositors who bought stocks in Bankia the day it was listed on the stock market. It was known that the bank had no credibility and that according to the ratings agencies its stock was just a step above junk.

But the depositors trusted Rodrigo Rato, then president of Bankia and ex-managing director of the International Monetary Fund, who proclaimed on May 2, 2012 (five days before resigning in response to market pressure and just before the Spanish government had to inject 23.5 billion euros to keep it out of bankruptcy): "In terms of both liquidity and solvency, we are in a very robust position."

It is known that a year earlier, in July 2011, Bankia apparently passed the "stress test" imposed by the European Banking Authority (EBA) on the 91 largest financial businesses in Europe. This should give an idea of the incompetence and ineptitude of the EBA, the European agency charged with guaranteeing the health of our banks.

But that wasn’t the end of the scandals. Indeed, new bank frauds have come to light in recent months. HSBC was accused of money laundering for Mexican narco-traffickers. J.P. Morgan engaged in massive speculation and unprecedented risk-taking that led to losses of 7.5 billion euros and ruined dozens of clients. The same happened at Knight Capital, which lost over 323 million euros in a single night because of a mistake by its automatic trading programme.

But the scandal that is most infuriating on a global scale is the Libor. The Association of British Bankers issues each day what is called the "London Interbank Offered Rate", an average calculated by Reuters financial news agency of the interest rates obtained by the 16 largest banks for borrowing.

As the rate at which the major banks lend money to each other, Libor constitutes a fundamental benchmark for the entire world financial system. In particular, it is used to calculate mortgage rates for homeowners. Worldwide, Libor influences some 350 trillion euros in credit and any variation in it can have a colossal effect.

How did this scam work? Some of the 91 Libor banks colluded in lying about the rates they were obtaining, thus manipulating not only Libor but all derivative contracts and the credit rates for businesses and families alike. This went on for years.

Investigations have shown that about ten major international banks ­ Barclays, Citigroup, JP Morgan Chase, Bank of America, Deutsche Bank, HSBC, Credit Suisse, UBS, Societe Generale, Credit Agricole and the Royal Bank of Scotland ­ participated in the racket.

What we see from the Libor disaster is that criminal behaviour has infected the very heart of the financial industry, and that probably millions of families were issued mortgages at incorrect rates. Many had to leave their homes. Others were evicted because they couldn’t pay artificially-manipulated interest rates. And once again the authorities charged with overseeing the operation of the markets turned a blind eye to this crime. No one has been punished beyond four schemers.

How long can democracies continue to allow such impunity? In 1932 in the United States, Ferdinand Pecora, son of Italian immigrants who became a prosecutor in New York, was named by president Herbert Hoover to investigate the responsibility of the banks for the crash of 1929. His report was overwhelming. It was he who coined the term "banksters" (out of "bankers’" and "gangsters").

On the basis of this report, president Franklin D. Roosevelt acted to protect the American people from the risks of speculation. He passed the "Glass-Stegall Act" which (until it was repealed in 1999) required the separation of commercial banking from investment banking. What government of the eurozone would dare pass similar legislation today? (END/COPYRIGHT IPS)

* Ignacio Ramonet is editor of Le Monde diplomatique en español.

All rights reserved, IPS – Inter Press Service, 2012.

This article may not be republished, broadcast, framed, or redistributed without the written permission of IPS – Inter Press Service. Republication of this material without permission from IPS, the copyright holder, constitutes a violation of United States and international copyright laws and may result in legal action.


Filed Under: Budget, Economic Crisis, Europe, Featured, Finance, Politics, Social Justice, Transparency, Unrest Tagged With: ,

Representative Ryan’s Far-Right Agenda: The Media Can’t Take the Truth

August 18, 2012 by
Dean Baker
Truthout, August 13, 2012

See the article on the original website

In principle the country faces a choice this fall between a moderate conservative, President Obama, and Governor Romney, an extreme conservative who wants to privatize Social Security and Medicare and eliminate most of the services that the public expects from the federal government. The reason why this choice only exists in principle is that the media have worked hard to conceal Representative Ryan’s extreme positions from the public. Now that Governor Romney has implicitly embraced these positions by selecting Representative Ryan as his vice-presidential nominee, it remains to be seen whether the media will does it job.

First, in spite of all the name-calling about President Obama being a Kenyan socialist, he has pushed an agenda that most Republicans would have been comfortable with 20 years ago. His health care plan was put forward by the conservative Heritage Foundation in 1992, before Governor Romney put it in place in Massachusetts. His Wall Street reform leaves the too-big-to-fail banks bigger than ever, even after they helped to inflate a housing bubble, the collapse of which brought the economy to its knees.

And, running large deficits in a downturn was a practice that Obama could tie to Presidents Nixon, Ford, Reagan, and both Bushes. It would be difficult to find a policy pushed by our Kenyan socialist president that would make a Nixon Republican unhappy. 

By contrast, Representative Ryan has an extreme right-wing agenda that predates both Great Society and the New Deal. He has put forward plans that would cut and privatize both Social Security and Medicare. He has also called for essentially zeroing out most categories of federal spending.

While Ryan supports current levels of military spending, the Congressional Budget Office’s (CBO) analysis of his budget shows that there will be essentially nothing left for anything else by 2040. The CBO analysis of the Ryan budget (prepared under his direction) shows that spending on all items other than health care and Social Security would fall to 4.5 percent of GDP by 2040 and to 3.75 percent of GDP by 2050.

The military budget currently is more than 4.0 percent of GDP. In the post-World War II era it has never been less than 3.0 percent. This means that Ryan’s budget would leave nothing for running the State Department, the Park Service, the Food and Drug Administration, the Justice Department, the National Institutes of Health and the other areas that comprise the federal government as it now exists.

However to imply that Ryan is some sort of stringent free market fundamentalist would be far too generous. Representative Ryan has never expressed any discomfort with the numerous forms of government intervention that redistribute income upward to those at the very top.

For example, Representative Ryan has never spoken up against the implicit insurance that the government provides to too-big-to-fail banks, a subsidy which has been estimated to exceed $60 billion a year. Representative Ryan has also never spoken up against government-provided patent monopolies for prescription drugs. Patent monopolies raise the price of drugs by close to $270 billion a year above the free market price. While there are more efficient mechanisms for financing drug research, Representative Ryan is apparently not bothered by a government-created monopoly that results in a massive upward redistribution of income.

He has also never spoken up against the professional and licensing restrictions that protect doctors in the United States from international competition. As a result of these protectionist barriers we pay our doctors more than twice as much as what doctors earn in Western Europe. If free trade lowered doctors pay to Western European levels it would be equivalent to a tax cut of $1,200 a year for an average family of four.    

It possible to cite many other government interventions along similar lines that never seemed to bother Representative Ryan. In other words, Representative Ryan doesn’t have any principled objections to government interferences in the market, even when this interference leads to enormous inefficiency, as is the case with too-big-to-fail banks or patent protection for prescription drugs.

Representative Ryan only seems to object to government programs and policies that benefit lower- and middle-income people. In this sense he seems to have perfectly captured the philosophy of the modern Republican Party: “a dollar in the pocket of a middle class person is a dollar that could belong to a rich person.”

We will face quite a choice this November.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of The End of Loser Liberalism: Making Markets Progressive. He also has a blog, "Beat the Press," where he discusses the media’s coverage of economic issues.

cc

This work by Dean Baker, also published by CEPR, is licensed under a Creative Commons Attribution-Noncommercial 3.0 United States License.


Filed Under: Budget, Economic Policy, Featured, Media, United States Tagged With: ,

First-time Homebuyer Tax Credit was Temporary Fix At Best

April 18, 2012 by

The credit led to an enormous transfer of wealth to sellers and lenders at the expense of buyers.

For Immediate Release: April 18, 2012
Contact: Alan Barber, (202) 293-5380 x115

Washington, D.C.- In February of 2009, with the housing market in a free fall, Congress decided to add a first-time homebuyer tax credit to the stimulus proposed by President Obama. While the credit paused the decline in home prices, a new report from the Center for Economic and Policy Research (CEPR) shows this was only temporary and actually resulted in luring millions of homebuyers into paying too much for their homes.

“While offering a tax credit to new homebuyers did lead to a jump in home sales, a big part of the story is that people who were thinking about buying in the next year or two simply bought earlier to take advantage of the credit,” said Dean Baker, author of the report and a co-director of CEPR. “Of course, after the expiration of the credit, prices began to slide as home sales fell once again.”

The report, “First Time Underwater: The Impact of the First-time Homebuyer Tax Credit,” examines the effects of the first-time homebuyer tax credit on the housing sector. Baker estimates that hundreds of billions of dollars were redistributed from new homebuyers to sellers and creditors due to the tax credit. Then the paper looks more closely at the impact of the tax credit in ten cities that were most affected by it.

With home prices falling at close to a 20 percent annual rate at the time of the passage of the stimulus package, the first-time homebuyer tax credit did temporarily reverse the drop in home prices. Unfortunately, since the housing bubble had not fully deflated at that time, this reversal could not last. In effect the credit artificially held prices above trend level.

Once the credit expired, sales plummeted and home prices began to slide again. Many of these new homeowners soon saw their mortgages ‘underwater’, a situation in which the value of a home is less than the value of their mortgage. On the other hand, those who sold their homes before the expiration of the tax credit benefited as did their lenders since they may have been forced to accept short sales or possibly deal with a foreclosure had the tax credit not pulled purchases forward. This amounted to a significant transfer of wealth from new buyers to sellers and creditors. Baker estimates the size of these transfers as ranging from $5,300 to $10,600 (in 2009 dollars) for every homebuyer who purchased a home over the 34 months from passage of the tax credit through the end of 2011.

Of course, these differences varied by region. Since the credit was capped at $8,000, it had the largest impact on the lower portion of the market in less expensive cities. To clearly demonstrate these differences, the report examines the price decline in the lower tier of the housing markets in ten major cities – Atlanta, Chicago, Las Vegas, Miami, Minneapolis, New York, Phoenix, Portland, Seattle and Tampa. The worst losses were seen in Chicago, which saw a decline of 31.5 percent, and Atlanta, where prices in the bottom tier fell by 49.1 percent. In all ten cities, prices in the bottom tier fell by at least 10 percent between the tax-credit induced peak of 2010 and December of 2011.

While the tax credit was successful in temporarily halting the collapse of the housing sector, the report demonstrates that this was a stop-gap solution at best. By enacting this tax credit when home prices were still above their long-term trend level, this policy mainly had the effect of transferring wealth to sellers and lenders at the expense of new homebuyers, who quickly saw their mortgages go underwater after the credit expired.

 

Center for Economic and Policy Research, 1611 Connecticut Ave, NW, Suite 400, Washington, DC 20009
Phone: (202) 293-5380, Fax: (202) 588-1356


Filed Under: Budget, Finance, Noteworthy, United States Tagged With: , , ,

Featured Articles and Reports on the Project on Defense Alternatives, PDA

November 16, 2011 by

Below is a Listing of Recent Articles and Reports on the Project for Defense Alternatives Site

Going for Broke: The Budgetary Consequences of Current US Defense Strategy. (printable .pdf version) by Carl Conetta, PDA Briefing Memo #52, 25 October 2011. Shows how the Pentagaon’s adoption of more ambitious goals, strategy, and missions after the Cold War led to today’s unsustainable defense budgets. Two tables.

Strategic Adjustment to Sustain the Force: A survey of current proposals. (printable .pdf version) by Charles Knight, PDA Briefing Memo #51, 25 October 2011. A survey of five proposals by independent experts for adjusting US global strategy to new fiscal realities in ways that enhance security while avoiding ‘hollowing’ of the forces.

Pentagon Cuts in Context: No reason for “doomsday” hysteria. (printable .pdf version)by Carl Conetta. PDA Briefing Memo #50, 11 October 2011. Analyzes the potential impact of the Budget Control Act on the defense budget under different scenarios and compares likely future budget levels to past ones. Two tables.

Pentagon Review Must Aim for More than Modest Cuts in Defense Spending. (printable .pdf version) PDA Briefing Memo #49, 25 April 2011. The President’s proposal to trim DoD’s future budget plans by 6.5% or $400 billion over 12 years is a modest step. The forthcoming Pentagon review must aim higher in order to achieve sustainability. Two charts summarize past and planned Pentagon budgets.

Continuing Resolution: Congress Goes Easy on DoD. (printable .pdf version) PDA Briefing Memo #48, 17 March 2011. Examines House and Senate allocation of budget cuts to defense and non-defense accounts for 2011 fiscal year.

The Pentagon and Deficit Reduction: FY-2012 Budget Retains Exceptional Level of Defense Spending. (.html version) (printable .pdf version) PDA Briefing Memo #47, 1 March 2011. Reviews military spending plans for 2012-2016. 10 tables and charts.

Pentagon Resists Deficit Reduction. (printable .pdf version) PDA Briefing Memo #46, 30 January 2011. Examines Defense Secretary Gates’ offer to cut $78 billion from defense plans over five years. Two tables compare different spending scenarios.

Experts Letter on Defense Spending to the National Commission on Fiscal Responsibility and Reform. (.html version) (printable .pdf version)18 November 2010. Joint declaration by 48 top scholars and practitioners of national security policy: “We can achieve safe savings in defense if we are willing to rethink how we produce military power and how, why, and where we put it to use.”

Debt, Deficits, and Defense: A Way Forward. Report of the Sustainable Defense Task Force. 11 June 2010. The report presents options for reducing DoD’s budget — in sum saving nearly $1 trillion over the next decade. (Executive Summary).

An Undisciplined Defense:  Understanding the $2 Trillion Surge in US Defense Spending (full text .pdf file with charts and appendices) (executive summary) by Carl Conetta, PDA Briefing Report #20, 18 January 2010. Analyzes the steep rise in defense spending since 1998. 21 charts and tables.

Military Intervention and Common Sense: Focus on Land Forces (Paperback and Kindle editions) (Mobipocket edition) by Lutz Unterseher with C. Knight and C. Conetta, June 2009. Ground force options for stability operations.

Forceful Engagement: Rethinking the Role of Military Power in US Global Policy (full text .pdf with graphics) (full text .html, no graphics) (exec. summary .html), Dec 2008. The US has been using its armed forces beyond the limit of their utility

 


Filed Under: Budget, Noteworthy, Security, United States Tagged With:

Debt deal distracts from the economy’s real problems.

August 2, 2011 by

Statement on the Debt Ceiling Deal

Debt deal distracts from the economy’s real problems.

Center for Economic and Policy Research, CEPR

For Immediate Release: August 1, 2011
Contact: Alan Barber, (202) 293-5380 x115

Washington, D.C.- Dean Baker, co-director of the Center for Economic and Policy Research (CEPR), issued the following statement on the debt ceiling deal:

"The protracted negotiations over the debt ceiling, as well as the final package agreed to by President Obama and the congressional leadership, show what happens when a small minority is allowed to gain control over national debate. While polls consistently show that the vast majority of the public sees jobs as the main problem facing the economy, there has been a well-funded crusade to ignore public opinion and make cuts to social insurance programs and other spending the top priority for Congress and the President.

"To further this effort, the anti-deficit lobby has been willing to rewrite the history of the downturn and the deficit. The data clearly show that the large deficits of recent years follow from the downturn caused by the collapse of the housing bubble. Prior to the downturn, the deficits projected for 2009 and subsequent years were relatively modest. In fact, even with the tax cuts, the cost of the wars, and the Medicare prescription drug benefit, the debt-to-GDP ratio fell from 2004 through 2007.

By all logic, leaders in Washington should have been focused on restoring the economy to its potential. This would be the most effective way to bring the deficit down to a manageable level.

"However the anti-deficit lobby has managed to dominate public debate and essentially pushed the sputtering economy off the agenda for both the president and congress. The cuts put in place as part of this deal will modestly slow growth in the short-term and are likely to take a big bite out of the investment portions of the budget over the longer term. If the country does not maintain its infrastructure, its research, and adequately support education it will hurt productivity and slow growth over the longer term.

"The agreement also sets in motion a process that could result in substantial cuts to Medicare, Medicaid, and Social Security to meet its debt targets. This would hurt retirees and near retirees, many of whom saw much of their wealth eliminated with the collapse of the housing bubble. Remarkably, there is nothing here that would increases taxes on corporations or the wealthy even as the data show a record high profit share and polls show clear public support for higher taxes to balance spending cuts in any debt ceiling deal.

"At a time when growth has slowed to a near halt and unemployment rate is again rising, it is tragic that the nation’s political leadership has spent the last few months crafting a deal that is likely to slow growth further and take away supports from the people who have been hit hardest by the downturn."


Filed Under: Budget, Commentary, Economic Crisis, Economic Policy, United States Tagged With: ,

Obama Dithering Between People and Corporate America

July 28, 2011 by

Global Geopolitics & Political Economy / IDN

By Lee Sustar*

IDN-InDepth NewsViewpoint    

Barack Obama, celebrated as a champion of all good causes three years ago, has thrown traditional Democratic constituencies overboard – not just to make a deal with Republicans, but to carry out the Corporate America’s agenda.

CHICAGO (IDN) – Can someone please remind us why the Democrats are so often called "the party of the people?"

There’s Social Security, of course – the cornerstone of the 1930s New Deal social programs created during the presidency of Franklin Delano Roosevelt. The popularity of Social Security is such that no Democrat would ever dream of offering it up to the Republican budget-slashers.

Except that Barack Obama has now done so.

Then there’s Medicare, a signal achievement of President Lyndon Johnson’s Great Society social programs. No Democrat could conceivably line up with the right to take aim at the widely supported health care program for the elderly.

Not until, that is, Barack Obama slashed Medicare in the name of health care "reform" – and then bowed to Republican demands for far greater cuts in the future.

What about support for organized labour? That’s a principle that clearly differentiates Democrats from Republicans, right? But Obama himself green-lighted the attack on public-sector workers, freezing federal workers’ pay for three years and pushing the Race to the Top education program to promote teacher-bashing state legislation – and he turned his back on private-sector unions after promising to support the Employee Free Choice Act to make organizing unions easier.

Surely, economic policy differentiates Democrats and Republicans? Where the Bush administration in 2008 rushed to provide $700 billion to bail out Wall Street, while leaving working people to suffer the brunt of the economic crash, the Obama administration continued the endless bailout of the bankers, and has done little more for the millions who face foreclosure or the almost 20 percent of the workforce that’s either jobless or underemployed.

The Democrats are on the record supporting women’s rights – in particular, the right to choose abortion. But as a growing number of state legislatures pass laws that further curb access to abortion, the Obama administration has done nothing to counter the trend. And when Obama’s own pro-choice views were the subject of controversy at a University of Notre Dame speech in 2009, the president failed to even state his position in favour of abortion rights.

What about civil liberties? Surely Obama has provided some relief from the Bush regime’s shredding of basic rights under the banner of the "war on terror."

Only he hasn’t. Instead, Obama has continued and even expanded virtually the whole of the Bush-Cheney approach to the war on civil liberties.

While George W. Bush offered a future of endless war in Arab and Muslim lands, the Obama administration no longer justifies U.S. military action in the name of a "global war on terror." But the wars continue anyway, with downsized but enduring occupations in Iraq and Afghanistan, plus a new war in Libya, launched with U.S. missiles and planes and supported by the U.S. through the NATO military alliance.

All this from the leader of what is supposed to be the mainstream party of the "left" in U.S. politics.

TRADITION AND EXPEDIENCY

Many people are justifiably upset at the Obama administration’s compromises, retreats and outright sellouts, and blame the president for being too weak in the face of the Republicans’ corporate-funded, Fox News-scripted backlash against even the most modest liberal measures.

But the reality is that Obama’s policies are perfectly consistent with the Democrats’ long tradition of making promises to their working-class base at election time, but delivering the policies demanded by the bankers, CEOs and Pentagon brass. Because while the Democrats depend on workers and the poor to turn out to vote, they’re just as much a pro-capitalist party as the Republicans.

To be sure, Obama has made concessions to the right that were unnecessary even from the narrow viewpoint of the most cynical Democratic political operative. By contrast, Franklin Roosevelt was willing to stand up to a business establishment that had been discredited by the Great Depression, declaring at one point during his re-election campaign that he "welcomed their hatred." Obama, on the other hand, bowed to business on every question – and then bowed some more.

But at the same time, Roosevelt rightly considered himself, as he also once said, "the best friend the profit system ever had." The pro-working class measures that Roosevelt is credited with introducing were the result of a labour rebellion that shook the U.S. in the 1930s and led to the unionization of much of U.S. industry in just a few years. Plus, Roosevelt was also prepared to turn his back on unions – for example, during the bitter 1937 strike for union recognition against so-called "Little Steel."

And it was Roosevelt who used the Second World War to advance the American empire, backed up by his successor Harry Truman, who ordered the atomic bombs dropped on Hiroshima and Nagasaki and later launched a war on the Korean Peninsula to ensure U.S. dominance of the Pacific. It was to maintain that control that John F. Kennedy and Lyndon Johnson sent more than half a million U.S. troops to Vietnam in the 1960s to fight wars that led to the deaths of 4 million Southeast Asians.

The next Democrat to occupy the White House, Jimmy Carter, has since become known as an advocate for human rights. But in office, Carter didn’t try to repeat Johnson’s attempt to have "both guns and butter" – the effort to combine the pursuit of U.S. imperial aims with expansion of the social safety net to widen the Democrats’ electoral base. Instead, Carter cut the budget for social programs and ramped up military spending – a trend that would continue when Republican Ronald Reagan took over the Oval Office.

Carter’s right turn couldn’t be explained just by the fact that he came from the conservative Southern wing of the Democratic Party. That was true of Johnson as well. Instead, the party’s shift to the right beginning in the late 1970s was the political consequence of the end of the long economic postwar boom, during which living standards rose for most working-class people.

The Democrats’ move to the right as the ’80s and ’90s dragged on didn’t go unchallenged. The civil rights movement led to increased prominence for African American political leaders in the party – Black politicians won seats in Congress and control of City Hall in a number of important cities. Rev. Jesse Jackson’s presidential campaigns in 1984 and 1988 seemed to provide a vehicle for more liberal forces in the Democratic Party.

OVERALL TRAJECTORY

But the overall trajectory of the Democratic Party was in the other direction – with the party establishment working to marginalize liberals and make the Democrats more business-friendly. Enter the Democratic Leadership Council (DLC) – a group formed in the mid-1980s by conservative Democrats as an internal pressure group to pull the party to the right.

Arkansas Gov. Bill Clinton was a founding member of the DLC. As president, Clinton earned the ire of the rich for raising their taxes – but soon enough, he fully embraced the Wall Street agenda of his adviser and later Treasury Secretary Robert Rubin.

Clinton’s plans for health care reform died in a Democratic Congress before even coming to a vote, and when the Republican Revolution of 1994 took back control of the House and Senate, Clinton moved even further right. Rather than expand the social safety net, he cut it dramatically, ending the federal welfare program and replacing it with state-run "workfare" programs that compelled recipients to work for low wages to get benefits that were no longer guaranteed by federal law.

Clinton hewed to this conservative line despite the promised "peace dividend" that was supposed to follow the collapse of the USSR and the end of the Cold War. In the 1990s, the Clinton administration undertook what former military officer and author Andrew Bacevich called "the unprecedented militarization of U.S. foreign policy" as the U.S. drove the expansion of NATO into the former Russian sphere of influence and twice intervened militarily in the Balkans.

"OBAMA, INC."

Barack Obama understood these new realities of U.S. politics well when he ran for president in 2008. The candidate who evoked social movements to excite volunteer campaign activists had already amassed crucial support among top party leaders and business interests, a combine that journalist Ken Silverstein called "Obama, Inc."

As president, faced with the worst economic crisis since the 1930s, Obama was willing to push through a $787 billion economic stimulus program that was big enough to prevent an outright depression, but not nearly substantial enough to stop the deterioration of living standards faced by tens of millions of workers who had voted for him.

In stark contrast to his campaign slogan of "Change we can believe in," Obama’s top priority was tending to the interests of business. Like so many party leaders before him, he assumed the Democratic base had nowhere else to go. In the resulting demoralization, millions of those voters stayed home in the 2010 election, giving a whipped-up Republican base the chance to retake the House and set the political agenda.

Obama has shown no hesitation in getting with the program since the Republican victory last November. While the Republicans’ proposals for cuts are savage and overwhelming, Obama poses as a responsible steward of the state, "protecting" Social Security and Medicare by backing cuts he portrays as more reasonable – even though they go further than what any Republican president has so far dared to propose.

Obama’s behaviour isn’t unique to national politics – just look at the policies of Democratic governors in California, Illinois, New York, Oregon and Connecticut, where social spending is being slashed and public-sector unions are under attack. In fact, political leaders around the world – whether from centre-left parties or traditional conservative ones – are embracing austerity under pressure from big business.

All this points to the need for independent working-class politics in the U.S. While the formation of a new political party isn’t on the agenda, what has to be tackled now is struggle against the austerity, whether pushed by hard-right Republicans like Wisconsin Gov. Scott Walker and House Speaker John Boehner or Democrats like Obama or New York Gov. Andrew Cuomo.

*Lee Sustar of anti-globalization group the International Socialist Organization is the labour editor of Socialist Worker. This is a slightly abridged version of the article that first appeared as editorial on July 27, 2011 on http://socialistworker.org/2011/07/27/party-which-people.

The views expressed in this article are not necessarily those of IDN editors or editorial board. (IDN-InDepthNews/28.07.2011)

2011 IDN-InDepthNews | Analysis That Matters

This article should not be republished or redistributed without the permission of the original author or copyright holder.


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Pushing Crisis: GOP Cries Wolf on Debt Ceiling in Order to Impose Radical Pro-Rich Agenda

July 23, 2011 by

Democracy Now!
July 22, 2011

Michael Hudson, Democracy Now interview: “if they can create a $13 trillion on a computer keyboard, taking over Fannie Mae and Freddie Mac, and the Federal Reserve can simply give this money, why can’t they, over 50 years, pay the trillion dollars for the Medicare and the Social Security? It’s—obviously, it’s a charade.”


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